In this article, Parth Sarthy Kaushik discusses Financial Creditors vs. Operational Creditors and gives reasons on who is better off and why.

The Insolvency and Bankruptcy Code, 2016 (IBC) which has replaced the earlier ‘debtor in possession’ insolvency regime with a more expedient ‘creditor in control’ regime provides that in case of default of debt or interest payment by the corporate debtor, any financial or operational creditor (or corporate debtor) can make an application to the adjudicating authority (i.e. National Company Law Tribunal for companies, limited liability partnerships and other body corporates) under the Code for commencing the Insolvency Resolution Programme.

Once such an application is admitted by the NCLT, an interim resolution professional will be appointed and the authority will declare a moratorium period during which all pending and future legal actions against company will remain in suspension. During the moratorium period, the resolution professional is required to constitute a committee of creditors (excluding the related parties) which would include both financial creditors and operational creditors. The main purpose of the committee is to create a resolution plan within the stipulated time frame, in order to revive the corporate debtor. For this purpose, IBC provides that such a plan must have the approval of at least 75% of the creditors and a failure to approve resolution plan would by default lead to the initiation of liquidation proceedings.

For the purpose of proceedings under the Code, a distinction has been created between ‘Financial Creditors’ and ‘Operational Creditors’. It is pertinent to note that the Companies Act, 2013 does not create any such classification and only uses the term ‘creditor’. Further, this classification under IBC has been used to put the creditors on different pedestals at every stage of the proceedings whether they pertain to maintainability of applications, approval of resolution plan or distribution of assets (in case of liquidation). Therefore, with a view to secure their interests, it is imperative for creditors to be completely aware of the range of options/rights available to them under IBC.

Classification of creditors

Who is a Financial Creditor?

Section 5(7) of the Code defines a financial creditor as – “a person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred“.

The term financial debt has been defined under Section 5(8) as – “a debt along with interest, if any, which is disbursed against the consideration for time value of money and includes:

1. Money borrowed against payment of interest;
2. Any amount raised by acceptance under any acceptance credit facility or its de-materialized equivalent;
3. Any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
4. The amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;
5. Receivable sold or discounted other than any receivable sold on non-recourse basis;
6. Any amount raised under any other transaction, including, any forward sale or purchase agreement, having the commercial effect of borrowing;
7. Any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;
8. The amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause“

Thus, all lenders who have extended any kind of loans, guarantees or financial credit are covered within its ambit.

Who is an Operational Creditor?

Section 5(20) of IBC defines an Operational Creditor as – “any person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred“.

The term operational debt has been defined under Section 5(21) as – “a claim in respect of the provisions of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority”.

Thus, operational creditor refers to anyone who has provided goods or services and the payment for same is due from the corporate debtor. In the course of business, several transactions are entered into on credit terms customarily in different industries.

Thus, IBC creates the distinction between a financial and operational creditor based on the nature of transaction (i.e. purely financial transactions or transactions related to day to day operations) a creditor enters in with the corporate debtor.

Ability to start insolvency proceedings

Financial creditors can start insolvency proceedings even for disputed debts but operational creditors cannot

Based on whether the creditor is a Financial or Operational creditor, the Insolvency and Bankruptcy Code provides for different schemes of admission for insolvency petition which will initiate the resolution process.

Section 7 of IBC provides that a financial creditor can directly approach the adjudicating authority and the only condition that needs to be satisfied is that the creditor must show that the corporate debtor has defaulted in the payment of a due debt.

On the other hand, Section 8 of IBC lays down that for an operational creditor to succeed in initiating the resolution process, it must satisfy the adjudicating authority by demonstrating that:

1. It has served a demand notice to the corporate debtor stating that the debtor has committed a default in debt; and
2. No dispute exists between the parties in relation to the payment of debt.

The Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd while interpreting the term ‘dispute’ as defined under Section 5 (6) and appearing in Section 8 (2) held that, the adjudicating authority is only required to see if there is a bona fide dispute in existence and it is not allowed to examine the merits such dispute. It is to be noted that this holds true even if the dispute notice has been served after the acceptance of demand notice by the corporate debtor.

Therefore, under the scheme of the Code, if a debt is not admitted by the organization (a corporate debtor) and is disputed within the meaning of Section 5 (6) or Section 8 (2), it is a sufficient ground to reject the insolvency application made by an operational creditor (i.e even if there are no pending proceedings between the parties, the corporate debtor can scuttle the insolvency proceedings). On the other hand, a financial creditor is allowed to initiate the resolution process even in case the debt is disputed by the corporate debtor.

Insolvency Resolution Process

Once the insolvency petition has been admitted by the adjudicating authority, Section 14 of the Code provides that a moratorium will be imposed on all judicial proceedings (both future and pending) against the corporate debtor until the approval of a resolution plan under section 31.

During the moratorium period, the Resolution Professional is required to constitute a committee of creditors which is tasked with the preparation of a Resolution Plan. This committee plays the most vital role in the insolvency resolution process as any resolution plan prepared and approved by it would be equally applicable on all the creditors. Thus, while the insolvency process can be initiated by any individual creditor, once the moratorium is imposed and Interim Resolution Professional appointed, the whole process becomes collective in nature, requiring a consensus among all the creditors for its success.

Operational creditors not permitted to be part of the Committee of Creditors

Section  21  (2) provides that the committee of creditors shall consist solely of financial creditors. The Code also lays down that each creditor shall vote in accordance with voting share assigned and the resolution plan can be implemented only if it has been approved by 75% of creditors. Further, Section 24 (3) (c) provides that only operational creditors having aggregate dues of at least 10% of the total debt shall be given the notice of the meeting. It is to be noted that, an operational creditor (irrespective of the claim size) is not allowed to be a member of the committee. Thus, IBC limits the right of an operational creditor to only attending the meeting of CoC subject to the abovementioned threshold.

Therefore, the Insolvency and Bankruptcy Code effectively confers only three rights on an operational creditor:

• To initiate insolvency resolution process.
• To receive notice of meeting of committee of creditors.
• To attend the meeting of committee of creditors.

It is to be noted that a resolution plan can be proposed by any category of creditors. However, it must be stressed that the same needs to be approved by the committee which is controlled by financial creditors. Therefore, unlike financial creditors, the rights conferred on the operational creditors are subject to certain conditions which resultantly gives more weightage to the concerns of financial creditors by giving them total monopoly over the entire resolution process.

Liquidation and Asset Distribution

Unsecured Financial Creditors and Operational Creditors are on Par, But Secured Financial Creditors Have a Priority

In case the committee of creditors fails to approve a resolution plan within the stipulated time period or demands liquidation, the adjudicating authority will pass an order for liquidation of the corporate debtor. The official liquidator appointed by the CoC is then required to sell the assets of the corporate debtor and distribute the proceeds among all the creditors. Section 53 provides that the order of priority for the distribution of assets shall be:

While a financial creditor can be either a secured or unsecured creditor, an operational creditor always falls in the category of unsecured creditors. Therefore, even in the case of liquidation and asset distribution, financial creditors are prioritised over operational creditors (excluding workmen and employees, who are operational creditors but are specified to be treated equally with secured financial creditors).

Conclusion

The rationale behind this imbalance in the rights assigned to financial and operational creditors under IBC has been explained by the Banking Law Reforms Committee in its report, which states that:

“….members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, operational creditors are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that, for the process to be rapid and efficient, the Code will provide that the creditors committee should be restricted to only the financial creditors.”

Therefore it is clear from the above position that framers of the Code created this classification with the aim to protect the rights of all stakeholders by providing a mechanism which primarily focuses on resolution and re-structuring of the debt by treating the corporate debtor as a going concern and provides for liquidation only when all the attempts towards such a resolution ultimately fail.

This approach is certainly much more rational than giving the reigns of the resolution process in the hands of Operational Creditors who are more than often not interested in the revival scheme and look for the obvious solution of liquidation to recover their dues which would defeat one of the main objects of the Code that is, to allow an honest but unfortunate corporate debtor to obtain a discharge from his debts subject to reasonable conditions.

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In this article, Vincent Omwenga Kofi pursuing M.A, in Business Law from NUJS, Kolkata discusses Code of Ethics for Advocates.

Introduction

In the context of the Indian law, an advocate is a subset of a lawyer. In other words, while all advocates are lawyers, not every lawyer is an advocate. The legal practice of advocates is established in the Advocates Act, 1961. Based on the Act, only advocates—and not any other subset of a lawyer—are permissible to practice in courts and plead on behalf of others, but only after obtaining the required license. An advocate transacts business under authority that is governed and restricted by power of attorney granted by the principal. An Advocate has to be registered with the State Bar Council as described under the Advocates Act, 1961. In Galanter and Robinson’s (2013) views, as experts, advocates analyze client’s legal problems carefully to provide exhaustively researched legal counsel. In addition, they represent clients before other deciding bodies, including tribunals, arbitrations, and professional disciplinary committees. Accordingly, they are expected to be very ethical.

The word ethics is a combination of two words, ethos (Greek for character) and more’s (Latin for customs). The combination defines how people choose to interact with each other. Philosophically, ethics outlines what is good for a person and for the whole society, as well as the duties individuals owe themselves and each other. In its application in philosophy and law, therefore, Gillers (2014) informs that ethics encompasses learning what is correct and incorrect, and then choosing to do the correct thing. The most ethical or right decisions have various alternatives and have far reaching consequences. According to Gillers (2014), such decisions may also have mixed outcomes, including indefinite consequences. The most ethical decisions also have personal consequences. In most, if not all jurisdictions, Code of Ethics for Advocates explains the demands of professional conduct for advocates. In Hazard, Hodes, and Jarvis’s (2014) understanding, and as will be demonstrated in the remaining section of this article, the determination of such requirements is to warrant that advocates do not act viciously or carelessly or in a manner distasteful to the decorum, dignity, or integrity of their occupation, or in such a manner as would utterly affect the trust bestowed on them.

Nobility of Advocates

It is commonly said that legal profession is noble—and it is indeed true. It should be noted, however, that the profession’s nobility is anchored in the observance and compliance of established professional standards by the people working in the legal industry, especially lawyers (Hazard, Hodes, & Jarvis, 2014). The standards are known as the ethics of the legal profession, or simply, legal ethics, or specifically in this article, Code of Ethics for Advocates. The most important scope of the legal ethics is to uphold the dignity and order of the law profession; to establish moral and fair transactions of the advocates with their clients, witnesses, and opponents; to maintain a spirit of friendly collaboration between the bar and bench in the furtherance of highest standard of justice; and to demonstrate a spirit of fraternity with bar.

Besides being professionals, advocates are court officers who play a critical part in the administration of justice. Therefore, advocates have the twofold responsibility of keeping the client’s’ interests confidently, while handling themselves as court officers. For these reasons, advocates are expected to follow the highest standards of integrity and honor. The conduct of advocates ought to reflect their honored position in society, which originates from the profession’s nobility (Bagust, 2013).  In fewer words, the services of advocates to their clients should be graced with compassion, morality, and law. In India, generally, advocates shall adopt the standards of professional conduct and etiquette outlined in Chapter II, Part IV of the Bar Council of India (BCI) Rules, as a guide for transacting matters associated with law. The advocates should also be guided by the Advocate Act, 1961.

The Advocate Act, 1961, under Section 49 (1) (c), authorizes the BCI to create rules meant to propose the standards of professional conduct and etiquette that need to be adhered to by advocates within the jurisdiction. Under this legal provision, BCI has successfully created many different rules related to the code of ethics of advocates. For instance, Chapter II of Part VI of the BCI Rules demands that practicing lawyers, who include advocates, shall have the social obligation and dignity of the legal occupation and high standard of veracity and effective service to their clients, as well as for other advocates, their opponents, and the public. Broadly, therefore, the responsibility of a lawyer is to make the law functional in terms of fairness and justice as much as possible. In that respect, a lawyer needs to act as a guard or law, as well as an advocate of a legal system against clients. While acting and presenting their cases before courts, advocates should act with self-respect. At all times, they should conduct themselves with dignity. Nevertheless, if there is proper reason for grave grievance against an officer of the judiciary, the advocate has a right and obligation to submit his or her complaint to relevant authorities.

Conduct in Court

Advocates should respect the courts always and be mindful that the dignity and reverence upheld towards courts are critical for the existence of a free community. As outlined under BCI Rule 3, 1961, advocates are not allowed to influence courts’ decisions illegally or improperly. The illegal and improper means include bribery and coercion.  Furthermore, Rule 3 prohibits advocates from communicating directly with judges in connection with pending cases. Advocates also have the responsibility of restraining and preventing their clients, based on BCI Rule 4, 1961, from falling back to sharp or unjust practice. Under BCI Rule 46, 1961, all advocates shall, while practicing law, be mindful that any person who honestly needs an advocate is ennobled with legal assistance even if he or she cannot pay for the legal services entirely or sufficiently.

Advocates should be aware of their social obligation of ensuring the oppressed and needy are entitled to free legal assistance. However, in determining where to practice that obligation, advocates are allowed to turn down requests to represent clients insisting on using unfair or indecorous means. In other words, advocates shall exercise their personal judgments in such matters, avoiding to blindly following the clients’ instructions. While corresponding and arguing in courts, advocates are expected to use ethical and dignified language (Gillers, 2014). That language need not be unparliamentary, and during pleadings, they should be careful to avoid damaging the reputation of other parties scandalously on delusive grounds. The BCI Rules prescribe how advocates should dress in court—they should be presentable all the time. However, outside court, particularly in other public places than on ceremonial occasions and as prescribed by the BCI and the court, advocates must not wear gowns or bands.

Conflict of Interests

Advocates must not act, or must stop acting further, in cases of conflict of interests between two current or potential clients; the advocate and the client or potential client; and a current client, a potential client or between potential clients (Folberg & Golann, 2016). Accordingly, advocates must turn down the opportunity to act where they or their partners, spouses, employers, employees, descendants, or ascendants directly hold some appointment or office, which may result in a conflict of interests. By extension, an advocate should not welcome invitations to serve as an advocate for clients if it is apparent the advocate or his or her associate or firm will be required to witness, unless the advocate’s evidence is strictly formal. Advocates shall neither create an impression that they are able to make use of any connection for the clients’ advantage. According to Folberg and Golann (2016), advocates should also avoid acting or pleading in matters in which they have financial interests. For example, they should avoid acting in bankruptcy litigation when they are also creditors of the bankrupt.

Advocates should avoid appearing in or before all judicial authorities for or against any establishment if they are members of the establishment’s management (Wilkins, Khanna, & Trubek, D2017).However; this ethical principle is inapplicable to members appearing as amicus curiae or without a fee on behalf of the BCI, Bar Association, or Incorporated Law Society. It is unethical for an advocate to accept invitation to acting in a matter where another advocate is representing the client regarding the same matter, except when he or she is certain that the first advocate has compensated lawfully on close of the brief. Withal this scenario, the second advocate may act in pressing special circumstances where the client’s interests would otherwise be extremely prejudiced, in which case he must notify the first advocate. In either case, the Chamber of Advocates may find it proper to authorize the second lawyer to act (Galliott, 2016).However, advocates must avoid accepting instructions being aware that a third party has conditioned that the advocates must act.

Service Fees

Advocates are obliged to accept any legal briefs in the tribunals, courts, or before any other authority, before or in which he offers to practice. They are required to charge fees that are equal with the fees charged by fellow advocates of the same rank at the Bar and a similar kind of the case (Lacity, Burgess, & Willcocks, 2014). Under special circumstances, Shapiro (2002) rejoins, it is justifiable for the advocates to turn down invitations to particular briefs. Advocates should also refuse calls to stand as surety, or attest the level-headedness of sureties that their client requires for the proceedings. In such cases where advocates receive instructions from other parties other than members in the legal occupation claiming to represent their clients, advocates should immediately and directly communicate with the clients to confirm whether that is true. If it is still doubtful, the advocates shall communicate with the clients or do anything necessary to confirm the third-party instructions soonest possible.

When charging for services, advocates should not set the amount depending on the triumph of the matter pursued. Neither should they set the amount as a per centum of the property or amount received after the victory of the matter. In other words, Code of Ethics for Advocates does not allow lawyers to set a fee contingent on the outcome of litigation or seek to share the incomes thereof (Curtis & Resnik, 1997). Clearer, advocates should not buy or deal in or stipulate for or offer to get any interest or share in any actionable claim. However, nothing in this rule in Code of Ethics for Advocates shall be applicable to shares, debentures, and stock of government securities, or to any instruments that are, for the moment, by law or tradition, negotiable or to any mercenary document of title to goods. The rule extends to forbidding an advocate from using proxies to directly or indirectly buy or bid for any property vended in the execution of an order in any case, prayer, or other proceeding in which he was professionally involved in any way. However, this forbiddance does not keep advocates from tendering for or buying for their clients any property that their clients may themselves legally tender for or buy, provided the advocates are clearly authorized in writing by the clients.

The Code of Ethics for Advocates does not allow advocates to adjust fee payable to them by their clients against the advocate’s’ own personal liabilities to the clients, which do not arise during the representation. In addition, advocates should not in any way take advantage of the clients’ trust and confidence (Kao, 2003). In effect, they are required to always keep accounts of the monies clients entrust to them. The accounts in question must indicate the amounts obtained from the clients or in the clients’ behalf. The accounts need to clearly indicate expenses and deductions with their respective dates, including all other essential particulars. In other words, according to Barrett and Herwitz, (2015), the bill of costs the advocate prepares should contain enough information to identify the item and matter to which it relates and when he or she rendered the services. In addition, the accounts should show whether the funds the advocate received from the client during the counsel or proceedings are on account of fees or expenses. This, therefore, forbids advocates from diverting part of the money received for expenditures as fees without clients so instructing in writing(Barrett & Hurwitz, 2015). Code of Ethics for Advocates forbids advocates from lending money to their clients for the purpose of any activity or legal proceedings in which clients involve such advocates. However, no advocate can be held guilty for a violation of this rule, if in the course of an incomplete suit, and without any agreement with the client regarding the same, the advocate feels obliged by reason of the Court’s rule to pay the Court on the client’s account for the continuation of the suit.

Disclosure and Withdrawal

Where advocates choose to accept clients’ instructions from third-parties, they are obliged to execute those instructions diligently, carefully, and skillfully. While doing that or anything in the interest of clients, advocates must keep their clients’ business and affairs private (Wood Jr., Hogan, Bhadha, & Dadrewala, 2008). Under normal circumstances, advocates should not withdraw from serving clients after agreeing to serve them. They can, however, withdraw only if they have compelling reasons and by rationally and sufficiently notifying clients. Upon withdrawal, they are required to refund fees not yet accrued to the clients. On terminating the brief, advocates should, in accordance with any prerogative and/or right of withholding, submit to their clients all papers and belongings to which the clients are entitled, as well as account for all the clients’ funds then in the advocates’ custody. Advocates should be careful not to accept briefs or appear in cases in which they are themselves witnesses. Further, if they reasonably believe they will be required to be witnesses at some point, they should discontinue appearing for the clients in question. However, when retiring from such cases, they should do so respectfully and without jeopardizing their clients’ interests.

At the beginning of their engagements and during the engagements thereof, advocates should fully disclose to their clients their connections to other parties and their interest in or about the matter as are likely to influence their clients ‘judgment in either engaging them or keeping the engagement(Wood Jr., Hogan, Bhadha, & Dadrewala, 2008). Advocates should uphold their clients’ interests fairly, honorably, and fearlessly. They should undertake the duty without fear of any hostile consequences to themselves. Accordingly, advocates shall defend clients accused of a crime notwithstanding the advocates’ personal opinions on the guilt of the accused. They should always keep in mind that they need to be loyal to law, which demands that no one ought to be chastised without compelling evidence. Advocates should not, directly or indirectly, divulge the communications between themselves and clients, including the clients’ advice. However, if the communications or advice breach Section 126 of the Indian Evidence Act, 1872, the advocates are liable to divulge.

When appearing for criminal prosecution, advocates should conduct the transactions in a way that it does not result in sentence of the innocent. Advocates should not, therefore, directly or indirectly, violate the obligations under Section 126 of the Indian Evidence Act. For instance, advocates shall not in any way bottle up any material or evidence that is meant to establish the innocence of the defendants. Advocates should be careful not to agitate or prompt litigation. One of the ways of avoiding this is to not act on any person’s instructions other than the clients’ or the clients ‘authorized agents. When clients make occasional sensible requests for information related to the brief, advocates should dutifully comply. In case an advocate terminates the relationship with his or her client, he or she should first issue sensible notification in the circumstances.

Social Conduct

In relation to society, whether in their individual or professional capacity, advocates should not act towards anyone in a manner that is evidently deceitful, fraudulent, or generally conflicting the appropriate exercise of professing as lawyers. They must not also use their positions and privileges as advocates to unfairly take advantage of the members of the public for themselves or anyone else. In upholding the nobility of the profession, if an advocate determines that an unqualified individual (for instance, posing as an advocate) is representing another party, the advocate should stop communicating with the unqualified individual, but without prejudicing his or her client’s interests. Advocates must also relate with other advocates in good faith, frankly, courteously, and consistent with their principal duties to their clients (Cooley, 2000).If this does not happen, especially from other advocates, in Malta, Jersey, and Seychelles, advocates are obliged to report any such serious violations to the Chamber of Advocates. If he or she finds it necessary, the advocate may obtain his or her client’s permission thereto (Donlan, Marrani, Twomey, & Zammit, 2017).

In relation to finding work, Code of Ethics for Advocates forbids advocates from soliciting work or advertising as they wish, but as prescribed legally (Burton, 1992). For instance, advocates should not promote themselves in interviews, circulars, personal communication except through personal relations, comments in dailies, advertisements, and photographs associated with cases in which they have been contracted or interested (Rossi & Marti, 2015). Advocates should not allow anyone to use their names or professional services to promote or start any unlicensed practice of law. To further protect individual integrity of lawyers, an advocate should not represent a client in any matter in which another lawyer has filed a memo for the same client. Nevertheless, with the other advocate’s consent, the advocate can appear for the same client. If it is impossible for the advocate to get consent of the other advocate who has filed a memo to represent a client, the advocate can make an application to the court for permission to appear. In such application, the advocate should provide the reason or reasons it was impossible to get such consent from the advocate who filed the memo first. Code of Ethics for Advocates only allows the advocate to appear following the court’s approval of the application.

References

Bagust, J. (2013). The Legal Profession and the Business of Law. Sydney L. Rev., 35, 27.

Bar Council of India Rules

Barrett, M. J., & Herwitz, D. R. (2015). Accounting for Lawyers. Foundation Press, West Academic.

Burton, G. E. (1992). Attitudes toward the Advertising by Lawyers, Doctors, and          CPA’s. Journal of Professional Services Marketing, 8(1), 115-128.

Cooley, J. W. (2000). Mediator & advocate ethics. Dispute Resolution Journal, 55(1), 73.

Curtis, D. E., & Resnik, J. (1997). Contingency Fees in Mass Torts: Access, Risk, and the          Provision of Legal Services When Layers of Lawyers Work for Individuals and        Collectives of Clients. DePaul L. Rev., 47, 425.

Donlan, S. P., Marrani, D., Twomey, M., & Zammit, D. E. (2017). Legal Education and the       Profession in Three Mixed/Micro Jurisdictions: Malta, Jersey, and Seychelles. In Small States in a Legal World (pp. 191-212). Springer International Publishing.

Folberg, J., & Golann, D. (2016). Lawyer Negotiation: Theory, Practice, and Law. Wolters Kluwer Law & Business.

Galanter, M., & Robinson, N. (2013). India’s Grand Advocates: A Legal Elite Flourishing in the Era of Globalization. International Journal of the Legal Profession, 20(3), 241-265.

Galliott, J. (2016). Commercial Space Exploration: Ethics, Policy and Governance. Routledge.

Gillers, S. (2014). Regulation of Lawyers: Problems of Law and Ethics. Wolters Kluwer Law & Business.

Hazard, G. C., Hodes, W. W., & Jarvis, P. R. (2014). Law of Lawyering. Wolters Kluwer Law & Business.

Indian Evidence Act. (1872). Indian Penal Code (1860). Criminal Procedure Code.

Kao, M. (2003). Calculating Lawyers’ Fees: Theory and Reality. UCLA L. Rev., 51, 825.

Lacity, M., Burgess, A., & Willcocks, L. (2014). The Rise of Legal Services Outsourcing: Risk   and Opportunity. A&C Black.

Rossi, J., & Weighner Marti, M. (2015). An Empirical Examination of the Iowa Bar’s Approach   to Regulating Lawyer Advertising.

Shapiro, S. P. (2002). Tangled Loyalties: Conflict of Interest in Legal Practice. University of Michigan Press.

Veeraraghavan, A. N. (1972). Legal Profession and the Advocates Act, 1961. Journal of the Indian Law Institute, 14(2), 228-262.

Wilkins, D. B., Khanna, V. S., & Trubek, D. M. (Eds.). (2017). The Indian Legal Profession in the Age of Globalization: The Rise of the Corporate Legal Sector and its Impact on   Lawyers and Society. Cambridge University Press.

Wood Jr., L. R., Hogan, E. M., Bhadha, C., & Dadrewala, J. (2008). Trade Secret Law and Protection in India. Intellectual Property & Technology Law Journal, 20(10), 25.

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In this article, Abhijeet Singh discusses how can Indians invest in US Stocks and Securities.

Can Indian Individuals invest in US Stocks and Securities?

Yes. Let’s find out how…

In 2004, the Reserve Bank of India introduced the Liberalised Remittance Scheme (LRS) to facilitate current and capital account transactions for individuals. Capital account transaction includes transferring or issuing of any foreign security by a person resident in India(section 6(3), Foreign Exchange Management Act, 1999). The current limit per resident individual per financial year is capped at $2,50,000 which subsumes private visits, gifts and education expenses. Although, exceptions are provided in cases of medical treatment. The permissible capital transactions includes a provision of making investments abroad vide section 6(iii) of the LRS. Acquisition and holding of both listed and unlisted shares, mutual funds, qualification shares, unrated debt securities, shares issued as remuneration for services rendered are all permitted under this scheme. Infact, reinvestment of the income earned on investment is allowed for (section 16, LRS).

Indian individuals can take these 2 routes to invest in the US Stock and Securities

Invest in a Global Mutual Fund or an Exchange Traded Fund (ETF) through your demat account Broker (eg. ICICI Securities, SBI Securities or Kotak Securities). Incase you do not have a demat account you can approach an Asset Management Company (AMC) to directly purchase a mutual fund of your choice, on paper without the need of a demat account.

OR   

Open a demat A/C with any Indian brokerage house which has a tie-up with a US brokerage firm and a banking account with an Indian bank listed as an authorized person of LRS (most of the major brokerage houses run by the banks listed under Authorized Dealer Category I, are authorized persons under the LRS)

If you simply wish to invest in a Global Mutual Fund or an ETF you need not bother yourself with the LRS or FEMA. These regulations will not apply to you in this case, if you are taking the first option. However, if you want your own portfolio of equities like Google, Facebook or Apple and you do not want your money to be wasted on AMC’s increasing tax liabilities due to GST (read more on this here), then considering the second option will be worth you time and money.    

(Note: I personally recommend using ICICI Securities as a broker as it is one of the leading brokerage houses in India. It also has a tie up with a US brokerage firm which enables its customers to trade in foreign equities. It also seamlessly integrates its banking facilities with its demat services and it is an Authorized Dealer Category I bank which makes the whole process a lot more easier. There are other players in the market offering similar facilities, feel free to choose and see which one suits your needs the best.)

Steps to follow for creating your own foreign equity portfolio

1. Open a demat account with your broker in India (who has a tie-up with a US brokerage house) or with a broker in the United States.
2. Fill out the Form A2 and send it to your bank(in India); this is an application for drawal of foreign exchange and a declaration required by the FEMA from the individuals to be submitted to their bank.
3. Voilà! Get ready to be the wolf of wall street…

Now before you go on to take your quaaludes*, keep in mind the following tax liabilities and rules for trading in foreign security.

Taxes

Income from sale of foreign securities is taxable in India.

Sale of shares by an Indian Individual, amounts to “[t]ransfer” of “Capital Asset” and is taxable as per the provisions of Section 45 of the Income Tax Act, 1961(IT Act) and will be taxable under the head “Income from Capital Gains.”

EXCEPTION

Holding domestic equities for over a year falls under long term capital gains and for domestic equities there is no tax levied on it while short term capital gains attract tax. However, holding foreign equity for long term will not entitle you to such benefits. It is liable to be taxed.

Taxes on dividends

Section 5 of the IT Act, 1961 provides a “[s]cope of total income” as elucidated under;

“All income received from all sources is, which received or is deemed to receive in India, accrues or arises or is deemed to accrue or arise in India or accrues or arising outside India, is taxable in India.”

Thus, dividends are liable to be taxed whether foreign or domestic. The earlier position under the IT Act, exempted profits earned from dividend pay-outs from any kind of taxes(section 10(34), IT Act). Now this section has been amended and dividends exceeding 10 lakhs will be be taxed at a rate of 10 percent u/s section 10(34) and 115BBDA of the IT Act.

EXCEPTION

The aforementioned exception provided for dividend pay-outs from domestic securities is not extended to the foreign securities. Therefore, the dividend generated from foreign equity is taxable under the head “Income from other sources” under the IT Act.

Will you be taxed in India and in the US as well?

No, thanks to the Double Taxation Avoidance Treaty between the two countries. The US-INDIA GTAA allows the tax on dividend to be deducted at source. In your case, if you’re investing in a US Security, you will have to pay between 15 to 25 percent tax at the source, i.e., in the United States of America.

Should you worry?

No. You are eligible for Tax Credits in India. Consult your Chartered Accountant for the same before filing your taxes. (For more information click here.)

Short selling US securities

Brokerage houses need what is called a margin account to be setup for an investor to enable short selling of stocks. Margin calls are essentially a form of collateral which the investor needs to provide in order to short stocks. However, section 5 of the LRS which reads as follows;

“[a]ll other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme” bars Indian individuals to set up margin calls. Thereby preventing short selling of foreign equity.  

Seems you can’t short Steve Madden like Wolfie after all!

[*DISCLAIMER: “quaaludes” is given as one of the references to the movie, ‘The Wolf of Wall Street’ throughout this article, the author does not, in any manner whatsoever, intend to promote, support or encourage the use of any narcotic substances or scheduled drugs banned by the Ministry of Health and Family Welfare in India under the Narcotic Drugs and Psychotropic Substances Act, 1985.]  

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This article is written by team JSLPG. Call for Papers – Journal of Sports Law, Policy and Governance (Published by NESFIL in collaboration with National Law University and Judicial Academy, Assam). Rolling Submissions accepted till 10th December 2017.

About the Journal

The JSLPG will be a bi-annual (May and December) double-blind peer reviewed open-access journal published under the aegis of North-East Students for the Furtherance of International Law (NESFIL), an International Law Students Association (ILSA) chapter, in
collaboration with National Law University and Judicial Academy, Assam.

Our aim is to build a global initiative for research and development in the niche area of International Sports Law, Policy and Governance. The journal will primarily focus on highlighting, contemporary and critical issues affecting the formulation, regulation and implementation of law and policy affecting sports.

All the submitted manuscripts will be put through a strict review process by an eminent Editorial Panel of experts in the area. Submissions are invited from legal practitioners, academicians, students and other stakeholders for the forthcoming issue (December, 2017).

Subject Area

The submissions may relate to (but not restricted to) the following themes –

• International sports Arbitration
• The regulation of Mega-sporting events
• Issues pertaining to Ethics and Governance in sports
• Comparative sports Law
• Legal Issues pertaining to E-sports
• Anti-trust issues in sports
• The legal battles of Fantasy sports
• Sports and Intellectual Property Rights (IPR)
• Human Rights issues in sports
• Gender Issues in sports

We seek contributions in the following forms

• Long Articles (between 7,000-15,000 words including
  footnotes).
• Short Articles (between 3,000-7,000 words including
  footnotes).
• Essays (2000-3000 words including footnotes).
• Book Reviews (1000-2000 words including footnotes).
• Case Commentaries (1000-3000 words including footnotes).
• Policy Reviews (No word limit).

Content guidelines

1. All submissions must be made through e-mails to jslpg@nluassam.ac.in in the form of an attachment in .doc or .docx (MS Word format). The subject of the email must be
edited as provided below:

Name of the Author_Type of Contribution_Name of the
Institute_Theme of the Contribution

2. All submissions must be accompanied by a cover letter containing,

• Title of the paper/essays/reviews/commentaries
• Name(s) of the author(s),
• Designation, including the institution/affiliation,
• The contact information(correspondence address, email, and phone number).

3. The submission must also include an abstract of not more than 250 words.

4. The submissions must conform to the prescribed word limit. The prescribed word limits are inclusive of footnotes but not the abstract.

5. The formatting shall be according to the following parameters:

Main Text and Headings

• Font – Times New Roman
• Font size – 12
• Line spacing – 1.5
• Margin – 1” from all sides.

Footnotes

• Font – Times New Roman
• Font size – 10
• Line Spacing – 1.

6. All citations shall be in accordance with The Bluebook: A Uniform System of Citation 19th Ed.

7. Co-authorship of up to 3 authors is allowed.

8. The submission should be original, unpublished and nonplagiarised. Authors are required to obtain written permission for the use of any copyrighted material and the same must be
communicated to the journal’s editorial board.

9. Copyright of all entries received shall exclusively vest with the JSLPG and the submission of work would imply that the contributor has assigned such rights to JSLPG on its publication in the journal. Only the moral rights will vest with the author.

10. Authors are also required to inform the Editorial Board if they have submitted their manuscripts to any other law journal and whether they have received an offer of publication.

11. JSLPG reserves the exclusive right to take the decision to publish the contribution or not.

Important dates

Last date for submission –Rolling submissions accepted till 10th December, 2017.

Contact Us:

All queries may be directed to the email – jslpg@nluassam.ac.in and in case of any immediate needs, contact us at – +91-7896524945, +91-8136086469

More information on our website HERE

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In this article, Ajay Sharma discusses acid attack sentencing and legislation in India.

Introduction

The incident of acid attack has been increasing phenomena in India and the most of the victim of the offence is especially women. While these attacks can be attributed to various factors such as the social; weakness of women and the existence of male-dominated society.

Which raised the question of the Indian society as well as the laws which are not able to deal with the problem? Acid is easily and inexpensively available weapon which makes it an ideal tool for the perpetrator. Acid is easily accessible at any shop near to your house anyone can buy it there is no restriction despite the Supreme Court has been passed the guidelines for the regulation of the acid but the problem is an implementation of those guidelines.

There is no specific and stringent legislation which deal with this problem because the acid attack is not like other offences in this the victim will have to survive with disfigured face whole life in which the victim has to face the ostracized not only from the society but some time from the family also. In India, there is no stringent law which can deal with this problem. This crime is mainly committed in four countries in the world namely, Bangladesh, Pakistan, India and Cambodia.

All the other countries have engaged in paving the way to an effective remedy for the survivors of the victims. Our neighbour, Bangladesh introduced a legislation for curbing the incidents of acid attacks in 2002. The legislation paased by Bangladesh is juresprudentially much stable when compared to the Indian law on the subject.Indian law neither effectively address the gravity of acid attack nor does it adequately help the acid attack survivors.

The Compensation is an important part of this crime but in India, there is no Criminal Injuries compensation Board yes we had heard much time that central government notify all states that form a compensation board but there is no single board which worked on it.

In Laxmi Vs. Union of India [1] the minimum compensation of 3, 00,000 peracid attack victim as not been fixed in some of the states. Let’s take an example of Bihar case in which 2 girls were attacked by acid in which the girls had caused several injuries and the state government gave them 25,000 and girls were already expended 5,00,000. This is a compensation processor scheme in India.

What is acid? According to the Black law dictionary, acid means “A solution with a Ph. below 7. It has a sour taste, releases hydroxyl, and makes litmus papers red. Strong acids are corrosive and weak ones are practically harmless. AKA mineral, inorganic, natural, and organic acids” unfortunately Indian Penal Code does not explain what is acid.

Laws in India

In India, there is no specific law which deals with the acid attack. Section 326A and 326B have been added in the Code Vide Criminal law (Amendment) Act 13 of 2013 with the object of making specific provisions for punishment in case of causing grievous hurt by use of acid etc. or voluntarily throwing or attempting to throw acid causing permanent or partial damage, or deformity to, or burns or maims or disfigures or disable any part of the body of that person.

Section 326 A of Indian penal Code says that – Whoever causes permanent or partial damage or deformity to, or bums or maims or disfigures or disables, any part or parts of the body of a person or causes grievous hurt by throwing acid on or by administering acid to that person, or by using any other means with the intention of causing or with the knowledge that he is likely to cause such injury or hurt, shall be punished with imprisonment of either description for a term which shall not be less than ten years but which may extend to imprisonment for life, and with fine;

Provided that such fine shall be just and reasonable to meet the medical expenses of the treatment of the victim.

Provided further that any fine imposed under this section shall be paid to the victim.

Section 326B of Indian Penal Code says that- Whoever throws or attempt to throw acid on any person or attempt to administer acid to any person, or attempt to use any other means, with the intention of causing permanent or partial damage or deformity or burns or maiming or disfigurement or disability or grievous hurt to that person, shall be punished with the imprisonment of either description for a term which shall not be less than five years but which may extend seven years, and shall also liable to fine.

Compensation

Section 357B the compensation payable by the State Government under Section 357A shall be in addition to the payment of fine to the victim under section 326A of the Indian Penal Code.

357C. All hospitals, public or private, whether run by the Central Government, the State Government, local bodies or any other person, shall immediately, provide the first-aid or medical treatment, free of cost, to the victims of any offence covered under section 326A, 376, 376A, 376B, 376C, 376D or section 376E of the Indian Penal Code, and shall immediately inform the police of such incident.”.

These sections inserted after the recommendation of the Justice J.S.Verma Committee and it was also a proposal of 226^th Report of Law Commission of India which dealt particularly with acid attack.

Though acid attack is a crime which can be committed against any man or woman, it has a specific gender dimension in India. Most of the reported acid attacks have been committed on women, particularly young women for spurning suitors, for rejecting the proposal of marriage, for denying dowry etc. The attacker cannot bear the fact that he has been rejected as seek to destroy the body of the women who have dared to stand up to him[2]

As we know that before the amendment there was no specific section or law which deals with this particular crime. Traditionally the offence is dealt with under Section 326 of the IPC which deals with ‘Voluntarily causing grievous hurt by dangerous weapons or means’. This provision also deals with causing grievous hurt using ‘corrosive substances’ which include acids.

Some cases before the inclusion of the section 326A of IPC

In Marepally Venkata Sree Nagesh Vs. State of A.P [3], the accused was suspicious about the character of his wife and inserted mercuric chloride into her vagina, she died due to renal failure. The accused was charged and convicted under Section 302 and 307 IPC.

In Devanand Vs. The State[4] a man threw acid on his estranged wife because she refused to cohabit with him. The wife suffered permanent disfigurement and loss of one eye. The accused was convicted under Section 307 and was imprisoned for 7 years.

State of Karnataka by Jalahalli Police Station vs. Jospeh Rodrigues[5] it is one of the most famous cases involving acid attack. The accused threw acid on a girl, Hasina, for refusing his job offer. This deeply scarred her physical appearance changed the colour and appearance of her face and left her blind. The accused was convicted under Section 307 of IPC and sentenced to imprisonment for life. Compensation of Rs. 2, 00,000/- in addition to the Trial Court fine of Rs 3, 00,000 was to be paid by the accused to Hasina’s parents.

Landmark cases related to the Acid Attack

Laxmi v. Union of India[6] This is a landmark case, in this case, the petition filed by the Laxmi (Acid Victim). In this case, Apex Court issued the direction for the regulation of acid to the State and UT. The court also addressed the problem of compensation. The Apex Court held that Section 357A[7]this section provides for the preparation of a scheme for providing funds for the purpose of compensation to the victim or his dependents who have suffered loss or injury as a result of crime and who require rehabilitation. The Apex Court direct that the acid attacks victims shall be paid compensation of at least Rs. 3 Lakh by the concerned State Government/UT as the aftercare and rehabilitation cost.

But in reality, no state has set victim compensation scheme and the compensation ranging is from 25,000 to 3Lakh depend upon the state to state which is not sufficient for the victim because the acid attack victim will have to go through several plastic injuries in a whole life.

Parivartan Kendra Vs. Union of India[8] I this case the PIL filed the petition for the plight of acid attack victims like free medical care, rehabilitative service or adequate compensation under Survivor Compensation Schemes- Highlighted plight of two Dalit girls – Acid attack victims. In this case, court also took a consideration that despite orders and directions of the same court in the Laxmi case, acid still readily available to most of the population in India. In this landmark judgment Supreme Court issued a direction that the State Governments/ UT should seriously discuss and take up the matter with all the private hospitals in their respective State/ UT to the effect that the private hospitals should not refuse treatment to victims of acid attack and that full treatment should be provided to such victims including medicines, food, bedding and reconstructive surgeries. The Apex Court said that there is no need to set up a separate Criminal Injuries Compensation Board and the Court also clarified that the State Government/UT concerned can give even more amount of compensation more than Rs. 3Lakh.

The Court also said that the State Government/ UT should take a stringent action be taken against those erring persons supplying acid without proper authorization and also the concerned authorities be made responsible for failure to keep a check on the distribution of the acid.

(Preeti Rathi Case) State of Maharashtra v. Ankrur Panwar[9] in the first such order in an acid attack in Maharashtra a special women’s Court here sentenced Ankur Panwar to death. The accused was convicted of the charge of throwing acid on Preeti Rathi at Bandra station in 2013 after she chose to pursue her nursing career, declining his proposal for marriage. Special Judge Anju S. Shende said “According to the mitigating and aggravating circumstances, the facts of the case and the recent acid attack judgments by the Supreme Court, the accused to death.

Laws in other countries

Bangladesh

 In 2002, the Bangladeshi Government passed two Acts, the Acid control Act 2002 and the Acid Crime Prevention Act 2002. The Acts address punishment of those involved in the acid attack itself and restrict import and sale of acid in open markets.

Some important feature of the laws include

• Establishment of a National Acid Control Council Fund
• Establishment of a Rehabilitation Center for victims of acid crimes
• Treatment for victims of acid crimes
• Provision of Legal Aid for victims of acid crimes, etc.

Cambodia

In Cambodia, the Cambodian Law on Regulating Concentrate Acid passed in November 2011.This law criminalizes acid violence provides regulation and controls for all forms of concentrated acid. The law provides an extensive definition of the term “concentrate acid” with an ability to supplements the list by sub-decree in the future. In addition, regulates the import, transport, distribution, retail, and storage of acid by requiring a license or permission letter issued by the relevant Ministry allowing such uses.

The acid attack still burning India

The sections (326A, 326B) have been added in the penal code by the Criminal (Amendment) Act 2013 would not be able to stop or decrease the crime but the crime rates still the same. The latest data released Ministry of Home Affair was that the years 2011,2012 and 2013 witnessed 83,85 and 66 cases being reported respectively, but this number shot up to 309 in 2014- almost four times the average number of acid attack cases in preceding years. The majority of acid attack was in the Uttar Pradesh (185), Madhya Pradesh (53).[10]

Conclusion and Suggestion

The height of brutality in acid attacks is more than that in the cases of rape. Rape is considered as destroying the very soul of the victim, but even then if she is kept at a safe place she can stay without disclosing her identity; but in the case of an acid attack, they [the victims] have to move around with their bodies. In the I would like to suggest making a particular legislation which deals with the acid attack and the problem of the acid victim because the acid victims will have to face problem in their whole life.

Suggestion

• To make specific legislation this would deal with the regulation of the acid.
• Insert a section 114B: Presumption as to acid attack in the Indian Evidence Act, 1872 which was recommended by the Justice J.S. Verma committee.
• Center Government and State Government both would come forward and make a separate fund which deals with compensation payable to acid victims.
• The victim, who cannot work, should get a pension.

References

[1] Laxmi Vs. Union of India 2014 4 SCC 427

[2] Proposal for the inclusion of acid attacks as specific offences in the Indian Penal Code and a law for compensation for victims of crimes, Law Commission of India,2008 at p.3

[3]Marepally Venkata Sree Nagesh  Vs.  State of A.P, 2002 CriLJ 3625

[4] Devanand Vs. The State  1987 (1) Crimes 314

[5] State of Karnataka by Jalahalli Police Station vs. Jospeh Rodrigues  Decided in the Hon’ble High Court of Kerala on 22/8/2006

[6] Laxmi v. Union of India  2014 4 SCC 427

[7] Inserted in the Code of Criminal Procedure,1973 by Act 5 of 2009

[8] Parivartan Kendra Vs. Union of India  2015 (13) SCALE 325

[9] State of Maharashtra v. Ankrur Panwar  Decided in September 2016

[10] The data submitted by the Ministry of Home Affair to the Supreme Court in the ( Laxmi V. Union Of India )

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In this article, Gaurav L. Deshpande, a practicing advocate at Aurangabad High Court discusses amendments to section 4 of the Payment of Gratuity Act.

The Payment of Gratuity Act, 1972 is for employees engaged in various establishment. The term Gratuity connotes a gift for the services rendered over a long period of time for an organisation.

This all exercises need to be done under social object i.e. to pay a particular amount as the gift for the whom, who has worked for an institution for a considerable period of time.

The act gives eligibility that, the person who worked for five or more years along with other requirements, are eligible under law for gratuity. Provisions of the Act are settled and there are catena of judgment covering various issues under the act.

The point of consideration or topic for present discussion is that employees claim gratuity ones they have received in full the retirement benefits along with gratuity as per their request, in view of the amendment in provisions of clause 3 to section 4. Section 4(3) of the act reads as,” The amount of gratuity payable to an employee shall not exceed. (Rs.3,50,000/-) which came to be amended (Rs.10,00,000/-). By the amending Act, 2010.

The issue arises is that, whether now once the employees, who have after retirement themselves filled in, FORM 1 and though themselves gave the calculation are now estopped from claiming the benefits in terms of amended provisions.

The peculiar circumstances in the present situations are that the employer bank is a co-operative society and is not in any manner supported or funded by the government. The bank has to run its business on its own funds raised. For those reasons from time to time the bank has insured itself with the Life Insurance Corporation for the payment of gratuity. It is also pertinent to note that, the employees joining the bank accepts the offer and in the appointment banks specifically mentions that, the employee has agreed to the benefits provided.

The retiring employees are/ can be categories into 3 classes VIZ.

1. The employees who have been retired in due course.
2. The employees who have been retired Under Voluntary Retirement Scheme.
3. The employees whose gratuity calculation comes below 5 lacks.

So far as the questions of all the employees in concern there is direct judgment of the Hon’ble Supreme Court of India in the case of State Government Pensioners Association and ors. V/s The State of Andhra Pradesh reported in AIR 1986 Supreme Court 1907, wherein there was the discussion as to applicability of the payment of gratuity act on revised rates before or after the amendment and the law has been laid down that, the employees cannot claim once they are paid with.

It is been specifically held that the case with regards to gratuity, which has already been paid to the petitioner, on the then prevailing basis as it has obtained at the time of their respective dates of retirement and it has already been paid to them on that footing the transaction is completed and closed this ratio decidendi covers the present issue.

In the present discussion, it is admitted position that all the employees, who are seeking the benefits are retired from 2013 which to January 2017 they all have themselves filled in the application more particularly in the manner, FORM 1 appended to the Payment of Gratuity Rules 1972. And Those forms bear their signature. Also, all the employees have accepted the calculation. In view the aforementioned Judgment of the Hon’ble Supreme Court and the principle of jurisprudence, principle of employer-employee relationship and the principles of contract would now operate Estoppel and more particularly in the words of the judgment of Hon’ble Apex Court referred supra, once the transaction is completed and closed there is no scope for up-word or down word revision. The employees who have been retired in due course are not entitled to claim for the reasons based on the judgment of Hon’ble Apex Court supra.

Now in relation to the categories mentioned above, the employees who have opted for Voluntary Retirement Scheme in the case of Manojbhai L.Shaah and others V/s Union of India decided on 07/01/2015 it has been held that the employees who retire under the scheme form a separate class of employees, are given many benefits, which are not given to the employees retiring in normal course. If they of form a separate class by any stretch of imagination, it cannot be said that, of those who retire under the scheme and those in normal course are similarly situated. Thus those employees, who are retired by VRS scheme can be put off different footing.

So far as the employees whose calculation is less than Rs.3,50,000/-. There is no question of them seeking any more amount.

Those employees, who are retired in due course in that regard the employer bank is shielded with the protection of doctrine of Estoppel.

When the employer is secured then the settled legal principle the interpretation of the provisions needs to be done because payment of gratuity act being a welfare legislation though receiving liberal interpretation but there are some difficulties still sustaining in the jurisprudential aspects. The Hon’ble Apex Court, in the case of Regional Director Employees, A State Insurance Cooperation V/s Ramanuja Match industries reported in 1985 AIR Supreme Court 278 has held that, though the beneficent legislation to receive liberal interpretation, however the court not to travel beyond the scheme statute and extend scope statute on pretext of extending statutory benefits to these not cover by the scheme of the statute.

The plane reading of section 4 of Payment of Gratuity Act, which head as ” Payment of Gratuity”, which in its first clause gives the employees, who become illegible for gratuity.

In its clause 2 provides for the calculation of gratuity, which is a formula and in its 3^rd clause which is negative in sense the upper limit to the payment of gratuity is embodied, intention of legislature behind inserting upper limit rather than lower limit which shows that, those provision needs slant weigh on the side of employer. If an exact interpretation of the section is to be done. The provisions need to look into the condition of service and embargo on the right of the employer to pay gratuity.

It is also to need to considered that while joining the service, the employer was made known the prevailing benefit which are incumbent for the service and after the service, those were very well known to the employees the gratuity his already secured with the insurance company by the bank and hence now the employees are not having any right to see the benefit.

The amended act of 2010 neither changes the entitlement nor it puts any burden on employer it only gives option. Thus employer, who are willing to pay more gratuity for them the ceiling extends from 3.5 to 10 lacks, which does not create any right in the employees more specifically when they have applied and has received gratuity for which transaction is closed and complete. in this view of the matter, I conclude, with my conclusion which is purely the opinion.

Those employees whose gratuity calculation is less than 3.5 lacks there is no question of them to seek enhancement. so far as the employees who are retired under voluntary Retirement scheme they cannot seek benefits of the amending provision and they stand on a different footing on the reasons /parameters Laid down in Manojbhais Judgment as they cannot equate themselves with those normally retiring and for those who retired in normal course for them the transaction is complete and closed this also bars those who retired voluntarily.

BIBLIOGRAPHY

The payment of gratuity act, 1972- bare act

Commentary on The payment of gratuity act, 1972 by Kharbanda

The payment of gratuity rules 1972 bare act.

Authorities Cited

1. Manojbhai Shah V/s Union of India Hon’ble  Supreme Court of India on 07/01/2015.
2. AIR 1986 S.C. 1907 State Government Pensioners Association V/s State of Andhra Pradesh
3. 1985 S.C. 278 Regional Director Employees A State Insurance Corporation V/s Ramanuja Match Industries.

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In this article, Abhijeet Singh discusses whether a real-estate agent can advertise for under-construction projects when its application is pending or not.

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) has made it mandatory for promoters and real-estate agents to register with the RERA Authority in each state. As of now there are 22 States and Union Territories which have established these authorities and formulated rules in consonance with the RERA Act, as listed below:

Which projects are required to be registered?

As per Section 3 of the RERA, the following kinds of commercial and residential projects (w.e.f 1st May 2017) are required to be registered under this act:

• that are ongoing, defined as projects for which a completion certificate has not been obtained from the local competent authority (whereas completed projects are those which have been given a completion project by the competent authority) or,
• where the area of the proposed land (not carpet area as per Section 2(k) of the RERA Act) for construction exceeds 500 sq.mt. or,
• which have more than 8 apartments

This threshold limit can also be reduced by the individual states or Union Territories.

Advertisement of projects with pending application

The RERA Act strictly prohibits promoters to advertise, market, book, sell or offer for sale or invite persons to purchase any plot, apartment or building in projects which have not been registered vide Section 3 of the Act.

Registration of real-estate agents

The RERA Act has made the role of real-estate agents more definitive and accountable. This had been done to curb the common mis-selling practices by the agents. Section 9 of the RERA Act requires agents to get themselves registered in order to engage in sale or purchase of any plot, apartment or building. A registration number is provided by the Authority upon successful registration which is then required to be quoted in every transaction facilitated by him (see Section 9(5).

So can the real-estate agents advertise for ongoing project?

NO.

The registration of the project mandates the promoters to share details of the real-estate agents at the time of registration of the project which includes registration of the under-construction projects to share details of its real-estate agents under Section 4 clause (j). Therefore, without being registered with the project, the real-estate agent cannot even facilitate in sale or purchase related to project let alone advertise it.

Can additional real-estate agents be added to the project after the project is registered?

NOT as of now.

Real-estate agents are required to be registered with the project at the time of project registration. At present, there is no provision of adding on agents to the project.

However, before the project registration window closes; the Maharashtra RERA has allowed the promoters to edit typographical errors and name corrections till 31st July 2017. (If you need to update your details please click here.)

Does a broker or real estate agent need to be registered under RERA for dealing in secondary sales?

No, RERA requires registration of real-estate agents if they are involved in selling ongoing or new projects that are required to be registered under the Act. If you are operating in the secondary sale market, that is, selling property which is already owned by someone, then you are not required to be registered under RERA.

Does a broker or real estate agent need to be registered under RERA if he or she is dealing in property which is itself not required to be registered under RERA?

If a broker is dealing with a builder’s flat of a project which itself does not require registration, that is, it has a construction area of 500 sq.mt. or less, or 8 apartments or less, no registration is required for a broker.

Does a broker need to be registered for dealing in rentals?

The RERA Act will not affect the brokers who are dealing in rentals. They do not have to register with the Authority, nor do they need to quote their registration number in dealing with projects which are not registered under this Act.

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In this article, Shagun Bahl discusses the Legal framework against Marital Rape in India.

MARITAL RAPE – THE WAY AHEAD

Marriage is a state of being united to a person of the opposite sex as husband or a wife in a consensual and contractual relationship recognised by law. It is considered as a sacred thread which binds two individuals in a lifetime of togetherness.

MARITAL RAPE

It is obnoxious to put something sacred as marriage and a heinous crime like rape in a single statement. But the reality seems to merge them together in form of marital rapes.

Marital rape is the act of forcible sexual intercourse by one spouse without the consent of the other spouse. Consent is the keyword which changes the marital intercourse to a marital rape. Marriage cannot be considered as the license to a spouse to have a forcible sexual intercourse with the other spouse without spouse consenting to it. The forceful sexual intercourse is an attack on the other spouse who do not wish to be a party of it and marital bonds cannot take away a spouse’s right to have autonomy on their bodies. It is definitely a form of sexual, domestic, psychological abuse on the partner in the marriage as the spouse committing marital rape is disregarding and disrespecting the other spouse’s identity and feelings attached to the forceful act being happened to them. In a marriage, there ought to be mutual respect, space and companionship among the couple and not the suffocation which is attached with forcibly giving absolute physical rights to the respective spouse in the marriage. Marriage should be an extension of a person’s identity and not shackles which forcibly traps them in a suffocated marriage.

MARITAL RAPE: THE ACT OF TRAUMA ON BODY AND MIND

As published in Marital rape – Wikipedia

Rape by a spouse, partner or ex-partner is more often associated with physical violence. A nine-nation study within the European Union found that current or ex-partners were the perpetrators of around 25% of all sexual assaults, and that violence was more common in assaults by ex-partners (50% of the time) and partners (40%) than in assaults by strangers or recent acquaintances (25%).

Rape in itself is such a traumatic experience and if faced by a spouse in a marriage, it can leave an everlasting scar on the spouse’s mind and can humiliate the spouse to such a core that the relationship cannot be fixed with the partner ever after that humiliating sexual experience.  Marital rape can be more traumatising experience than rape by a stranger as in a marital rape as the trust bond between the partners are broken blatantly which is beyond repair. It perpetuates feeling of mental agony, humiliation and hate and contempt against the partner.

It invokes feeling of emotional despair and victimization in a spouse which faces forced sexual intercourse with their spouse and it is not a one time experience which makes it impossible for the spouse to get rid of such feelings to feel normal ever after such experience.  

These kinds of rapes such as marital rape is different than other forms of rape and sexual abuse as the victims in these cases feels locked in a cage with their rapist, unlike other rapes in which the victim can separate themselves from their offender and gets time to heal themselves from such traumatic experience. This can prove to be destructive for the spouse mental and emotional state of mind and can aggravate her sufferings with no legal recourse available to her to come out these trappings.

The researchers Finkelhor and Yllö remarked in their 1985 metropolitan Boston area study summed it well for the spouse who faces marital rape.

“When a woman is raped by a stranger, she has to live with a frightening memory. When she is raped by her husband, she has to live with the rapist“.

EVIDENCE OF MARITAL RAPES

Behind the closed doors, it is hard to picture the dark reality of marriages in form of marital rapes. The real picture of marriages in society at large is more often seen to carry the burden of high moral expectations out of the married couple rather than addressing the hidden realities of their married life. For addressing these hidden realities behind closed doors, we would first have to ask this question to ourselves that how actually will one prove that he/she is being raped by his/her respective spouse. In order to to get justice in marital rape cases, it is paramount to established before the Courts that the intercourse was forced on the spouse and to substantiate the allegations on strong evidence produced for the same.

Under Section 102 of Indian Evidence Act, the burden of proof lies on that person who would fail if no evidence at all were given on either side. Therefore the burden of proof will lie on the spouse who will allege that he/she is a victim of marital rape. Proving a marital rape is most difficult as practically bringing out the dark reality of one’s married life is next to impossible for the simple reason as to how will anyone prove it the intercourse was so brutal tantamounting to “rape” in nature and will society accept it ?

To prove the brutality of intercourse or forced sex by one’s spouse, there are few evidences one can substantiate on –

• Physical injuries to vaginal and anal areas, lacerations, bruising.

• Cruel conduct in sexual intercourse e.g. battery, mental torture

• Evidences of damages to their genitals and rectum leads to the strong indicative proof that women are subjected to very violent rapes.

• Under the Indian Evidence Act (IEA), when alleged that a victim consented to the sexual act and it is denied, the court shall presume it to be.

• Nail marks, scratches and physical injuries around penis area in case of male victims

WHY INDIA IS NOT READY TO CRIMINALIZE MARITAL RAPE?

India is trapped in age-old traditions and the talks in India to criminalize marital rape have almost been stalled from past few decades as Indian mindset is still not ready to accept that marital rape is a crime and as we are so trapped and blind to save the sanctity of marriages that we do not realise those kinds of marriages are already broken and are beyond repair. We as a country are so behind to have this talk that can be deduced from the judgements laid by Honourable Supreme Court the judges who were unable to contemplate on LGBT issue. The answer is same for all these social issues as our Indian mindsets are so rigid in their approach to uphold the Indian tradition system and cultural values that they have shut their eyes and ears and not addressing the real contemporary issues faced by society.

The article published in:

https://bpr.berkeley.edu/2015/10/29/trapped-in-traditions-prison/

clears the picture on how as a nation we are failing to address marital rape as a crime. For the first time, the Criminal Law (Amendment) Bill of 2013, established a definition of rape within India’s legal code and declared a strict prison sentence to anyone who committed it. Despite its progressive nature, the bill did not criminalize marital rape or assault of any kind.

Section 375 of the Criminal Law (Amendment) Bill of 2013 states that “sexual intercourse or sexual acts by a man with his own wife, the wife not being under fifteen years of age, is not rape.”

Marital rape is among the leading offenses committed to women worldwide. While gathering definitive statistics about marital rape with a small margin of error is difficult, a study conducted by the World Health Organization reports that at least 10 percent but as many as 69 percents of women across the world admit to having been physically assaulted by an intimate male partner.

The rigidity of the Indian legislature and judiciary’s stance on marital rape stems from cultural expectations of the role of women, traditional beliefs about the purpose of sex, and existing laws that fail to acknowledge and criminalize marital rape.  

The Indian society has always tried to shun the voice of social activists , NGO’S, countless Indian women who seek justice from our courts leaving with no legal recourse and they are always showed their ways to address the marital rape under Domestic Violence Act, 2005 which is in itself is inadequate to address the marital rape as a crime.

Protection of Women from Domestic Violence Act, 2005 offers civil remedies for crimes against women including marital rape It is absolutely unreasonable to view marital rape as a civil wrong than as a criminal wrong. It is almost like crushing a women’s right in order to force her to live with her rapist.

Criminalizing marital rape or spousal rape seems far from the reality in India as neither the lawmakers of this country nor the Indian judicial systems are prepared to bridge the gap between marital rape and rape as they are both heinous crimes which could scar the victim for all their life.

LEGAL SOLUTION – CHANGES IN DIVORCE LAWS IN INDIA AND CRIMINALIZATION OF MARITAL RAPE

Marital bonds are considered sacrosanct in India and marriages in India do not thrive on sex. But is this the reality in modern context or just a camouflage in today’s society of marriages. These are some hard hitting realities of this contemporary world in which marital bond is not as sacred as it is considered to be.  There is a pressing need to criminalize marital rape as crime and amend divorce laws of the country by making marital rape as a legal ground to take divorce from an abusive marriage. The criminalization of marital rapes will also have a domino effect on divorce laws in the country as the “marital rape” could also become a ground for the couples to file for divorce like other grounds like cruelty, adultery etc.

The changes in divorce laws by making marital rape as ground for divorce will definitely be a great relief to all the victims of marital rape who now will legally be able to take an action against their respective spouse. The other relief which victims of marital rape is that through changes in divorce laws is that they can seek compensation from the competent court for the physical and mental torture they have gone through because of the marital rape is done by their spouse.

INTERNATIONAL STANDPOINT –  MARITAL RAPE

Internationally, many progressed nations have criminalized marital law as in civilized societies there is no place for sexual assaults on women whether inside or outside their wedlock. Marital rapes have been criminalized in these societies long ago simply because the marriage as an institution rests on mutual respect and companionship and any sort of forced sexual act on the spouse is great attack on one’s dignity and to the marriage’s union. It cannot be left to be practised in any civilized society with a legal stamp on it. The lawmakers in international countries realising the deterrent effect marital rape has on society decided to put an end to it and have criminalized marital rapes.

The article published in

https://thewire.in/36111/indian-exceptionalism-cannot-be-a-valid-excuse-for-india-not-to-criminalise-marital-rape/ submits the international standpoint on Marital rape internationally.

In the US, spousal rape is illegal throughout the country. The criminalisation of marital rape is fast becoming the norm in the world, with many Latin American, South East Asia, European Countries, and African Countries passing laws to this effect. A table with a list of countries with laws against marital rape can be found here. 2.6 billion women still live in countries where marital rape is not an offence, and spousal rape remains entirely legal in 35 countries.

JUDICIALLY AWAKENING –  WHAT IS THE WAY FORWARD FOR INDIA

The challenging question is “Can India criminalize marital rape”? Is there a road forward to criminalize marital rape ?

The only way forward to criminalize marital rape is to persuade the Courts with principled advocacy through writ petitions under Article 32 of the Indian constitution and Public Interest Litigations (P.I.L.) filed before them to judicially awaken them that the time has come for India to criminalize martial rapes in light of devastating effects it is having in the society and to push the Indian mindset forward while breaking the traditional chains as the other progressed nations have dealt with this social evil. Still, India is far away from criminalizing marital rape but there are hopes to turn this into a living reality by active judicial activism and with the sincere efforts of principled advocacy persuading Honourable Courts to depend on justice to innumerable victims of marital rape in India.

The post Legal framework against Marital Rape in India appeared first on iPleaders.

In this article, Shagun Bahl discusses the reasons why India’s Abortion Law is failing its women on so many fronts.

WHY IS INDIA’S ABORTION LAW FAILING ITS WOMEN

Abortion laws in India is the mirror image of the patriarchal social system in India which still continues to practice not only in Indian society but also on heart and minds of thousands of women in India who still are aborting their right to govern their life as they want like these abortion laws in our country wherein also they are aborting their right to terminate their pregnancy if they fail to meet the parameters as laid out in  Medical Termination Of Pregnancy Act, 1971 http://tcw.nic.in/Acts/MTP-Act-1971.pdf. They still, in 21st Century have to seek consent from the courts to abort their own child on terms and conditions laid out in an outdated piece of the act called The Medical Termination of Pregnancy Act, 1971.

The MEDICAL TERMINATION OF PREGNANCY ACT, 1971

The Medical Termination of Pregnancy bill was passed by both houses of Parliament and received the assent of President of India on 10th August, 1971. This law guarantees the Right of Indian women to terminate their unintended pregnancies by a registered medical practitioner in a hospital maintained or established by a Government or place recognised in the Act by the Government. The note to be taken here is that all pregnancies cannot be terminated. There is a qualification in the act mentioned in Section 3 of the Act which under extraordinary circumstances allow Indian women to abort their child.

IMPORTANT PROVISIONS OF MEDICAL TERMINATION OF PREGNANCY ACT, 1971

Section 3 – When Pregnancies may be terminated by registered medical practitioners.

The pregnancy may be terminated by a registered medical practitioner in following cases,-

(a) Where the length of the pregnancy does not exceed twelve weeks if such medical practitioner is,

or

(b) Where the length of the pregnancy exceeds twelve weeks but does not exceed twenty weeks, if not less than two registered medical practitioners

are of opinion, formed in good faith, that,-

(i) the continuance of the pregnancy would involve a risk to the life of the pregnant woman or of grave injury physical or mental health ; or

(ii) there is a substantial risk that if the child were born, it would suffer from such physical or mental abnormalities as to be seriously handicapped.

Section 4 – Place where pregnancy may be terminated

No termination of pregnancy shall be made in accordance with this Act at any place other than,-

1. A hospital established or maintained by Government, or
2. A place for the time being approved for the purpose of this Act by Government.

Section 5

Sections 3 and 4 when not to apply

1. The provisions of Sec.4 and so much of the provisions of subsection (2) of Section 3 as relate to the length of the pregnancy and the opinion of not less than two registered medical practitioner, shall not apply to the termination of a pregnancy by the registered medical practitioner in case where he is of opinion, formed in good faith, that the termination of such pregnancy is immediately necessary to save the life of the pregnant woman.
2. Notwithstanding anything contained in the Indian Penal Code (45 of 1860), the termination of a pregnancy by a person who is not a registered medical practitioner shall be an offence punishable under that Code, and that Code shall, to this extent, stand modified.

INEFFICIENCIES OF MEDICAL TERMINATION OF PREGNANCY ACT, 1971

This consent seeking practice of taking permissions from the Court to terminate their pregnancies only before 12-20 weeks on medical opinion from Medical Practitioners seems to have defeated the purpose for which it was laid originally in  Medical Termination Of Pregnancy Act, 1971. Ostensibly, the reason for the relatively low time frame to terminate the pregnancy was to safeguard the girl child by preventing sex-selective abortions or female feticide in this country but this law has contradicted the modern reality of today and the brunt of it is being faced by women who face some abnormalities during their pregnancies , rape survivors or simply any woman who wishes now to keep their child as she feels unprepared for it Lawmakers by making abortions as a qualified right are taking away right of women to have an autonomy on their own body and to decide whether they want to keep the child or not and leaving them with no option  than turning to  the doorsteps of court for seeking permissions to terminate their pregnancies, if they do not wish to keep the child.

It is provided in the act that a woman do has the say in aborting the child only if she is 18 years of age i.e. the age of attaining majority and not lunatic. Though the lawmakers have considered the situations where pregnancies constitute a grave impact on the mental health of the women or the pregnant woman’s life is at risk or where the pregnancy has been caused as an outcome of rape which is itself a big trauma for the women to cope with all her life and this act also realises that such unwanted pregnancy will only aggravate her misery. But in a holistic view , lawmakers have disregarded other facet of a woman’s life where she maybe by her free will do not want to carry the child as she is not ready for it or she does not feel financially or mentally fit to carry the responsibility of a  having a child. It seems as the lawmakers and courts only can guarantee women’s right to safe abortion only when she is in a miserable position in her life or facing predicament in her life .

The question here is when the woman is allowed to exercise her rights on their body? only in certain difficult junctures of life or always as a free citizen of this country?  

ABORTION LAW – REALITIES IN INDIA

The failure of abortion laws in this country in dispensing justice to the women for whom the law was made and how it stands can be understood by witnessing the plight faced by these underaged rape girls who are the biggest victims of this 20 week mark provided in the Medical Termination of Pregnancy Act, 1971 as the pregnancies in this act are discovered very late and the stigma attached to rape survivors in this country silences them in such a way that they are left with no option other than to plead before the court to seek permission to  terminate the unwanted or unintended pregnancy but in most cases they have to forcibly deliver the child as they are pregnant with the child for more than 20 weeks.

The qualified legal status of abortion in India questions the right Indian women possess on the reproductive life and the restrictive abortion laws in India attacks the very sanctity of gender neutrality which the constitution of this country guarantees to provide its women. The abortion laws of this country are failing its women in many fronts as we as a society has witnessed time and again that this restrictive abortion practices has only continued to jeopardizes women’s reproductive rights and played with their life and health and increasing to their plight the slow legal machinery of this country which makes the whole law futile as after hitting the 20 week mark of their pregnancy they are not allowed to medically abort the child and in some cases can also cost the life of mother due to unsafe deliveries in complicated cases.

It is worth mentioning here that a report published in case of a 35-year-old HIV+ woman from Bihar was forced to have a baby because her paperwork got stuck at a government hospital for 4 weeks and she crossed the 20-week mark. A long legal battle ensued, which ended with both Bihar’s high court and the Supreme Court rejected her abortion plea in.The reason cited by the court cast light on the failure of abortion laws in the country which are so rigid in law and fails to empathize with the sufferings of women.  She was already 26 weeks pregnant by then and due to this she was not permitted to abort her child as it seemed a risky proposition to the courts.

It is worth applauding that there has been change of heart in some cases by Supreme Courts where they have on humanitarian grounds permitted women and underaged rape girl child to abort pregnancies off the 20 week mark as provided in Medical Termination of Pregnancy Act, 1971. (MTP) Act.

But still we need in light of compelling circumstances, a stronger law which can empower its women rather than leaving them alone to be victimized by the hands of outdated MTP Act,1971.

ABORTION LAW AND RIGHT TO LIFE AND PERSONAL LIBERTY UNDER ARTICLE 21 OF CONSTITUTION OF INDIA

Abortion is act of terminating a child’s life before even its existence. The law has to strike a balance between a mother’s mental and physical state to bring the child to life and the life of child which is at stake. This is a big dilemma which Courts have to resolve within the four corners of law with a humanitarian approach to bring justice to both mother’s and child’s life. The Constitution of India recognizes right to life and personal liberty under Article 21 to every person which includes both man and woman.  Right to abortion is the fundamental right which every woman has among the various other rights she possesses as this right is directly a matter of privacy which very recently is accepted by our apex court as an integral part of fundamental right under Article 21 of the Indian Constitution. The bone of contention is to bridge the gap between right to life of pregnant women and right of life of an unborn child. The Medical Termination of Pregnancy Act, 1971, as if now, has not been able to solve the conflict of life of mother versus life of child effectively.

In the case of  R and anr v Haryana too, the petitioner was a minor. She was pregnant as a result of rape and was in the 24th week of her pregnancy. The amicus curiae in this case contended before the high court that the protection of the rights of an unborn child is an obligation cast upon the state under constitutional provisions, and in view of simple understanding of the provision of Section 5 of the MTP Act,, a conflict between the right to life of the pregnant woman and the right to life of an unborn child would yield in favour of the woman.

It is to be noted to force a woman to continue with a pregnancy that she does not want to have is an infringement on the right to privacy and dignity of the woman as well as an infringement of the right to a healthy and dignified life of the nascent life in her womb.Article 21 guarantees right to live a dignified life to every person and is a constitutional right which cannot be taken away from the victim in the present case.

Thus, the Courts in abortion case ought to examine the plea of abortions of pregnant women from two standpoints, firstly protecting the life of pregnant women and secondly the rights of unborn child whose life could be taken away by the said abortion.

ABORTION LAWS IN CASE OF JUVENILE RAPE VICTIMS

The juvenile rape victims are the victims of abortion law and facing the brunt of Section 3 of Medical Termination of Pregnancy Act, 1971 as mostly in cases of juvenile rapes, the pregnancy is detected at a very later stage adding to the misery is the social stigma attached to it which silences the juvenile rape victim to come out and speak about it. The provisions of Medical Termination of Pregnancy Act, 1971 leaves no recourse in case of juvenile rape victims also, they too have to seek consent from the Courts before aborting the child in their womb if their pregnancy exceeds 20 week. There is only little protection given in case of juvenile rape cases where they are allowed to abort their child if the anguish caused by the unwanted pregnancy constitute as a grave injury to the mental health of pregnant women or there is a danger to their life as provided in Section 5 of the Act.

But as in most unfortunate cases, the under-aged rape victims have to keep the unwanted pregnancies birthed out of rape and sexual assaults

The most recent case of rejection of plea of abortion of juvenile rape victim by District Court in Chandigarh which shocked our consciousness blatantly was “when  10-year-old rape survivor was denied permission to terminate the pregnancy resulting from the rape. The child was allegedly raped continuously over a period of time by her maternal uncle.The plea for abortion was rejected after it was confirmed that the minor was 26 weeks pregnant. According to the Medical Termination of Pregnancy (MTP) Act of 1971, the legal ceiling for abortions in India is 20 weeks. In more advanced pregnancies, exceptions are made by the courts if the foetus is proved to be genetically unviable or if the pregnancy poses a grave threat to the mother’s life.”

This is the most heartbreaking reality come out of provisions of Medical Termination of Pregnancy Act, 1971 that how a 10 year old victim who already is devastated by the rape done by her maternal uncle will also now have to go through the unwanted pregnancy which will be detrimental for her well being and life of the child she will be forced to give birth to.

ABORTION LAW OF INDIA – STEP FORWARD

The liberalization of abortion laws is the only way forward to empower the Indian women to exercise their reproductive rights and the making informed decisions in giving birth to a new life in a safe, healthy and productive environment. The unsafe abortions are widely prevalent even after 46 years of the act coming into force and thus making it imperative for the legislators to amend the Medical Termination of Pregnancy Act, 1971 in order to remove the roadblocks of abortions not being legally permitted after the gestational age of 20 weeks of Pregnancy.

AMENDMENTS

DRAFT MEDICAL TERMINATION OF PREGNANCY AMENDMENT BILL,2014

• The draft Medical Termination of Pregnancy (Amendment) Bill, 2014 purports to amend Section 3 of The Medical Termination of Pregnancy Act, 1971 in order to remove the length of pregnancy clause in cases to be decided for aborting a foetus diagnosed with substantial foetal abnormalities as may be prescribed.
• The draft bills seek to increase the legal limit for abortion from 20 weeks to 24 weeks.
• The draft Bill to allow to a woman to take an independent decision in consultation with a registered health-care provider.

This draft bill on Medical Termination of Pregnancy Amendment Bill, 2014 has not seen light till day. But the amendments proposed by this bill when will come into force will definitely be a way forward in liberalizing abortion laws of this count and will strive to decrease the plight of many helpless Indian women who again will have an autonomy in making an informed choice for themselves to keep the child or to abort it by their free will and without any societal pressure and social stigma.

APPROACH TO BE

The MTPA in 1971 did not foresee the changes in the medical technological sphere which will make it possible in time to come to monitor the natal health of the child. The MTPA in 1971 also did not make itself conducive to the reproductive needs of women and their enterprising approach who do not wish to being regulated in four corners of laws for aborting their child. So the legality of for a revised limit for abortion needs to be checked by the apex court of the country and time and amend the provisions of Medical Termination of Pregnancy Act, 1971 in the light of emergent social prejudices faced by the women of our country.

The post Abortion Law – Policy and Legal framework in India appeared first on iPleaders.

In this article, Swati Shukla pursuing M.A, in Business Law from NUJS, Kolkata discusses all you need to know about Right to Privacy.

RIGHT TO PRIVACY

An extremely captivating advancement in the Indian Constitutional statute is the stretched out measurement given to Article 21 by the Supreme Court in post-Maneka period. The Supreme Court has declared that Art. 21 is the core of the Fundamental Rights. Article 21 has turned out to be multi-dimensional. The expansion in the measurements of Art. 21 has been made conceivable by giving a stretched out significance to “life” and “freedom” in Article 21.

These two words in Art. 21 are not to be perused barely. These are natural terms which are to be understood definitively. The Supreme Court has affirmed that to regard a perfectly fine central right, it is a bit much that it ought to be explicitly expressed in the constitution as a Fundamental Right. Political, social, and monetary changes in the nation involve the acknowledgement of new rights. The law in its endless youth develops to meet the requests of society.

Ideal to security is one such right which has gone to its reality in the wake of enlarging up the measurements of Article 21. The constitution, in particular, doesn’t concede any privilege to security in that capacity. Notwithstanding, such a privilege has been separated by the Supreme Court from Art. 21 and a few different arrangements of the constitution read with the Directive Principles of State Policy. In this paper we will be talking about finished another measurement of Art. 21 that is the Right to Privacy and furthermore the contentions identified with it.

Before we get into an entire dialogue of Right to Privacy most importantly we have to recognize what does the word Privacy mean. As indicated by Black’s Law Dictionary “appropriate to be not to mention; the privilege of a man to be free from any outlandish attention; the privilege to live with no ridiculous impedance by people in general in issues with which the general population is not really concerned”.

Article 21 of the Constitution of India expresses that “No individual should be denied of his life or individual freedom with the exception of as per method set up by law”. In the wake of perusing the Article 21, it has been translated that the expression “life” incorporates every one of those parts of life which go to make a man’s life significant, finish and worth living.

Like everything humankind has ever accomplished, there has been a positive and a negative side to it. Innovation has attacked all aspects of our lives whether the intrusion was wanted or not, we can’t make sure whether what we say host’s been heard by a third gathering too whether that was wanted or not. The notorious Hindi saying of even dividers having ears has never rung more genuine. The guideline of the world today can be: whatever you may do, the world will become acquainted with before you understand, get some information about it.

In the prior circumstances in India, the law would give assurance just from physical threats, for example, trespass from which the Right to Property developed to secure his home and cows. This was thought to be the Right to Life. As the consistently changing customary law developed to oblige the issues confronted by the general population, it was understood that was physical security required, as well as security of the profound self and of his sentiments, astuteness was required. Presently the Right to Life has extended in its degree and involves the privilege to be not to mention the privilege to freedom secures the activity of broad common benefits, and the expression “property” has developed to contain each type of ownership — impalpable, and in addition substantial.

The technique embraced by the Supreme Court with a view to grow the ambit of Art. 21 and to infer certain in that spot from, has been to translate Art.21 alongside worldwide sanctions on Human Rights. The Court has inferred the privilege of protection from Art.21 by deciphering it in similarity with Art.12 of the Universal Declaration on Human Rights and Art.17 of the International Covenant on Civil and Political Rights, 1966. Both of these worldwide records accommodate the privilege of security.

Appropriate to protection is not counted as a Fundamental Right in the Constitution of India. The extent of this correct first came up for thought in Kharak Singh’s Case which was worried about the legitimacy of specific controls that allowed reconnaissance of suspects.

The minority choice of SUBBA RAO J. manages this light. With regards to Article 19(1) (d), the privilege to security was again considered by the Supreme Court in 1975. In a nitty-gritty choice, JEEVAN REDDY J. held that the privilege to security is understood under Article 21. This privilege is the privilege to be not to mention. With regards to reconnaissance, it has been held that observation, if meddlesome and truly infringes on the security of native, can encroach the opportunity of development, ensured by Articles 19(1) (d) and 21.

Reconnaissance must be to counteract wrongdoing and on the premise of material gave in the history sheet. With regards to a hostile to fear mongering institution, it was held that the privilege to protection was subservient to the security of the State and withholding data applicable for the detainment of wrongdoing can’t be invalidated on the grounds of appropriate to protection. The privilege to protection regarding Article 21 has been examined in different cases.

Worldwide Concepts of Privacy

Article 12 of Universal Declaration of Human Rights (1948) states that “Nobody might be subjected to discretionary impedance with his protection, family, home or correspondence or to assault upon his respect and notoriety. Everybody has the privilege to insurance of the law against such impedance or assaults.”

Article 17 of International Covenant on Civil and Political Rights (to which India is a gathering) expresses “Nobody should be subjected to discretionary or unlawful obstruction with his protection, family, home and correspondence, nor to unlawful assaults on his respect and notoriety”

Article 8 of European Convention on Human Rights states “Everybody has the privilege to regard for his private and family life, his home and his correspondence; there might be no obstruction by an open specialist aside from, for example, is as per law and is important in a vote based society in light of a legitimate concern for national security, open wellbeing or the financial prosperity of the nation, for the assurance of well being or ethics or for the insurance of the rights and flexibilities of others.”

Idea of Privacy in India

As of now talked about Article 21 of the Constitution of India expresses that “No individual might be denied of his life or individual freedom aside from as per strategy built up by law”. The privilege to life cherished in Article 21 has been generously translated in order to mean something more than simple survival and negligible presence or creature presence. It consequently incorporates every one of those parts of life which makes a man’s life more significant, finish and worth living and appropriate to security is one such right. The first run through this point was ever brought was up for the situation of Kharak Singh v. Territory of UP where the Supreme Court held that Regulation 236 of UP Police direction was illegal as it conflicted with Article 21 of the Constitution. It was held by the Court that the privilege to security is a piece of appropriate to assurance of life and individual freedom. Here, the Court had likened protection to individual freedom.

In Govind v. Province of Madhya Pradesh, Matthew, J. acknowledged the privilege to security as a spread from Art. 19(a), (d) and 21, however ideal to security is not outright right. “Accepting that the key rights unequivocally ensured to a national have penumbral zones and that the privilege to protection is itself an essential right, the major right should be liable to limitation on the premise of convincing open intrigue”. Reconnaissance by domiciliary visits require not generally be an absurd infringement on the security of a man attributable to the character and precursors of the individual subjected to observation as additionally the articles and the impediment under which the observation is made. The privilege to security manages ‘people not places’.

In Smt. Maneka Gandhi v. Union of India and Anr.,(1978) for this situation SC 7 Judge Bench said ‘individual freedom’ in article 21 covers an assortment of rights and some have status of basic rights and given extra assurance u/a 19. Triple Test for any law meddling with individual freedom: (1) It must endorse a system; (2) the technique must withstand the trial of at least one of the major rights presented u/a 19 which might be appropriate in a given circumstance and (3) It must withstand trial of Article 14. The law and strategy approving impedance with individual freedom and right of security should likewise be corrected just and reasonable and not self-assertive, whimsical or harsh.

In Naz Foundation Case (2009) Delhi HC gave the point of interest choice on consensual homosexuality. For this situation S. 377 IPC and Articles 14, 19 and 21 were analyzed. Ideal to security held to ensure a “private space in which man may progress toward becoming and remain himself”. It was said people require a position of asylum where they can be free from societal control-where people can drop the veil, halt for some time from anticipating on the world the picture they need to be acknowledged as themselves, a picture that may mirror the estimations of their associates as opposed to the substances of their temperament.

It is currently a settled position that privilege to life and freedom under article 21 incorporates ideal to security. Ideal to security is ‘a privilege to be not to mention’. A native has a privilege to defend the protection of his own, his family, marriage, reproduction, parenthood, kid.

Bearing and training among different issues. Any individual distributing anything concerning the above issues aside from with the assent of the individual would be at risk in real life for harms. Position in any case, be extraordinary, if a man deliberately pushes himself into contention or willfully welcomes or raises a discussion.

Ideals to Privacy – Permissible Restriction

Interruption into security might be by –

1. Legislative Provision
2. Administrative/Executive request
3. Judicial orders,

New Issue: Invasion of Privacy by UIDAI and IT department

The execution of national projects like Unique Identification Number, National Intelligence Grid, DNA profiling, special correspondences, Crime and Criminal Tracking Network and System, brain mapping etc. and the wild utilization of innovation by the majority for everyday issues, there have been concerns communicated on the conceivable attack of a native’s entitlement to security ensured under Article 21 of the Constitution of India (hereinafter alluded to as the “Constitution”).

The Department of Personnel and Training (hereinafter alluded to as the “DoPT”) had arranged a draft charge on appropriate to security in the year 2011, the Right to Privacy Bill, 2011 (hereinafter alluded to as the “Draft Bill 2011”). Despite the fact that, there had been a few exchanges on the Draft Bill 2011, however the same has neglected to appear into an exhaustive enactment on protection.

The requirement for remain solitary security enactment was felt in the wake of break of the Nira Radia tapes in the year 2010, raising genuine dangers and worries over the security of people and its insurance. Resulting to this notorious hole, Mr. Ratan Tata, the then Chairman of the Tata Group had moved toward the Supreme Court for an infringement of the crucial appropriate to security.

Keeping in mind the end goal to adequately address the security issues, the Planning Commission of India had coordinated the constitution of a ‘Gathering of Experts’ on December 26, 2011, to distinguish the protection issues and set up a give an account of the same to encourage writing of protection charge for India. The Group was constituted under the Chairmanship of Justice A.P. Shah, Former Chief Justice, High Court of Delhi with 11 different individuals (hereinafter alluded to as the “Shah Committee”).

The key terms of reference of the Shah Committee included investigation of the security laws and related bills proclaimed by different nations, top to bottom examination of projects being actualized by the Government from the viewpoint of their effect on protection and particular proposals for thought of the DoPT for consolidation in the proposed draft charge on privacy. The Shah Committee presented its answer to the Planning Commission of India on October 16, 2012 (hereinafter alluded to as the “Advisory group Report”).

Advancement of the Right to Privacy

Preceding going into exchanges on arrangements of the Draft Bill 2011 or the Committee Report, it is fascinating to take a note of the advancement of the privilege to protection under the Indian legitimate administration.

The Supreme Court of India (hereinafter alluded to as the “Preeminent Court”) had the chance to first choose and set out the shapes of the privilege to security in India on account of Kharak Singh v. Territory of Uttar Pradesh. This case did not witness the acknowledgment of the privilege to security as a crucial directly under the ‘individual freedom’ statement of Article 21 of the Constitution. Greater part of the judges for this situation declined to decipher Article 21 out of a way to incorporate inside its ambit the privilege to security, however two of the seven judges attested that the privilege to protection forms a basic element of individual freedom. In this manner, the Supreme Court while choosing the instance of Govind v. Territory of Madhya Pradesh set out that various major privileges of residents can be portrayed as adding to one side to security. Despite the fact that the Supreme Court likewise expressed that the privilege to protection should experience a procedure of case by case development. The Supreme Court on account of R. Rajagopal v. Province of Tamil Nadu, interestingly straightforwardly connected the privilege to protection to Article 21 of the Constitution and set down:

“The right to security is certain justified to life and freedom ensured to the citizens of this nation by Article 21. It is a “right to be not to mention”. A native has a right to shield the security of his own, his family, marriage, reproduction, parenthood, tyke bearing and instruction among different issues. None can publish anything concerning the above issues without his assent whether honest or generally and whether commendatory or basic. In the event that he does as such,

1. Kharak Singh v. Territory of Uttar Pradesh, referred to at: (1964) SCR (1) 332.
2. Govind v. State of Madhya Pradesh referred to at: AIR 1975 SC 1378.
3. R. Rajagopal v. Territory of Tamil Nadu, referred to at: 1994 SCC (6) 632.

“He would be violating the appropriate to security of the individual concerned and would be subject in an activity for damages.” Further, while choosing the issue of phone tapping on account of PUCL v. Union of India, the Supreme Court watched that phone tapping would be a genuine intrusion of a person’s privacy. Thus, phone tapping would infract Article 21 of the Constitution, unless it is allowed under the system built up by law.

Accordingly, the idea of protection of an individual has developed throughout the years and has been held to be a principal ideal by the Supreme Court. On account of Selvi v. Territory of Karnataka the Supreme Court held that an automatic subjection of a man to narcoanalysis, polygraph examination and BEAP tests abuses the privilege to protection.

It is to be noticed that even with the augmented extent of Article 21 of the Constitution covering ideal to security, the privilege to a person’s protection is not an outright one and accompanies certain special cases. The Supreme Court watched that the privilege to security might be confined for the aversion of wrongdoing, issue or assurance of well being or ethics or insurances of rights and flexibility of other.

The Supreme Court has explained a certain privilege to security got from the dialect set out in Article 21 of the Constitution. In any case, India does not have a different and particular enactment that unequivocally perceives the right to privacy and sets out the shapes of its pertinence.

Suggestions of the Shah Committee

As a rule, the Shah Committee prescribed that the enactment on ideal to security must orchestrate every single statutory arrangement that identify with protection. As per the Committee Report submitted in October 2012, the real proposals of the Shah Committee were as per the following:-

The administrative system will comprise of privacy commissioners at the Central and Regional levels;

• PUCL v. Union of India, referred to at: (1997) 1 SCC 30.
• Selvi v. Province of Karnataka referred to at: AIR 2010 SC 1974.
• “X” v. Doctor’s facility ‘Z’, referred to at: (1998) 8 SCC 296.

An arrangement of co-direction giving the self regulating associations at industry level the decision to create security models. These principles ought to be endorsed by a privacy commissioner;

People would be given the decision (pick in/quit) as to giving their own data and the information controller would take singular assent simply subsequent to giving contributions of its data rehearses; The information controller should just gather that individual data from information subjects as is fundamental for the reasons recognized for such accumulation and in addition process the information pertinent to the reason for which they are gathered;

The information gathered would be put to use for the reason for which it has been gathered. Any adjustment in the use would be done just with assent of the individual concerned;

Information gathered and handled would be pertinent for the reason and no extra information components would be gathered from the person;

Block attempt orders must be particular and all captures would just be in drive for a time of 60 days and might be reestablished for a time of up to 180 days. Records of capture attempt must be decimated by security organizations following a half year or 9 months and specialist organizations must demolish following 2 months or a half year; and

Encroachment of any arrangement under the Act would constitute an offense for which people may look for remuneration.

The Proposed Privacy Regime

(a) Privacy– Rule and Exceptions

The privilege to privacy proposed by the Draft Bill 2011 has been allowed to all citizens. The expression ‘individual information/data’ has been attributed the importance of any information that identifies with a living or characteristic individual, if such individual can be distinguished from the information, either straightforwardly or by implication in conjunction with the other information under lock and key or prone to come possessing the individual controlling the said information. Moreover, it has likewise been elucidated that individual data incorporates any statement of assessment about a man also. Further, the standards of information insurance pondered under the Draft Bill 2011 have been made material on all people handling information utilizing hardware situated in India or gathering, preparing or utilizing the individual information in India, in the case of having a position of business in India or not.

Since each manage accompanies certain special cases, so does the privilege to protection. The Draft Bill 2011 examines the accompanying occasions, where the privilege to protection of an individual might be encroached:-

• Power, uprightness and security of India, vital, logical or monetary enthusiasm of the state; or
• Anticipating prompting to the commission of any offense; or
• Counteractive action of open issue or the recognition of wrongdoing; or
• Assurance of rights and opportunities of others; or
• In light of a legitimate concern for agreeable relations with remote states; or
• whatever other reason particularly said in the Act.

In accordance with the Draft Bill, the Shah Committee too prescribed the above special cases, with certain extra exemptions, such as disclosure out in the open intrigue, journalistic purposes, memorable and logical research and security of the individual rights and opportunity and so on. Keeping in mind the end goal to gauge the degree and legitimacy of the said special case to one side to security, the Committee Report set forth the parameters of proportionality, legitimateness and need in a just state, as the measuring stick of such assurance.

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In this article, R. Gowrishanka of Galgotias University discusses Legal regulations needed in India over ICO.

“Bitcoin is a Techno Tour de Force” ~ Bill Gates

This paper would discuss the main aspects in relation with Initial Coin Offering and the main elements of ICO, Bitcoins and Ethereum. The rise of Bitcoin and how it got has become the next big thing in the IT industry and how we do our financial transactions in our present and future. How it has risen so quickly and what are the Indian perspectives and how Indians are making use of Bitcoins in their life.

We have seen thousands of companies come and go, and we have seen that a company does well even if it does not have any one of the above four mentioned, take for example the biggest cab service provider Uber. Uber does not own any of the cars which it uses for providing the cab service, this goes to show that one thing can be removed and you can still do well. But the one thing that can never be removed from for establishing business is Capital. Capital means the money involved in the process of establishing the business and the most common way of raking money is by issuing shares to the people who provide the money through a process called Initial Public Offering or IPO. These people are called investors of the company and they have a share of ownership in the company.

Since many years there has been a drive to discover alternate ways to raise money for the establishment of a company and in present the most eye catching of all is through cryptocurrency or digital currency and is called the Initial Coin Offering or ICO.

What is ICO?

So this begs the question as to what is an ICO and how is it different from an IPO.

An Initial Coin Offering (ICO) is akin to an Initial Public Offer (IPO) and it involves selling a new digital currency at a discounted or a “token”. If the value the token rises, the investor has made a profit in the same.

Doesn’t this make it similar to an Initial Public Offer? Well the main difference between an Initial Coin Offering and the Initial Public Offer is that in an ICO, the token does not “confer any ownership rights in the said company, or entitle the owner to any sort of dividends/bonus from the company.

The first time ICO was used was by Ripple Labs in the year 2013. Later in the same year Mastercoin promised to create a layer on top of the Bitcoin to execute smart contracts and tokenize Bitcoin transactions. The developer of this sold Mastercoin against Bitcoin and made around $1000000.

Several other crypto currencies have been funded with ICO, like Lisk sold its coins for around $5 Millions in early 2016, and the most prominent is Ethereum. In mid-2014 the Ethereum Foundation sold ETH against 0.0005 Bitcoin each. With this, they receive nearly $20 Millions, which has become one of the largest crowd funding ever and serves as the capital base for the development of Ethereum.

Ethereum – A part of ICO

The easiest function of the Ethereum is to create a simple token which can be transacted on the Ethereum blockchain instead of Ether. This has made Ethereum host of such wide scope of ICO that one can safely say that it has become the largest and common platform for crowd funding and fundraising. [1]

The biggest development in the field of Crypto Currency was witnessed in the year 2008 when a person under the pseudonym[2] of Satoshi Nakamoto published a paper titled “Bitcoin: A Peer-Peer Electronic Cash System” and described the use of peer-peer network as a solution to the problem of double-spending.[3] In the year 2009, the bitcoin network started to operate with the release of its first open source bitcoin client and the issuance of the first bitcoins with Satoshi Nakamoto mining the first block of bitcoins ever which amounted to 50 bitcoins, which at that time was valuing at virtually no value or very less.

From a very nascent stage in 2009 where only 50 bitcoins were traded, in just nearly 8 years or so a whopping 16,596,738 bitcoins have been traded till now.[4] The total number of bitcoins in circulation that have been mined; in other words means the supply of bitcoins on the network.

What is meant by Mining of Bitcoins?

Bitcoin operates as a Peer-To-Peer network. This means that everyone who uses bitcoins is a tiny fraction of the whole bank of bitcoin.

How do we get currency? We get our currency from our central government and the RBI issues us the currency. In the case of bitcoins there are no central government but there are miners. Miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also create an incentive for more people to mine. Since miners are required to approve bitcoins transactions, more miners mean a more secure network.

The miners from beginning use computer for solving of the questions and as technology advances the speed in derivation of solution has increased. And so is the difficulty level of the problems and the amount on a certain miner. Due to this reasons, the miners pool in their efforts for solving the problem and divide the amount of bitcoin according to their efforts put in. Mining is an important and integral part of Bitcoin that ensures fairness while keeping the Bitcoin network stable, safe and secure. [5]

Regulations relating to Bitcoins

There has been much hue and cry over the legal status of such virtual/digital currencies like Bitcoins, Ethereum, XRP Money etc. In the year 2013, the Financial Crimes Enforcement Network (FinCEN) a bureau of the United States Department of Treasury issued a report regarding centralized and decentralized “virtual currencies” and their legal status within the “Money Services Business” (MSB) and Bank Secrecy Act regulations. It classified such digital currencies( Bitcoins)s “Virtual Currencies” as they are not a legal tender under any sovereign jurisdiction. However it was considered by the FinCEN that if any American person or entity generates “virtual currency” such as Bitcoins are money transmitters or come under the MSB if they sell their generated virtual currency for national currency. This is specifically for the miners of the Bitcoins.

In the year 2013, the United States extended its Anti-Money Laundering regulations to the processors of Bitcoins transactions.

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards.[6]

Pros and Cons of Bitcoin

1. Freedom in Payment

You are in control of your bitcoin, there is no central authority figure in Bitcoin network.

2. Control and Security

It is secure because in Bitcoin transactions there is no need to reveal any personal information.

3. Information is Transparent

With the block chain technology being used all finalized transactions are available for everyone to see.

4. Lack of Awareness and Understanding

It is a known fact that not all people are aware of the usage of Bitcoin in the world including India. People are to be educated on the aspects and functioning of Bitcoin. Many businesses are accepting bitcoins but are relatively small compared to physical currencies.

5. Risk and Volatility

Bitcoins are volatile in nature because supply of Bitcoins is very less as compared to the demand made for bitcoins. The risk surrounding Bitcoins may end soon as and when big media houses and companies start accepting the usage of Bitcoins.

6. In a Nascent form

Bitcoin in still in an infancy stage with incomplete features that require further development. Bitcoin has some growth to do before it comes to its full potential.[7]

ICO: An Indian Perspective

ICO is everywhere now. Look right, look left and straight and then cross the road. In the same way wherever you look now there is a prospect of ICO being there. Around $665 Millions has been raised from token sales in the month of July 2017 alone and the amount for the year is expected to be at $3 billion.

How do startups scale up operations, through Venture Capitalists, angel funding but entrepreneur such as Shumukh Shetty the founder of EZ Ether has a new option: ICO.[8]

He says that ICO creates a shared structure wherein not just one stakeholder makes all the money.

Another instance where we can see that Indians are engaging in crypto currency is in the case of Mr. Mohit Mamoria who is prepping to launch crypto hedge fund, a first of its kind in India. The tokens are called GOD Tokens and the token will represent a proportionate equivalent based on the investment amount.

The minimum investment amount has to be set at 3.5 ETH which is worth $1000 and for every $1000 invested the investor will receive 1000 GOD Tokens each valued at $1.

Indicoin a cryptocurrency and a social service platform built on top of the Ethereum Blockchain started India’s First Token Sale on October 1^st. The accepted currencies in Indicoin are ETH, BIT and LTC and the token amount available is 550 Million. Rate of INDI Tokens during the Token sale are: 1 ETH= Rs. 12,500/- 1 BIT= Rs. 175,000/- and 1 LTC= Rs. 2500/-. The sale of token ends on November 1^st.[9]

Regulations in place in India for Bitcoins and ICO

The ever so growing rate in which ICO and Bitcoins are increasing has even made the Indian government to match up with its growth. The Ministry of Finance had created an Inter-Disciplinary Committee[10] which has been given the responsibility to track the growth, usage trends, cryptocurrency market and the embedded technology in India. The usage of Bitcoins have been a new trend in the MyGov.in app that is the official app for the present government led by Shri Narendra Modi. Before the implementation of the Inter-Disciplinary Committee on ICO and Bitcoins the Indian government had a negative view towards cryptocurrency and feared that these go against the Anti-Laundering laws. The Inter-Disciplinary Committee has recommended the implementation of Know Your Customer or KYC Forms and make it compulsory in order to regulate its safe and secured handling. The said committee also wants to make changes in the Reserve Bank of India Act, 1934, and wants to bring cryptocurrenices under the blanket of RBI Act 1934. Cross Border payments done with the help of cryptocurrency would come under the FEMA Act to address the issue of foreign exchange.

Recently it was cited[11] in one of the sites that tracks the happenings of the digital currency stated that the usage of Bitcoins may come under the new Goods and Services Tax or GST and the trading of the Bitcoins would be regulated by the Securities and Exchange Board of India (SEBI)

Conclusion

“There are three era of currency: Commodity based, politically based and now, Math based” ~ Chris Dixon.

ICO and Bitcoins are the next big thing. In this ever fast and ever changing and ever demanding era, the emergence of Bitcoins are just icing on the cake. There are no or less regulations which control the management and functioning of these digital currencies making it easier and available to a huge spectrum of the world. Unlike plastic currency where there is a regulatory body sitting over us, here we are the owners.

Every new thing brings some fears, speculations, myths and a blizzard of questions with it, which make the adaption of it quite slow. With ICO and Bitcoins the same is happening, very less amount of people are aware of the concept of ICO and Bitcoins let alone trading of the same. We need to educate our people in how ICO works. Like seen above in my article it is a booming market, in just a span of 8-9 years the value of bitcoin has increased by a mammoth 14, 44,000 times. This just goes to show the immense prospects of growth in this sector. There are some fears and problems faced by this sector too, but which new thing does not go through ups and downs. We have to create new laws that would regulate the functioning of ICO and Bitcoins, Ethereum, LTC and other forms of ICO.

I would like to finish by quoting the words of Mr. Eric Schmidt- CEO of Google.

“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”

[1] BlockGeeks (https://blockgeeks.com/guides/what-is-an-initial-coin-offering/)

[2] Coin Desk (https://www.coindesk.com/information/who-is-satoshi-nakamoto/)

[3] Bitcoin (http://www.investopedia.com/terms/s/satoshi-nakamoto.asp)

[4] Blockchain (https://blockchain.info/charts/total-bitcoins?timespan=all)

[5] What is Bitcoin Mining? (https://www.youtube.com/watch?v=GmOzih6I1zs)

[6] Wikipedia (https://en.wikipedia.org/wiki/History_of_bitcoin)

[7] CoinReport (https://coinreport.net/coin-101/advantages-and-disadvantages-of-bitcoin/)

[8] Factor Daily (https://factordaily.com/altcoin-cryptocurrency-exchanges-in-india/)

[9] The values are given at the website of IndiCoin (https://www.indicoin.org.in/)

[10] Bitcoin News (https://news.bitcoin.com/india-government-committee-investigate-bitcoin/)

[11] KrytoMoney (http://kryptomoney.com/bitcoin-government-rules-bitcoins-in-india/)

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In this article, Tushar Dey pursuing M.A, in Business Law from NUJS, Kolkata gives Legal arguments against the concept of CSR.

Introduction

Corporate Social Responsibility (CSR) in the recent time has become a much-debated topic. What is the business of business is the prime question? Should corporations/businesses try to solve ills of the society? Or should corporations/businesses exist only to maximize the wealth of shareholders? All sides of the Corporate Social Responsibility debate have been forcefully attacked and vigorously defended by each other. Do the warnings concerning Corporate Social Responsibility given by the noted economists Theodore Levitt and Milton Friedman become irrelevant in the modern Age? Up until recently, there was hardly any dispute that the only aim and objective of corporations/businesses was to maximize shareholder wealth in the long term. However, the debate concerning the role that corporations/business should play in the society at large has undergone a massive change.

What is Corporate Social Responsibility

The widest definition of Corporate Social Responsibility concerns with what is or shall be the relationship between individual citizens, global corporations and governments of countries.  More importantly and when understood in the local terms, the definition is concerned with the relationship between a business/corporation and the society in which it resides or operates locally.

One more definition concerns itself with the relationship that exists between a business/ corporation and its stakeholders.  For a distant observer all of these definitions are relevant and each one of them reflects a dimension of the issues at large.  A co-existing debate is taking place in the area of ethics. Should increased regulation on corporations be applied for more control or has the very basis of citizenship been lost and needs replacing before socially responsible behavior by corporations/businesses will ensue? This debate however as represented above, seems to be the one concerned with some type of social contract existing between society and corporations.  

Roughly put, the idea of corporate social responsibility  involves the expenditure of resources of the corporations/businesses at the whims of the management on doing “good works” for the society at large (like sponsoring projects for the community or funding charitable institutions) or prohibiting themselves from doing “wrong things” (like polluting water or air or stopping deforestation) instead of using these same resources towards the goal of profit maximization for the corporations/businesses .

Corporate Social Responsibility is, in fact, a punch line for the role that corporations/businesses are now being asked to play in resolving the collective problems of the society. Such a role does not involve corporations/businesses shunning their pursuit of profit in Toto – but merely that the corporations/businesses should be willing to accept returns on expenditure that are lower than the returns available from some other alternate expenditures. In simpler words, it is being argued that companies should now be themselves satisfied with making a little less profit (not that they necessarily give up all profit) as the diminished returns will be more than adjusted against by the social Profits that they will generate.

A good example recently of this type of Thinking is the shifting to renewable sources of energy by Power corporations. Although the corporations/businesses claimed it was a fine example of their sensitivity towards global warming, the move was actually mandated by the hardcore commercial reality that cost of renewable power had gone down dramatically, and that it was in the interests of their profitability to make the change to renewable power.

In light of the above mentioned, it seems the most pertinent working definition of Corporate Social Responsibility : it  signifies  the obligations and inclinations, if any, of corporations/businesses existing  for profit, voluntarily or under the duress of law,  to take aim of achieving  social objectives  that conflict with their natural  desire to maximize profit for the shareholder.

Arguments against Corporate Social Responsibility

For the traditional businessmen, the natural and proper role of a corporation/businesses was always clear-cut simple and That the corporation/businesses for traditional businessmen  was always “an association of persons or shareholder  formed for their respective private profit  and which is to be managed by its concerned Board of Directors with a sole aim of doing the same”.

The powers of the Board of Directors were exercisable only for the joint Profit of all the shareholders according to their respective shareholding. Roughly saying, the objective was only to maximize profits so as to give shareholders the best possible return on their investment. This objective not only absolute but also a paramount and unqualified, however the same was pursued subject to the law and regulations, and due consideration was always given to moral and ethical principles normally regarded as being relevant to the conduct of the corporation/businesses. Other than the abovementioned constraints, though, the businessmen were always free and unconstrained to pursue the profit maximization objective. However the advocates of Corporate Social Responsibility do not view the role of corporation/businesses in such a dim light. The emergence of large-scale mega industry has made corporations/businesses into huge ’holder of power and the most important centers of non-governmental power in our society at large.

An argument is also put forth that corporations/ business have a social as well as an economic dimension since they have the capacity and power to affect and influence the lives of many their employees, their customers and the local community generally.

The Economist, Keith Davis has argued in his thesis that all economic decisions of whatever sort must necessarily have social consequences, and that corporation/businesses must be expected to conduct themselves in a responsible manner just as any other person resident in society in possession of such power would be expected to behave.

Other arguments which are produced in favour of Corporate Social Responsibility for example, it is suggested that by putting resources to the fight against social problems, the local community in which the corporation/businesses exists and operates will become better place in which to do business in as the social environment will be more conducive to commerce, with happy and healthy customers, easy recruiting, lesser crime and so forth. Another line of argument suggests that by acting in a socially responsible manner, the corporation might preempt an expensive government intervention.

In the final analysis, however, the principal argument always remains that the corporations has having vast resources at its disposal, should not be devoted exclusively for the Profit of stockholders, but rather for the Profit of the wider society and its various group that constitute it. This broader view of the corporate social responsibility is based on the assumption that the corporations are consuming resources belonging to the wider society, and is therefore expected to use such resources in interest of wider society.

Economic Arguments against Corporate Social Responsibility

In each and every society, some form of a rationing system is required to distribute limited resources amongst the unlimited demands of the members of the community. Rationing systems come in many shapes. During World War II, for example, many domestic goods were distributed by means of administrative fiat. These systems very wasteful because of the absence of data about buyer needs. In the free endeavour economy that is common to most parts of the Western world, the chosen means of rationing is the price mechanism.

Profit assumes a focal part in the operation of the price mechanism. It is the presence of (or potential for) profit, or its absence, that determines the dispersion of resources in a free market Profit serves as the primary source of information for producers.

The viability of the price mechanism rests on the assumption that organizations will actually pay heed to the signals provided in the form of profit. A profit maximizing firm does this and it results in maximum efficiency in the use of its resources, and cheaper and more plentiful goods and services for the wider consumer. A socially responsible corporation, however, would only follow those signals up m a point. The inescapable outcome is an exchange off in effectiveness and the more constrained accessibility of products and enterprises (which will influence their cost). In more outrageous cases, overlooking Profit will prompt shortcomings, lines and underground markets.

One must pose the inquiry: what do we need from an economic system? This question is of paramount importance since the manner in which a society chooses to distribute or redistribute its scarce resources will shape the very nature of the society.  The proper object of an economic system is the fulfillment of the financial needs of the person. On the off chance that one acknowledges that question (which infers the supply of merchandise in sufficient sums and at sensible costs) at that point the trial of the framework lies in the effectiveness with which it fulfills person’s needs. For the reasons clarified above, on this test an approach of Profit boost is obviously better than an arrangement of “social responsibility.

In short, Corporate Social Responsibility is on a very basic level subversive of the capitalist free enterprise system – a system that has so successfully done the job of satisfying the material needs of the community.’ Certainly, there are those in the group who are happy with material belonging and feel that our financial system ought to be set up to exchange off productivity for social duty. Economist Rancher and Hogue contend that such people are in a little minority with most individuals from society as yet needing the material advantages that expanded financial development gives.

Another oft-advanced point of a monetary framework is social combination. At the end of the day, the self-enthusiasm of people can be made to agree with the bigger interests of the group. The bad habit of voracity, as indicated by Bernard Mandeville, ‘places a want in every individual to gain more advantages. In seeking after this target, it is contended, new thoughts are orchestrated, new items are created and better strategies for fulfilling the necessities and needs of the group are produced. This prompts financial development, expanded proficiency in the utilization of assets and rising business – all of which are open advantages. Man’s want to serve his own self-enthusiasm by seeking after Profit will prompt a more effective utilization of restricted assets which will create the best advantage for the aggregate group.

Practical Arguments against Corporate Social Responsibility

There are various practical objections to Corporate Social Responsibility. One of these stems from the trouble of characterizing correctly what the term social obligation implies by and by. Hayek proposes that the term social reason for existing is so indistinct as to be futile by and by. Recognizing the suitable beneficiaries for corporate largesse is best case scenario problematical. The peril is that directors may have the capacity to stretch out the definition to for all intents and purposes any reason that they favor.’ Managers, specifically, are not prepared to distinguish proper items for Corporate Social Responsibility, very separated from the definitional laxity. They are prepared in the speciality of business, not social welfare. They don’t have the master aptitudes important to distinguish social purposes (on the off chance that they can be recognized!) nor do they have the allotment abilities required to successfully apply the organization’s assets? Further, such a procedure would strife with the corporate culture of generally organizations. For the reasons expressed in Part One, most directors are orientated towards profiting, and it conflicts with the grain to give it away.

There is no perceived estimation standard by which the adequacy or generally of Corporate Social Responsibility exercises can be judged. At the point when objectives are absolutely monetary, surveying the execution of the organization (and of its administration) is just an issue of taking a gander at the base line. But in the event that cash is gone through on social destinations with no sign for the investors concerning whether they are getting an incentive for cash, the share trading system’s employment of esteeming the offers turns into that substantially harder. This disables capital market productivity; Corporate Social Responsibility is ostensibly a wasteful method for tending to social issues in that business’ approach is probably going to be specially appointed, and ungraceful. Enterprises, albeit part of a bigger business arrange, are as yet autonomous units. They think that it’s hard to co-work and Marshall Resources so they might be connected in a productive approach to address issues. There is additionally the topic of the amount Corporate Social Responsibility singular partnerships ought to embrace. There is no commonsense guide in the matter of what offer of its Profits an organization should commit to social articles Corporations can’t be left in limbo in this mold.

Philosophical Objections to Corporate Social Responsibility

Various contentions of a comprehensively philosophical nature are progressed contrary to Corporate Social Responsibility. The focal contention is a basically political one and sits decisively in the liberal-law based custom of worry about restriction on the activity of energy. The advocates of Corporate Social Responsibility and the traditionalists concur that enterprises have incredible power, despite the fact that they differ on the degree of opportunity to practice that impact. The Corporate Social Responsibility advocates are worried to see that power is utilized for good. The traditionalists’ accentuation is unique, be that as it may: they are worried to see that the power not be practised for terrible purposes, particularly given the troubles (examined above) of characterizing what is great. On the traditionalist view, the enterprise fills an entirely constrained need – making greatest Profits. Hayek recommends that inasmuch as corporate power is coordinated towards a particular reason, nobody require have any dread of its abuse? On the off chance that the end is clear, and the standard of execution promptly connected, at that point any uniqueness from quest for that end for undesirable purposes can be promptly checked. Profit is a high contrast standard; value is most certainly not. Whatever its different deficiencies, Profit amplification, in any event, fills in as an enforceable and lucid standard.’ Dodd contended that, until ‘a viable and enforceable option plan of duties to another person’ can be created, it is excessively unsafe, making it impossible to desert or even debilitate the Profit boost objective?” Without a particular execution measure, implementing responsibility turns out to be considerably harder. Supervisors would viably be left everywhere in their activity of energy. The presence of focuses of uncontrolled power has dependably been dreaded in a majority rule society, notwithstanding when the individuals who have that power purport to utilize it for the general population great. The worry is that their origination of what is “great” may not accord with that of the general population? Cases flourish of harming activities of enterprises in insubordination of the Profit amplification standard for the sake of people in general great. Amid the Vietnam War, the Dow Chemical Company kept on delivering napalm, despite the way that it was unrewarding, in light of the fact that administration viewed the activity as ‘ethically and politically desirable’.”‘ Similarly, in Weimar Germany, numerous intense industrialists considered it to be their devoted obligation m effectively bolster the exclusive that they earnestly accepted could lead their financially weakened district into another time of thriving. One need not list the abhorrence of World War Two to show the habit of their social obligation.

The contention is best summed up by Milton Friedman, who said that ‘In a free society, it is hard for good individuals to do great, yet that is a little cost to pay for making it hard for ‘underhanded individuals to do ‘abhorrent’, particularly since small time’s great is another man’s malevolent’. This contention suggests acknowledgement of partitioned and unmistakable parts for business and government. Friedman, Lodge and others contend that the way toward recognizing social items ought to be an open one. They propose that ‘esteem setting is the capacity of legislative issues, not of private business. Similarly, they see the way toward consuming assets upon those qualities as an open capacity, best left to open bodies.

The ability to act in people in general intrigue should be kept to the legislature. Governments are responsible to the group for their activities, and are liable to built up systems controlling the activity of their forces. They are far superior suited to the matter of dealing with the welfare of society than are partnerships. So, in a popularity based society, the matter of business ought to be business alone, not social designing. People in general elements of distinguishing and seeking after social goals should be left to openly choose authorities, not secretly designated ones. While the political procedure may regularly be a frustratingly bulky method for accomplishing a similar outcome, it has the excellence of being popularity based.

A different line of contention is progressed by Keith Gibson who portrays the requirement of a lessening in the part of Profit as an arrival to the Dark Ages. Gibson clarifies that financial (and thus political) action was truly hindered amid the Dark Ages by the accentuation on thriftiness and humility in inclination to the quest for Profit. Roused by the Church, agents were urged to charge a reasonable cost for products and to look for no more return than was important to live. The consequence of this marvel was social and financial stagnation. It was not until the Reformation – when Profit ended up noticeably respectable by and by that huge monetary or political advance was made. The Reformation expedited an expanded accentuation of independence. Indivisibly associated with this rationality was the part of private property. One of the key protests to Corporate Social Responsibility is that it includes directors who, are just trustees of the investors’ riches, burning through another person’s cash for purposes detached with the business’ targets Friedman proposes that an enterprise is only an instrument of the investors who possess it, and ought not be viewed as having unique duties only in light of the fact that it has gone up against corporate form? The reality of fuse ought not to contribute the property held by the organization with some kind of open commitment that does not make a difference to a person’s property? In addition, any demonstrations of social obligation that devour assets successfully deny singular investors of the opportunity to be socially mindful themselves. The investors are the suitable ones to use assets on magnanimous commitments, political gifts and so forth. It is their privilege to give separately, since it is their property.

Conclusion

In the final analysis, then, it is submitted that business and corporations should confine itself to fulfilling its economic function. One is reminded of the Biblical o remember the Biblical directive against serving two experts the organization that looks to seek after benefit and do ‘benevolent acts’ in the meantime is probably going to do neither exceptionally well. Besides, the potential for misuse of energy is more constrained when there is an entirely characterized protest and perceived standard of execution against which administration can be measured, benefit amplification plays out this capacity. Until the concept of social responsibility can be defined with equivalent precision, it is simply too dangerous to release corporate management from the profit maximization object.

This does not imply that companies are allowed to stomp everywhere throughout the community’s social interest in the quest for profit. Non-intentional social obligation, where organizations are constrained to act in a specific form accordingly especially to shopper concerns, ensures responsiveness of business. Besides, there is dependably the alternative of upholding social obligation by outside direction by government. Whatever the benefits of government mediation, it is in any event the result of a popularity based process: the group can pick its social objectives for itself, at that point choose how they are to be sought after. Organizations ought not to be left to do this without anyone’s help. At whatever point the quest for profit happens to create socially undesirable outcomes, their conduct can be adjusted by outer weight. With regards to a liberal, just free endeavor society, this is the far prevalent option.

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In this article, Raghav Vaid, pursuing M.A, in Business Law from NUJS, Kolkata discusses the problems and challenges to the new Insolvency and Bankruptcy Code.

Introduction

Insolvency is a situation when an individual or a company is unable to repay its outstanding financial loan to its lender in due time. A solution to such a situation is by modifying the repayment method or by writing the loan off. In the event such a situation is unresolved, then insolvent assets are sold off in order to pay off or recover the outstanding debts. This is done by way of a legal action in a Court of law. The Court appoints an official liquidator whose primary job is to liquidate all the assets of the insolvent company and pay off the proceeds to the creditors.

Although the term sounds similar to insolvency, Bankruptcy is a different concept. Bankruptcy is a concept which is like voluntary surrender. It this case, the person voluntarily goes to the Court and officially declares that he is unable to pay any further debts. In such a scenario, the Court takes the responsibility of liquidating a person’s assets and distributes the proceeds to his creditors. The primary difference between an insolvent and a bankrupt is that, a bankrupt can post the distribution of proceeds and creditors can have a new lease of life.

Background

The research shows that India has about 11% of bad debt records out of the total lending and it is increasing day by day. Mr. Vijay Mallya is one such example. The time taken to resolve a case of insolvency is very high as compared to many other countries of the world. Due to this issue, India ranks 130th in ease of doing business in the world. More than 50% of bad debts are that of Corporates who have taken such loans from nationalised banks. The recovery from such defaulters is generally next to impossible because of a number of reasons like overlapping jurisdictions etc. Hence, these cases continue for years and years but the recovery remains zero. Previously there were about twelve laws which dealt with insolvency. Basis on those twelve laws, it took more than four years to wind up a corporation in our country.

Due to lack of required institutional and legal setup, the defaulters started considering India as a safe haven for such activities which clearly depicted incompetence on the part of our country when compared to global standards. Although India had numerous acts in place to punish the defaulters like the Indian Contract Act, the Recovery of debts due to Banks and Financial Institution Act 1993, the Securitizations and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and so on has failed miserably to recover to the outstanding dues from the defaulters. The aforesaid laws had many loopholes which kept the defaulters fear free and safe. If there is no fear of law, this scenario is likely to happen.

Based on the abovementioned increasing issues, the government finally decided to take some stand. The Government decided to replace the existing insolvency laws with new stringent laws which would take care of the existing defaulters in a time bound manner and also set an example for the people of the country who considered this activity of wilful defaulting as a gag. It was on 11th of May, 2016, when the Insolvency and Bankruptcy Code, 2016 was passed by both the houses and received the assent of the President on 28th of May, 2016.

A Brief on the new Code

The primary motive of launching the Insolvency and Bankruptcy Code, 2016, was to amend and consolidate the laws relating to insolvency resolution from a number of acts into one single code. The key emphasis of this Code is to provide revival and resolution in a time bound manner thereby maximizing the value of defaulter’s properties. This legislation clearly provides a structure to aid sick companies to either wind up their business or come up with a modified plan in order to revive. It also aims to safely depart the investors from such companies without making them lose their investments. This new Code has also vested the operational creditors like suppliers and workmen with the power to initiate insolvency proceeding against a company if the default takes place.

Another great feature about the code is that it considers no difference between the rights of domestic and international creditors or among the varied classes of economic organizations. The Code has a hit the nail on the head by balancing the interest of the involved shareholders including modification in the order of primacy of payment of Government dues. This new law is drafted keeping in mind the international standards bearing a broad philosophy that any future insolvency proceedings must be professionally and commercially driven rather than Court driven. The intention is to ensure that the role of the adjudging authorities is to ensure the due procedure rather than refereeing on the merits of the insolvency resolution.

The new Insolvency and Bankruptcy Code, 2016 has repealed a number of outdated acts like the Provincial Insolvency Act, 1920, the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920. It further amends certain legislations like the Indian Partnership Act, 1932, the Companies Act 2013, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Limited Liability Partnership Act 2008 and Sick Industrial Companies (Special Provisions) Repeal Act 2003. In order to sidestep any further litigation in insolvency proceedings, this new Code shall overrule all other laws and Acts. The Code clearly states that the Courts shall not have the authority to grant any injunction as it shall not be a part of their jurisdiction. The new law in the form of Code has replaced a number of laws which were earlier prevailing thereby proving to be an important step in developing the procedure of recovery of bad debts. With the launch of this new law, there is a sudden surge in economic growth because of the unbending timeframe prescribed in the Code in order to resolve the insolvency and liquidation proceedings.

Step by Step Insolvency Resolution Process

The new Code makes a departure from the typical outdated regime by shifting the onus on the creditor in order to initiate the insolvency resolution procedure against a corporate defaulter. Whereas, in the earlier Code, the responsibility to initiate a proceeding was with the debtor and the creditor was to pursue parallel actions for recovery of debt.

Process of Liquidation for Corporates

In case the default is for an amount over and above Rs. 1 lakh, the creditor has the authority to initiate insolvency process as per the new Code. The Code recommends two autonomous stages:

1. Resolution Process for Insolvency

Under this stage, the financial creditors make an assessment of whether the debtor’s business is worthy of continuing or not. The creditors come up with options for restructuring the business model to avoid any further losses.

2. Liquidation

In the event the abovementioned Insolvency Resolution Process fails, the creditors make a unanimous decision to wind down and sell the debtor’s assets in order to recover their dues.

Resolution Process for Insolvency

In case a corporate debtor makes a default in repayment of dues of the creditors, a financial creditor/s, an operational creditor or a corporate debtor through corporate applicant or any authorised member, a person who has the controlling capacity over the financial affairs of the corporate debtor has the power to start the insolvency resolution process. In order to initiate the resolution process, an application has to be made to National Company Law Tribunal (NCLT). A ten days demand notice has to be given to the corporate debtor by the operational creditor before he approaches the NCLT. However, an operational creditor can directly approach the NCLT if the corporate debtor does not repay the outstanding dues or fails to show any existing difference.

The new Code states that the insolvency process of a Corporate must be concluded within 180 days from the date of initiation by the NCLT. The claims of the Creditors shall be frozen for a period of six months on admission of application by NCLT. During this time, the NCLT shall listen to the options to revive and decide the future course of action. It is further clarified that unless a resolution plan is made or liquidation process is initiated, no legal claim shall be sought against the corporate debtor in any other forum or Court. When the application for insolvency is accepted, the NCLT within fourteen days appoints an Insolvency Professional (IP) on receiving a confirmation from Board of Insolvency and Bankruptcy. The appointed IP then takes up the responsibility of the debtor’s properties and functioning. He also collects all the information that is relevant with regard to the financial condition of the debtor from information utilities. IP is appointed for a term of thirty days only within which he does all the necessary scrutinization.

The next step is to make a public announcement about the commencement of corporate insolvency process so that claims from any other creditors can also come forward, if any. A creditor’s committee is constituted by the IP post receiving any claims by public announcement. In the event any financial creditor is a related party of the defaulting debtor, such a creditor will not have the right to represent, participate or vote in the committee of creditors so constituted by the IP. In order to be a part of the Creditor’s Committee, the average dues of the operational creditors must be at least ten percent of the debt. The Committee of Creditors shall first seven days of its incorporation decide through seventy five percent votes whether the interim IP should be used as a Resolution Professional or should be replaced with someone else. After the Committee finalizes the Resolution Professional, he is appointed by the NCLT. The Resolution Professional so appointed can be replaced anytime by the Creditor’s Committee with a majority of seventy five percent votes. In the interim, i.e. till the appointed of any new Resolution Professional, the Creditor’s Committee can take decisions with regard to insolvency resolution by seventy five percent majority voting.

In the event majority (75%) of the financial creditors are of the view that the case is very complex and more time extension is required, the NCLT may grant a one-time extension of up to a maximum of 90 days over and above the pre decided tenure of 180 days. It shall be the sole responsibility of the Resolution Professional to manage and conduct the corporate insolvency resolution procedure during such a term. To enable the resolution applicant for preparing a resolution plan, the Resolution Professional shall compile a statistics note. A resolution applicant can be defined as an individual who has the duty and responsibility to submit a resolution plan to the Resolution Professional. The Creditor’s Committee further receives the plan from the Resolution Professional for its approval.

On the resolution being approved, the next step by the Creditor’s Committee is to come up with options on restructuring which can be either coming up with a modified repayment plan or to simply liquidate the properties of the company in order to recover dues. If the Creditor’s Committee fails to take any binding decision with regard to the repayment by the debtor, the debtor’s assets are liquidated in order to pay back the creditors. If there is a plan prepared for resolution, the same shall be sent to NCLT for approval and implementation.

Liquidation

The liquidation process commences only if:

1. The Committee fails to submit the resolution plan with the provided time frame to the NCLT.
2. The Resolution Plan is rejected because of non-adherence to the Code.
3. The Creditor’s Committee takes a decision for liquidating the assets by a majority vote.
4. The resolution plan is flouted by the debtor.

As mentioned above, no suit can be instituted by or against the corporate debtor during the liquidation process. The only exception, in this case, can be through the liquidator representing the corporate debtor based on the permission of the NCLT. The liquidator shall be the same person as the Resolution Professional lest replaced. The liquidator so appointed shall constitute the liquidation estate which shall comprise of all the properties, whether financial or immovable, of the corporate debtor. The claims of the creditors may be received, verified, admitted or rejected based on the final decision of the liquidator within a prearranged time. In order to appeal to the adjudicator, the creditor gets a total of fourteen days.

Based on the priority, a security creditor may receive the proceeds from sale of assets or realize the security interest by enforcing or dealing with the secured asset as per the applicable laws related to him. He may either relinquish his security interest or realize it based on his intent. Any supplementary sum so realized shall be submitted to the liquidator. Although the security creditors will be paid by the liquidator on priority basis out of the corporate debtor’s assets, his claim shall be considered subordinate to the unsecured creditors to the extent of deficit. The distribution shall be in manner laid down in the Code. All those persons who have any sort of individual rights over the assets of the debtor shall also form a part of the liquidation procedure. There are certain funds which cannot be attached to the estate of the debtor for recovery of debts. Such funds are provident fund, gratuity fund and the pension fund because this amount belongs to the employees and workmen and hence they are given the priority with regard to these funds. Once all the assets of the corporate debtor are liquidated, the NCLT passes an order to finally liquefy the corporate debtor.

Fast Track Insolvency Resolution Process

Nowadays the government is providing fast track procedures in a number of divisions like passport etc. The new Insolvency and Bankruptcy Code also provides a similar feature wherein the process shall be concluded in ninety days with a maximum extension of forty five days. This fast track insolvency provision applies to the process of insolvency. This particular feature is made with an intention to woo the start-ups of our country so that they can complete the resolution process as soon as possible and move on.

Voluntary Liquidation by Corporate Person

The Insolvency and Bankruptcy Code also provides a section wherein the corporate person can take a decision of liquidating itself if it has not committed any default and has the capacity to pay its creditors through liquidation of its assets. In order to proceed with such a liquidation process, it is mandatory for majority of the directors of the said corporate to give a declaration stating that such activity is not taking place in order to defraud any person. Such a resolution shall be approved the creditors of the company who are signifying at least two thirds value of debts of the company. The commencement of voluntary liquidation takes place on approval received by the creditors. Even in case of voluntary liquidation, provisions of liquidation process apply. On the assets being totally liquidated, NCLT passes an order for dissolution of the corporate.

Bankruptcy and Insolvency Resolution in Case of Individual and Partnership Firms

In case of individuals and partnerships, the Code does not provide any specific time frame within which a resolution decision has to be structured. The reason behind this leniency is that individual businesses are of diverse types and there are no set rules for functioning of their activities. Also, it is a fact that corporate person is an artificial legal entity, hence can be liquidated. But an individual is a real person, there is no way the term liquidation will fit him, he has to be declared a bankrupt. The Code applies to all those individuals and partnerships that make a default above Rs. 1000.

Distinct Features and Evaluation of the New Code

The new Code clearly demarcates the commercial facets of insolvency proceedings from that of judicial facets. The role of the Insolvency Professionals is to deal with commercial aspects i.e. to manage the affairs of the corporate debtor, facilitate formation of committee of creditors, to organise their meetings, to examine the resolution plan etc. Whereas, judicial aspects are taken care of by the National Company Law Tribunal. This helps in reducing the burden on judiciary thereby eliminating delays.

The very basis of the new Code is that, in case of default by a corporate person, the control of the said person must shift to the creditors. This Code also emphasises to do things in a time bound manner. The idea behind this is if the things are done in a time frame, there are greater chances to save a corporate from liquidation and the assets of the corporate entity can be used to best use before they are exhausted.

Conclusion

As India is at the bottom of the list of countries as per the World Bank’s Index on ease of resolving issues, this Code shall make a definite difference in the overall ease of doing business in our country. The Code aims at giving the power to the creditor in case of default by the debtor. It is exactly the opposite of the earlier acts and laws which is a welcome move. The stringent procedure if the Code will definitely bring a wave of positivity to the individuals and corporates. It will, in turn, attract foreign capital as most of the foreign firms have a set standard which shall be met with the help of such Codes.

The Code also covers provisions with regard to cross-border insolvency through various types of reciprocal and bilateral arrangements with other countries. The unified Code envisions an organized and time-bound procedure for insolvency resolution and liquidation, which should significantly improve debt recovery rates and revive the ailing Indian corporate bond markets. Although the changes are a welcome move, too many changes have also caused apprehensions. But in the end, there is no doubt it is one of the best moves by the lawmakers and a wish come true for better economy.

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In this article, Kunal Sharma discusses the Challenges and shortcomings of GST in India.

Goods and service tax – One nation, one tax

The essay based on ‘GST- One Step towards Simplifying Tax System in India’ shows the flaws and adverse effects of GST on the economy of India. The bill was brought to implement one tax in the country but resulted into the biggest drawback as it ended up implementing 31 different taxes under GST. It is not only a burden on the Indian economy but is a deadly weapon for poor and middlemen of the country. Price hikes in basic amenities make a wider gap between consumers and the market. Despite all the shortcoming, this model could be a grand success had it been planned considering the welfare of poor people. When GST was implemented it was claimed that it would bring great changes in the Indian economy in the market and increase country’s GDP by 7% but reality is that it has made Indian economy worse as the economy was already in a death phase due to Demonetization. According to the latest report of Reserve Bank Of India the economic development rate of the country is decreased from 9.1% ( March 2016) to 6.1% (January –March ) and now suffering at 5.7% ( April – June ) which shows that the implementation of GST is the biggest failure of the present government. Even the finance minister said that the rate 5.7 % in last three months is really a matter of concern. This shows that the plan of GST was brought without a vision which might harm the country’s economy in the long run.

GST – A Step towards Simplifying the Tax System of India

The Goods and Services Tax commonly known as GST was introduced in India on 1^st July 2017. The basic idea to introduce GST in India to remove the multiple tax system which was a part of central and state government and to provide uniform tax system throughout the country. The present GST tax model is inspired from the Canadian GST model and is divided into different tax slabs ranging from 0% to 28%.

After implementation of GST, India became one of the 160 countries to introduce a unified tax regime at midnight. And by unified, we mean four slabs (5%, 12%, 18%, and 28%) and an additional ‘sin tax’ of 40% to be implemented on rare occasions.

A comparative look at the rates in Asia and Europe shows, not only does India have the highest tax rates, but also by splintering a so-called unified structure, we have made it a whole lot more confusing. Therefore, by the present model of GST we cannot conclude the system just by seeing its few advantages but we should also consider its disadvantages and the wrongful decision of implementing GST on Indian phase which is recovering from death phase after demonetization.

The present GST tax system is full of flaws and lacks economic vision as the present GST bill has various loopholes which are laying adverse effects on Indian economy and the people of the country either from working or business class.

• Firstly, the principle on which GST works i.e. one nation, one tax is not suitable for India. Previously we had 32 taxes which included 29 state VAT taxes, 1 sales tax, 1 excise duty and 1 service tax and after implementation of GST we have now 31 taxes including 29 SGST taxes, 1 CGST and 1 IGST which again gives complicated tax structure to the country and contradicts the principle of single tax in nation.
• Secondly, the Constitutional Provisions and Judgments on GST. If we want to impose a single GST tax system in India it is not possible due to,
  • According to the 101^st amendment in the constitution, Article 246 A states that parliament and state can levy taxes on supply on goods & services. So not only parliament but state can have its own GST.
  • Article 279 A of the constitution says that GST council has only recommendatory powers. So it’s up to state governments to implement its ideas. In this way state government levies its own GST and distorts the entire GST system of the country. On 11^thNovember 2016, 9 judges on behalf of the Supreme Court of India gave its judgment regarding entry tax case that every state is as sovereign as parliament in its powers to levy taxes. So it gives freehand to state by which they can levy their own GST.

The present GST Tax System has certain flaws that thereby weakens the movement thus started and proves to be a shockwave for the disturbed economy:

1. GST system is totally dependent on the online submission of taxes which in result overburdens the online system of the Ministry Of Corporate Affairs and the online infrastructure existing is not very sound, so the problem of hanging and website crashes occurs repeatedly which makes tax filing more adverse than before.
2. Due to the implementation of the present GST system in the country it also increases the problem of tax evasion which results in huge loss in the economic condition of the country due to the following provision existing in the Bill which states that business entity with an annual turnover less than Rs. 20 lakhs is given exemptions under GST registration. The above provision provided in the bill is the biggest loophole which can increase the problem of tax evasion and can be explained by a simple example — If a businessman owns a firm or company with an annual turnover of 80 lakhs and falls under the taxpaying category according to the norms of the GST but rather paying taxes he divides his business into 4 firms of 20-20 lakhs and make his wife, son, daughter and himself director of the following four firms and by showing the business into four parts with an annual turnover of rupees 20 lakhs he is not entitled to pay GST but originally these four firms were only in the papers and he saves his firm which has annual turnover of 80 lakh rupees to pay GST and this is how people will do tax evasion in many forms and thus, will result in huge economic loss to our country.

According to the previous tax system in our country, one had to file tax twice a year but now the system has been made so complicated that one has to file GST thrice a month on the 10, 15 and 20 dates of the month respectively, only through online system. So in a simple way one has to file 36 GST taxes then has to file 12 TDS returns. So now 36+12=48 and 1 annual return so total 49 taxes are filed in a year which is really tedious process and hence lays overburdening on the Tax department of India and businessmen too and if a person owns 13 outlets in 13 states of country then he has to file 49*13= 637 taxes in same year which is simply very irrelevant system.

India’s GST model is based on the Canadian GST model but is a failure in country like India because in Canada throughout there is uniformity and same culture but country like India which is a diversified country and is not uniform throughout as in the North there is an entirely different culture compared to the South. In North where people demand wheat, in south there is huge demand for rice, so by the implementation of GST uniformly in India would lay adverse impacts in near future, as the demands in different areas differ in a huge country like India, unlike small ones like Singapore.

Impact of GST on agricultural sector

Before and after independence of the India its economy is mainly dependent on primary sector i.e. agricultural sector and now also agricultural sector is considered the backbone of Indian economy but due to implementation of GST this backbone is broken and is suffering a lot as tax slabs in agro sector has been increased without taking initiatives for making the infrastructure and new irrigation techniques for the betterment of farmers but imposing more tax than before not only lays adverse effects on agricultural sector but is also responsible for the increase in price in manufacturing sector too, as cost of production will increase if the primary or raw material is costly. We can analyze adverse effects on agro sector by following aspects :

1. Fertilizers are considered as key factor of agricultural sector but previously 6% (1%excise + 5% VAT) tax was levied on that but after GST now it is put under tax slab of 12%.
2. The same impact is there in tractors, waiver on the manufacture of the tractors is removed and GST of 12% has been imposed and its spare parts lie under the 28% tax slab which is considered as luxury category tax slab and kept with the parts of BMW and AUDI which is totally irrelevant as without tractors agriculture is not possible and levying 28% tax on tractor parts is a mockery with the poor farmers who spends his entire life on fields just to fulfill his nation’s demand and needs.
3. India’s milk production in 2015-16 was 160.35 million ton, increased from 146.31 million ton in 2014-15. Previously only 2% VAT tax was charged on milk and certain milk products but under GST the rate of fresh milk is nil and skimmed milk is kept under 5% bracket and condensed milk is taxed under 18% tax slab which again is burden on farmers and cattle farmers.
4. Tea is considered as a crucial item in the Indian household but its prices are also increased due to imposed 5% GST more than previous VAT rate of 4-5% with Assam and West Bengal with the exception of 0.5% and 1%. So, imposing heavy taxes on the agricultural is not justified with the poor section of the society which includes farmers and peasants, this will not only increase the cost of production for farmers but also decrease their profit margin which will subsequently result in increase in creditability among farmers and instead of giving them support this tax system is increasing insecurity and due to which suicidal cases among farmers, peasants will take a boost.

Impact of GST on Insurance sector

On one hand the government is pushing every citizen of the country to open a bank account by initiating ‘PradhanMantri Jan DhanYojna’ and on the other hand GST has made financial services expensive. Transactions fees in financial services have become more expensive as these services are put under 18% tax bracket in the new goods and services tax (GST) regime. Previously these services were so taxed at 15% and the hike in the tax rate means that individuals will have to pay 3 rupees more for every 100 rupees paid for banking transactions. (Economic times: you will have to shell out more from banking transactions from July).

India is amongst the most under-penetrated Insurance market (less than 10% population of India has insurance). This was the only reason for the governments launching the ‘Pradhan Mantri Jeevan Bema Yojna’ however, with the GST, insurance premiums have become expensive which is proving a roadblock in a price sensitive market like India. Life, health and motor insurance are increased up by 300 basis points.

Impact of GST on telecom sector

The telecom sector is already under server debt and a burden of license fee. The current debt stands at around 4 lakh crore (Telecom debt unsustainable – TOI). So with the implemented GST model further taxes in this field will increase definitely. On one hand, government is initiating ‘Digital India’ and on the other hand telecom services (Phones, broadband etc-) is getting costlier as most of the operators will pass on the increase to the consumers in order to cope up with GST. Therefore, it contradicts the initiative of Digital India in order to give boost to Digital India initiative. Government should lower the tax slab in telecom sector. So that the telecom services can be accessed easily even by the poor sections of the society.

The petroleum sector is not kept under GST slab. Petroleum products like crude, high-speed diesel, ATF are kept away from tax slabs. So its costs are likely to rise because of dual indirect tax mechanism.

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In this article, Shagun Bahl discusses the provision of Corporate Governance under the Companies Act, 2013.

Emergence of Corporate Governance in India

Corporate Governance is the new golden term coined in the corporate sector in the late 1990’s by the Industry Association On Confederation of Indian Institute which was the first initiative in India as a voluntary measure to be adopted by Indian companies. It has outlined a series of voluntary recommendations to integrate best-in-class practices of corporate governance in listed companies which touches the four cornerstones of fairness, transparency, accountability and responsibility in managing the affairs of the company. The second major initiative was taken by Security Exchange of India (SEBI) as Clause 49 of the Listing Agreement. The third key initiative to effectively introduce Corporate Governance was taken by Naresh Chandra Committee and Narayana Murthy Committee who previewed Corporate Governance model working in companies from the viewpoint of shareholders, investors and other stakeholders of the company. Corporate governance guidelines both mandated and voluntary have evolved since 1998, due to the sincere efforts of several committees appointed by the Ministry of Corporate Affairs (MCA) and the SEBI. The real change in the corporate sector could be felt with the introduction of 2009 Mandatory Corporate Governance Voluntary Guidelines which has to be comply by companies listed on stock exchange by Clause 49 of Listing Agreement including mandatory codes to be followed by companies pertaining to board of directors, audit committees and various disclosures with respect to related party transactions, whistleblower policies etc. The final assent to Corporate Governance practices in the effective management of the company can be seen as introduction to new significant provisions introduced in the Companies Act, 2013 in form of independent directors, women directors on the board, corporate social responsibility and mandatory compliance of Secretarial Standards issued by Institute of Company Secretaries of India as per Section 118 of Companies Act, 2013.

Corporate Governance – Meaning and Definitions

Corporate Governance is a multi-faceted subject and difficult to comprehend in a concise definition. The main theme of corporate governance is to integrate sound management policies in the corporate framework in such a manner to bring economic efficiency in the organization in order to achieve twin goals of profit maximization and shareholder welfare. Few comprehensive definition on Corporate Governance are discussed below.

Institute of Company Secretaries of India

“Corporate Governance is the application of best Management Practices, Compliance of Laws in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.”

Standard and Poor

“Corporate Governance is the way a company is organized and managed to ensure that all financial stakeholders receive a fair share of the company’s earnings and assets.”

Mathiesen [2002]

“Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return” – www.encycogov.com,

The Cadbury Committee U.K, defined corporate governance as follows

“It is a system by which companies are directed & controlled”.

Need of Corporate governance

The collapse of international giants like Eronf, Worlcom, Tyco, AOL and financial scams like Satyam have been big eye-openers in the corporate arena to make realise the company’s management, ownership and stakeholders the emergent need to comply with Corporate Governance principles in order to prevent themselves from paying huge corporate criminal liabilities in the future. These huge corporate giants paid the cost for lack of good corporate governance practices and corrupt policies adopted by management of these companies and their financial consulting firms

The significance of good corporate governance solutions has widened because of the increasing conflict between ownership and management disciplines, the non-compliance of financial reporting by auditors which inflicts heavy losses on investors and lack of fair and transparent culture in the company which shook’s investor trust in the financial viability of the company and its ethical standards.

Good Corporate Governance – Corporate solutions

Good corporate governance is embedded to the very existence of a sound company. It is important for the following reasons:

1. Corporate governance lays down the foundation of a properly structured Board and strives to a healthy balance between management and ownership which is capable of taking independent decisions for creating long-term trust between the company and external stakeholders of the company.
2. It strengthens strategic thinking at the top management by taking independent directors on the board who bring intellectual experience to the company and unbiased approach to deal with matters related to companies welfare.
3. It instils transparent and fair practices in the board management which results in financial transparency and integrity of the audit reports.
4. It sets the benchmark for the company’s management to comply with laws in true letter and spirit while adhering to ethical standards of the company for bringing out effective management solutions in order to discharge its responsibility for smooth functioning of the company.
5. It instils loyalty among investors as their interest is looked after in the best manner by a company who adopts good management practices.

Scope of Corporate Governance

Corporate governance instils ethical standards in the company. It creates space for open dialogue by incorporating transparency and fair play in strategic operations of the corporate management. The significance of corporate governance lies in :

1. Accountability of Management to shareholders and other stakeholders
2. Transparency in basic operations of the company and integrity in financial reports produced by the company
3. Component Board comprising of Executive and Independent Directors
4. Checks & balances is an integral part of good corporate governance.
5. Adherence to the rules of company in law and spirit
6. Code of responsibility for Directors and Employees of the company
7. Open Dialogue between management and stakeholders of the company.
8. Investor Loyalty is a guarantor of good corporate governance practices

A Component board comprising of experienced professionals and active directorship who brings rich experience and intellectual vision on the board resulting in a greater economic efficiency of the company and enjoys the indispensable trust of the shareholders and key stakeholders of the company and they turn into trusted market players in the corporate sector enjoying everlasting market repute.

Key market players involved in corporate governance

The Corporate management decisions have an impact on various people and entities associated with the company who are collectively known as stakeholders which include shareholders, directors, creditors, employees, suppliers, government agencies and society at large. But there are only key stakeholders like shareholders, directors, officers who are active participants in corporate governance process and other stakeholders who themselves are not involved in corporate governance practices but rather are recipients of benefits derived from companies having good corporate governance practices.

The Key Participants are as following

Shareholders

The shareholders are the principal owners of the company who provide capital to the company in lieu of return received by them in form of dividends on the earnings of the company. The individual shareholders participate in corporate governance procedures by exercising their voting rights on the key decisions of the company in in the interest of all stakeholders. The other institutional shareholders of the company like, insurance companies, trusts, investment banks, etc. who have greater shareholding than other shareholders actively have a greater role in monitoring corporate governance activities of the company as they are interested in market viability of the company in form of large market shares.

Directors

The Board of Directors are key constitute players for formulating and implementing corporate governance practices in the heart of the company machinery by making key decisions pertaining to setting long term corporate strategy of the company, sharing high responsibility to run the company on good governance structure, bringing effective board leadership to tackle the company’s operations at all levels and monitoring its performance in a fair and transparent manner.

Officers and key managerial personnel

Key Managerial Personnel (KMP) and other officers of the company who serve the top – management level under the Companies Act, 2013 includes the Chief Executive Officer, Managing Director or Manager; Whole Time Director; Company Secretary.
The Key Managerial Personnel would advise the Boards to achieve the corporate goals and by adhering to Good Corporate Governance practices. KMP would also have to report to the Sectoral Regulators for the non-compliances made by the company.

The new law bestows upon KMP’s a significant role to run the company’s operations in such a manner by adhering to laws in true letter and spirit in order to spell out the will of directors and other stakeholders effectively and efficiently in achieving company’s twin objective of profit maximization and maximization of wealth.

Role of Corporate Governance in banks

Bank and Financial Institutions are the backbones of the economic and financial system of any country. Banks are the richest source of economic wealth of the company any nation’s progress report is depicted through healthy and sound functioning of the banking system of the country.

To strengthen the banking practices in India, RBI plays a leading role in formulating and implementing corporate governance norms for banking regime in India sector. Banking structure is the lifeblood of an economy to survive in this globalized scenario.

• The chapter on Corporate Governance in Banks in India elaborately discusses the role of
• RBI in regulating good corporate governance practices in banking sector in India.

Paper on – IIBF

“The RBI move to strengthen Corporate Governance led to seminal changes in the bank administration. The sustained profitability, lower level of non-performing assets, improved return on assets etc are some of the laud indicators of the sustaining policy of operating sound banking system. Moreover, the movement of share prices in the market, increased appetite of investors to look at banks for investment in bank centric equity market further speaks of broad market opinion of bank’s performance and reflection of market confidence. The corporate governance framework in banks has been strengthened through regulation, supervision and by maintaining constant interaction with the management. They cover identification of responsibilities of the Boards of banks, disclosure and transparency in published accounts, and shareholder and stakeholder rights and controls. The rating on management (M) which has been introduced as part of the CAMELS (Capital, Asset Quality, Management, Earnings, Liabilities and Systems) supervisory process takes into account the working of the board and its committees including the Audit committee, effectiveness of the management in ensuring regulatory compliance and adequacy of control exercised by the head/controlling offices. This model has been further modified to include risk based supervision. The new evolution is intended to manage influx of a range of financial risks entering the market with their nuances.”

Role of proxy advisory firms in Corporate Governance

Proxy advisory firms is a very nascent terminology introduced in the corporate world which are basically independent research centers that evaluate the performance of corporate matters such as mergers, acquisitions, top appointments and CEO pay, on which shareholders are expected to vote on in AGMs, EGMs so that an informed decision can be taken by the shareholders about the corporate policies undertaken by these companies in order to increase their shareholding value.These firms engage in comprehensive analysis of the major activities of the company and submit detailed reports in order to guide the shareholders to take decisions which turn out to be beneficial to shareholders in the long run for safeguarding their interest with the company.

Proxy advisory firms charge fees from institutional investors and provide independent advisory services and voting recommendations to the shareholders and other institutional investors.

India has home grown proxy advisory firms such as Institutional Investor Advisory Services (IiAS), InGovern and Stakeholder Empowerment Services (SES) which provide more analytical, sophisticated and structured report to shareholding units leading to a change in the governance structure of the company.

Role of corporate governance in Family Business

The history of Indian Corporate giants includes names like Tatas, Birlas, and now presently Reliance who all are listed public Indian companies enjoying biggest market share in the country are family promoted and managed companies. Nearly a third of the Sensex companies can be said to be family promoted, controlled and managed. Research and experience show that family ownership and control brings positive approach to the family business and its constituent shareholders. However it is also true and has been seen in many family owned business in India and abroad that these businesses also brings with itself magnitude of problems delineating ownership from family management and sometimes destroying the whole businesses where power play and conflicts take the first place and fair play and transparency in takes a back seat in family owned businesses.

Corporate governance is the measuring rod which measures the long-term success of the company and keeps peace in the family.

Corporate governance regulates the family and business levels of the company and brings good solutions to family ownership challenges and often results in the long-term success of the family business and maintains peace and harmony in the controlling family and maintaining fair balance between family ownership and outside management control.

As published in :

https://www.oecd.org/daf/ca/corporategovernanceprinciples/43654301.pdf Governance Solutions to Family Business Challenges -This section looks at various governance solutions to the challenges unique to family-owned businesses, and covers a variety of topics:

• Distinguishing governance solutions in different ownership stages of the family business
• Family governance institutions
• Family governance documents of Specific solutions to some family governance challenges
• Succession planning in family-owned

The main motivations for seeking improvements in their governance policies and practices:

• To institutionalize and perpetuate the business model.
• To provide the means to implement the defined strategic plan.
• To add value for shareholders.
• To enhance the potential for attracting debt financing, resources and shareholders
• To improve the company’s image abroad, facilitating globalization and reaching a base of foreign investors

Key features of corporate governance in Companies Act, 2013

There has been a sea change in companies Act, 2013 which has waved its way from principle of corporate governance practices as the new key change in the act. The Companies Act, 2013 has taken a foot forward from SEBI’s Clause 49 of listing agreement by introducing provisions in the companies act 2013 which promotes corporate governorship code in such a manner that it will no longer be restricted to only listed public companies but also unlisted public companies. The new (Companies Act), 2013 has introduced various key provisions which have changed the corporate regime in such a way to run the corporate machinery in alignment with the globalised corporate world by mandatory disclosure requirements for:

Independent Director Under the Companies Act, 2013

The strength of number of Independent Directors for the prescribed companies under Section 149(4) read with Rule 4 of Companies (Appointment and Qualifications of Directors) Rules, 2014 for listed Public Company is at least one third of total number of directors and public companies having turnover of 100 crores rupees or more at least 2 directors and public companies having paid up capital of 10 crores rupees or more at least 2 directors.

Audit Committee

The Audit Committees of the Companies Act,2013 has undertaken both private and public companies within its ambit to constitute audit committees. The constitution of audit committee has also seen change as compared to clause 49 with minimum with three independent directors on the board along with the chairperson who should be able to read and understand the financial statement.

Section 177 of the Companies Act,2013 and Rule 6 and 7 of Companies (Meetings of Board and its Powers) Rules,2014 deals with the Audit Committee.

The Board of directors of every listed company and the following classes of companies, as prescribed under Rule 6 of Companies (Meetings of Board and its powers) Rules,2014 shall constitute an Audit Committee.

1. All public companies with a paid-up capital of Rs.10 Crores or more;
2. All public companies having turnover of Rs.100 Crores or more;

Internal Audit

Companies Act, 2013 has mandated the internal audit for certain classes of companies as specified under Section 138 of the Companies Act, 2013.

Serious Fraud Investigation Offence (SFIO)

Section 211 (1) of the Companies Act, 2013 shall establish an office called the Serious Fraud Investigation office to investigate fraud relating to Company. The powers are given to SFIO under the act as mentioned that he can investigate into the affairs of the company or on receipt of report of Registrar or inspector or in the public interest or request from any Department of Central Government or State Government.

Corporate Social Responsibility

The concept of CSR rests on the good corporate citizenship where corporate contributions to the societal growth as a part of their corporate responsibility for utilizing the resources of the society for their productive use.

Ministry of Corporate Affairs http://www.mca.gov.in/  has recently notified Section 135 and Schedule VII of the Companies Act as well as the provisions of (CRS Rules) which has come into effect from 1 April 2014.

Applicability

Section 135 of the Companies Act provides the threshold limit for applicability of the CSR to a Company :

1. Net worth of the company to be Rs 500 crore or more;
2. Turnover of the company to be Rs 1000 crore or more;
3. Net profit of the company to be Rs 5 crore or more.

Further, as per the CSR Rules, the provisions of CSR are not only applicable to Indian companies but also applicable to branch offices of a foreign company in India.

CSR Committee and Policy

Every company as prescribed in Section 135 http://www.mca.gov.in/SearchableActs/Section135.htm of the Act and Company (Corporate Responsibility ) Rules, 2014 http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification2_2014.pdf within the threshold limit requires spending of at least 2% of its average net profit for the immediately preceding 3 financial years on CSR activities.

Further, the company will be required to constitute a committee (CSR Committee) of the Board of Directors (Board) consisting of 3 or more directors.

The CSR Committee shall formulate and recommend to the Board, a policy which shall indicate the activities to be undertaken (CSR Policy); recommend the amount of expenditure to be incurred on the activities referred and monitor the CSR Policy of the company. The Board shall take into account the recommendations made by the CSR Committee and approve the CSR Policy of the company.

The new CSR regime is based on “Comply or explain” approach to stringently push big corporate giants to take initiative towards their duty to contribute towards their CSR activities. Companies failing to do so would be required to explain why they have not included such information, in the annual report as under Section 92 of the Companies Act, 2013 as part of “comply or explain” approach for large companies.

Conclusion

The Companies Act, 2013 empowers independent directors with proper checks and balances so that such extensive powers are not exercised in an unauthorized manner but in a rational and accountable way. The changes are a step forward in the right direction to smoothly run the management and affairs of the companies in the interest of stakeholders. These are all welcome changes in the globalised corporate world of today and they will strengthen the core corporate machinery by instilling strong corporate governance norms in a company leading to economic efficiency and higher ethical standards which will always inspire the company’s management to work in the direction to uphold its goals of maximization of wealth of stakeholders backed with good corporate repute.

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In this article, Anushka Ganguli of Rajiv Gandhi National University of Law, Punjab discusses top research centres in Delhi for a law student to intern in.

Research knows no bounds. It is everything around you. It is about unravelling every story that exists around you. In simple terms, it is a quest to find out what the common eyes cannot, and only the thirst for more and more can actually discover.

Knowledge is power, and research is the tool to bestow this power upon you. It is the in-depth study and investigation of facts to draw concrete conclusions, and solutions.

Research, for a law student, is an indispensable weapon. The nature of the profession is such, that one cannot escape the clutches of laws, acts, facts, precedents, law reviews and the like. This is why legal research stands out as an essential tool for every law student, that becomes a part of him and any individual associated with this profession.

Undoubtedly, legal research is an essential lawyering skill, but to develop this skill is no petty task. It takes time, patience and pursuance and may involve hours and hours of study and dedication. In such case, it is always recommended and advisable for an avid researcher to intern at as many good research hubs and firms as possible, to widen the spectrum of his knowledge and add assets to his researching skills under experienced and proper guidance. But it is equally important to invest one’s efforts and time at the right place, under the right people and in the environment.

The article explores top ten places to intern in Delhi, which is certainly the hub and heart of opportunities in India. Among the places galore to intern for legal research, here are a shortlisted few to consider and venture out for.

(Note: The order doesn’t reflect the ranking in any manner)

Vidhi Centre for Legal Policy

Vidhi, with a tagline of ‘Better Laws, Better Governance’ is an independent think-tank doing legal research and assisting the government in making better laws. For budding and experienced legal researchers, Vidhi offers interns tasks relating to hardcore research involving cases on important matters of law, analysis of the case laws, making lists of cases decided by various tribunals, etc. The place is known for publishing its own blog (SCOI), articles and reports on various legal matters, that ensures interns to keep up to their heels and work intensively.

Vidhi provides an internship for a minimum period of 4 weeks, and basic stipend is taken care of. The interns are expected to apply through their official website https://vidhilegalpolicy.in/internships-delhi/ at least 2-6 months prior the internship period.

Know more about internships at Vidhi, click here!

Contact:

Phone: 011 4310 2767

Email: vidhi[a]vidhilegalpolicy.in

Address: D-359, Lower Ground Floor, Defence Colony

Thompson Reuters

The name needs no further explanations or justification, a name that can work wonders on the CV of an intern. Thompson Reuters is known for being an intelligent source of information for world’s businesses as well as professionals. Their task is to enable professionals and entrepreneurs’ to make decisions of utmost importance, all powered by one of the most trusted news organizations.

The work assigned to interns is mostly and essentially legal market researching and the like, via interviews and interaction with lawyers.

Thompson Reuters offers a global platform for research enthusiasts, to invest your efforts in coming up with innovative and expert solutions. This task involves intensive research, in-depth study of the topic and area, this could become an experience to cherish.

The internship period could range from four weeks to more, depending upon the vacancies, in the months of April and May. It offers programs such as Legal Advancement Programs, which offer direct entry to the interns.

To add on to all the perks and the global name, depending upon the quality of work and research, interns are offered a nominal stipend around Rs. 4000. So grab on to your chance to intern at this wonderful place!

Contact:

Phone: + (91)-11-61102000, 61102001, 61102002

Email: shweta.munjal@thomsonreuters.com

Address: 4th Floor, Statesman House, Barakhamba Road

Centre for Policy Research

The Centre for Policy Research (CPR) is an Indian think tank focused on public policy. It is dedicated to extensive and in-depth research on current economic, social, and political issues.

It is a non-profit, independent institution dedicated to conducting research that contributes to a more robust public discourse about the structures and processes that shape lives in India.

The internship opportunities’ include position of a research associate.

The areas of work of CPR include international law and relation, environmental law and governance and economic and social challenges. Interns have to invest huge chunk of their time getting well versed with all such issues, studying policies and contributing to the articles and reports published by it.

Undoubtedly, the tag of a government organization shall enhance the portfolio value of any intern manifold; hence CPR finds a place in this list. Research maniacs, more power to you.

Contact

Phone: +91 (11) 26115273-76

Email: cprindia@cprindia.org

Address: Dharma Marg, Chanakyapuri

The Energy and Resources Institute (TERI)

For biotechnology or environmental law freaks, there is no better place than TERI to invest your time in. One of the largest developing institutions, it does not have a formal internship program, but interested candidates may drop their application at hr@teri.res.in. TERI ensures a range of research opportunities’ for its interns in areas of environmental law jurisprudence, sustainable development and the like. Apply soon, you may just be the next Marshall Eriksen!

Contact:

Phone: 91 11) 2468 2100 and 41504900

Email: mailbox@teri.res.in

Address: Darbari Seth Block, IHC Complex, Lodhi Road

Federation of Indian Chambers of Commerce and Industry

Interested in intellectual property rights, patent issues and trademarks? The IPR division at FICCI might be your destination where you can explore and research about the intricacies of the trending issues of IPR, PVFR act, TKDL, online piracy issues.

The internship period can vary between 15 days to 2 months. FICCI IPR Division at hr@ficci.com or to Sheetal Chopra, Deputy Director and Team Leader, IPR Division at sheetal.chopra@ficci.com.

FICCI has a big brand name, and ensures sufficient exposure for a legal research enthusiast. This could be your opportunity to add value to your CV as well as your research skills. Go on, browse away! Click here to know more about this place.

Contact:

Phone: 011 2373 8760

Email: ficci@ficci.com

Address: FICCI, Federation House, Tansen Marg

Public Interest Legal Support and Research Centre (PILSARC)

From issues ranging from human rights, consumer disputes, intellectual property, rural development and education, PILSARC deals with research pertaining to all of them.

Needless to say, interning at PILSARC could be an experience worth a shot. PILSARC is primarily a national level public interest law firm and research centre. It assists activists, non-governmental organizations, social action groups and human rights commissions through preparation of working-papers, litigation and legal advice; bringing together documents, material and information and by engaging in public advocacy.

So if you wish to see yourself interning and racking your brains at this great place, mail your applications at pilsarc@gmail.com or rashmi@pilsarc.org.

Contact

Phone: 91-11-26822525, 91-11-26927813

Email: pilsarc@gmail.com

Address: A – 131, New Friends Colony

Centre on the Death Penalty (National Law University, Delhi)

If one wishes to work policies on death penalty in India, invest his time in exploring more on the academic aspects of the subject, then Centre on the Death Penalty might open your doors to your desires. The work mainly includes study of issues like death penalty, criminal justice system, and execution of prisoners and so on.

Quality of work may also reward in decent stipend for the interns. The interested candidates must send their applications addressed to the Director, Centre on the Death Penalty and sent by email to nidhi.thakur@nludelhi.ac.in and deathpenalty@nludelhi.ac.in. No time to lose, no battle to lose. Legal researchers, you’re one email away!

Contact:

Phone: +91-11-28032533

Email: deathpenalty@nludelhi.ac.in

Address – National Law University, Delhi, Sector 14, Dwarka

Center for WTO Studies, Indian Institute of Foreign Trade, Delhi (IIFT)

This research based organization works specifically in the field of world trade in particular and international trade relations in general, and hence here is the place for interns wishing to indulge in intensive and core research work and studies in this field. Under the guidance of excellent mentors and faculty, one can only be assured to come out with a lot more than with what he entered.

Interested interns can email their applications at either at aklahiri@iift.ac.in or lahiri@nic.in at least 4-5 months before the desired period of internship. So do not just let the clock tick away, instead browse away and know about this place here!

Contact:

Phone: 91-11-26965124, 26965300, 26966360

Email: cws@iift.ac.in, cws@iift.edu

Address: 7th Floor, IIFT Bhawan, B-21, Qutub Institutional Area.

Center of Excellence in Cyber System and Information Assurance, Indian Institute of Technology, Delhi

The Centre of Excellence in Cyber System and Information Assurance aims to conduct basic and applied research in the area of Cyber Systems and information assurance. Thus, this is the ideal destination for researchers primarily interested in cyber laws and the like. Interns get the opportunity to delve deep into the nitty-gritty of cyber laws under the able guidance of mentors at the Institute.

Contact:

Phone: 011-2659-7351

Email: http://web.iitd.ac.in/~rbose/

Address: Center of Excellence for Cyber Systems and Information Assurance Room No. IIA-306, Bharti Building, IIT Delhi.

Researching and writing are skills that cannot be developed in a day. It is something that grows each day, each moment, with every read, with every publication. Interning at the right place is one step towards achieving you aim. So choose wisely from the endless list of options around, what suits you the best. Carpe Diem!

S&R Associates

If capital markets, corporate law, M&A stimulate your senses like none another, you can find your place at S&R Associates. This firm attracts research work that includes RBI policies, SEBI guidelines, holdings, buybacks etc. and offers ample scope to develop one’s research skills.

Apart from all that learning experience, the firm is known to offer a stipend which can go up to Rs 12000, which ensures brownie points for the interns and their pockets. So without any further delay, team up with this firm and get going with your application process. Apply now, here.

Contact: 

Phone: 011 4069 8000

Email: ygrover@snrlaw.in

Address: 64 Okhla Industrial Estate PHASE-III

Happy learning! Happy Researching! Happy Interning!

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In this article, Shreya Ahuja of RGNUL discusses strategies and techniques for using principles of tort in practical life situations.

Ask a fresher inside a law school of a law they know, Law of Tort will definitely find a mention in their answer. One of the subjects taught to law students in their first semester is Tort Law. We study, we cram and we forget the principles of law. The article is a guide on how to use the lessons taught in your law of tort classes in practical life situations.

Tort means ‘to twist’

Tort Law is generally the most common law that one studies in a law school or in any field of law but the least common law that one makes a use of in a practical life. The term ‘tort’ is derived from a Latin word “tortum” which means “to twist”. Any such action which is twisted, crooked and wrong arises an action under tort law and is in contrast to a word rectum which means straight. Everyone is expected to behave in a straightforward manner, and one who deviates from his straight path into crooked ways is said to have committed a tort. We in our daily lives, see instances where people act in a manner which may cause an infringement of our rights is actionable under the law of torts. But we are generally not aware of these rights. We don’t know that such a person can also be held responsible for such actions of his. For example, if a friend of yours demeans you publically about anything which you think is not true, you can hold him liable under the tort of defamation.

Nuisance

Some people intentionally or unintentionally interfere unlawfully in other’s enjoyment or use of land without being aware of its consequences. Such actions may constitute a nuisance which is not only a crime but also actionable under tort law. For example-

• If you are not able to sleep peacefully due to the daily morning prayers, devotional songs, frequent discourses relayed on the loudspeaker in your locality that you can sue them for private or public nuisance.
• Or say any industrial activity being carried out in a residential area near your house, the smoke or fumes of which cause harm to trees, shrubs, plants of your garden it will be a case of nuisance.
• Your neighbour waters his own garden and everyday spills water over your premises you possess the right to sue him.
• Someone parks his vehicle in a midway without any danger signal or indicator which may cause an inconvenience or obstruction to you, rather than engaging in a dilly-dally with him you can hold him liable.
• A person residing just above your floor in flat everyday throws garbage from above, you can get unliquidated damages for the inconvenience caused.

Assault

Whenever we hear the term Assault severe acts such as rape or extreme actions of causing physical hurt comes to our minds. These wrongs, undoubtedly, are assault but there are other simple actions which does not involve actual touching or violence but is enough to cause a reasonable apprehension in the minds of people,. A person while doing such acts may not be aware of it but is can have serious consequences under tort law. Let us see some examples:

• Your friend putting away your chair while you are about to sit (until you reach the floor) is not just a practical joke but an actionable wrong.
• Someone’s attempt to throw water on you is an assault.
• You land yourself into a fight with someone, and he scares you by rolling his sleeve, clenching his fist, threatening to break your neck you can drag him to the court for the tort of assault.
• Pointing a gun, showing up a lathi, threatening to hurt by a kitchen knife, golf club, screwdriver, wrench or a rock, also amounts to an assault.

Battery

Every simple action of a person if not done cautiously can land him into a trouble. Someone spits on you and if the spittle hits you, you can sue a person for Battery. Battery can be defined as the direct and an intentional application of force on someone. When assault is actually acted upon, it converts into tort of battery and is actionable under tort law. Some of the similar instances you might encounter are:

• You visit a beauty salon, and the attendant applies a cream or a tone-rose on your skin without your consent, which later produces any adverse reaction on your body you have a right to sue a lady for battery.
• If you suffer harm due to an electric wire placed without any indication and warning to restrict a person from entering, it will constitute battery.
• You are standing in a long queue at a ticket counter, waiting for your turn to come, a person in haste pushes you from back, you can sue him for battery.

Product Liability

We all are customers and our daily purchases affect our lives in some or the other way. What if we fine goods defective which we had spend a penny on due to the negligence of a manufacturer? Not only consumer protections acts protect us against these malpractices but we can also seek remedy under tort law for the liability of defective products.

• No sooner had you bought a cold drink than you find something suspicious inside the bottle that may have posed danger on you anyway, you can hold manufacturer liable for his negligence.
• You have to face an adverse skin reaction by applying a cream or a skin lotion that you recently bought from the nearby cosmetics store, you can sue the manufacturer under the tort law for the annoyance suffered.
• Even you can hold a manufacturer liable if you receive any product defective bought by online shopping, the most popular method of shopping these days.

Trespass to land

Trespass to land is an actionable wrong under tort law which means if anyone interferes with possession of your land without any lawful justification will be held liable. For instance, to throw stones upon neighbour’s land or premises would amount to trespass. Or say-

• If someone grows a plant or a tree on your land or premises that will be a trespass to land
• Anyone enters your house without your permission or uses your premises as a shortcut to go somewhere he’ll be held liable for trespass
• Also, someone’s domestic pet causes you annoyance by frequently entering into your premises, you can sue him for trespass
• An advertisement hoarding just above your terrace which may cause a reasonable disturbance in your enjoyment of the land will also be a trespass to land.

Self Defence

Law not only provides you the opportunity to bring an action against a person who commits wrong to you but also permits you to protect your body or property by what we call self-defence. Law gives you Right to Self-Defence if you face an imminent threat. For example- if a person is about to attack you by say a stick or throwing a stone, you can revert an action by using a reasonable force on him. There are many such defences that law gives you which may prevent you from being sued, you just need to be quite aware of your rights and privileges.

Malicious Prosecution

Also, there is a concept of malicious prosecution which enables you to take action against a person who without any probable cause or lawful justification has dragged you in the court of law. You can recover damages from the person if they have involved you in the misuse of the legal process and procedure for improper purposes. So you can even sue for being sued.

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In this article, Tejaswinee Roychowdhury pursuing M.A, in Business Law from NUJS, Kolkata discusses Celebrity Endorsement in the Consumer Protection Bill.

Introduction

To understand celebrity endorsement in the Consumer Protection Bill, we first need to familiarise ourselves with the basics of what the Consumer Protection Bill is and what it seeks to accomplish. What is Consumer Protection and Why is it Necessary?

Consumer Protection implies insurance of consumers from different out of line exchange rehearses. The motivation behind such security is to maintain a strategic distance from misuse and check different business acts of neglect. Business associations are efficient, better educated and have a superior ruling position. Along these lines, they effortlessly prevent abuse of consumers. The most noticeably bad influenced casualties of these business associations should be secured and the consumer is ensured through consumer protection. [1]

Importance of Consumer Protection

Firstly, the significance of the consumer protection is to shield the consumer from abuse. Without consumer security, consumers were abused from multiple points of view e.g. offer of dangerous items, contaminated and storing of merchandise, utilizing incorrectly weights and measures, charging over the top costs and offer of mediocre quality products, and so on. Through different Consumer Protection Acts; business associations are under strain to avoid abusing consumers.

Secondly, Significance of shopper insurance is to make mindfulness among purchasers about their rights and duties by sorting out workshops and classes and gives them certainty to make legitimate move against organizations who have defaulted.

Thirdly, Significance of shopper insurance is to empower the legit specialists. Associations give the credit to the business associations which goes for buyer fulfilment by distributing ideal reports in their periodical about them. This aide in building goodwill for such associations. Business without moral esteems is only a criminal action. Ensuring the premiums of the purchaser incorporates non appearance of uncalled for business practices, for example, dark promoting, profiteering, making a simulated lack, utilizing incorrectly weights and measures, distributing false ad, and so forth. It is fundamental for a specialist not to practice such uneven means in this manner secure the enthusiasm of buyers.

Fourthly, Significance of customer assurance is they play associating join between the shoppers. Purchaser Protection association’s go about as a connection between buyers needing to record objections on one side and the business associations that have defaulted on different sides and ensure that equity is done to definite buyers and present the shopper grumblings in proper customer courts and ensure that equity is done to buyers.

Fifthly, Significance of buyer assurance association is to issue different diaries and periodicals in which wide reputation is given to the out of line exchange hones received by business associations with the goal that they are influenced to give reasonable treatment to purchasers.

Sixthly, Shopper Protection goes for conveying solidarity among purchasers to battle aggregately against the business associations which enjoy uncalled for exchange hones. Shoppers are urged to shape co-agent social orders with the goal that the emphasis is on giving administrations to individuals as opposed to acquiring benefit on the cost of clients.

Seventhly, Significance of purchaser assurance does not confine the business. Money related foundations and banks give back to business. Government offers help and impetuses. Representatives contribute their opportunity, ability and work. Purchasers are prepared to pay for esteem. The businessmen can get the best help of every one of these gatherings just when it quits abusing its clients. [2]

Need for the Consumer Protection Act

The fundamental thought behind sanctioning of the Consumer Protection Act is plain as day that is to shield the consumer from out of line exchange hones. As all the business association are all around overseen and knowledgeable with the economic situation so unquestionably they are in the better commanding position and utilize it to abuse the consumer. To evade this, misuse this demonstration is a milestone ever monetary enactment and has been viewed as the most dynamic, thorough, and one of a kind bit of enactment. The essential motivation behind this demonstration is to accommodate the basic and expedient equity, not at all like other existing laws which are corrective and preventive in nature. Guaranteeing the welfare of the consumer is one of the real duties of the legislature and subsequently, the customer security act was presented. The uncommon normal for this demonstration is rapid and economical equity to the consumer’s grievance and further to invest with help of particular nature and honour remuneration wherever suitable. In one of the gatherings held in Malaysia in 1997, this Act was portrayed as one “which has gotten under way insurgency in the fields of customer rights, the parallel of which has not been seen anyplace on the planet”. This demonstration additionally guarantees the privileges of the consumer like the privilege of decision, wellbeing, data, redressal, open hearing and consumer instruction. [3]

Understanding Celebrity Endorsement

It is assumed that ‘customer is the ruler’ and that purchaser assumes an imperative part in the monetary arrangement of any country and that shopper is the key player in the market. While, the ground the truth is very turnaround as the utilization examples of the market is enormously affected by big name supports and not by the customers.

The shopper who is ostensibly alluded to be a “lord” is, truth be told, a “hostage” or a “casualty” of market misbehaviours. Makers and specialist organizations have just a single proverb: extricate the most extreme benefit through promoting by participating in a wide range of injurious practices and creating items that don’t meet the required quality gauges.

Advertisement idea in India is not new but rather prior promoting used to be a type of correspondence and training to draw the consideration of customers about the details of an item, for example, its value, highlights, accessibility, sources, organization name and its fixings yet today with the appearance of VIP support drift, the cases are as spurious as the item itself. Makers and specialist co-ops are spending colossal measure of spending plans by connecting with commercial organizations and big names for underwriting of their items and administrations.

These big names actuate customers by method for unconfirmed cases against the interests of the shoppers. They bait buyers from multiple points of view, be it wellbeing, drinks, nourishment items, prescriptions or instruction. They offer their fantasies through varying media and print media in the most enticing way. Such endeavours make a want in the psyche of a buyer to buy a thing which was generally not his genuine request. There are a few laws and offices to manage customer insurance yet the same are not discovered viable. [4]

It is difficult to dissect the effect of superstar supports on the offers of a specific item however it is obvious that when a conspicuous open figure underwrites an item the mental impact will drive the group of onlookers to purchase the item and will add to the benefits of the broker and the big name. One of the worldwide corporate fund organizations found that “the aggregate estimation of the best 15 big name marks in India is worth over US$691 million”. [5]

Celebrity Endorsement and the Consumer Protection Bill, 2015 – The Stand of the Parliamentary Standing Committee and Lok Sabha

Despite the fact that it is obvious that big name supports are huge cash exchanges, with late advancements in the business and with the proposition to supplant the Consumer Protection Act, 1986, with the Consumer Protection Bill, 2015, superstars will never again appreciate a free lunch in the underwriting business.

In the present lawful structure, a VIP can be held obligated for wrong notices and special exercises of items that unfavourably influence the enthusiasm of purchasers, under statutory arrangements of the Food Safety and Standards Act, 2006, and the Indian Penal Code, 1860, and additionally under the Consumer Protection Act, 1986. However, under the proposed arrangements of the bill famous people who make false or deluding claims in their supports would be liable to substantial punishments. [6]

The administration’s turn has been incited by a report of the Parliamentary Committee on Food, Consumer Affairs and Public Distribution, which favoured “stringent arrangements to handle misdirecting ads, and additionally to settle risk on endorsers/superstars.” The bill was presented in the Lok Sabha in August 2015 has been considered by the parliamentary standing board of trustees. The board of trustees has recommended the incorporation of strict arrangements for making VIPs responsible for their supports.

The topic of making brand representatives responsible has been in the spotlight since the charged nearness of monosodium glutamate and overabundance lead in Maggi noodles, which was embraced by film performers, for example, Amitabh Bachchan, Madhuri Dixit and Preity Zinta.

The clatter over the Maggi reports goaded the legislature into a fragile exercise to find out the legitimate and expert risk of brand diplomats who, by supporting a specific brand, convey to it consideration, validity and trust, and other immaterial advantages in ways that different sorts of promoting can’t.

When even organizations are considered “people” with corporate social duty, the law will undoubtedly develop to control lead of famous people who are assuming an ever more extensive part in present day culture and utilization designs, filling in as judges of taste, style and popular conclusion the world over. It gave off an impression of being simply an issue of time before enactment tended to lacunae that enabled advertisers to utilize big name energy to make enthusiastic bonds with buyers with the question of expanding deals. [7]

The parliamentary standing board of trustees is of the view that the distortion of consumable items ought to be considered important and the present arrangements are not adequate to dissuade makers and sponsors from utilizing open figures in misdirecting supports. Therefore, strict arrangements are prescribed for settling the risk of superstars in instances of misdirecting supports.

Under the underlying proposition the correctional arrangements comprised of the greatest fine of ₹100,000 (US$1,500) and detainment up to two years for submitting an offense under the bill interestingly. For an ensuing comparable offense, the punishments could be expanded to a most extreme fine of ₹500,000 and detainment up to five years. In spite of the fact that it was not clear from the underlying suggestion that the nearness of a superstar in the deceptive commercial would pull in the arrangements of fine and detainment, such a derivation can be drawn. Presently the proposed punishment is a fine of up to ₹1 million for a first-time guilty party and ₹5 million for resulting offenses and detainment for the maker of perilous and risky items.

In spite of the fact that the fine for big names has been expanded in the bill, the detainment arrangements were dropped. Rather a one-year restriction from support would be forced on a superstar taking an interest in a deceptive ad surprisingly and a five-year boycott for consequent offenses.

The proposed statute would cultivate an awareness of other’s expectations among famous people and make them more watchful while tolerating offers of brand supports. Despite the fact that it is impractical for famous people to comprehend the unpredictable issues identified with item institutionalization as per the statutory standards or to check the nature of the items actually, due determination in the interest of the big name will be required after the establishment of the bill. The legislature has facilitated the sanctioning procedure by incorporating the bill in the rundown of “Bills for Consideration and Passing” in the last two sessions of the parliament. [8]

Section 75B of the new Bill tries to make any “false or misdirecting” support which is “biased to the enthusiasm of any customer” a corrective offense, culpable with a correctional facility term of up to 2 years and a fine of Rs 10 lakh for the primary offense, and detainment of 5 years alongside a fine of Rs 50 lakh for the second and ensuing offenses. The stipulation to Section 75B, notwithstanding, says that risk could be evaded by demonstrating that the VIP “endorser avoided potential risk and practiced due persistence before supporting an item or administration”.

At the end of the day, Section 75B looks to punish just foolhardy supports by mark diplomats who continue to practice their effect on shoppers without paying regard to the veracity and honesty of cases made by the items. The proposed law does not make VIPs vicariously subject if something turns out badly with the item — yet secures them with a lawful commitment to avoid potential risk and act with due determination. For instance, a VIP can’t be considered responsible in the event that he publicizes how great an item tastes since he has tasted it, however in the event that he guarantees that it is free from bugs and microscopic organisms, the minimum he needs to do is look at a lab report.

Once more, a superstar requires not be careful about confronting trial in a criminal court on a grievance by a shopper — the proposed law sets out that no court should take cognisance of such an offense aside from upon an objection made by an officer of the Central Consumer Protection Authority, appropriately approved by the Chief Commissioner. This Central Authority has been proposed as another official office to fill “an institutional void in the administrative administration surviving”.

Including another layer of security, the new law additionally takes into consideration the intensifying or settlement of the main offense by mark envoys — and the Central Authority, the administration’s area of expertise, has been engaged to do as such. In this way, a charge of false and misdirecting ad can be dropped if the brand envoy spends money related harms. On the off chance that the arraignment has just started in a trial court, the Central Authority could in any case look for absolution of the brand diplomat by moving an application under the steady gaze of the court, the proposed law states. In the event that the court is fulfilled, the charged might be released. The Bill likewise sets out that no procedure, legal or something else, can be organized against a brand minister if the offense has been aggravated under the law.

The core of this is the ability to start arraignment of a big name brand ambassador will lie with an official wing of the legislature, and it would not be interested in a shopper to autonomously squeeze charges against the diplomat in a court for false and misdirecting advertisements. Likewise, a court would not have the capacity to arraign them without a protest by the Central Authority, which is approved to settle the offense on the instalment of an expense. Furthermore, these stringent conditions previously the brand envoys can be indicted are notwithstanding the protection of due ingenuity and adequate safety measures that big names should have. [9]

The Current Scenario

The new draft Bill, 2016, sees no difference amongst manufacturers, service providers and celebrities with regards to discipline for misdirecting notices. The official correction to the Bill at first presented in the Lok Sabha on August 10, 2015, peruses as: “Whoever makes an underwriting which is false or misdirecting and biased to the enthusiasm of any buyer should be culpable with detainment for a term which may reach out to two years and with fine which may stretch out to ten lakh rupees; and for the second and consequent offenses, be culpable with detainment for a term which may reach out to five years and fine which may stretch out to fifty lakh rupees.”

Be that as it may, the Consumer Affairs Ministry, after suggestion by a Parliamentary Committee, pushed for the prison term without leaving choice to rebuff a VIP just with fine, however by and large the corrective law accommodates detainment or fine or both as discipline. A similar discipline is accommodated any producer or specialist organization “who causes a false or deluding commercial to be made, which is biased to the enthusiasm of any buyer”.

The draft Bill was in this manner alluded for verifying by a between ecclesiastical panel headed by the Finance Minister Arun Jaitley alongside Transport Minister Nitin Gadkari; Consumer Affairs Minister Ram Vilas Paswan; Law Minister Ravi Shankar Prasad; Health Minister J.P. Nadda; Power Minister Piyush Goyal and Commerce Minister Nirmala Sitharaman. There are signs that amid the casual meeting of the priests on August 29, 2016, the agreement that developed was that correctional facility term ought not be recommended for VIPs who underwrite marks in misdirecting commercials; rather there should just be model money related punishment. A punishment of more than rupees one crore was referred to as praiseworthy amid the meeting.

Responding to this rendition, Colonel Sanjeev Kaul watched this is just an ‘escape course’ to protect the effective endorsers. The fine of rupees 50 lakh or one crore is only a shelled nut for these well off famous people who draw crores of rupees through supports. Col. Kaul anticipated that in times to come, we will see these purported VIPs have the last chuckle as it is an effective anteroom submit glove with government officials.

Consenting to Col Kaul’s perspectives, Dr. Khan Noor Ephroz, a teacher of law stated, “There are yet other escape conditions in the draft Bill. Say, for instance, the stipulation to Section 75-B, which enables a VIP to escape risk by demonstrating that he/she had played it safe and practiced all due industriousness before supporting the item or administration. What’s more, there is yet another point to secure the famous people against grumblings by purchasers, i.e., the Court can take comprehension of an offense under the law just on an objection in composing by a Consumer Protection Authority. In that capacity, the proposed law may turn out to be a flounder appear.”

Dr. Khan Noor Ephroz depicted the whole ad business as for the most part deceptive, a revile for the naïve buyer. The entrepreneur assembles comprising of maker, promoter and endorser have been ‘picking up wrongfully’ and the poor customer has been ‘losing wrongfully’. The sponsors and endorsers case to expand the stature of a man; while, the tallness increments to a specific age represented under the law of nature. Notwithstanding the above, there are hereditary elements. In what capacity can a specific prescription or procedure increment the tallness of a man living in uneven territory to a stature proportional to a man living in fields? Likewise, in what manner can an offspring of dark guardians turn into a white-cleaned kid by applying a face cream? Envision a film on-screen character in a TV indicate applying a face cream and portraying the cream as the mystery of her magnificence; while she is delightful by birth and not subsequent to applying the cream. The cream and no more may give a shine all over.

Consenting to Col Kaul and Dr. Khan, noted backer O.P. Saxena, President of All India Lawyers Forum for Civil Liberties, said that the promotion business starting today has turned into a painful session of abuse being played with innocuous purchasers. “We are never again irritated for our rights and obligations. We noiselessly endure the worst part of the powerful cost acquired on commercials and VIPs; while, the producer is exempted from charges on promotions. We have turned out to be insusceptible to cold-bloodedness caused by sponsors and don’t raise a voice to stop this revile.”

He additionally stated, “Today there is an extraordinary need to acquire a law to free the shoppers from the obligations of false supports. In actuality, the proposal of the ‘Parliamentary Committee’ for repairing the duty was a well-thought after process which had noticed that the buyers have a tendency to accept such notices advanced by famous VIPs aimlessly. Be that as it may, when uncalled for exchange rehearses are uncovered, the famous people rush to disassociate themselves with items/organizations they were until now speaking to.”

Saxena called attention to that in creating nations there are laws to rebuff the big names for underwriting deceiving brands. He referred to the case of Kardashian sisters: Khloe, Kourtney and Kim who were sued in the year 2012 for shopper extortion identifying with the part they played in creating income for Quick Trim’s weight reduction framework. The three sisters were named in a ‘legal claim’ recorded in the Southern District of New York, in which the clients guaranteed that Kim, Kourtney and Khloe made “unconfirmed, false and deceiving claims” in notices, meetings and tweets about the viability of Quick Trim. It was accounted for that Kim Kardashian’s blessing earned Quick Trim $45 million in deals. The sisters had been telling their fans amid TV and magazine meets that they utilize the brand to lose their weight and remain thin. “Yet, what move has been made against the Indian famous people whose supports were not discovered genuine and substantiated?” asks Saxena.

In the United States, an autonomous office, the Federal Trade Commission (FTC) was built up by the Federal Trade Commission Act, for the advancement of customer insurance, which likewise offers rules to the promoters on the best way to keep their supports in accordance with FTC. As per the rules, if the activities of the VIP were tricky or misdirecting, ‘member obligation’ may take after.

Starting at now, in India, the gathering of pastors taking care of the proposition is required to allegedly roll out improvements and present the draft enactment for the bureau’s investigation in the winter session of the Parliament after which the last form will be given to the Parliament for endorsement. Notwithstanding, if the correctional facility term is not recommended for the producer, endorsers and the escape conditions are not expelled the proposed law won’t have the adequate teeth to manage the incensing threat.

Truth be told, each partner occupied with the generation of notice – extending from producers, promoting organizations, craftsmen, famous people and print/electronic media – ought to be considered in charge of the contribution in the demonstration. The offices, for example, Advertising Council of India ought to likewise be made responsible for inaction or postponed activity. [10]

Conclusion

The corrections to the Consumer Protection Bill, 2015 – which will now be exhibited as Consumer Protection Bill, 2016 – have rolled out a progression of improvements to accommodate settling duty on VIPs who could be utilized by producers and specialist organizations for profiting by bamboozling purchasers.

The official change rethinks notice by including underwriting as one of the features of ad. In what could bring therapeutic, dental and different affiliations and foundations obligated, the alteration embeds Section 17A as per which an individual, gathering or an establishment could be an endorser. Section 17B characterizes underwriting in the broadest conceivable approach to guarantee that notwithstanding loaning of name, putting mark and so on does not go unpunished.

Underwriting under Section 17B signifies “any message, verbal proclamation, show” or delineation of the name, mark, similarity or other recognizing individual attributes of an individual or the name or seal of an association “which make the buyer to trust that it mirrors the feeling, discoveries or experience of the individual making such support”.

Going to the wide net of Section 75B which accommodates risk of an endorser, a big name would be subject if the support is “false or misdirecting” and preferences the interests of buyers and he or she can’t take “mixed up conviction” as a protection.

While the big name could be subject for false claims made in an ad by the maker or specialist co-op, a plain perusing of the arrangement recommends that he or she could likewise be at risk in the event that it is demonstrated that he or she had erroneously asserted to have been utilizing an item, be it an inverter, RO or hair oil.

While suggesting settling of duty, the Parliamentary board had noticed: “The shoppers have a tendency to accept such notices advanced by famous identities or big names indiscriminately. Be that as it may, when the uncalled for exchange hones are uncovered the famous people rush to disassociate themselves with the items/organizations they were up to this point speaking to.”

In what could be a kind of shield against bogus claim of the producer or specialist co-op, the stipulation to Section 75B enables a VIP to escape obligation by demonstrating that he or she played it safe and practiced all due perseverance before embracing the item or administration.

In spite of the fact that the law ought to convey cheer to customers, there is an arrangement which would secure big names against provocation with cases being recorded by purchasers the nation over. As per the draft, a court can take perception of an offense under the arrangement just on an objection in composing by or in the interest of the Central Consumer Protection Authority. [11]

Footnotes

[1]http://www.indiastudychannel.com/resources/128900-Importance-Consumer-Protection.aspx

[2]http://articles-junction.blogspot.in/2013/06/what-is-need-and-importance-of-consumer.html

[3]https://www.scribd.com/doc/43722299/Importance-of-Consumer-Protection-Act-Document

[4]http://www.web.lawyersupdate.co.in/cover-story/celebrities-endorsement-re-look-at-consumer-protection-law/

[5] http://www.mondaq.com/india/x/598440/Consumer+Law/Celebrity+Endorsement+In+The+Consumer+Protection+Bill

[6] Ibid 5

[7]http://indianexpress.com/article/explained/celebrity-brand-ambassadors-consumer-protection-act-misleading-ads-3006843/

[8] Ibid 5, 6

[9] Ibid 7

[10] Ibid 4

[11] http://www.firstpost.com/business/consumer-protection-bill-draft-celebrities-cos-face-same-punishment-for-misleading-ads-2982626.html

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In this article, Varsha Balasubramanian pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on Double Taxation Avoidance Agreements and its impact on your decision to do business in a country.

Understanding DTAA

When two or more sovereigns seek to impose, under their domestic laws, comparable taxes on the same person regarding the same taxable event and for an identical period, what arises is international double taxation. Double taxation occurs because the tax codes of most jurisdictions provide for both residence-based and source-based levy of tax. Typically, this arises when one jurisdiction seeks to tax a person on his worldwide income, based on his residence, and another jurisdiction taxes the person regarding his income sourced in that other jurisdiction. To avoid double taxation, most jurisdictions have entered into bilateral international income tax treaties primarily for the allocation of fiscal jurisdiction as between the treaty partners. These are treaties as defined by the Vienna Convention on the Law of Treaties and are binding on the countries.[1]

Position in India

As of now, India has DTAA with 84 nations, to establish a strong tax bond with other nations as such agreements work towards promoting trade and investments among contracted nations. Regarding the double taxation issue, Section 90 of the Income Tax Act, 1961 conferred power on the central government to enter into income tax treaties with other countries. According to section 90(2), the taxpayer can either choose the provisions of the Income Tax Act, 1961 or the DTAA whichever is ‘‘more beneficial’’ to the taxpayer.

Therefore,

• In its application to a taxpayer, a section 90 treaty is accorded a preferential status over the Income Tax Act, 1961; and
• In case of a conflict between the treaty and the Income Tax Act, 1961, it is the more beneficial of the two that prevails.

Though structurally similar, treaties often differ in terms of their exact texts, making some treaties more favorable than others and attracting businesses to take advantage of the most favorable treaty, leading to what is sometimes referred to as treaty shopping.

What is Treaty Shopping

Treaty shopping can be defined as a process of setting up an entity by the investors in a country having a favourable tax treaty, through which the investment is routed into the source country, being the country to which the investment is destined to and wherefrom the income is expected to be earned.

Effective treaty shopping tend to have the following components,

• A beneficial tax treaty between the intermediate country (wherein the investor proposes to set up an enitty to route his investment) amd the destination country wherein the investment is propsoed to be made and income earned from.
• Favourable tax laws internally in such intermediate country.

Treaty shopping is arguably, a tool for international tax planning. If it is just a planning device, then why should it evoke so much debate on an objectionable measure? International tax community has put forth lots of reasoning for the use of treaty shopping as a tool of tax planning. In a leading case, the Supreme Court upheld the legality of treaty shopping.[2]

Treaty shopping being valid every businessman’s mentality will be to choose the country that gives maximum tax benefits and exemptions. Hence there are certain pros and cons of treaty shopping.

Advantages of Treaty shopping

In Union of India v. Azadi Bachao Andolan, the Supreme Court emphasized that in developing countries treaty shopping was often regarded as a tax incentive to attract scarce foreign capital or technology. Developing countries are keenly looking for foreign investments. Treaty shopping opportunities can be strong incentives to attract such investments. The developing countries may permit the use of treaty shopping, in order to accommodate inflow of capital and technology from developed countries. Such developing economy may consider the tax losses on account of treaty shopping as a small cost as compared to the significant gains it will obtain by way of economic activity and related benefits flowing to the country from such investments. Most often, such source countries keep a “shut eye” policy towards treaty shopping unless and until the revenue losses lead to significant erosion of overall revenues/benefits to the state or such measures are leading to other abuses of the law. Developing economies may bear “Treaty Shopping” as a part of the cost of long-term development; in its consideration, the increased economic activity from treaty shopping could more than offset the country’s tax losses.

Disadvantages of Treaty shopping

Treaty shopping is perceived as harmful by both, the OECD and the UN. The revenue loss due to treaty shopping is massive if the statistics are looked at. India’s tax treaty with Mauritius was reviewed because the tax department had estimated a revenue loss of over Rs.5,000 crore caused by treaty shopping.

• Treaty Shopping breaches the reciprocity of a tax treaty: First and foremost, it is put forth that treaty shopping is a method of tax avoidance and, accordingly contrary to the objectives of tax treaties. It is also a contention that treaty shopping breaches the reciprocity of a treaty and lead to revenue loss by violating the principle of reciprocity. The State of residence receives disproportionate benefits as compared to the source State due to treaty shopping. A person, whose country has not participated in an arrangement with the source country (which is the investment destination and source for the income) and thus may not reciprocate similar benefits (including exchange of information), by using treaty shopping, is able to derive the benefits of the treaty between the source country and a third country. In this process, expected quid pro quo of the treaty is obviated and there is the misuse of the intended benefit.
• Treaty Shopping leads to revenue gains for third countries: Secondly, considering the principle of economic allegiance, a taxable base is attributable to the jurisdiction where it is presumed to have its economic existence. Tax treaties are effected according to this principle, in terms of allocation of taxing rights between the countries. Treaty concessions are expected to be available only to residents of the treaty countries and are not expected to be extended to residents of other countries. Under treaty shopping, it is quite conceivable that a third country could gain revenue even though there is substantial absence of any claim to economic allegiance. It can also be argued that treaty shopping leads to disinterest for countries to effect tax treaties, as the benefit from such tax treaties ultimately flow to third countries with a loss to the countries which actually have a right as per the economic allegiance principle. It also could lead to putting countries which have agreed to fiscal co-operation and exchange of information at a disadvantage in the global financial market.
• Treaty Shopping leads to revenue loss: Lastly, it can be considered that treaty shopping could be linked with undesirable revenue loss. Tax treaties are effected on a balanced consideration of the capital and income flow amongst the effecting countries. When this balance is impaired due to treaty shopping, it automatically leads to distortion in the revenue amongst these countries. Treaty shopping leads to the bilateral relationship of the treaty being expanded to cover transactions and situations beyond the underlying intent leading to the bilateral nature being de facto modified to multi-lateralisation. This could result in a significant unwarranted cost to the source country.

Factors that have to be considered while treaty shopping

1. Tax Benefits and Exemptions: The businessman who chooses a DTAA should primarily check on the tax benefits and exemptions offered in the country. The businessman should be aware of the fact that countries have different tax rates for various types of businesses and some of them can even avail exemptions, like in India registered charitable institutions are exempt from payment of tax.
2. Other Legislations: It is extremely important to look into the other legislation in the country where the businessman decides to do his business. Sometimes a country might offer the best tax benefits through a DTAA but might place a check on such businesses through other laws. Certain types of businesses may be exempt from tax but may have to follow some Income Tax, Labour, Registration laws etc, that are extremely stringent that either it takes great efforts to set up the business or if established makes it impractical to run smoothly.
3. Limitation of Benefit Clause: A Limitation of Benefits provision is an anti-abuse provision that sets out which residents of the Contracting States are entitled to the treaty’s benefits. The purpose of a Limitation of Benefits provision is to curtail benefits under the said treaty being obtained by residents of a third country. Hence certain countries in their DTAA might have a Limitation of Benefits clause which might not be visible to the naked eye of the businessman but might curb the growth and actual purpose of the business as the businessman would have planned it in such a way anticipating several tax benefits by seeing the DTAA on the face and not analysing much. It is hence pertinent to scrutinise the DTAA before structuring a business model based on it.

Conclusion

DTAA of different countries provide for various tax benefits but have some drawbacks like the ones mentioned above which if not noticed will lead to great risk factor and loss for a businessman setting up a business in another country solely relying on the provisions of the DTAA. Hence other legislation should be read hand in hand with the provisions of the DTAA before coming to a decision about which country to invest in.

[1] Can the Proposed Tax Code Override Indian Tax Treaties? by Amit M. Sachdeva

[2] Union of India v. Azadi Bachao Andolan, 263 ITR 707 (SC).

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In this article, V Surash Babu pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on kinds of dispute resolution mechanism that should be incorporated in Shareholders’ Agreements and Co-founder Agreements.

Starting a new venture has its own inherent risk. People having same ideas, same passion, same thinking will come together, put their hard earned money and hard work on their dream idea to make it a great success. So a written agreement between the members of the founder team that clearly spell out roles, responsibilities and functions of the of each founder member. Such an agreement, Co-Founders agreement should be incorporated in the very early stage of its existence.

In Indian contest many time the founders neglect this vital aspect of making this internal document signed by them to draw the broader vision, mission, roles, obligation, responsibility objectives of its members to convert their collective idea into a winning reality.

A well-drafted co-founder agreement help to nurture the working relationship among its founder, help in align every member goals with that of their start up’s. The founders’ agreement is a legal binding agreement between the founders of the company but doesn’t involve any other third party like investors or creditors. A Co-Founders agreement should address all unforeseen events to avoid chances of potential and disruptive conflict between its members in future. So the Co-Founders agreement and to a large extent shareholder agreements basically set down the rules and principles over which the firm should exist, internally managed towards faster growth and value creation.

Also, this Co-Founder agreement gain real importance in the later stage of the business, as many potential investors look this document critically before making decision to invest. Even though AoA can address many issues of the newly incorporated firm, still AoA cannot be considered as a replacement of or substitution of Co-Founders or shareholders agreement, as articles of association bind the company and its members in their capacity as shareholders of the company only and not in any other capacity in the company. Also, articles of association of a company are public documents and are open to inspection, hence not suitable document to discuss on internal management and control functions of the company. In addition to that Articles of Association can be amended by way of a special resolution passed by 75% or more majority. By contrary, shareholder agreements and co-founder agreements require unanimous agreement to incorporate the modifications.

The following areas can be considered as the key domain where clear terms of reference will be made available in a well-defined co-founders agreement.

Roles, Responsibilities & Accountability

The roles and responsibilities of each member should be clearly placed in the agreement to avoid chances of future misunderstanding among the team members. For example in a starts up to produce an electronic stabilizer, the roles such as design & development of the stabilizer, its mass production, selling the product, arrange finance to purchase the raw material etc should be clearly defined and demarcated between the members.

Decision-making

As the start up grows, decision making become more and more complex. So the agreement should adequately address this issue of decision making for smooth functioning of the firm and to avoid delay and conflicts in decision making process. For instance, agreement shold address, how are key decisions and day-to-day decisions of the business to be made, majority vote or unanimous. What are the areas where decisions solely in the hands of the CEO? Who will have the authority to sign cheques? Who can approach investors or enter into important contracts on behalf of the business? etc.

Equity Ownership

Each Co-Founder’s equity must be defined clearly in the agreement. To split equity equally between cofounders or dividing proportionally to depending on who brings what to the company. How the factors such as experience, technical know-how, marketing network, financing the firm of the members are taken into consideration in percentage of share allotment to each member.

Intellectual Property

Intellectual Property comes in many forms but it’s important to make sure that whatever IP is being developed for the new enterprise it belongs to the entity and not to the individuals behind such development. So the agreement adequately discusses this issue of IP and included the clause like “whatever inventions, design an individual do for the firm, should remain the property of the firm”.

Non-Compete

The co-founder should not undertake any activity, such as starting another firm, offering similar product or services, becoming the shareholder of a competing company, which affect the fortune of the firm. The agreement should have clear deliberation on this conflict of interest area.

Confidentiality

Agreement must include terms to prohibit the members and fix the accountability, on the members on leaking sensitive business related matters to outside which may adversely affect the business operations.

Conflict resolution

In case of any disagreement on certain issues raised among the founder members, resolving the issue is very important for sustainable development of the firm. Hence, agreement should have provision to resolve the conflict. Agreement should stipulate a strong and clear, predetermined mechanism for dispute resolution which can resolve the issue quickly without causing any damage.

Vision of the business

Overall goal and vision of the existence of the company should be incorporated to make the team focused. It helps the cohesion between the members to achieve the common goal.

Transfer of Shares

Existing shareholders, the founders, generally want to ensure that unwanted parties do not become shareholders involuntarily as a result of any of the above such as member becomes bankrupt, discharged, resigns, retires, becomes incapacitated, or dies. Hence it is important to include these aspects also in founder /shareholders agreement. The agreement should have provisions to regulates the sale and transfer of the startup’s shares. It covers items such as who has the right of first refusal and provides a mechanism for the redemption of the shares for shareholders, who.

Value Additions

The agreement should deliberate clearly about the how to compensate the co-founders who bring value addition to the firm. For example, members can bring value addition in terms of IP, Technical Know-How, marketing network etc.

Compensation

Founder members are more than the full-time workers of the start up. Hence agreement should have clarity in terms of employment, compensation, fringe benefits of each co-founder members proportional to their contribution of revenue generation and growth of the firm, mechanism to change the compensation package from time to time according to the profit generation also should be there in the agreement.

Removing a founder member

Even this looks sensitive issue while the starting point of the firm, but clear terms on this also there in the founders agreement. It should address what grounds a member be removed, the due procedure to be followed, the compensation to be made available to that founder. For example, if one founder member found to be underperforming and dragging the business down or not living up to expectations or committed fraud. Agreement should have clear terms to deal such situations.

Exit strategy

Co-founders generally never think about exiting a business, but due to some personal or other, positive and negative reasons, one of the founder wants to leave. Hence it is important to meet such an eventuality, and the agreement should have adequate provisions for the exit of a co-founder before the lock-in period. The agreement should spell out clearly on what is going to happen to the money that the co-founder have invested, the equity the leaving member. Sale the shares to a Third Party, or to the other members, price on which the shares to be transacted.

Exit in case business shuts down

The questions like what circumstances will the co-founders agreement be terminated? What if the business does not take off and becomes unviable? How will founders distribute assets, liabilities and any money left in the business, etc, even though it looks unpleasant to the founders in the beginning, should also be adequately covered in the agreement.

Expected minimum time commitment

Hard work with devotion of all members is essential for successful establishment of a firm. Hence co-Founders generally prohibited to do other works. The agreement should have clear guidelines on the minimum time commitment from each member to the growth of the company.

Deadlock resolution

If a deadlock reached on a certain important issue and there is no provision in the agreement to deal with it, it may cause serious repercussions in the functioning the company. Hence before reaching such deadlock situation and gravely suffer it is always better to include adequate provisions to handle such situations in the agreement.

Finance

Frequently early stage companies will not be sufficiently cash generative to meet the working capital requirement. If this initial capitalization together with available cash flow is not sufficient, and sometimes forced to avail loan from third party. Agreements has to lay out clear terms to deal situation such as loan capital, the provision of founder personal guarantees to support bank facilities. A shareholders’ agreement may also provide for what is to happen in the event that a party defaults on its obligations. It should be clarified how loan received from founders will be treated. It may be paid back with or without interest, or may be compensated by issuing shares of the incorporated entity. Also agreement should have clear understanding regarding the reimbursement of out-of-pocket expenses.

Division of profits

Profits are another crucial aspect that must be deliberated over in the agreement. How the profit generated should be shared between the members.

Induction of new members

Induction of new co-founders can be very sensitive issue. This should not become a bone of contention between co-founders and lead to decision paralysis. Co-founders agreement should include specific provisions for addressing this.

Minority Protection

Generally the standard articles of association gives extensive powers to the board of directors to take decisions. The Companies Acts and AoA provide limited rights for minority shareholders. Hence it is always recommended to include clauses to protect the interest of minority share holders for a healthy growth of the company in its later stage of life cycle.

Conclusion

A well drafted shareholders agreement sets out the framework within which a company intends to operate. It include provisions which address matters such as the management and control of the company, funding structure, exit strategy, dispute resolution and a deadlock resolution etc.

A balanced agreement establishes in clear terms of relationship between the Co-Founders. And more importantly, for Investors it acts as a guiding document to judge the governance mechanism in the Company. One of the best ways to minimize the probability of co-founder dispute is by drafting appropriate provisions in the agreement by respecting the interest of all the parties. Therefore, not having a rational and balanced Co-founders Agreement can cause enormous hardships and jeopardize the viability f the new enterprise in long run.

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