In this article, Abdul Hannan pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on Foreign Trade (Development and Regulation) Act, 1992.

Foreign Trade and its implications

Imports and exports are considered to be two important components of foreign trade. Foreign trade refers to nothing but the exchange of the goods and services between two or more countries, across their respective international borders. The former implies the physical movement of the goods into a country from another country following a legal manner. The latter is concerned with the physical movement of the goods and services out of the country in a legal manner. Thus, both the import and export have made the world a local market.

Foreign trade or international trade is considered to be extremely important for the brand survival as well as the growth of any country. This is because foreign trade acts as one of the primary economic boosters for that specific entity. Not only this, foreign trade is also supposed to cover up the need for a country for particular resources and to further get rid of the extra resources that are abundantly available in the country.

Whether it is the optimum utilization of the resources, specialization and labor division or price equality, quality of goods, multiple choices or the overall economic development of the country, foreign trade has always helped in the growth of a country where a country could stand on its own to address itself on an international platform. Exporting, importing as well as entreporting involved in the foreign trade of any country helps to raise the standard of living of the people. These kinds of foreign trade also help to maintain the payment solution balance of the country and make sure that there always exists a free flow of economy.

Globalization has reached on its very summit and therefore a number of countries have introduced their own respective foreign trade policies so as to avoid all the hassle that might occur while trading with the foreign countries. Thus, India, like other countries of the world has its own respective foreign policy that covers all the know-hows as well as aspects involved while dealing with the foreign countries.

The Foreign Trade (Development and Regulation) Act, 1992

The foreign policy of India is governed and regulated by the Foreign Trade (Development and Regulation) Act, 1992. This Act was established on the 7^th of August in the year 1992. The Act hasn’t been originated as a separate act to regulate the foreign policy, but the same came into existence as a replacement to the Import and Exports (Control) Act, 1947.  Today, the entire scenario of exports and imports in India is regulated and managed by the Foreign Trade (Development and Regulation) Act, 1992. This act has eliminated all the existing nuances of the previously introduced act and has given the Government of India some of the most enormous powers to control it. This act is considered to be a supreme legislation in accomplishment of the foreign trade taking place in the country. The Act has been incorporated with a major intention to provide a proper framework as to the development as well as standardization of the foreign trade by the way of facilitating imports and enhancing the exports in the country and all the other matters related to the same.

Under this Act, various powers have been bestowed upon the Central Government. According to the provisions of this act, the Central Government has all the power to make any provisions that are related to foreign trade in order to fulfill the objectives of the act. This Act also empowers the government to make any provisions in tandem to the formulations of import as well as export policies governing throughout the country. The Act further provides for the appointment of the Director General by the Central Government by notifying this appointment in the Official Gazette for carrying out all the foreign trade policies as per the provisions provided.

Salient Features of the Act

Foreign Trade (Development and Regulation) Act, 1992 is believed to be a breakthrough in the economic development of the country, especially in today’s world of globalization and industrialization. The entire act has been designed in such a manner so as to run in consonance with the current trade policies associated with the foreign countries. Thus, overall, this Act features everything that makes the economy of the country stronger whenever the regard of foreign trade is taken into consideration.

The following are considered to be the salient features of the act:

• The act has empowered the Central Government to make provisions for the development as well as regulation of foreign trade by the way of facilitating imports into as well as augmenting exports from the country and in all the other matters related to foreign trade.
• This act authorizes the government to formulate as well as announce the export and import policy and to also keep amending the same on a timely basis. The government has also been given a wide power to prohibit, restrict and regulate the exports and imports in general as well as specified cases of foreign trade.
• The act provides for certain appointments especially that of the Director-General to advise the Central Government in formulating import and export policy and to implement the same.
• The act commands every importer as well as exporter to obtain a code number called the ‘Importer Exporter Code Number (IEC)’ from the Director-General or the authorized officer.
• The act provides the balancing of all the budgetary targets in terms of imports and exports so that the nation reaches the very peak of economic development. The principal objectives here include the facilitation of sustain growth as to the exports of the country, the distribution of quality goods and services to the domestic consumer at internationally competitive prices, stimulation of sustained economic growth by providing access to essential raw materials as well as enhancement of technological strength and efficiency of Indian agriculture, industry as well as services and improvement of their competitiveness to meet all kinds of requirement of the global markets.

Present scenario of the Foreign Trade Policy

Presently, the Foreign Trade Policy of our country is in its sixth instalment of the five-year policy that was earlier introduced in the year 1992 by the Government of India. The new foreign trade policy of the country was announced on the 1^st of April, 2015 by the Government of India, Ministry of Commerce and Industry. This current foreign trade policy extends for the period 2015-2020. The major aim of the current foreign trade policy introduced in the country is nothing but the development of export potential, improvement of export performance, encouragement of foreign trade as well as the creation of favorable balance of the position of the payment. This policy, also known as the Export Import Policy (EXIM Policy) is updated every year on the last day of March and all the new improvements, modifications as well as schemes so updated become effective from the first day of April each year.

The current foreign trade policy so introduced in the country has laid down certain aims and objectives before it. The major objectives that the current foreign trade policy of our country has laid down are stated as under:

• The simplification as well as merger of all kinds of rewards schemes including the Merchandise Exports from India Scheme (MEIS), Service Exports from India Scheme (SEIS), incentives to be made available in these schemes for all the Special Economic Zones, duty credit slips to be freely transferable and useable for the payment of various duty and many others.
• Special boost has been given to ‘Make in India’ policy that has been launched by the government to encourage national as well as multinational companies to manufacture their products in India.
• The trade facilitation and ease in terms of the performance of legal business of all the kinds.
• The introduction of various other initiatives involving new schemes that could run in tandem with the growing needs and wants of the people at large and the increasing use of technology as well as digitalization into these initiatives so as to reach the summit of technical advancement.

Importance of Foreign Trade Policy

Foreign Trade policy of any country is equally important for the free flow of economy and the overall economic development of the country. Without a proper foreign trade policy, any country would fail to execute its import as well as export business smoothly. If there exists no proper foreign policy in a country, the entire import-export and international business of the country will fall down miserably and the same will surely meet a dead end. A foreign trade policy of any country ensures a free flow of business as well as economy while transacting or trading on an international scale. The same policy helps to maintain the free flow of economy of the country, thereby accelerating the financial growth, facilitating a free trade and liberalization as well as improving the overall standard of living of its people.

Conclusion

After the implementation of foreign trade policy in India, the import, as well as export among the foreign countries, have increased and the same has become very safe and secure to perform. Setting up of different plans/policies such as SEZ and EPZ by the Foreign Trade Policy of India has increased the number of foreign investors in the country. Trading Housing has given a platform to both, the consumers as well as the manufacturers and thus the same has entertained an easy practice of trade in between different countries. Furthermore, the simplification of procedures, as well as the idea of incentives provided to the exporters and importers involved in the foreign trade, has acted in a fair way for the traders and there is still a wide scope of improvement in the same.

Thus, the introduction of Foreign Trade (Development and Regulation) Act, 1992 in India has made the industrialization more liberal and the same has been proven to be highly beneficial for all the traders as well as consumers in the coming ages.

The post Foreign Trade (Development and Regulation) Act, 1992 appeared first on iPleaders.

In this article, Anisha pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on Impact of GST on Information Technology Sector.

INTRODUCTION

“GST is one indirect tax for the whole nation, which brought India under one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.”[1]

The GST gives a lot of benefits to the manufacturers, sellers and to the end users i.e. the consumers. Some of the main advantages of GST, in general, are that it follows a uniform tax structure and there cannot be any discrimination between place, etc. It is easy compliance because the taxpayer services such as registration, payment, returns, etc. could be made through the online portal. In addition, GST aims for removal of cascading effect of taxes, improved efficacy thereby improving the competition and also gain to the manufactures and the exporters.

From the view of the Central and State Government, GST is beneficial because it is simple and easy to administer, there is better control on leakage since tax is paid at each steps and also higher revenue efficiency thus promoting the overall development and growth of the country.

In view of the consumers, there is a single and transparent tax that is proportionate to the value of goods and services and relief in overall tax burden.

The much-awaited GST Bill was passed on July 1^st, 2017. The IT sector will include services like the software development, mobile app development, website design, etc will have a huge impact because of the GST.

Impact of GST

The main ways in which the GST implementation will impact the IT sector are discussed below.

The Tax Rate Administration

The GST is dual structured and is governed by the Central Board of Excise and Customs (CBEC) and State Tax Administration and they will be responsible for collecting CGST and SGST. Hence for this dual tax structure to be in place, there requires a robust mechanism and system in place to track down the flow of goods and services across the country. The implementation and execution part has to be strong, only then non-compliance will be less and the punishment also should have a deterrent effect in as much as any other law.

As per the CRISIL analysis will reduce the cost of logistics for non-bulk goods by 20% thus excluding the bulk commodities that are transported by the railways like coal, iron ore, cement, steel, food grains, fertilizers and the like. Under the GST luxury goods are charged at a higher level, at about 28% which includes luxury cars and high end products whereas essential commodities such as education, healthcare and the like are charged less. The rates of the cess will be 5%, 12%, 18%, 28%. The tax rate for IT sectors before GST was 15%. Under GST, even though the recommended rate was 15-15.5%, it is around 17-18%. Hence this will raise the cost of IT services thereby rendering it difficult for the end use consumers who do not claim the tax input credit.

Under the previous tax structure, for the sale of packaged software, there was VAT (Value added tax) approximately 5% which will go the State Government and the Service Tax approximately 15% will be directed to the Central government and all of which would amount to 25%-35%. But under the GST scheme it is expected to be only around 18-25% because of taxing only by the last dealer and not at every stage.

For example, under the old scheme, if a software comes on a CD, DVD, Hard disk then there might be three types of taxes applied on it like Excise duty for manufacturing of product, VAT for sale and Service Tax for providing service. But under GST, all these complications will not be present.

Cascading Effect of Taxes

Cascade tax means that the amount of tax levied on each stage of production up to the final stage of production till it reaches the final consumer. This GST scheme purports to remove the idea of cascading of taxes to a greater extent. There is benefit of credit of services for the traders under the GST such as in the Annual Maintenance Scheme (AMC) contracts. Under the previous structure IT service providers cannot guarantee credits of quality including the assessment or arrangement charge spent on setting the IT infrastructure and also services given to the client is a cost to that was incurred by the IT service providers. But under the present scheme, the IT service providers and the clients can claim full credit of GST. This will remove the cascading effect of the taxes.

Business Restructuring

IT companies might need a business restructuring because of the fact that under this scheme, the IT service providers will have to bifurcate their services and bill their customers based on their location of consumption and hence GST can also be termed as Destination-based tax system for this reason. So the IT service providers should get registered in all states where they have customers. As per the interview given by the NASSCOM (National Association of Software and Services Companies) Chief, Mr. Chandrashekar he points out certain difficulties that the Information and Technology sector could face because of operation of GST. The Central Goods and Services Tax Act, 2017 was passed by way of hundred and first Constitutional Amendment. Mr Chandrashekhar also stated that the current GST scheme might give rise to potential litigation risks because of certain provisions. This is so, because of the complex billing and invoicing requirements due to the ‘supply and valuation’ provisions making it difficult to the service sector especially the information technology sector.

In GST scheme there are three points of taxing, the center, inter-state and state GST whereas in the previous tax structure there was only one point of taxation i.e. central service tax. This would mean that an IT company has to register under 37 jurisdictions which comprises of 29 States and 7 Union Territories if the company is on a PAN-India basis and also the IT company has to register and file compliance reports at 111 points (37 jurisdictions multiplied by 3 tax points). Hence in the previous tax structure, the process was simple as the service industry was under the central service tax regime. But this system hampers the ease of doing business for IT companies at this one juncture. Moreover, the ‘place of supply’ will be requiring multiple invoices. Although GST brings in a uniform tax structure, the valuation of services can potentially invite many legal claims. Also, most of the items used in the IT industry like printers, photocopier and fax machines are highly taxed at a rate of 28 percent.

E-commerce Sphere

For the e-commerce traders, the GST is expected to increase its administration costs.

Also with respect to e-commerce, there are taxes imposed on businesses that depend on online transactions. This is because of the provision which says ‘Tax Collection at Source’ thus rendering e-commerce platforms unrealizable. This also makes compliance difficult for the e-commerce companies since they have a lot of sellers on their platform. Moreover, this might lead to cash flow issues and small scale sellers might ask for refund on the tax paid on inputs.

New Software’s required

Accounting systems and ERP (Enterprise Resource Planning) are done in batches. So ERP are the resource persons who train the company employees and understand the needs and requirements of the company and design the software accordingly. In the previous tax structure, ERP’s were taxed over the years and service tax was charged accordingly keeping in account the amount paid. Under the current GST system, the ERP’s will be taxed periodically and continuously as and when their service is provided. Now all companies will thrive to build GST oriented software systems and hence will open a market for software developing companies. India is one of the biggest exporters of IT services. Exports are zero rated and input taxes will be allowed as a refund. The default rule for ‘place of supply’, in this case if it is export of services, is the location of the service recipient if his address is available. Freelancers who are offering software services such as designing, app development, website designing etc., earlier paid a service tax of 15%. But now under the GST, it has been raised to 18%. Even though the service rates had been increased to 18%, the IT sector will benefit due to the increase in the sale of the software. Now since the availability of the Information and Technology service providers has increased, it will bring down the operating costs and thereby increase the consumer base and bring in more profit.

Hence the current GST scheme should encompass all the positive aspects of the previously existing system so that there could be more ease of doing business as India ranks low when it comes to Ease Of Doing Business.

References

http://www.gstindia.com/about/

https://cleartax.in/s/impact-of-gst-on-it-sector

http://blog.saginfotech.com/gst-impact-on-indian-it-industry

[1] http://www.gstindia.com/about/

The post Impact of GST on Information Technology Sector appeared first on iPleaders.

In this article, Anchal Gandhi pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on rights of minority shareholders under Companies Act, 2013.

Introduction

In corporate world, all democratic decisions and management of a company are made with the majority rule which is deemed to be fair and justified. The majority rule of decision making, quite often than not overlooks the views of minority shareholders. A minority shareholder is a person in a company who does not enjoy much power in the management of the company and their interests are disregarded. Despite the provisions placed under Companies Act, 1956 of protection of the interest of minority shareholders, the minority shareholders found themselves incapable of exercising their rights due to lack of the resource or of time. Therefore, this resulted in the majority domination and suppression of minority shareholders rights in the decision making and management of the company and to overcome this problem faced by the minority, the Companies Act, 2013 came up with the solution to tackle the problems which are usually faced by the minority shareholders. However, the definitions of minority shareholders are not mentioned under the Companies Act, 2013 but under Section 235 (Power to acquire shares of the dissenting shareholders) and under Section 244 (Right to apply for the oppression and mismanagement) of Companies Act, 2013 the minority shareholders are given 10% of shares or minimum hundred shareholders, whatsoever, is less with share capital and 1/3 of the total number of its members in case of companies without the share capital.

This article throws light on the rights of minority shareholders protected under Companies Act, 2013.

Definition of minority shareholders

Minority shareholders are the equity holders of a firm who does not enjoy the voting power of the firm by the virtue of his or her below 50% ownership of the firm’s equity capital.

Rights of Minority Shareholders

Many provisions of Companies Act, 2013 deals with the situations where minority shareholders rights have been protected and the same can be divided into various major heads. The rights of minority shareholders are discussed below.

Oppression and Mismanagement

In Companies Act, 1956, the protection for the minority shareholders from oppression and mismanagement have been provided under section 397 (An Application to be made to company law board for relief in cases of oppression) and 398 (An Application to be made to company law board for relief in cases of oppression).

According to Section 397(1) of Companies Act, 1956, the term oppression has been defined as “when affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members‘”.

Whereas the definition of mismanagement has been defined under Section 398(1) as “conducting the affairs of the company in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company or there has been a material change in the management and control of the company, and by reason of such change it is likely that affairs of the company will be conducted in a manner prejudicial to public interest or interest of the company”.

Therefore, right to apply to the company board for the oppression and mismanagement is provided under the Section 399, which is,  meeting 10% of shareholding or hundred members or one-fifth members limit. However, central government under their discretionary powers has allowed any numbers of shareholders to apply for the company board for the relief under Sections 397 and 398.

Whereas, on the other hand, under Companies Act, 2013, the relief from the oppression and mismanagement has been provided under Section 241-246 where the relief can be sought from the tribunal in case of mismanagement and oppression through section 244(1) which provides the right to apply to tribunal with the same minority limit mentioned in Companies Act, 1956 but however, the tribunal, while exercising discretionary powers, may allow any numbers of shareholders and to be considered as minority.

Further, under the Section 245, Companies Act, 2013, the new concept of class action has been introduced which was non-existent in Companies Act, 1956 wherein it provides for class action suits to be instituted against the company as well as against the auditors of the company.

Reconstruction and Amalgamation

In Companies Act, 1956 with respect to minority shareholder right for reconstruction and amalgamation of companies, under section 395 states that for the transfer of shares or any class of shares of a company to another company, consent of the holders of at least (9/10) i.e. 90% of the shareholders consent will be required, which is therefore referred to the majority suppressing the rights of the minority shareholders. It further states that the transferee can give a notice to any dissenting shareholder expressing his desire to acquire their shares within 2 months after the lapse of the 4 months. Whereas, to counter these shortcomings, Companies Act, 2013 under Section 235 grants the power to acquire the shares of shareholders dissenting from the scheme approved by the majority not less than 9/10 in value of the shares and can transferee company may give notice to dissenting shareholder for acquiring his shares. Therefore, under Section 235 it is made mandatory for the shareholders to notify the company regarding their intention of buying the remaining equity shares or by a group of persons holding 90% consent of the registered holder of the company. The Companies Act, 2013 further provides the shares need to be acquired at a price determined on the basis of valuation by a registered valuer in accordance with the rules and the regulations.

Minority Upgraded

Companies Act, 2013 has empowered the corporate decision making of the minority shareholders also. Under Section 151 of the Companies Act, 2013, listed companies are now required to appoint directors who are elected by the small shareholders i.e. shareholders holding shares of a nominal value of not more than twenty thousand rupees. Furthermore, the provision in this regard was elaborated where it is stated that the listed companies may elect a small shareholders’ director amongst the small shareholders by either suo-moto or by giving notice of not less than 500 or 1/10^th of the total number of the small shareholders. It is important to note that the small shareholders are different from minority holders as the former ones are being ascertained according to their individual shareholding which can be less than INR 20,000. Whereas minority shareholders are collectively ascertained as by having non-controlling stake in the company.

Apropos, it has been further provided the procedures for the nomination of a small shareholder director with the information to be furnished along with. However, the Company Rules of 2013 also provides the majority and protection to the small shareholders for safeguarding their interests. The Company Rule further protects the interests of small shareholder director and ensures that the small shareholder director will not retire by the rotation and shall enjoy tenure of three years. However, the small shareholder director will not be further eligible for reappointment.

Furthermore, sub clause 4 of clause 11 of the companies rules provides that “such director shall be considered as an independent director subject to his giving a declaration of his independence in accordance with sub-section (7) of Section 149 of the Act”.

It is therefore clear from the aforesaid clause that the small shareholder director may or may not be an independent director, thus, making optional for small shareholder director to be an independent director.

This empowers the minority/small shareholders rights in the process of decision making and in the management of the company. Thus, it also states the provisions where the interest of the minority shareholders can be protected through the appointment of an independent shareholder directors.

E-Voting

E-Voting has been made mandatory for the listed companies with at least 1000 shareholders which indeed will enhance the active participation and offers a platform to the minority shareholders in the management of the company. This will also enable the minority shareholders to exercise their power in the company.

Protection of Minority Shareholders – Steps taken by companies

Piggy Backing – This provision states that if the majority sells their shares then the minority shareholder right has to be included in the deal. Moreover, “Piggy Backing” requires the party to consider the purchase of the business to sell 100 percent of the outstanding shares. To ensure the compulsory provisions of the minority shareholders.

Conclusion

After critically examining the provisions of Companies Act, 2013, it can be ascertained that the core intention of the legislation is to safeguard the interests of the minority shareholders but it requires the proper implementation of these provisions safeguarding and to give due consideration to their valuable rights. It may also be concluded that the minority shareholders back in Companies Act, 1956 were not considered as a major part of the company due to suppression of the majority rules and regulations in the company. But Companies Act 2013 has taken various crucial steps to safeguard the interest of the minority rights of the shareholders in the company irrespective of existence of oppression and mismanagement of the company affecting the rights of the minority shareholders. Therefore, this dual approach towards the enforcement of the minority rights guarantees proper administration of the corporate activities successfully only when it is implemented properly by giving importance and rights to the minority shareholders in the management of the company.

The post Rights of minority shareholders under Companies Act, 2013 appeared first on iPleaders.

In this article, Akansha Vidyarthi discusses enforcement of foreign judgments and decrees in India.

ABSTRACT

In this new Era of globalization, Indian legal system is often appreciated for the importance it gives to enforcement of foreign decrees and judgment. Foreign legal materials are now easily available due to communication and technological development. Foreign judgments may be recognized based on bilateral or multilateral treaties or conventions or other International Instruments. The “recognition” of a foreign judgment occurs when the court of one country accepts a judicial decision made by the courts of another “foreign” country, and issues a judgment in substantially identical terms without rehearing the substance of the original lawsuit. Recognition of judgment will be denied if the judgment is substantively incompatible with basic fundamental legal principles in the recognizing country.

Indian legal system is based on Common law legal system. The Constitution of India is inspired from laws and statute of other countries, as many provisions of Indian Constitution has been borrowed from the Statutes of other countries. Fundamental Rights from The U.S. Bill of Rights, DPSP from Ireland etc. Therefore, it is necessary that Indian Judiciary enforce such foreign decrees and judgments in India which is in consonance with the basic fundamental rules and laws in force in India.

The Indian Judiciary has given various guidelines and judgment which are greatly inspired by laws of other countries. One of the recent examples is Triple Talaq which has been declared unconstitutional by Supreme Court. In recognizing freedom of the press, the Court relied on the U.S. Supreme Court’s decision in Kovacs v. Cooper. In upholding the death sentence, the Supreme Court relied on the U.S. cases of Furman v. Georgia, Arnold v. Georgia, and Proffitt v. Florida. Cases where conflict of laws arises, judges do the comparative study of laws of various countries to reach a fruitful conclusion.

This Article aims to study in detail the enforceability of foreign Judgments & decrees passed by foreign courts and the nature and scope of Section 13, Section 14, Section 44-A of the Civil Procedure Code, 1908. The exceptions of Section 13 has been dealt separately in detail. This paper discusses various decisions of the Supreme Court, High Courts and other Courts of India, and some propositions are also discussed so that the decisions can be rightly appreciated.

Civil Procedure Code, 1908

The Indian Code of Civil Procedure, 1908 (CPC) lays down the procedure for enforcement of foreign judgments and decrees in India. CPC, 1908 had defined the following as-

• Section 2(5) “foreign Court” means a Court situate outside India and not established or continued by the authority of the Central Government[1].
• Section 2(6) “foreign judgment” means the judgment of a foreign Court.

Nature and Scope of Foreign Judgments

Section 13 embodies the principle of res judicata in foreign judgments. It embodies the principle of Private International law that a judgment delivered by a foreign court of competent jurisdiction can be executed and enforced in India.

Object of Recognizing Foreign Judgments

The judgment of a foreign court is enforced on the principle that where a foreign court of competent jurisdiction has adjudicated upon a claim, a legal obligation arises to satisfy that claim in the country where the judgment needed to be enforced. The rules of private international law of each state differ in many respect, but by the comity of nations certain rules are recognized as common to civilized Jurisdictions. Through part of the judicial system of each state these common rules have been adopted to adjudicate upon disputes involving a foreign element and to enforce judgments of foreign courts, or as a result of International conventions[2]. Such a recognition is accorded not as an act of courtesy but on consideration of basic principle of justice, equity and good conscience[3]. An awareness of foreign law in the parallel jurisdiction would be a useful guideline in determining our notions of justice and public policy. We are a Sovereign Nation within our territory but “ it is not derogation of sovereignty to take accounts of foreign law”.

“We are not provincial as to say that every solution of the problem is wrong because we deal with it otherwise at home”[4].

Therefore, we shall not brush aside foreign judicial process unless doing so, “would violate some fundamental principle of justice & deep-rooted traditions of common weal”.

Jurisdiction of Foreign Courts

In Private International Law, unless a foreign court has jurisdiction in the international sense, a judgment delivered by that court would not be recognized in India[5]. But it considers only the territorial competence of court over the subject-matter and defendant. Its competence or jurisdiction in any other sense is not regarded as material by the court in this country.

Presumption as to foreign judgments

Section 14 states the presumption that an Indian court takes when a document supposing to be a certified copy of a foreign judgment is presented before it. The Indian Courts presume that a foreign Court of competent jurisdiction pronounced the judgment unless the contrary appears on the record, but by proving want of jurisdiction may overrule such presumption.

Section 14. Presumption as to foreign judgments – The Court shall presume, upon the production of any document purporting to be a certified copy of a foreign judgment, that such judgment was pronounced by a Court to competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction[6].

Conclusiveness of Foreign Judgments

Section 13 lays down the fundamental rules which should not be violated by any foreign court in passing a decree or judgment. The decree or judgment of foreign court will be conclusive except where it comes under any of the clauses (a) to (f) of Section 13.

13. When foreign judgment not conclusive[7].-A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except,—

(a) Where it has not been pronounced by a Court of competent jurisdiction;

(b) Where it has not been given on the merits of the case;

(c) Where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;

(d) Where the proceedings in which the judgment was obtained are opposed to natural justice;

(e) Where it has been obtained by fraud;

(f) Were it sustains a claim founded on a breach of any law in force in India. 

In Brijlal Ramjidas v. Govindram Gordhandas Seksaria[8], Supreme Court held that Section 13 speaks not only of “Judgment” but “any matter thereby directly adjudicated upon”. The word ‘any’ clearly shows that all the adjudicative parts of the judgment are equally conclusive.

Foreign Judgments when cannot be Enforced in India

Before enforcing a foreign judgment or decree, the party enforcing it must ensure that the foreign judgment or decree must not fall under these 6 cases. If the foreign judgment or decree falls under any of these tests, it will not be regarded as conclusive and hence not enforceable in India. Under Section 13, there are six cases when a foreign judgment shall not be conclusive. Six tests are discussed below.

Foreign Judgment not by a competent court

It is a basic fundamental principle of law that the judgment or order passed by the court which has no jurisdiction is void. Thus, a judgment of a foreign court to be conclusive between the parties must be a judgment pronounced by a court of competent jurisdiction. Such judgment must be by a court competent both by law of the state which has constituted it and in an international sense and it must have directly adjudicated upon the matter which is pleaded as Res judicata.

In the case of R.M.V. Vellachi Achi v. R.M.A. Ramanathan Chettiar[9], it was alleged by the respondent that since he was not a subject of the foreign country, and that he had not submitted to the jurisdiction of the Foreign Court (Singapore Court), the decree could not be executed in India. The Appellant, in defense of this argument, stated that the Respondent was a partner of a firm which was doing business in Singapore and had instituted various suits in the Singapore Courts. Therefore, the Respondent had accepted the Singapore Courts jurisdiction. The Court held that it was the firm which had accepted the jurisdiction of the foreign Court and the Respondent, in an individual capacity, had not accepted the jurisdiction. Thus, High Court held that the decree against the Respondent was not executable.

PROPOSITION

Under Section 13(a) of CPC, the following proposition may be laid

In case of actions-in-personam, a foreign court may pass an order or judgment against an Indian defendant, who is served with the summons but he remains ex parte. But it may be enforceable against such Indian defendant, by fulfilling any of the following conditions.

• If the person is a subject of the foreign country in which the judgment or decree has been obtained against him on prior occasions.
• If the person is a resident in foreign country when the action is commenced.
• If a person selects the foreign Court for taking action in the capacity of a plaintiff, in which he is sued later
• If the party on being summoned voluntarily appears before the foreign court
• If by an agreement a person has contracted to submit himself to the Court in which the judgment is obtained.

Foreign Judgments not on Merits

In order a foreign judgment to operate as Res Judicata, it must have been given on merits of the case[10]. A judgment is said to have been given on merits when after taking evidence and after applying his mind regarding the truth or falsity of case.

The Actual test for deciding whether the judgment has been given on merits or not is to see whether it was merely passed as a matter of course, or by way of penalty of any conduct of the defendant, or is based upon a consideration of the truth or falsity of the plaintiff”s claim.

In the case of Gurdas Mann v. Mohinder Singh Brar[11], the Punjab & Harayana High Court held that an exparte judgment and decree which did not show that the plaintiff had led evidence to prove his claim before the Court, was not executable under Section 13(b) of the CPC since it was not passed on the merits of the claim.

PROPOSITION

Under Section 13(b) of CPC the following proposition may be laid

A judgment or decree passed by a Foreign Court against an Indian defendant, who has remain ex-parte, may not be enforceable against him, unless it can be shown that the said judgment was passed after investigation into the plaintiff’s claim.

Foreign Judgments against International or Indian Law

A Judgment which is contrary to the basic fundamental rules of International law or a refusal to recognize the law of India where such law is applicable is not conclusive. Where a suit instituted in England on the basis of contract made in India, the English court erroneously applied English law, thus, the judgment of the court is covered by this clause as the general principle of Private International Law is that the rights and liabilities of parties to a contract are governed by the place where the contract is made (lex loci contractus).[12]

In the case of I & G Investment Trust v. Raja of Khalikote[13], a suit was filed under the English Jurisdiction to avoid the consequences of the Orissa Money Lenders Act. The Court held that the judgment was passed on an incorrect view of the international law. The Court further observed that, although the judgment was based on the averment in the plaint that the Indian law did not apply, however, there was no “refusal” to recognise the local laws by the Court.[14]

PROPOSITION

Under Section 13(c) of CPC, the following proposition may be laid

• A judgment passed by a foreign Court upon a claim for immovable property, situated in the Indian territory may not be enforceable since it violates International Law.
• A judgment passed by the foreign Court, where before a contrary Indian law had been shown, but the Court had refused to recognize such law, then that Judgment or decree may not be enforceable, except where the proper law of contract is the foreign law.

Foreign Judgments opposed to the principle of Natural Justice

It is the essence of a judgment of court that it must be obtained after due observance of the judicial procedure i.e., the court rendering the judgment must observe the minimum requirements of natural justice. It must be composed of impartial persons, who must act in a fair and justified manner, without bias, and in good faith, it must give reasonable notice to the parties to the dispute and each party should be given equal opportunity of presenting their case. A judgment which suffers from such infirmities on the part of a judge will be regarded as a nullity and the trial “coram non judice”[15]

In the case of Lalji Raja & Sons v. Firm Hansraj Nathuram[16], the Supreme Court held that just because the suit was decreed ex-parte, although the defendants were served with the summons, does not mean that the judgment was opposed to natural justice.

PROPOSITION

Under Section 13(d) of CPC, the following proposition may be laid

The foreign court must follow the principle of natural justice while delivering the judgment. Judgement must be impartial, given fairly, moreover, the parties to the dispute should be given appropriate notice of the initiation of legal proceedings. Equal opportunity of presenting their case, in order to avoid any allegation of not fulfilling the principles of natural justice in case the judgment or decree comes to the Indian court for enforcement. Unless this is done the judgment or decree passed by a foreign Court may violate the Principles of Natural Justice.

• Foreign judgment obtained by fraud

It is a well settled principle of Private International Law that if foreign judgments are obtained by fraud, it will not operate as res judicata.

It has been said “Fraud and Justice never Dwell together” (fraus et jus nunquam cohabitant); or “ Fraud and deceit ought to benefit none” (fraus et dolus nemini patrocinari debent)[17].

In the case of Satya v. Teja Singh[18] the Supreme Court held that since the plaintiff had misled the foreign court as to its having jurisdiction over the matter, although it could not have had the jurisdiction, the judgment and decree was obtained by fraud and hence inconclusive.

In S.P. Chengalvaraya Naidu v. Jagannath [19] Supreme Court held that it is well settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law.

PROPOSITION

Under Section 13(e) of CPC, the following proposition may be laid

Where the plaintiff misleads the Foreign court and the judgment or decree is obtained on that basis, the said Judgment may not be enforceable, however, if there is some error in the judgment then the Indian courts will not sit as a Court of appeal to rectify the mistake or error.

• Foreign Judgments founded on breach of Indian Law

When a law in force in India is wrongly construed so as to form the reasoning behind a judgment delivered by a foreign court, in such cases the enforceability of the foreign judgment in Indian courts will be under question.

China Shipping Development Co. Limited v. Lanyard Foods Limited, wherein the High Court held that a petition for winding up of an Indian company would be maintainable on the basis of judgment of foreign Court. In this case, the foreign company delivered cargo to the Indian company in compliance with requests made by the Indian company and in the process the foreign company had incurred certain liabilities towards third parties and it had to pay certain amount in legal proceedings and therefore, in terms of the letter of indemnity issued by the respondent Indian company, the foreign company claimed the amount from the respondent Indian company, which denied its liability and therefore the foreign petitioner company initiated legal proceedings against the Indian company in the English Courts as provided in the Letter of Indemnity. The respondent Indian company did not file defence and therefore the English Court passed ex-parte order awarding a certain amount in favor of the petitioner foreign company on consideration of evidence and on merits of the claim filed by the foreign company. By a notice issued under sections 433 and 434 of the Companies Act, 1956, the petitioner foreign company called upon the respondent Indian company to pay the amount due under the order of the English Court. 

After the respondent Indian company failed to honour the amount, the petitioner Foreign Company filed a petition for winding up of the Indian company. In the above circumstances since the records of the case manifestly revealed that the respondent Indian company was unable to pay its debts, the petition for winding up was admitted vide order dated 4.4.2007 under sections 433 and 434 of the Companies Act, 1956.

PROPOSITION

Under Section 13(f) of CPC, the following proposition may be laid

A judgment passed by a foreign court, which breaches any law in force in India may not be enforceable, except where it is based on a contract having a different “proper law of the contract”.

Enforcement of Foreign Judgments

A foreign Judgment which is conclusive and does not fall within section 13 (a) to (f), may be enforced in India in either of the following ways.

By instituting execution proceedings

A foreign Judgment may be enforced by proceedings in execution in certain specified cases mentioned in Section 44-A of the CPC.

Section 44A – Execution of decrees passed by Courts in reciprocating territory[20].-(1) Where a certified copy of a decree of any of the superior courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court.

(2) Together with the certified copy of the decree shall be filed a certificate from such superior court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.

(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decree, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.

Explanation I: “Reciprocating territory” means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section, and “Superior Courts”, with reference to any such territory, means such courts as may be specified in the said notification.

Explanation II: “Decree” with reference to a superior Court means any decree or judgment of such court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalties, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.

The List of the Reciprocating Territories as per the Provisions of Section 44 A of the Code of Civil Procedure, 1908

1. United Kingdom
2. Singapore
3. Bangladesh
4. UAE
5. Malaysia
6. Trinidad & Tobago
7. New Zealand
8. The Cook Islands (including Niue)and The Trust Territories of Western Samoa
9. Hong Kong
10. Papua and New Guinea
11. Fiji
12. Aden.

Moloji Nar Singh Rao vs Shankar Saran[21] Supreme Court held that a foreign judgment which does not arise from the order of a superior court of a reciprocating territory cannot be executed in India. It ruled that a fresh suit will have to be filed in India on the basis of the foreign judgment.”

Therefore Under Section 44A of the CPC, a decree or judgment of any of the Superior Courts of any reciprocating territory are executable as a decree or judgment passed by the domestic Court. The judgment, once declared, will be executed in accordance with section 51 of the Code. Thereafter, the court may order measures such as attachment and sale of property or attachment without sale, and in some cases arrest (if needed) in enforcement of a decree. This is done by the methods discussed below.

By instituting a suit on such foreign judgment

Where a judgment or decree is not of a superior court of a reciprocating territory, a suit has to be filed in a court of competent jurisdiction in India on such foreign judgment. The general principle of law is that any decision of a foreign court, tribunal or any other quasi-judicial authority is not enforceable in a country unless such decision is embodied in a decree of a court of that country[22]. In such a suit, the court cannot go into the merits of the original claim and it shall be conclusive as to any matter thereby directly adjudicated between the same parties. Such a suit must be filed within a period of 3 years from the date of judgment[23].

In Marine Geotechnics LLC v/s Coastal Marine Construction & Engineering Ltd.[24], the Bombay High Court observed that in case of a decree from a non-reciprocating foreign territory, the decree-holder should file, in a domestic Indian court of competent jurisdiction, a suit on that foreign decree or on the original, underlying cause of action, or both.

However, in both the cases, the decree has to pass the test of Section 13 CPC which specifies certain exceptions under which the foreign judgment becomes inconclusive and is therefore not executable or enforceable in India.

Foreign Award

An award passed by foreign arbitrator is enforceable in a country where it was made and can also be enforced in India. Courts may refer to CPC or any other statute while considering the procedure to be followed for enforcement of foreign awards under Foreign Awards (Recognition and Enforcement) Act (45 of 1961)

Effect of Foreign Judgment

A foreign judgment is conclusive for any matter adjudicated between the parties. Such judgment is conclusive and would create Res judicata between the same parties or between parties under whom they or any of the claims.

Limitation period for Enforcement of Foreign Judgments

As per the provisions of the Code, foreign judgments from reciprocating territories are enforceable in India in the same manner as the decrees passed by Indian courts. The Limitation Act, 1963 prescribes the time limit for execution of a foreign decree and for filing of a suit in the case of judgment passed by foreign court.

• Three years, commencing from the date of the decree or where a date is fixed for performance; in case of a decree granting a mandatory injunction; and

• Twelve years for execution of any other decree commencing from the date when the decree becomes enforceable or where the decree directs any payment of money or the delivery of any property to be made at a certain date, when default in making the payment or delivery in respect of which execution is sought, takes place.

A judgment obtained from a non-reciprocating territory can be enforced by filing a new suit in an Indian court for which a limitation period of 3 years has been specified under the Limitation Act, 1963 commencing from the date of the said judgment passed by foreign court.

Foreign currency conversion rate

In a decree passed by foreign court, the amount awarded is generally in a foreign currency. Therefore, while enforcing the foreign decree in India, the amount has to be converted into Indian currency. In Forasol vs. ONGC [25] it was held that the date of the decree should be used for the calculation.

Confilct between Domestic Judgment & Foreign Judgment

The principle of res judicata embodied in the Code prohibits a court of competent jurisdiction from trying a suit on a matter that has been substantially decided in a prior suit between the same parties. Therefore, a decree or judgment passed by a superior court of a foreign country cannot be enforced in India if it contradicts an earlier conclusive judgment passed by a competent court in a suit between the same parties. A foreign judgment passed by a court of a non-reciprocating country can only be enforced by filing a new suit in India where the foreign decree is merely a piece of evidence with persuasive value. Therefore, the judgment debtor can raise the claim of res judicata and stay the suit at the preliminary stage.

Conclusion

Therefore, the above discussion of the legal issues involved in enforcement of foreign decrees in India emphasizes the need for the Indian business sectors not to treat the summons received from foreign courts casually. Rather, to contend at a later stage that the foreign decision/decree is not based on “merit” or contrary to the provisions of the Indian Civil Procedure Code, may turn out to be unsafe and may jeopardize the protective umbrella which the Indian companies are so accustomed to while dealing with litigations in Indian courts.

Where a judgment or a decree is passed by a foreign Court against an Indian defendant, the judgment or decree may not be enforceable against him due to the operation of Section 13 of CPC. It can be seen that the plaintiff has to come to the Indian courts to either get the foreign judgment executed or enforced in India under Section 44A or file a fresh suit in Indian courts upon the foreign judgment for its enforcement. Therefore by getting a decree in the foreign court, the plaintiff only avoids the inconvenience of leading evidence in the Indian Courts but runs a much bigger risk under Section 13. Therefore, it is advisable for a foreign plaintiff to institute claims in India itself where the defendant is in India as generally international transactions involve more of documentary evidence and that comparatively leading of evidence may not be that inconvenient, it may be advisable to avoid the risk under Section 13 and file claims in India itself.

Hence, we can conclude that a judgment of foreign court creates estoppel or res judicata between same parties, provided such judgment is not subject to attack under any of the clauses (a) to (f) of Section 13 of the Civil Procedure Code. If any claim is made by any party and subsequently abandoned at the trial of a suit and if the decree or judgment in that suit implies that claim has not met with acceptance at the hands of the court, then the court must be deemed to have directly adjudicated against it.

References.

[1] Code of Civil Procedure, Twenty Sixth Edition, Eastern Book Company, 2014, Pg 2,3.

[2] R. Viswanathan v. Rukhn-ul-Mulk Syed Abdul, AIR 1963 SC 1 at pp. 14-15: (1963)3 SCR 22

[3] Satya v. Teja Singh, (1975) 1 SCC 120: AIR 1975 SC 105

[4] Cardozo, J. in Loucks v. Standard oil Co. of New York, (1918) 224 NY 99 at p.111.

[5] Sankaran Govindan v. Lakshmi Bharathi, (1975) 3 SCC 351 at p.368: AIR 1974 SC 1764 at p. 1766.

[6] Code of Civil Procedure, Twenty Sixth Edition, Eastern Book Company, 2014, Pg.10

[7] Code of Civil Procedure, Twenty Sixth Edition, Eastern Book Company, 2014, Pg.9

[8] Brijlal Ramjidas v. Govindram Gordhandas Seksaria, (1946-47)74 IA 203:AIR 1947PC 192 (194)

[9] R.M.V. Vellachi Achi v. R.M.A. Ramanathan Chettiar, AIR 1973 Mad. 141

[10] Narasimha Rao v. Venkata Lakshmi,(1991)3 SCC 451.

[11] Gurdas Mann v. Mohinder Singh Brar AIR 1993 P&H 92.

[12] Ibid 5

[13]I & G Investment Trust v. Raja of Khalikote AIR 1952 Cal.  508.

[14] Ibid. at p. 525 para 43 and 44.

[15] Viswanathan v. Abdul Wajid, AIR 1961 SC 1 at pp. 24-25, 32

[16] Lalji Raja & Sons v. Firm Hansraj Nathuram AIR 1971 SC 974 at p. 977.

[17] A.V. Papayya  Sastry v. Govt. Of A.P., (2007) 4 SCC 221 at p.231: AIR 2007 SC 1546.

[18] Satya v. Teja Singh AIR 1975 SC 105 at p. 117 para 50.

[19] Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1 : AIR 1994 SC 853

[20] Code of Civil Procedure, Twenty Sixth Edition, Eastern Book Company, 2014, pg22.

[21] Moloji Nar Singh Rao vs Shankar Saran AIR 1962 SC 1737

[22] Roshanlal v. R.B. Mohan Singh, (1975)4 SCC 628: AIR 1975 SC 824

[23] Art 101, Limitation Act, 1963.

[24] Marine Geotechnics LLC v/s Coastal Marine Construction & Engineering Ltd. 2014 (2) Bom CR 769

[25] Forasol vs. ONGC 1984 AIR 241, 1984 SCR (1) 526

The post Enforcement of Foreign Judgments And Decrees In India appeared first on iPleaders.

In this article, Parth Sarthy Kaushik discusses whether SEBI should have the power to penalise Auditors or not.

Introduction

Corporate governance refers to the role played by different participants (such as the management, the board of directors, the shareholders and the auditors) entrusted with the supervision, control, and direction of the company. The need for good corporate governance essentially arises from the division between ownership and control of the company. Therefore, corporate governance focuses on running the company in the mutual interest of all stakeholders.

The role of the auditors is pivotal to effective corporate governance as they are in the best position to provide an unbiased analysis of the finances of the company thereby acting as trustees of shareholders and prospective investors. The shareholders of the company place very high trust on the auditor’s report, which apparently shows the true and fair view of the accounts of the company. However, in many cases the auditors fail to perform this role diligently and honestly and are often found to commit fraud in collusion with the management.

Therefore, the need for an effective oversight of the performance, independence and objectivity of the auditor and the quality of the audit cannot be overstated. With a view to enhance the standards of corporate governance of listed companies in India, Uday Kotak Committee on Corporate Governance has recommended, inter alia, an active monitoring of the role of auditors and conferring powers on SEBI to act against auditors in case of an ineffective audit. However, The Institute of Chartered Accountants of India (ICAI) has expressed its dissent on these recommendations as the regulation of chartered accountants is covered under the Chartered Accountants Act, 1949 and disciplinary measures for auditors will come under the National Financial Reporting Authority (NFRA), which is a regulatory agency for auditors proposed to be set up under Section 132 of the Companies Act, 2013.

Thus, these recommendations can give rise to jurisdictional conflict and have wide-ranging implications for companies and their auditors. In the present context, it is very important to examine these recommendations and objection raised in light of the failure of the ICAI to rein in erring auditors.

Rules Governing the Role of Auditors – Present Framework Vis-à-Vis Proposed Framework

Following are some of the key proposals made by the Committee to ensure independence of the auditors and the quality of audit reports:

1. Audit Qualifications

Under Schedule IV, Part-A of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (LODR) if the impact of audit qualification is not quantifiable, the management is required to make an estimate which shall be reviewed by the auditor. In case the management is unable to make an estimate, it is required to provide the reasons.

Committee has recommended that the disclosures regarding audit qualifications should be made mandatory. However, there is one exception to this rule i.e. matters of going concern or sub-judice matters. In such cases, the management will be required to provide reasons which will be reviewed by the auditor.

2. External Opinion

Currently, there are no specific provisions in any law which enables an auditor to obtain an independent external opinion in relation to the audit/limited review.

Committee has recommended that Regulation 33 of LODR, which deals with the Financial Results of a listed entity, should be amended to grant auditors a right to independently obtain opinions from external experts, when they do not agree with experts appointed by the listed entity. Also, it has been suggested that any expenditure incurred for obtaining such opinion shall be borne by the listed entity.

3. Resignation of Auditors

Section 140 (2) of the Companies Act, 2013 read with Rule 8 of the Companies (Audit and Auditors) Rules, 2014 provides that, upon the resignation of auditors, reasons for such resignation shall be filed with the company and Registrar of Companies. However, SEBI LODR Regulations does not have any specific provision providing for such disclosure.

To ensure that auditors don’t resign quietly when called upon to take a position on contentious issues, it is very important that detailed reasons for their premature resignations are provided. Therefore, with a view to bring the LODR Regulations in consonance with the provisions of the Companies Act, 2013 the Committee has recommended that it should be mandatory for a listed entity to disclose the reasons for the resignation of its auditors. Furthermore, auditors shall also be required to truthfully disclose the reasons for their resignation.

4. Role of ICAI

At present the Chartered Accountants Act, 1949 regulates the conduct of Chartered Accountants in India which, inter alia, provides for the mechanism of disciplinary action against erring members. Further, Section 147 of the Companies Act, 2013 provides that if an auditor contravenes any of the statutory duties laid down in the Act then –

(a) In case of unintentional contravention, the auditor can be punished with a maximum fine of Rs. 5 Lac; and

(b) In case of wilful contraventions, the fine can be extended upto Rs. 25 Lac. Further, in case where audit of a company is being conducted by an audit firm, the partners of the concerned audit firm and the firm can be made jointly and severally liable. However, it must be emphasised that the enforcement of the provisions of CA, 2013 is through the Ministry of Corporate Affairs and not the ICAI.

As the current mechanism has failed to deter auditors from participating in fraudulent activities in collusion with the company management. The Committee has recommended that ICAI may be given powers to increase the scope of punishment as well as the penalty amount by increasing the upper limit to Rs. 1 crore in case of auditors and Rs. 5 crore in case of repeated violations by an audit firm. In addition, it has been recommended that a separate cell should be formed by ICAI for the enforcement of disciplinary proceedings pertaining to listed entities.

5. Enforcement by SEBI

Section 11 of the SEBI Act, 1992 provides that, in order to protect the interests of investors and to promote the development of the securities market, SEBI can restrain person accessing the securities market a certain time period. However, under the SEBI Act or Regulations framed thereunder, currently there is no specific provision which provides for specific penal powers in relation to auditors.

As SEBI is duty bound to protect the interests of investors in the securities market and regulating listed entities, it is only logical that SEBI should have clearly defined powers to act against auditors with respect to their functions concerning listed entities. The Committee has recommended that the power conferred under Section 11 ought to be extend against the audit firms as well.

ICAI and Auditors – A Mutual Benefit Society?

The infamous Satyam scandal which broke out in January, 2009 showed that no system is fully equipped to prevent greedy and dishonest people from putting their personal interests ahead of the interests of the companies they manage. Today it’s a well-known fact that the auditors were paid to hide the fraud and actively participated in luring the investors by manipulating facts and figures.

This is not a one off instance where auditors were found hand in gloves with the management in perpetrating frauds of unheard proportions. In 2001, the role of the auditors of Global Trust Bank had come to light in the backdrop of Ketan Parekh stock market scam. A lot of noise is made in the regulatory circles, every time there is a new scam exposing the wrongdoings of auditors but the system governing auditors does not witness any observable improvement.

The reforms suggested by Uday Kotak Committee can have far reaching impact on the role of auditors in the corporate governance of listed companies. As expected, ICAI has protested by claiming that the Committee has exceeded its mandate and the recommendations if implemented would cause a conflict of jurisdictions between SEBI and ICAI or proposed National Financial Reporting Authority (NFRA). Considering that ICAI has been successfully lobbying against NFRA and its own track record in taking action against the erring auditors, one may find it baffling to see ICAI making the above argument. But given that the governing council of ICAI is elected by Chartered Accountants, it can hardly be expected that elected representatives will show any diligence in acting against the members who elect them. One such example is the disciplinary proceedings against the auditors of Global trust Bank, which stretched for more than a decade.

It is clear that self-regulation of auditors has resulted in dubious accounting and auditing practices. Therefore, it is imperative that SEBI should be allowed to strengthen its capacity to effectively reduce opportunities for accounting fraud and insure greater accountability of the auditors.

Conclusion

The auditing profession has an important role to play in strengthening the corporate governance mechanism. If the above recommendations are implemented in their letter and spirit then transparency in accounting and auditing practices is sure to increase, which will result in adoption of more ethical practices. In long-term, these reforms will prove out to be instrumental in the evolutionary process of India’s corporate governance mechanism.

The post Whether SEBI should have the power to penalise Auditors? appeared first on iPleaders.

In this article, Archit Singh, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on the legal framework and regulations governing Nidhi Companies.

Understanding Nidhi Companies

“Nidhi” is a Hindi word, which means finance or fund. Nidhi means a company which has been incorporated exclusively with the object of developing the habit of thrift and reserve funds amongst its members, receiving deposits, and lending to its members only for their mutual benefit. Nidhi Companies are monetary business companies operating in India and can be classified as Non Banking Financial Companies (NBFC) and Banking Companies. However, unlike NBFCs and Banking Companies a Nidhi company does not require a license from the Reserve Bank of India (RBI) to operate. A Nidhi Company works through its members. Any person who is a member of a Nidhi can make deposits and borrow or take loans when need be.

Nidhis are also known as ‘Mutual Benefit Societies’ or ‘Mutual Benefit Companies’, terms given to it by the ‘Sabanyagam Committee on Nidhis’ and the ‘Expert Committee on Nidhi’ to distinguish it from other Co-operative societies and Banks which may engage in a similar kind of activity. The basic function of a Nidhi is to promote the savings and utilization of funds by its members and to safeguard the financial conditions of its members.

Objectives of Nidhi Companies

Nidhi is Public Limited Company formulated with the primary object to carry on the business of accepting deposits and lending money to member-borrowers only against jewels, mortgage of immovable property and fixed deposit receipts. Nidhis are not permitted to engage themselves in the business of Chit Fund, hire purchase, insurance or in any other business including investments in shares or debentures. Thus, Nidhis do their business only with Members. Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as Members.

The Nidhis cater to the needs of middle class and lower middle class persons, who are all the members of the Nidhi generally operate in a small local area and the members are very often known to each other.

Legal framework and regulatory bodies regulating the functioning of Nidhi Companies

Nidhis are companies registered under Section 406 of the Companies Act, 2013 (or Section 620A of the Companies Act, 1956) and is regulated by the Ministry of Corporate Affairs (MCA). NBFCs are wholly or partially regulated by the RBI. Nidhis are one such class of NFBCs that is only partially regulated by the RBI i.e. in reference to the matters relating to their deposit acceptance activities. Unlike section 620A of the 1956 Act, the 2013 Act under Section 406 finally defines Nidhi Companies. This definition was first recommended to be added by the Sabanyagam Committee on Nidhis.

It was observed by the ‘Expert Committee’ that since Nidhis operate in a small area and cater the needs majorly of the middle and lower middle section of the society and the members are often well known to each other, certain norms prescribed for the NBFCs should be diluted when applied to these institutions.

Nidhi Rules, 2014

• Nidhi companies are governed by Nidhi Rules, 2014. They are incorporated in the nature of Public Limited company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi rules, 2014. Nidhis are regulated by the provisions of the Companies Act in force.
• They also come under one class of NBFCs and hence RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. RBI has in recognition of the fact that these Nidhis deal with their shareholder-members only exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs.
• However, unlike other NBFCs, no RBI approval is necessary to register the company, as RBI has specifically exempted this category of NBFC in India to comply with its core provisions such as the notified Nidhi companies are exempted from the provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets) and Section 45-IC (Creation of Reserve Fund), it has been decided on the lines of Government advice to exempt the MBCs in existence as on January 9, 1997 and having NOF of Rs.10 lakh from the above mentioned provisions of the Act in terms of powers vested with the Bank under Section 45-NC of the Act and also from those provisions of NBFC Directions on Acceptance of Public Deposits and Prudential Norms which do not apply to notified nidhi companies.

Question regarding the regulatory powers of RBI upon a Nidhi was raised in the case of Puraswalkam Santhatha Sanga Nidhi Ltd. v. Reserve Bank of India wherein restrictions were placed on Nidhi Companies by a notification issued by the RBI under Section 45-I of the RBI Act, 1934. The notification placed restrictions on the rate of interest and payment of brokerage and commission etc on Nidhi Companies. The Madras High Court in this case held that RBI hold power to issue directions to all financial institutions carrying on trading or activities relating to advancing of loans. The Court stated that since Nidhis are engaged in the activity of advancing loans to its members it falls squarely within the definition of a ‘Financial Institution’ and there RBI was empowered to issue directions with intention to regulate credit system of the country.

Further, S. 406 empowers the Central Government to notify a company to be a Nidhi company. Central Government is also empowered to notify the which all provisions of the Companies Act may or may not be applicable to a Nidhi Company along with any modification or exception to any procedure that may apply to it.

Incorporation of a Nidhi Company

For a Nidhi to be incorporated under the Companies Act, it has to be incorporated as a public company with a minimum paid up equity share capital of five lakh rupees. Except as provided under the proviso to sub-rule (e) to Rule 6, no Nidhi can have any object in its Memorandum of Association other than the “object of cultivating the habit of thrift and savings amongst its member, receiving deposits from, and lending to, its members only, for their mutual benefit.” And lastly, Rule 4(5) makes it mandatory for every company incorporated as a Nidhi to have the last words “Nidhi Limited” as part of it name.

Membership

Rule 5 of the Nidhi Rules, 2014 specifies the requirements of the minimum number of members and net owned funds that a Nidhi company must have. The rule stipulates that it must have not less than 200 members at any point of time of the existence of the company after its incorporation, have Net Owned Funds of ten lakh rupees or more and the ratio of the net owned funds to deposits should not be more than 1:20.

Other than this, the provisions with regard to share capital and allotment, membership, net owned funds, branches, acceptance of deposits, loans, rate of interests, rules relating to directors, dividend, auditors, prudential norms are provided in the rules 7- 20.

General restriction imposed on Nidhi Companies

1. Nidhis are barred from issuing of any preference shares, debentures or any other debt instruments. Preference Shares issued before the commencement of the Act are, however, permitted to be redeemed as per the terms of their issuance.

2. Nidhis are barred from opening any current accounts with its members. The objective of Nidhis is to promote savings and thus they are permitted to only open savings accounts with their members.

3. There is an absolute restriction on a Nidhi to extend loans or allow deposits to any person who is not its member.

4. Nidhis cannot carry on any business other than the business of borrowing or lending in its own name.

5. Further, Nidhis are restricted from accepted any deposits or advancing loans to any persons (including body corporates) other than its members, pledge any of the assets ledged by its members as security, enter into any partnership arrangements, pay any brokerage or incentives for mobilising deposits from members or for granting loans.

6. At present, Nidhi Companies are barred from payment of brokerage on deposits and making advertisements in any manner. The only stipulation of RBI presently applicable to Nidhis pertains to the ceiling on interest rate payable on the deposits.

Conclusion

Nidhi companies, with its unique institutional structure, offer a profitable path for organising a lending business without getting into the regulatory web of ordinary financial services. Though there exist a dedicated gamut of legislation governing Nidhi Companies carefully crafted to plug possible loopholes, this structure is advantageous with its relatively easier formation and limited regulation. Nidhi Companies being mutual benefit organisations is devoted strictly to its members, pro lower and middle class. A bulk of members are attracted with the benefit of easy documentation and favourable rates. Thus, in a country like India having a high percentage of unbanked population and with a society still not fully equipped with a sound banking culture, these companies are a solid alternative to a traditional banking system to align the interests of many within a closed unit. However, these companies are still not common uniformly throughout India with the bulk of them in Southern India. Though the concept of such companies is quite old, the recent tightening of regulation for interests of depositors is a positive step to promote yet another means of financial inclusion.

The post Legal framework and regulations governing Nidhi Companies appeared first on iPleaders.

This article is written by Mishika Bajpai. The article answers the question whether rewriting or sharing news articles amounts to violation of Copyright law or not.

Can one have a copyright over a news item? Can one exercise this right which might result in a violation of the fundamental right to know and express?

This short write-up aims to clarify the position of news items in the copyright law and whether any embargo on the right of the citizens to express daily events and discern themselves with common facts in the public domain can be legally exercised. The whole idea is presupposed on a belief that copyright and public interest are not inevitably competing forces and can co-exist in a cultural society.

Consider an example, where A gains knowledge from B about a football match that is about to happen, and uploads a story about it on the internet after the match. Can B claim copyright over the idea of reporting this event? Can B claim copyright over the fact that she knew about the event and only she had the right to publish any story on it?

First, there exists no copyright in news or facts or information, as the same are neither created nor have they originated with the author of any work, which embodies these facts.

Second, facts may be discovered and discovery of facts cannot be given the protection of copyright.

Third, the protection of copyright is afforded only when a fact or event or information or material is applied to create a form of work, literary or otherwise. When there is no copyright in news, there can be no infringement of an original ‘idea’ either, copyright may exist in the manner of expressing it.[1] That being the position, any edited piece of work which had an established amount of skill, labor and capital put as inputs would amount to innovative thoughts and creation of the editor. Copyrighted material is that what is created by the author by his own skill, labor and investment of capital. Therefore, it is necessary to perceive the labor, skill and capital invested in the expression of the work and not the fact itself.[2]

Fourth, law of Copyright in India only protects original and creative expressions of ideas and not ideas themselves. As held by the Supreme Court of India[3], “There can be no copyright in an idea, subject matter, themes, plots or historical or legendary facts and violation of the copyright in such cases is confined to the form, manner, arrangement and expression of the idea by the author of the copyrighted work.” Even Article 2(8) of the Berne Convention for the Protection of Literary and Artistic Works 1886 excludes the protection for “news of the day or to miscellaneous facts having the character of mere items of press information.”

Fifth, the news element in the information reporting current events contained in the literary production is not the creation of the writer, but is a report of matters that ordinarily are publici juris; put in different words, it is the history of the day.[4] The same is true for all facts scientific, historical, biographical, and news of the day. They can never be copyrighted and are part of the public domain available to every person.[5]

Copyright vis-à-vis freedom of speech & expression

Consider another example, where A has received a scoop from B about an event which may not have seen the light of the day yet. A publishes an article on the scoop, setting out the impact this particular scoop may have on public interest. Can B claim monopoly over this news scoop, which may have a direct bearing on public interest?

If it were the law that practice of reporting stories in one’s own words constituted breach of copyright, the consequences, would be that a paper or person that obtained a scoop from a confidential source would obtain a monopoly on that piece of news. That would not be in the public interest as it would prevent the wider dissemination of the news to the public at large.[6] Such an approach would also prove counterproductive to the duty to communicate to the general public for various sociological, economic, and political functions. Whilst the admitted position of law that there cannot be a copyright in news items, any impediment in its numerous and recurring expressions amounts to violation of the fundamental right[7] and human right[8] of freedom of expression.[9] When it comes to dissemination it is not done with a view as to whose news is it.

An instance, when the Indian judiciary delivered on this subject extensively was a case^[10] which raised the question of reproduction of the Supreme Court judgments. The court found that the reproduction or publication of anything in the public domain did not amount to infringement of copyright. Therefore, if a person gains knowledge of an event and creates news item or publishes an informative story on the internet or shares a report, perhaps on Whatsapp or Twitter, cannot be said to be violating any copyright. The discoverer of these facts may only find and record the instances, but it is the expression that matters.

The issue gains more importance in the light of the fact that the legislature not once, but on many occasions limited the right of the freedom which has sought justice and been successful before the Courts. The right to know, as laid down by the Courts, flows from the assertion of the Supreme Court which in 1975 declared any impediment against the right of press as a violation of the fundamental right to freedom of speech and expression.[11] The Apex Court has also on numerous occasions stated the right to know derives its powers from the quintessential part of Article 19(1)(a) of the Constitution of India. There is no gainsaying in stating the obvious that without adequate information, a person cannot form an informed opinion.[12] It is the press responsible for the reporting of timely news and information for public consumption, journalistically; And an underinformed or uninformed press would hardly be in a position to disseminate any news to the public.

Where there was the dissenting opinion of Mathew, J. in Bennett Coleman & Co. v. Union of India^[13] that “the freedom of speech does not mean a right to obtain or use an unlimited quantity of newsprint. Article 19(1)(a) is not a “guardian of unlimited talkativeness”. The majority ruling in the case supported the faith of the citizens in political wisdom and virtue which would sustain themselves in the free market of ideas so long as the channels of communication are left open. The confidence in the popular Government also rests on the old dictum, “let the people have the truth and the freedom to discuss it and all will go well.”[14]

It is worth recollecting the words of Justice Patanjali Sastri, J.,[15] speaking for the Supreme Court in the landmark case of Romesh Thappar[16]–

“Thus, every narrow and stringent limits have been set to permissible legislative abridgement of the right of free speech and expression, and this was doubtless due to the realisation that freedom of speech and of the press lay at the foundation of all democratic organisations, for without free political discussion no public education, so essential for the proper functioning of the processes of popular Government, is possible”.

Celebrated scholar, William Blackstone, is also revered for his commentaries on freedom of the press to express:

“Every free man has an undoubted right to lay what sentiments he pleases before the public; to forbid this is to destroy the freedom of the press; but if he publishes what is improper, mischievous or illegal, he must take the consequence of his own temerity.”

Reasons rather than rhetoric

Every man has a right to publish and circulate, for the purpose of giving the public information that which it is proper for the public to know.[17] And as long as the expression of that particular fact or news or information or event does not fall within the exceptions under Article 19(2) i.e. the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence, there ought to be no restriction on the exercise of the right. On another instance, our Apex Court had, while dealing with the censorship of a film, stated the following.

“Our commitment of freedom of expression demands that it cannot be suppressed unless the situations created by allowing the freedom are pressing and the community interest is endangered. The anticipated danger should not be remote, conjectural or far-fetched. It should have proximate and direct nexus with the expression. The expression of thought should be intrinsically dangerous to the public interest. In other words, the expression should be inseparably locked up with the action contemplated like the equivalent of a ‘spark in a power keg’.”[18]

While it is undeniable that journalists do not experience any copyright issues or have to never take crucial decisions while portraying true pictures, the news ought to necessarily reach its deserving audience. While dissemination of news and views for popular consumption has always been permissible under our constitutional scheme, it is sometimes a ‘forced’ cultural responsibility backed by the dogmatic and conventional morality which might be enough ground to penalise an author.

It is not just the citizens who face limited content, but also the journalist who are hit by the worry whether they can publish in the new world or do they need to first comfort themselves with the copyright laws on fair use reporting which gives them the liberty to override the limited monopoly rights of copyright holders in the course of their work.

At this stage, the Courts have to consider all the circumstances before approaching the moot question, and the same shall include whether the information is at all sufficient value to the public. The rationale behind keeping the veil of public interest as low as possible is to reduce obstacles to the facilitation and reporting of news.

Truth can only prevail in the absence of any obstruction or monopolisation of that market whether it be by the Government itself or by a private licensee. It shall then enable the members of the society to preserve their political expression of comment not only upon public affairs but also upon the vast range of views and matters needed for free society.[19]

Since no copyright protection can be advanced against the fundamental right to expression, the court may at the highest, in principle indemnify the author for any loss caused to him or account to him for any profit made as a result of copying his work.[20]

It is not necessary that an exclusionary right such as copyright may never be in tandem with the protection of human rights and fundamental rights of the general public. Hence, the very motive of an effective copyright regime is to encourage production and investment. Though copyright protection is a tool for economic emancipation, sheer conventionalism may hamper the effective willingness to share. A society will fail if it does not reward such creators who would eventually cease to exist.

References.

[1] Springfield v. Thame, (1903) 89 LT 242 at 243; Express Newspaper v. News (1991) F.S.R. 36

[2] Feist Publications Inc. v. Rural Telephone Services Company, 499 U.S. 340 (1991)

[3] R.G Anand v. Delux Films, AIR 1978 SC 1613 [14-18] [41] [61]

[4] News Service v. Associated Press, 248 U.S. 215, 234, 354 (1918)

[5] Miller v. Universal City Studios Inc., (650 F.2d 1365, 1369 5th Cir. 1981

[6] See Express Newspaper v. News, (1991) F.S.R. 36, 7

[7] Constitution of India, 1950, Article 19(1)(a)

[8] Universal Declaration of Human Rights, 1948, Article 19

[9] LIC v. Manubhai D. Shah (Prof.), (1992) 3 SCC 637, 648

[10] Eastern Book Company v. D.B. Modak, (2008) 1 SCC 1, 111

[11] State of Uttar Pradesh vs. Raj Narain (1975) 4 SCC 428, Read also, S. Khushboo v. Kanniammal, (2010) 5 SCC 600

[12] State of U.P. v Raj Narain, AIR1975SC865; Reliance Petrochemicals Ltd. v. Indian Express, AIR1989SC190; Secretary, Ministry of Information and Broadcasting, Govt. of India v. Cricket Association of Bengal, AIR1995SC1236; Dinesh Trivedi v. Union of India (1997)4 SCC 306; and Association for Democratic Reforms v. Union of India, AIR2001Del126.

[13] (1972) 2 SCC 788 at page 843

[14] Bennett Coleman & Co. v. Union of India, (1972) 2 SCC 788 at page 823

[15] Ibid

[16] Romesh Thappar v. State of Madras [AIR 1950 SC 124

[17] Cox v. Feeney, (1862) 4 F and F 13,18

[18] S. Rangarajan v. P. Jagjivan Ram [(1989) 2 SCC 574, pp. 595-96, para 45

[19] Red Lion Broadcasting Co. v. Federal Communications Com. [(1969) 395 US 367 : 23 L.Ed.2d 371] – Neither regulation nor direction with regard to medium of expression encroaches on the First Amendment right of the American Constitution. [“Regulatory statutes which do not control the content of speech but incidentally limit the unfettered exercise are not regarded as a type of law which the First Amendment to the American Constitution forbade the Congress of the United States to pass.”]

[20] See Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd. 2008) 13 SCC 30 [87]; Copinger & Skone James on Copyright, Vol. 1, 10th Edn., 2012, 165

The post Does rewriting or sharing news articles amounts to violation of Copyright law? appeared first on iPleaders.

This article is written by Atul Alexander. The article deciphers the legal perplexities of Rohingyas crisis.

The historical roots of the Rohingya crisis

The ongoing conflict in Myanmar is reflective of many aspects that the society is heading towards. The suppression of minorities has reached an all-time high in the recent past. The Rohingyas, whose population constitutes 1% of the entire population of Myanmar, have their roots in Ancient Indo-Aryans race. It is also to be highlighted that the Bay of Bengal which was considered a key center for maritime trade and cultural exchange was once ruled by the migrant Rohingyas.

Moreover, the Arabs came in contact with the Rohingyas in the mid of 8^th & 9^th century. So, culturally and traditionally Rohingyas had a very spread out history and customs. The unabated human rights violations, of these distinct sects have dented the morale of International community as a whole. The oppression of the minorities is a common occurrence in the 20^th century, be it the case of the mass massacre of the Jews at the hands of Adolf Hitler or the Genocide in Cambodia, Rwanda and Yugoslavia, the international community has remained as a silent spectator to these vicious acts.

International Law is the branch that offers a healing effect to the crimes committed to the minorities. In this respect one has to view the escalating crimes committed towards Rohingyas under two broad categories namely; Genocide and Crimes against Humanity.

Abuses against Rohingyas – Human Rights Perspective

The role played by the Human Rights Monitoring Committees in supervising the Human Rights abuses in the Rakhine state is self-evident. The Kofi Annan led commissions on Human Rights to enquire into the state of affairs, opinioned, “the Rohingyas were restricted from freedom of movement, education, employment etc, and Human Rights”, along with the reports of several Human Rights Officials describe, terming it as an Ethnic Cleansing, which is quite tangible since the crackdown on Rohingyas were orchestrated on several episodically phases (1978, 1991, 1992, 2012, 2015, 2017), one of the starkling report, by the United Nations Special investigator Yanghee Lee underlined the state sponsored propaganda to wipe out the entire Rohingyas populations, in the other side, the contention placed by the State counselor of Myanmar is that “these groups are illegal migrants from the Bangladesh having dubious track record in terms of terrorist act.”

United Nations on Rohingya crisis

This has been condemned by several head of the states at the recently held 72^nd United Nation General Assembly Session. It is not surprising to witness such statements since the General Assembly is a common platform to exude countries customary national interest. Notably, the statements issued by the President of United States, terming the North Korean dictator as Rocket Man is placing national interest of United States above the acute Human Rights Violation across the Globe.

With regard to the gross human rights violation in the turbulent terrain of Rakhine state, the broad segment of applicable law which could be pressed into service are International Humanitarian Law, International Criminal Law, International Human Rights Law, International Refugee Law, which have to be unlocked to get a clear picture on the ground realities.

Rohingyas as victims of genocide under Genocide Convention of 1948

The most appropriate Law in the context of the human rights violation meted out on the Rohingyas is the 1948 Genocide Convention. The peculiarity of the convention is that, Article 1 of the convention enumerates that Genocide could be committed even during peace time.

Secondly, it is a Human Rights Instrument, since the preamble of the convention employs the term humanity. Article 2 of the Genocide Convention lists down the categories of persons on whom the convention would be binding and one such category is religion. Also, one of the paramount fact is that dolus specialise or specific intent as fulfilled which is an essential component of a crime of Genocide.

Historically, the crime of Genocide was codified post world war II. During 1990’s the Rwanda and Yugoslavian Genocide paved the way for a more comprehensive interpretation on the Genocide Convention, albeit majority of Genocidal acts have remained cremated in the minds of the large sections of international actors, which is also true in the current scenario of Rohingyas.

Genocide is considered as a Crime of Crimes as observed in, Prosecutor vs. Jean Paul Kambande, therefore to remain ignorant of the heinous acts in the Rakhine state is absurd. The clenching element that makes it as a case of Genocide is intention to destroy the group in whole or part in Aricle 4 of the Genocide Convention, which makes even the constitutional ruler capable for the act of Genocide. He/she cannot claim immunity by virtue of being the Head of the State.

Rohingyas crisis – Crime against Humanity

Henceforth, the Governmental agencies can be held liable for the acts of Genocide, which is widely touted as an act perpetrated by the Myanmarese Government. The other crime which falls short of Genocide is Crimes against Humanity under which Torture, sexual violence, Murder, Deportation, enslavement would fall, that being the case, anything of a lesser kind would fall under Crimes against Humanity.

The elements of Crimes against Humanity is borrowed from International Military Tribunal, Control Counsel Law no 10, Draft code on Peace and Security of Mankind, International Criminal Tribunal For Rwanda (ICTR) and International Criminal Tribunal for Former Yugoslavia (ICTY) which stands as, it should be targeted against civilian population, widespread and systematic together with the notion that it should be against a common policy.

So, considering these elements, it is perspicuous that Crimes against Humanity is also effectuated in the ongoing conflict. Apart from these crimes that are enlisted in the documents of International Criminal Law, International Humanitarian Law gains momentum in view of Geneva Convention vis-à-vis Additional Protocols.

The Common Article 3 of Geneva Convention, which guarantees minimum protection to the civilian population, has to be noted. The said provision mentions the phrase Right to Life, since life is an embodiment of Humanitarian Law, the killing of civilian population in the Muslim occupied terrain of Myanmar constitutes gross violation of Human Rights and Humanitarian Law. Another major law which is the bone of contention is International Refugee Law which is most fitting law when it comes to migration of Muslim population to Bangladesh and India.

Definition of Refugee under Article 1 of the Refugee Convention, 1951 

“A person who owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it.”

The focal point of Article 1 is the fear of persecution, this has to be determined on a case to case basis, when it boils down to the present situation the Rohingyas are to be given the refugee status, since there is a constant fear with respect to extortion, arbitrary taxation, land confiscation, forced disappearance etc., in 2016, the senior officials in Bangladesh accused Myanmar of ethnic cleansing.

Further, one of the cardinal principles of International Refugee Law is the principle of non-refoulement which has attained the status of Jus Cogens. Jus Cogens are norms in International Law, which the nations pledge to abide, irrespective of treaty status, violation of which would entail state responsibility, hence, to refuse safe passage of Rohingyas refugee in the territory of Bangladesh and India is a violation of Jus Cogens principle under Article 32 of the Refugee Convention, 1951.

India has been at the forefront in accommodating Refugees from across the globe, Indian Government has enlisted the categories of Refugees under its Ministry of External Affairs and Rohingyas finds a place in the discourse of Refugees in India, but lately, the stance taken by Government has been controversial.

The external affairs spokesperson has cited development and security as a factor in limiting the number of Refugees entering India, but prior to this statement Indian government has proactively undertaken a mission viz. operation insaniyat to provide relief materials like Rice, Sugar, Salt, Pulses, Oil to the affected refugees. Accusations of Rohingyas being radicalized by the militant groups like Lashkar-e-Taiba, Al-Qaeda has underscored the credibility of refugee to a larger extent.

The statement issued by Minister of State for Home Affairs has been, extremely hypercritical on the movement of Rohingyas refugees in the volatile borders of Bangladesh. India’s refused to sign the Bali Declaration, has clearly demonstrated the position taken by the Indian Government, which is zero tolerance on any insurgent movement to the North-East and a step towards protection of national interest. The Supreme Court of India has directed the executive to play a mediators role in resolving the tensions between the stakeholders.

PIL as a resort to protect the Legal Rights of Rohingyas

In line with that, Public Interest Litigations (PIL) have flooded, to protect the Rights of Rohingyas, Mr. Mohammed Balimuolla a citizen of Myanmar filed a PIL on account of the widespread violence, bloodsheds and Persecution in their home territory. The counter affidavit on the part of the center alleges the draining of countries resources and security threats.

One of the pitfalls of Genocide Convention is that the definition of Genocide is inadequate since it fails to factor in gender, environment and political element, also the Genocide Convention does not provide compensation to the aggrieved victims. Moreover, the Genocide Convention mentions Genocide as a crime having universal jurisdiction the convention per se does not deal about universal jurisdiction.

Myanmar being a sovereign has unilateral control over its territory, the question of fixing the international liability seems farfetched courtesy the doctrine of sovereignty, which is a stumbling block in the enforcement of International Legal Order. The grotesque political framework surrounding the whole episode could be laid to rest by adopting a collaborative approach like increased involvement of International Fact Finding mechanisms, Human Rights Investigatory Agencies, Regional Mechanisms, intervention of United Nations coupled with Security Council’s active involvement to discover an amicable solution.

The post Rohingya crisis – Deciphering the Legal Perplexities appeared first on iPleaders.

In this article, A. Mohamed Musthafa pursuing M.A, in Business Law from NUJS, Kolkata discusses how to claim Tax benefits under DTAA.  

A DTAA is a tax treaty signed between two or more countries. The key objective of DTAA is that tax-payers in these countries can avoid being taxed twice on the same income. A DTAA applies in cases where a taxpayer resides in one country and earns income in another. For example, let’s say that you are a resident in the USA and I’m a resident in India. You render some service to me for which I pay certain sum of money to you. In that case there will be two implications on you.

1. The amount paid for service rendered will be taxed (by way of tax deduction at source) in India as it is an income which has arisen in India.
2. And secondly, since you are a resident in USA, the income earned in India will be taxed in USA as well.

In this case, there will be an unnecessary burden on you to pay tax on same income twice.

Thus, DTAA comes to the rescue in cases where an entity is being taxed twice. As per the agreement, the income will be taxed in just one country. Say it is taxed in India, after taxing in India when you offer the same income for taxation in USA, you will get a foreign tax credit as deduction from tax payable which will be equivalent to the amount of tax that you have paid in India. DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport, inheritance, etc. India has DTAAs with more than eighty countries, of which comprehensive agreements include those with Australia, Canada, Germany, Mauritius, Singapore, UAE, the UK and US.

In the current era of cross-border transactions across the world, due to unique growth in international trade and commerce and increasing interaction among the nations, residents of one country extend their sphere of business operations to other countries where income is earned.

One of the most significant results of globalization is the introduction noticeable impact of one country’s domestic tax policies on the economy of another country. This has led to the need for incessantly assessing the tax regimes of various countries and bringing about indispensable reforms. Therefore, the consequence of taxation is one of the important considerations for any trade and investment decision in any other countries. Where a taxpayer is resident in one country but has a source of income situated in another country, it gives rise to possible double taxation.

This arises from two basic rules that enable the country of residence as well as the country where the source of income exists to impose tax.

Source rule: The source rule holds that income is to be taxed in the country in which it originates irrespective of whether the income accrues to a resident or a nonresident Taxation

Residence rule: The residence rule stipulates that the power to tax should rest with the country in which the taxpayer resides.

If both rules apply simultaneously to a business entity and it were to suffer tax at both ends, the cost of operating in an international scale would become prohibitive and deter the process of globalization. It is from this point of view that Double taxation avoidance Agreements (DTAA) become very significant.

International double taxation has adverse effects on the trade and services and on movement of capital and people. Taxation of the same income by two or more countries would constitute a prohibitive burden on the tax-payer. The domestic laws of most countries, including India, mitigate this difficulty by affording unilateral relief in respect of such doubly taxed Double income (Section 91 of the Income Tax Act). But as this is not a satisfactory solution in view of the divergence in Taxation the rules for determining sources of income in various countries, the tax treaties try to remove tax obstacles that inhibit trade and services avoidance and movement of capital and persons between the countries concerned.

It helps in improving the general investment climate agreements. The double tax treaties (also called Double Taxation Avoidance Agreements or “DTAA”) are negotiated under public international Law or “DTAA” law and governed by the principles laid down by the Vienna Convention on the Law of Treaties. It is in the interest of all countries to ensure that undue tax burden is not cast on persons earning income by taxing them twice, once in the country of residence and again in the country where the income is derived. At the same time sufficient precautions are also needed to guard against tax evasion and to facilitate tax recoveries.

In India, the Central Government, acting under Section 90 of the Income Tax Act, has been authorized to enter into double tax avoidance agreements with other countries. The fundamental principles of Taxation throughout the world, therefore, aim at eliminating the prevalence of double taxation. Such agreements are known as “Double Tax Avoidance Agreements” (DTAA) also termed as “Tax Treaties”. DTAAs ensure that countries adopt common definitions for factors that determine taxing rights and taxable events. Crucial among these is the definition of a permanent establishment.

Most treaties also specify a Mutual Agreement Procedure (MAP) which is invoked when interpretation of treaty provisions is disputed. To prevent abuse of treaty concessions, treaties increasingly incorporate restrictions and rules, such as a general anti-functions of avoidance rule (GAAR), that allow tax authorities to determine if a DTAAs transaction is only undertaken for tax avoidance or not. Benefit limitation tests and Controlled Foreign Corporation (CFC) rules also place limits on claims of residence in countries eligible for treaty concessions. Exchange of tax information on either a routine basis or in response to a special request is provided for in most treaties to assist countries counter tax evasion.

As of now, there exists 84 Double Taxation Avoidance Agreements (DTAAs) between India & other countries. These treaties are usually between countries with substantial trade or other economic relations. Most treaties are between pairs of developed countries while, of the balance, most of the DTAAs entered are between developed and developing countries. DTAAs Taxation provides reciprocal concessions to mitigate double taxation, avoidance, assign taxation rights roughly in accordance with that “existing consensus” and largely though not rigidly follow the OECD Model Tax Convention or, for developing agreements countries, the UN Tax Convention (DTAAs). Recent treaties contain new clauses following the OECD Model Tax Conventions of 2005 to 2010 which extend areas of cooperation to administrative and information issues. A typical DTAA agreement between India and another country covers only residents of India and the other contracting country which has entered into an agreement with India. A person who is between India & not resident either of India or of the other contracting country cannot claim any benefit under the said DTA Agreement.

Section 90 of the Income Tax Act, 1961- Agreement with foreign countries or specified territories

Since the tax treaties are meant to be beneficial and not intended to put taxpayers of a contracting state to a disadvantage, it is provided in Section 90 that a beneficial provision under the Indian Income Tax Act will not be denied to residents of contracting state merely because the corresponding provision in tax treaty is less beneficial. Section 90A facilitates double taxation relief to be extended to agreements (between specified DTAAs & Associations) adopted by the Central Government. Section 91 explains, countries with which no agreement exists i.e, Unilateral Agreements. Some Double Taxation Avoidance agreements provide that income by way of interest, provisions of royalty or fee for technical services is charged to tax on net basis. This may result in tax deducted at source from sums paid to Non-residents which may be Income-Tax more than the final tax liability. The Assessing Officer has therefore been empowered under section 195 to determine the appropriate proportion of the amount from which tax is to be deducted at source Act. There are instances where as per the Income-tax Act, tax is required to be deducted at a rate prescribed in tax treaty. However, this may require foreign companies to apply for refund. To prevent such difficulties Section 2(37A) provides that tax may be deducted at source at the rate applicable in a particular case as per section 195 on the sums payable to non- residents or in accordance with the rates specified in DTAAs.

Importance of DTAA

DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation. Such relief is provided by exempting income earned abroad from tax in the resident country or providing credit to the extent taxes have already been paid abroad. DTAAs also provide for concessional rates of tax in some cases. For instance, interest on NRI bank deposits attracts 30 percent TDS (tax deduction at source) here. But under the DTAAs that India has signed with several countries, tax is deducted at only 10 to 15 percent. Many of India’s DTAAs also have lower tax rates for royalty, fee for technical services, etc.

Favourable tax treatment for capital gains under certain DTAAs such the one with Mauritius have encouraged a lot of foreign investment into India. Mauritius accounted for $93.65 billion or one-third of the total FDI flows into India between April 2000 and December 2015. It has also remained a favoured route for foreign portfolio investors. But the problem is DTAAs can become an incentive for even legitimate investors to route investments through low-tax regimes to sidestep taxation. This leads to loss of tax revenue for the country.

Why should I care?

For us to prosper, the economy has to grow. And for growth in today’s globalised world, foreign investments are inevitable. DTAAs basically provide clarity on how certain cross-border transactions will be taxed and this encourages foreign investors to take the plunge. If you are sent on deputation abroad and you receive emoluments during your stint away from home, your income may sometimes be subject to tax in both the countries. You can claim relief when filing your tax return for that financial year, if there is an applicable DTAA. Similarly, if you are an NRI having investments in India, DTAA provisions may also be applicable to your income from these investments or from their sale.

However, given India’s narrow tax base, it can ill-afford a tax regime that allows big fish to completely evade the tax net, citing a DTAA. Hence the ongoing drive to plug loopholes in these agreements.

Income types under DTAA

Under the Double Tax Avoidance Agreement, NRIs don’t have to pay tax two times on the following income earned from

• Services provided in India
• Salary received in India
• House property located in India
• Capital gains on transfer of assets in India
• Fixed deposits in India
• Savings bank account in India

The primary idea behind DTAA agreements with various countries is to minimize the opportunity for tax evasion for taxpayers in either or both of the countries between which the bilateral/multilateral DTAA agreement have been signed.

Lower withholding tax is a plus for taxpayers as they can pay lower TDS on their interest, royalty or dividend incomes in India, while some agreements provide for tax credits in the source or country of operations so that taxpayers don’t pay the same tax twice. In some cases, such as agreements with Mauritius, Cyprus, Singapore, Egypt etc. capital gains tax is exempted which can be a boon to taxpayers as they can use the DTAA agreement to minimize taxes.

DTAA Rates

The rates and rules of DTAA vary from country to country depending on the particular signed between both parties. TDS rates on interests earned for most countries is either 10% or 15%, though rates range from 7.50% to 15%. List of DTAA rates for particular countries is given in the next section.

Double Taxation Avoidance Agreement (DTAA) Country List

A total of 85 countries currently have DTAA agreements with India. The following countries having Double Taxation Avoidance Agreement with India. TDS rates on interests are listed below. (Listed alphabetically)

DTAA, or Double Taxation Avoidance Agreement is a tax treaty signed between India and another country ( or any two/multiple countries) so that taxpayers can avoid paying double taxes on their income earned from the source country as well as the residence country. At present, India has double tax avoidance treaties with more than 80 countries around the world.

The need for DTAA arises out of the imbalance in tax collection on global income of individuals. If a person aims to do business in a foreign country, he/she may end up paying income taxes in both cases, i.e. the country where the income is earned and the country where the individual holds his/her citizenship or residence. For instance, if you are moving to a different country from India while leaving income sources such as interest from deposits in here, you will be charged interest by both India and the country of your current residence as per your consolidated global earnings. Such a scenario can have you pay twice the tax over the same income. This is where the DTAA becomes useful for taxpayers.

The Protocol for amendment of the India-Mauritius Convention signed on 10th May, 2016, provides for source-based taxation of capital gains arising from alienation of shares acquired from 1st April, 2017 in a company resident in India. Simultaneously, investments made before 1st April, 2017 have been grandfathered and will not be subject to capital gains taxation in India. Where such capital gains arise during the transition period from 1st April, 2017 to 31st March, 2019, the tax rate will be limited to 50% of the domestic tax rate of India. However, the benefit of 50% reduction in tax rate during the transition period shall be subject to the Limitation of Benefits Article. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards.

The revised DTAA between India and Cyprus signed on 18th November 2016, provides for source-based taxation of capital gains arising from alienation of shares, instead of residence based taxation provided under the DTAA signed in 1994. However, a grandfathering clause has been provided for investments made prior to 1st April, 2017, in respect of which capital gains would continue to be taxed in the country of which taxpayer is a resident. It also provides for assistance between the two countries for collection of taxes and updates the provisions related to Exchange of Information to accepted international standards.

The India-Singapore DTAA at present provides for residence based taxation of capital gains of shares in a company. The Third Protocol amends the DTAA with effect from 1st April, 2017 to provide for source based taxation of capital gains arising on transfer of shares in a company. This will curb revenue loss, prevent double non-taxation and streamline the flow of investments. In order to provide certainty to investors, investments in shares made before 1st April, 2017 have been grandfathered subject to fulfillment of conditions in Limitation of Benefits clause as per 2005 Protocol. Further, a two year transition period from 1st April, 2017 to 31st March, 2019 has been provided during which capital gains on shares will be taxed in source country at half of normal tax rate, subject to fulfillment of conditions in Limitation of Benefits clause.

The Third Protocol also inserts provisions to facilitate relieving of economic double taxation in transfer pricing cases. This is a taxpayer friendly measure and is in line with India’s commitments under Base Erosion and Profit Shifting (BEPS) Action Plan to meet the minimum standard of providing Mutual Agreement Procedure (MAP) access in transfer pricing cases. The Third Protocol also enables application of domestic law and measures concerning prevention of tax avoidance or tax evasion.

In a laymen’s language, DTAA is an agreement entered between two countries so that the citizens of those countries need not pay taxes on same income in two countries.

Basically, some countries have residence based taxation like the USA, while some countries have source based taxation, meaning you have to pay taxes on such income if its source is in that country. India follows a dual structure.

So for the benefits of their citizens, the respective governments enter into agreement, defining tax residency, tax rates, where particular income shall be charged to tax etc, so that a particular income is not taxed in both countries. In case same income is being taxed in both countries, the respective income tax legislation generally have provisions to give credit of taxes paid in foreign countries with respect to that income.

A new revised Double Taxation Avoidance Agreement (DTAA) between India and Korea for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income was signed on 18th May 2015 during the visit of the Prime Minister Shri Narendra Modi to Seoul. It has now come into force on 12th September 2016, on completion of procedural requirements by both countries. The earlier Double Taxation Avoidance Convention between India and Korea was signed on 19th July, 1985 and was notified on 26th September 1986.

Provisions of the new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

Salient features of new DTAA

• The existing DTAA provided for residence-based taxation of capital gains on shares. In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source-based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.
• In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income.
• The revised DTAA expands the scope of dependent agent Permanent Establishment provisions in line with India’s policy of source-based taxation.
• To facilitate movement of goods through shipping between two countries and in accordance with international principle of taxation of shipping income, the revised DTAA provides for exclusive residence based taxation of shipping income from international traffic under Article 8 of revised DTAA.
• The revised DTAA, with the introduction of Article 9(2), provides recourse to the taxpayers of both countries to apply for Mutual Agreement Procedure (MAP) in transfer pricing disputes as well as apply for bilateral Advance Pricing Agreements (APA). Further, as per understanding reached between the two sides, MAP requests in transfer pricing cases can be considered if the request is presented by the taxpayer to its competent authority after entry into force of revised DTAA and within three years of the date of receipt of notice of action giving rise to taxation not in accordance with the DTAA.

It may be added that a Memorandum of Understanding (MoU) on suspension of collection of taxes during the pendency of Mutual Agreement Procedure (MAP) has already been signed by Competent Authorities of India and Korea on 9th December 2015. The MoU provides for the suspension of collection of outstanding taxes during the pendency of MAP proceedings for a period of two years (extendable for a further maximum period of three years) subject to providing on demand security/bank guarantee.

• The Article on Exchange of Information is updated to the latest international standard to provide for exchange of information to the widest possible extent. As per revised Article, the country from which information is requested cannot deny the information on the ground of domestic tax interest. Further, the revised DTAA contains express provisions to facilitate exchange of information held by banks. Information exchanged under the revised DTAA can now be used for other law enforcement purposes with authorization of information supplying country.
• The revised DTAA inserts new Article for assistance in collection of taxes between tax authorities.
• The revised DTAA inserts new Limitation of Benefits Article i.e. anti-abuse provisions to ensure that the benefits of the Agreement are availed only by the genuine residents of both the countries.

The revised DTAA aims to avoid the burden of double taxation for taxpayers of two countries in order to promote and thereby stimulate flow of investment, technology and services between India and Korea. The revised DTAA provides tax certainty to the residents of India and Korea.

What are the benefits of DTAAs?

Every country seeks to tax the income generated within its territory on the basis of one or more connecting factors such as location of the source, residence of taxable entity, maintenance of Permanent Establishment and so on. The interaction of two tax systems each belonging to different country, can result in double taxation. Following are the main advantages of DTAAs.

1. DTAAs avoid double taxation by considering the specific ax laws of the two countries (the two countries in the case of a bilateral DTAA).
2. DTAAs as international tax treaties often provide tax information exchange. This tax exchange information lowers the administrative costs of taxation.
3. Another advantage is that there is legal certainty in DTAAs as there are specific rules for taxing international income. This encourages foreign investment to developing countries as there is tax certainty.
4. DTAAs also incorporates anti-abusive provisions to ensure that the benefits of the DTAAs are availed by the genuine residents of the two countries.
5. With DTAA, investors need not depend on conflicting national tax rules. Rather the taxation of international income falls under the rules of DTAAs.

Income types under DTAA

Under the Double Tax Avoidance Agreement, NRIs don’t have to pay tax two times on the following income earned from:

• Services provided in India
• Salary received in India
• House property located in India
• Capital gains on transfer of assets in India
• Fixed deposits in India
• Savings bank account in India

When income from these sources is taxable in the NRI’s country of residence as well, they can avoid paying taxes on it India by availing the benefits of DTAA.

The benefit of DTAA can be used by the following methods

Bilateral relief – Under this method, the Governments of two countries can enter into an agreement to provide relief against double taxation by mutually working out the basis on which relief is to be granted. India has entered into 84 agreements for relief against or avoidance of double taxation. Bilateral relief may be granted in either one of the following methods:

• Exemption method, by which a particular income is taxed in only one of the two countries and types of relief.
• Tax relief methods under which, an income is taxable in both countries in accordance with the respective tax laws read with the Double Taxation Avoidance Agreements.
• However, the country of residence of the taxpayer allows him credit for the tax charged thereon in the country of source.

Unilateral relief – This method provides for relief of some kind by the home country where no mutual agreement has been entered into between the countries.

Exemption Method – One method of avoiding double taxation is for the residence country to altogether exclude foreign income from its tax base. The country of source is then given exclusive right to tax such incomes. This is known as complete exemption method and is sometimes followed Methods of in respect of profits attributable to foreign permanent establishments or income from immovable property. Indian tax Eliminating treaties with Denmark, Norway and Sweden embody with respect to certain incomes.

Double Credit Method Taxation – This method reflects the underlining concept that the resident remains liable in the country of residence on its global income, however as far the quantum of tax liabilities is concerned credit for tax paid in the source country is given by the residence country against its domestic tax as if the foreign tax were paid to the country of residence itself. Double Taxation Avoidance Agreements with India.

Tax Sparing – One of the aims of the Indian Double Taxation Avoidance Agreements is to stimulate foreign investment flows in India from foreign developed countries. Methods of One way to achieve this aim is to let the investor to preserve to himself/itself benefits of tax incentives available in India for such Eliminating investments. This is done through “Tax Sparing”. Here the tax credit is allowed by the country of its residence, not only in respect of taxes double actually paid by it in India but also in respect of those taxes India forgoes due to its fiscal incentive provisions under the Indian Income Taxation Tax Act. Thus, tax sparing credit is an extension of the normal and regular tax credit to taxes that are spared by the source country i.e. forgiven or reduced due to rebates with the intention of providing incentives for investments. Double Taxation Avoidance Agreements with India.

Procedure to Seek exemption under DTAA

A person who earns income must pay tax in the country he earns in as well as the country he resides in. In order to avoid this, India has signed Double Taxation Avoidance Agreements (DTAAs) with many countries so that the income is taxed only once.
To claim this benefit, one needs to know whether the country one resides in or earns income in has a DTAA with India. One has to file Form 10F, a tax residency certificate and self declaration in the prescribed format to the entity responsible for deducting tax at source.

Form 10F

This can be obtained from the bank or downloaded at www.incometaxindia. gov.in/forms/income…/103120000000007197.pdf

Details like the applicant’s nationality, tax identification number, address and period of residential status has to be filled and the form has to be signed. Form 10F must be verified by the government of the country in which the assessee is a resident for the period applicable.

Points to note

1. PAN of the assessee needs to be provided in Form 10F and the self declaration form.

2. In order to know whether a particular country is under a DTAA, one can access the following link: http://www.incometaxindia. gov.in/Pages/internationaltaxation/dtaa.aspx 

A person who earns income must pay tax in the country he earns in as well as the country he resides in. In order to avoid this, India has signed Double Taxation Avoidance Agreements (DTAAs) with many countries so that the income is taxed only once.

To claim this benefit, one needs to know whether the country one resides in or earns income in has a DTAA with India. One has to file Form 10F, a tax residency certificate and self declaration in the prescribed format to the entity responsible for deducting tax at source.

The post Claiming tax benefits under DTAA appeared first on iPleaders.

In this article, Akanksha Baghel does an analysis on bad debt crisis in India.

Bad Debt Problem

India’s banking industry is in the throes of a crisis. Bad debts are piling up at banks. According to the statistics provided by Reserve Bank of India (RBI), Gross Non Performing Assets (NPA) is INR 6120 Billion and the percentage of variation is 89.3 in the economic year 2015-16 as against INR 3233 billion and 22.3 percentage variation in 2014-15. The business of Scheduled Commercial Banks (SCBs) also slowed significantly during 2015-16. The Gross Non-Performing Advances (GNPAs) ratio increased sharply to 7.6 percent from 5.1 percent between September 2015 and March 2016, largely reflecting a reclassification of restructured standard advances as non-performing due to Asset Quality Review (AQR). A special inspection was conducted by RBI in 2015-16 in the August-November period and was named as Asset Quality Review. The profitability of SCBs declined significantly and the public sector banks (PSBs) recorded losses during 2015-16.

Understanding Bad Debt

A bad debt is a debt that cannot be recovered. Insolvency refers to a situation where any person or a body corporate is unable to fulfil its financial obligations (often occurring due to several factors such as a decrease in cash flow, losses and other related issues). Bankruptcy, on the other hand, is a situation whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors. An asset becomes non-performing when it ceases to generate income for the bank. With a view to moving towards international best practices and to ensure greater transparency, \’90 days\’ overdue norms for identification of NPAs have been made applicable from the year ended March 31, 2004.

This article is a discussion on the reasons behind the bad debt problem of India, its impact on the Indian Economy, changes introduced in insolvency proceedings by the Insolvency and Bankruptcy Code, 2016 and the impact of the Ordinance to amend the Banking Regulation Act, 1949.

Reasons for compilation of bad debts in the Indian Economy

One reason for compilation of bad debts in Indian Economy is the sluggish domestic growth. During 2004-08 economic growth encouraged banks to give more and more loans. The investors wanted to scale up their projects and they expected that the economy will grow just like it did previously. The banks too freely lent to those project without carrying out proper checks. But then in 2008 as a result of the financial crisis, things went downhill.

Many of these projects which stated with extended financing stalled. Earlier in 2000 when banks were suffering from bad loans, economic growth helped banks to recover from the loss. But this time when bad loans are higher than ever and world economy is also not doing well, this has further increased the problem. Global uncertainty has led to lower exports of various products such as textiles, engineering goods, leather and gems.

Another reason is the ban on mining projects and delays in clearances that affected the power and iron and steel sector. Yet another reason in a few cases was corruption and undue influence which affected lending decisions. Some companies were involved in fraud as well. But these were minor cases compared to the bad decisions taken by the banks of not carrying out proper checks.

Also, not extending throughout support to troubles is one of the causes. Therefore there were many projects which could not be completed due to various reasons and were not able to return money lent by banks. Banks stopped lending further money to them because of further increase in NPAs, thus revival of those projects became impossible. Moreover, with projects getting delayed the investors started requesting banks to infuse more capital into the projects with the hope that the project can be turned around with the increased funding. In return for the additional funding, sometimes banks were given part ownership of the project. And the term of financing was re-negotiated. This is called as restructuring of loans. However, in these cases, the banks are the one who loses because by taking ownership of failing projects instead of walking away from them, the banks were absorbing the losses of the failing projects.

India’s bad loan problem is choking off new credit and dampening the economic growth. We have a credit market which doesn’t function very well because creditors can’t collect on their debt and credit ends up in the wrong places. Borrowing costs are high and banks don’t make money. Bad debt clogs the system. India’s robust growth slowed recently as a result of the government’s unexpected move last year to ban 86 percent of the nation’s currency in an effort to root out “black money,” currency on which taxes haven’t been paid. The move has produced widespread shortages of cash. Economic growth is expected to face challenges as long as banks here are saddled with enormous bad debts. For the corporate bond market to develop in India, we need to have jurisprudence, we need to have recourse, we need to have laws, and we need to have transparency.

Insolvency & Bankruptcy Code – Debt Restructuring in India

There are thousands of pending litigations for recovery of money, squarely due to overlapping jurisdictions of various laws governing insolvency resolutions and courts. Hitherto, there were about 12 laws concerning insolvency before Insolvency Bankruptcy Code, 2016 (IBC). Hence one consolidated law was brought in order to expedite the proceeding and resolve the matter in an efficient manner, by introducing the IBC, 2016 which got President’s assent on 28^th May, 2016.

The code makes a significant departure from the existing resolution regimen by shifting the responsibility on the creditor to initiate the insolvency resolution process against the corporate debtor. If the default is above INR 1 Lakh (may be increased up to INR 1 Crore by the Government, by notification) the creditor may initiate insolvency resolution process.

The Code specifies a timeframe of 180 days after the process is initiated, plus a 90-day extension for resolving insolvency. It proposes to do so by creating a host of new institutions such as Insolvency professionals (IP), Insolvency Professional Agencies, Information Utilities and the Insolvency and Bankruptcy Board of India.

When a loan default occurs, either the borrower or the lender approaches the National Company Law Tribunal (NCLT) or Debt Recovery Tribunal (DRT) for initiating the resolution process. The creditors appoint an interim IP to take control of the debtor’s asses and company’s operation, collect financial information of the debtor from information utilities, and constitute the creditor’s committee. The committee has to then take decisions regarding insolvency resolution by a 75 percent majority. Once a resolution is passed, the committee has to decide on the restructuring process that could either be a revised repayment plan for the company, or liquidation of the assets of the company. If no decision is made during the resolution process, the debtors’ assets will be liquidated to repay the debt. The resolution plan is then would be sent to the tribunal for final approval, and implemented once approved.

Challenges Ahead

This is a progressive step but practically there are various problem too. The NCLT will face the biggest challenge in the process of transitioning existing cases to the IBC. The second concern related to the NCLT is regarding the case law that develops under the IBC. Given that it is a new law, the procedures and common practices under it need to develop independently from the case laws under the pre-IBC regime. IPs form the backbone of the IBC. Their role requires a fine balancing act, given that they are in charge of managing the debtor company and are accountable to the committee of creditors and the adjudicating authority for their actions. To ensure that the IPs perform their role without any misfeasance, well-defined entry barriers to the profession must be designed and the IPs must be closely regulated by the IBBI. The lack of IU infrastructure is going to be another challenge.

Banking Regulation (Amendment) Ordinance, 2017

On May 4, 2017, President Pranab Mukherjee promulgated the Banking Regulation (Amendment) Ordinance, 2017. This adds sections 35AA and 35AB to the Banking Regulation Act, 1949 (BRA). RBI can, under powers given to it by a new law, issue directions to any banking company to initiate insolvency resolution process. However, we must remember that the IBC is itself new. The institutional infrastructure for the IBC worked poorly as of yet. It will take time for IBC to work well. No doubt, the good news is that the government, as the owner of the country’s largely state-dominated banking system, seems eager for a solution but according to a study by professional services firm Alvarez & Marsal, a debt-recovery judge in India clears 360 cases a year on average, compared with 2.895 by his counterpart in a U.S bankruptcy court. In other words, the RBI’s efforts to ease strains in Indian corporate debt are likely to confront an already overburdened, ill-equipped, and under-staffed, inexperienced judicial bureaucracy with a history of poor productivity. Another issue with it is that the ordinance gives power to RBI to issue directions and even overrule the commercial judgements of the banker. However in true sense as a regulator the job of RBI should be to commercially motivate banks and RBI should blow the whistle when the rules are being violated. Because, commercial decision making is best done in for-profit private sector environments, not by the bureaucracies.

Adequate institutional capacity is essential to ensure that the IBC does not suffer from the predicament of earlier reform attempts such as the DRTs. Doing all of these needs time and needs proper planning. Rushing through the implementation of the new law may serve to improve India’s ranking in World Bank’s Doing Business report but may not result in a de facto improvement of the insolvency resolution framework, thereby defeating the very purpose of the IBC. The manner in which the IBC is currently being implemented seems to focus more on expeditiously operationalising the law rather than effectively implementing it. These concerns, if not addressed suitably, will defeat the purpose of enacting a new insolvency law to improve the recovery rate in order to promote the development of credit markets and entrepreneurship.

The next step after resolving the insolvency disputes is of “stressed assets”. What would happen to them? After IBC many Indian and foreign investors are interested in investing in the process of cleaning up of the stressed assets. However, there is an ongoing discussion regarding the set up of “bad bank” in order to provide India with a durable solution. The concept of bad banks and the proposed models would be discussed in my next article.

REFERENCES

• Master Circular – Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs, RBI (July 1, 2013).
• Financial Stability Report, RBI (June 2016).
• Database on Indian Economy, RBI.
• Master Circular on Income Recognition, Asset Classification, Provisioning & Other Related Matters, RBI (July 1, 2010).
• Anita Raghvan, India’s Bad Debt is looking better to Investors (May 29, 2017).
• Andy Mukherjee, Indian Bad Debt’s Long Day in Court (May 7, 2017).
• Rajeshwari Sengupta & Anjali Sharma, Challenges in the Transition to the New Insolvency and Bankruptcy Code (Dec 15, 2016).

The post An Analysis of Bad Debt Crisis in India appeared first on iPleaders.

In this article, Ashita Chawla pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses what is BATNA and why is it important.

Understanding BATNA

BATNA or Best alternative to a negotiated agreement is the most advantageous alternative course of action a party can take if negotiations fail and an agreement cannot be reached.

BATNA can be explained with the following example. Suppose there is only one supplier of steel, the seller, in this case, dictates the price. The buyer, in such condition will have no say in this. On the other hand, if there were multiple sellers, then the buyers would suddenly be in a negotiating position. You have a BATNA!

BATNA is seen by negotiators not only as a point of safety net by the negotiators but rather as a point where they can seek a leverage in a negotiation. For example, A shopkeeper quotes me eggs for INR 20. I know the shopkeeper in the adjacent block sells it for 18. Therefore, instead of totally giving up the deal, I would rather renegotiate it with this shopkeeper telling him about the options available to me elsewhere.

However such simple BATNAs as above rarely exist in real life. Often the deals aren’t as plain, specially at large business platforms.

Therefore it is important to analyse one’s BATNA while making decisions or negotiating an agreement. For example, if I were to negotiate selling of the shares of my firm, following an ongoing litigation, it would be a good idea to analyse my BATNA at this point. I can make an estimation of the amount fetched by selling the shares of the company. Say its 10 million, the money I’ll lose in litigation is 2 million. The chances of me winning is 70%. I can now reach a rough estimate of my BATNA. But as mentioned above calculating BATNA is not easy, since there are a number of practical uncertainties associated with each decision and the way they’ll play out.

Broadly one can list these steps to calculate one’s BATNA

1. Assessing your BATNA
2. List your alternatives
3. Evaluate your alternatives
4. Establish your BATNA
5. Calculate your reservation value

An awareness of our BATNA can help us move away from a Sub Par case. Even though BATNA is a common sense idea, reaching one in real life isn’t an easy option. For example, I already have an option to continue my internship in the present law firm, but in the meanwhile, I have also applied to another better law firm. Figuring out my best odds here are to find out what are the odds of my internship being confirmed in that law firm.

A few practical steps to reach the BATNA

1. Translate your BATNA to the current deal

It is very important that one does not assume his/her BATNA. Only when one is completely sure that the deal is as attractive as it looks and that it has the potential to turn out the way it looks on paper should one leave the option at hand. For example, I might feel that changing my son’s school from school A to school B is a better option since school A charges more fee. I exercise this option, only to realize that school B had hidden charges. The new deal, in this case, turns out to be worse off than the older deal. Here, in this case, I had not analysed my BATNA properly.

2. Assess your BATNA with care

Like the examples mentioned above, one may not always analyse the choices available very well. For example, i had a plot of land in an area which is now sanctioned for commercial development. I was running a low revenue generating grocery store on that land. On having done an estimation of my business I decide to sell it for 20 lakh rupees. The offerer offers 30 lakh for the land. I quote 40 lakh and the deal finally settles at 35 lakh. Here even though I have got more than what I expected, it wasnt the best deal I could negotiate. I completely missed out calculating the value of that piece of land from the buyers perspective. That the area is now soon going to be a commercial hub and that it would yield huge profits to the buyer. That the value of that land was very high now after the announcement was completely missed by the seller.

3. Think through two level BATNAs

Most often when big negotiations are going on, one often comes across an individual’s negotiating on behalf of an organisation. It is important to analyse the BATNA at both these levels, the individuals and institutions. Often people dealing on behalf of such organisations have their individual egos and performance at stake. It is important to look at what an individual is looking at apart from the organization. An example of this case be seen from a case study shared in the Harvard Law School Journal few years later, the manufacturer held its annual meeting of top managers at the resort to show off its installations and celebrate the deal. The two organizations held a panel discussion to reflect on the dynamics of their negotiation. At one point, the moderator asked Frank to reveal his BATNA. He responded with a textbook analysis: “Our BATNA was to look around for some other major contract in which to powerfully demonstrate our capability.” When pressed, he continued, “Well, my BATNA, as a new hire, was probably to look around for another job if I didn’t get the deal.”

 “The reason you negotiate is to produce something better than the results you can obtain without negotiating. What are these results? What is that alternative? What is your BATNA – your best alternative to a negotiated agreement? That is the standard against which any proposed agreement should be measured” (Fisher, Ury, and Patton 1991:104)

A very interesting example of a negotiation can be taken from Kashmir. Here are the extracts of Ambedkar’s thoughts on Kashmir. One can see how well the then kingdom of Kashmir negotiated despite facing severe security threats from Pakistan and facing extremely tight existential crisis. The interesting point to note here is the deal is still kind of not sealed. The negotiations on the issues are still on.

“You wish India should protect your borders, she should build roads in your area, she should supply you food grains, and Kashmir should get equal status as India. But Government of India should have only limited powers and Indian people should have no rights in Kashmir. To give consent to this proposal, would be a treacherous thing against the interests of India and I, as the Law Minister of India, will never do it.“

Both the parties are readily in search of their respective BATNAs to clinch the deal. This also illustrates the importance of compromising and reaching an agreement instead of negotiating for eternity and reaching a deadlock.

Another analysis of BATNA can be seen in negotiation of H1B visas with the US. US sources highly skilled labour from India and other third world country using this Visa. This labour force provides a set of highly specialized and professional workforce which sustains the US economy. But the present political regime somehow felt that this labour was eating into the US jobs. The Indian authorities are now negotiating relaxation of these visa norms on behalf of the potential Indian workforce. Let us now analyse each party’s BATNA.

US cannot ignore the contribution of these workers to their industry, but at the same time must also play to the galleries of it local voters. India on the other hand has much less to loose. It would if not US find a demand for its workforce in other upcoming markets. The firms at most will shift their base from US to other world markets. In this case, India has much less to loose, and there is much more for the US to loose. The crackdown on H1 B visas is therefore going to be much lesser than anticipated in the media.

These real life examples shows how exactly BATNA plays out in complex negotiations involving more than one players and factors.

Negotiation is therefore a very valued skill and is left to experts, specially while negotiating big agreements involving millions of dollars and affecting a lot of people. In such a situation it is important to analyse the options available before sealing a deal. Analysing the options available to oneself alone do not determine where a deal would be set. An equally important thing is to deeply analyse the other parties BATNA. It is important to analyse the strength and weaknesses of the other party. It is important to understand what a party has to gain or loose from a particular negotiation. The expectations of the opposite party, negotiator, their potential of handling an agreement, the options available to them, all form an important part of calculating ones BATNA and reaching the most optimal solution. An understanding of calculation and analysis of BATNA is extremely helpful in such cases.

The post Best Alternative to a Negotiated Agreement (BATNA) appeared first on iPleaders.

In this article, Bhuvana pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses how technology is changing the practice of law.

Technology is a process or manner with which a specialized knowledge is applied in any particular area to achieve optimum results within the possible minimal time frame. It emerged in the course of global evolution of mankind and has its own boon and bane to the universe.

Technology is at every footstep of the mankind from the stone-age era till this ultra-modern era and will go in furtherance.

How Law was practiced in prior centuries

Prior to the “type-writer” era, law practice was quite a traditional, manual, meticulous, laborious act. As the typing machine and telephone came in, it eased the manual scripting and mode of communication to some extent.

The emergence of electronic type-writers, copiers, fax machines and the desktop computers with certain applications paved faster way to the legal practice.

Mobile phones, Laptop computers and internet highway advanced the practice to next level which enabled a global link in terms of records, research materials and large voluminous data access. A paradigm shift came in disguise of Smartphones and the global legal platform is at its excellent edge of cloud computing era.

Emergence of Technology and its impact in Legal field – Global Picture

Artificial intelligence and e-discovery are the sizzling trend of modern era which is utilized optimum across the globe in all possible spheres of business and industries. Within a span of a decade from 2004 to 2014 the global scenario was reshaped and revamped with technology.[1]

Technology came in rescue to mobilize the desk oriented, pen-pushing working style of law practice. Legal practitioners need not be glued to libraries, record offices, telephones or copiers to work on their cases. With the help of advanced computing, storage systems, internet, search engine tools, smartphones, tablets, kindles, there emerged a migration from conventional desktop working mechanism to mobile operations.

Prior to the techie era, the simplest research work for a case may be time consuming which involved manual inquiries in person, library visits, record references, calls, meetings and consumed several days to achieve the required result. The situation in the court halls were more intricate, time-consuming lengthy process. This is one amongst the major setbacks in the litigating system and a branch of root cause for piling pendency of cases.

As the technology evolved, the legal field across the countries quickly switched and adopted it into their practices to link worldwide to stay state-of-art in currency with modern times and remain tuned to the latest information. The work which took laborious days together to accomplish in earlier era is completed within hours now in the modern world.

Law Practice Vs Clients

Change is an inevitable, impermeable, permanent organism in the world. Emergence of electronic discoveries and artificial intelligence advanced the practice of law in all countries to keep pace with the growing demands and piling litigations. Courts started relying on the e-data, search engines, storage devices, recording systems to minimize the labor, time, efforts to administer and adjudicate.

Law firms and client relationship improvised and expanded the role functions of a normal law firm to multi-dimensional, dynamic phase. The e-data availability enables a law firm to analyze the requirement of its clients in far better way to meet up the client’s expectations and gives a superior competitive edge in the field.

Mass departure from manual recording system to electronic data management, case histories, and reports, utilization of video conferencing, evidence analysis, legal search and analyses of global scenario for a given situation, genetic determinations, and psycho-analytical techniques has advanced not only the process of practicing law but also the products of law.

In the emerging trend, the Legal Processing units connect the globe by addressing the issues of various countries by de-centralized operative system. Advanced mechanisms are experimented and adopted for the ‘replaceable’ and ‘non-replaceable’ law practices such as online solutions providing legal templates, forms, drafting on various situations.

A forecast from American Bar publication reports as follows

“The key to our future success as legal service providers lies in our ability to identify the specific lawyering areas in which we can be replaced and those in which we cannot be replaced. The most prosperous law practices in 2020 will be those that are able to successfully adjust their business models to use artificial intelligence–type tools while at the same time promoting and delivering the part of the legal service value proposition that the machines are not able to provide.

Consider for a moment the success of non-lawyer legal service providers such as Rocket Lawyer and LegalZoom. Both of these online services provide the ability for legal service consumers to create their own legal documents and forms. Both services proclaim that they do not provide legal representation, are not law firms, and are not a substitute for an attorney or law firm. Yet they essentially provide the same deliverable that many of us do: contracts, wills, business formation documents, bankruptcy filings, and the list go on. They provide consumers with the ability to create documents that are intended to accomplish a specific legal purpose.”

According to this report, an influx of non-law service providers entering the legal market, some of which will be exclusively consumer focused, some lawyer focused, and others will sell their wares to both consumers and lawyers.[2]

Technology in Indian Courts

In 1990, the National Informatics Centre of Ministry of Information Technology, under Courts Informatics Division initiated the computerization of applications in the Supreme Court and the High Courts.[3]

The listing of business information system (LOBIS) provides schedule of the cases to be heard by the courts on the following day which eliminated the manual process of cause list generation. The fundamental skeletal back-office operation of a court came to a total re-vamp by adopting this system.

This streamlined the chronological order of filing dates, automatic generation of cause lists, grouping and posting of cases with similar law points, speedy recall of dismissed cases for reviews, instantaneous statistical reports, computerized filing of records.

Computerization of filing counters in the Apex court eased the lengthy queues of advocates, removed the difficulties by instant defect detection, speedy rectification, calculation of court fee, time limitation, etc.

The digital advancement in Indian judiciary enabled the litigants to get their queries answered online about their pending cases. A complete text of all reported judgment of Supreme Court cases from 1950 till date is available online. An interactive voice response system (IVRS) is provided for the litigants and advocates finding their case status.

In pursuance to the proposal forwarded by the then Chief Justice of India in the year 2004 to the Union Government, an E-Committee was constituted to formulate a National Policy on computerizing Indian Judiciary and for advice in technology, communication and management related requirements. Accordingly, a report was submitted and the purpose of this project was to help the judicial administration of the courts to streamline their daily activities, reduce the pendency of cases, provide transparency of information to the litigants, and provide access to legal and judicial databases to the judges. This project was scheduled to execute in 3 phases to have an ultimate output of having e-courts in Indian judiciary to expedite the litigation system eliminating the lengthy pendency of cases.[4]

Technology brings in a paperless environment. Filing FIRs online, examining witnesses, criminals, recording evidences etc by video-conferencing saves time, travel, costs, risk of handling hard-core offenders and enables speedy disposal of cases. The judges are in better position to analyze and determine the cases with readily available precedents and legal prepositions online.

With the dynamic technological advancement across the globe, the Indian judicial scenario insofar as the e-courts are concerned, traversing towards a silver-line which is subjected to the question on the strength of well-balanced IT support and back up mechanism preventing the operations from hacking terminals worldwide.

Pros and Cons

As the technology advances, there evolves a refined system in place with speedy disposal of cases, client consultations and legal analyses. A paperless system contributes to save trees. In a way also enables employment.

Nevertheless, there remains a question as to the replaceable element with regard the legal practitioners in certain aspects and a threat as to the cyber hacking of web portals.

Conclusion

Technology has not only changed the practice of law, but also the basic legal education system. Learning law is no more a classroom process exclusively. Though the element of practical approach, court hall exercises, clinical methods are involved, technology overtook the educating methods to the legal applications, online learning, web seminars, paperless moot court exercises etc. The field of law inevitably pulled into the fast pace of emerging trends practiced worldwide and compelled to move forward with the technology to meet the ends of justice with optimum speed. Amidst the technology being a boon as well as a bane, it has uncontrollably become a part and parcel of system in practice and therefore, it is ideal to adopt the recommended aspects to equip in accordance with the demands to meet up the social, economical and legal expectations to remain and maintain the core competency to obtain the essentially required outcome.

References

[1] https://www.mycase.com/blog/2014/07/10-technologies-changed-practice-law/

[2] https://www.americanbar.org/publications/gp_solo/2014/may_june/how_technology_changing_practice_law.html

[3] http://indiancourts.nic.in/courts/itinjud.html

[4] http://www.kamrupjudiciary.gov.in/documents/ecourts.pdf

The post How technology is changing the practice of Law appeared first on iPleaders.

In this article, Sahali Manna discusses the benefits of notarizing a document.

Introduction

Notarization is also referred as “notarial acts”. It includes a three-part process by a notary public that includes vetting, certifying and record keeping. It is basically the official process to prevent fraud and assure the parties in the transaction that the document notarized, is genuine. Mostly, documents required in banking transactions or court documents are mandatory to be notarized.

In India, a notary is done by a notary public who acts as an impartial witness in discharging fraud deterrent activities related to legal documents. Notaries Act, 1952 governs the duties of a notary public. Certifying, attesting or authenticating any instrument, carrying out translations and verifying such translation of legal documents from one language to another. He can administer oaths and witness swearing by deponents for affidavits. A notary may also function as an arbitrator.

Who can notarize?

A practising lawyer having experience of at least 10 years and 7 years for SC, ST category candidates and women candidates may become a notary public in India. A person who has served as a member of judicial services or has held office under state/central government with a position requiring special knowledge of law is also eligible to become a notary public in India.

Importance of notarization

A notarized document helps to verify that you are the one signing the document. So, the sole purpose of notarizing a document is to prevent any kind of document fraud and or identity theft by preventing someone from presenting a forged document. A notarized letter which is certified by a notary public also helps in protecting the rights of the citizens who might otherwise be exploited and also a lot of court proceedings may be avoided if the document of a transaction is certified by a notary.

Different types of notarial acts

Acknowledgements – Acknowledgements are mainly required for document of valuable assets. Example: deeds, mortgages.

An acknowledgement ensures that the signer of the document has voluntarily signed the document and for this purpose, he must appear before the court personally at the time of notarization.

Jurats – By appearing personally before the court a jurat has to be signed by the signer. By signing a jurat the signer confirms the contents of the documents to be true.

Oath and affirmation – The verbal oath or affirmation is also to compel a client to truthfulness. Affirmation and oaths are done orally.

Copy certification – Diploma, driving license, medical records, bills of sales may require copy certification. A copy certification confirms that a copy of an original document is true.

Benefits of notarizing a document

• It is not mandatory to notarize all legal document but in some cases notarization of documents are mandatory. Because if you do not notarize the documents which need to be notarized then its legal validity will be questionable which may lead to rejection of such documents in court.
• Rule 12 of the Notary Rules, 1956 prescribes that a notary seal should be of 5 cm, which is used for the verification of documents. The seal actually validates the fact and the identities of the people signing the documents are authentic.
• It also helps to prevent forgery and avoid frauds in legal documents.
• The presence of a notary seal in any document confirm for the court that the signatures in that document were placed by genuine person and it is not fabricated.

Registering a sale agreement of an immovable property

Registration of an immovable property is of utmost importance for the buyer of the property. Unless he registers the property in his name, he won’t be considered the legal owner of the of the property and the previous owner will be considered the rightful owner.

According to the Transfer of Property Act, 1882 and the Registration Act, 1908, lease of immovable property from year to year basis or a term exceeding twelve months requires a mandatory registration from the office of the sub-registrar.

If a lease agreement which is not registered by the parties, but was required to be registered will not be considered as a valid evidence of any agreed terms and conditions affecting the leased property.

It is important on the part of the purchaser or the transferee to pay the stamp duty and registration charges. Stamp duty is a kind of tax which is collected by the government under its jurisdiction for a transaction of a property.

Stamp duty is a kind of tax which is collected by the government under its jurisdiction for a transaction of property. Payment of stamp duty is important to register the new property in your name.

Sec 17 of the Indian Registration Act, 1908 mandates the documents to be registered regarding transfer, sale, lease of a property. Two witnesses and payment of the appropriate registration fees are required to be paid.

Importance of registering a sale agreement – Judicial Interpretation

Registration of a sale agreement is also backed by several various acts such as the Indian Contract Act, Specific Relief Act and various apartments act enforced by many states. Even U.P Apartment Act, 2010 also mandates all sale agreements to be necessarily registered in U.P. So it is a wise step to get a sale agreement registered.

In the case of TG Ashok Kumar vs Govindammal, it was held that “If all agreements of sale are compulsorily registered that will go a long way to discourage generation and circulation of black money in real estate matters, as also undervaluation of documents for purposes of stamp duty. It will also discourage the growth of land mafias and musclemen who dominate the real estate scene in various parts of the country.”[1]

It has been held by so many High courts and the Supreme court that a sale agreement if not registered will not be recognized in a court of law.

In the case of Vijay Kumar vs Devesh Behri Saxena in 2007, the Allahabad high court held that for immovable property the contract of sale in UP has to be registered, an unregistered agreement of sale for an immovable property will not be considered as evidence.

Summing up

On discussing throughout the article what is an act of notarization and what is registration and why is it important to execute a sale deed we can say that a notarization is a mere formality that should be followed while executing a lease agreement. Notarized documents assure legal authenticity of a person’s identity and signature whereas, without registering a sale agreement of a property a person cannot claim ownership of that particular property. Hence, notarization cannot be a substitute of registering an agreement. Both notarization and registration has importance in executing an agreement.

REFERENCES:

Web sources

• nationalnotary.org
• http://www.hindustantimes.com
• http://www.indiainfoline.com
• http://www.mondaq.com

Cases referred

1. Vijay Kumar vs Devesh Behri Saxena
2. TG Ashok Kumar vs Govindammal

[1] Civil Appeal No. 10325 of 2010

The post Benefits of notarizing a document appeared first on iPleaders.

This article is written by Kunal Ahuja. The article is a discussion on how to negotiate effective deals.

“ In business as in life, you don’t get what you deserve you get what you negotiate “      

                                               Chester L. Karrass

In life, every day is a series of negotiation whether we realize it or not from deciding on who will clean up the house or who will pick up the children from school. From hiring someone to crack a deal on what terms, deciding a location while planning a trip and much more. In every relationship whether personal or professional, we need to go through certain negotiations. Negotiating skills are very important if we look at it from a commercial point of view as every deal made, contract signed, business combinations taking place, buying or selling a product, functioning in different countries etc.

But not everyone is good at discussing things or lacks convincing power or restrain themselves to talk out of fear.

Most of us face some or the other problems while negotiating with the other person.

Some major questions one frequently ask themselves while negotiating are

• What should I start with?
• Am I sounding too rude?
• Is this the right time to put up this question?
• Where will this discussion end?
• Am I able to convey properly?
• I hope the other side doesn’t get this statement wrong/offensive?
• Do I need to tell him this?
• I hope I am not sounding too selfish
• Why is he not getting along?
• Am I leading this negotiation on the right track?
• Is it going to be productive?
• What if I am not able to bargain well?

These questions are infinite as we cannot determine the mindset of the person sitting on the other side but we can work on to change it by applying proper techniques and by moving ahead through proper steps.

Not everyone is good in negotiations or getting things worked out in their favour but this does not mean we can’t build them. With the proper skills and steps anyone can become a good negotiator and no doubt it is one of the most important tool these days which help people understand each other’s needs and give what they want, we don’t realize but by giving them what they need we are one step ahead of getting what we want.

Negotiating with the right set of skills makes you a good leader

Builds trust

Building trust is the foremost step one should keep in mind while making a good relation and which helps in bringing a sense of comfort while discussing. Making the other person trust you is one thing which makes the conversation easy and lessens the probability of the opponent judging you. If the other person trusts you he/she is more likely to open up quickly and share what they want out of this deal or negotiation otherwise it takes quite long to break the ice and understand what the exactly another party is seeking out of this negotiation. Having a certain amount of transparency is quite helpful in maintaining trust but not too much.

Don’t show those cards which can pose you as weak in this discussion.

Focus on the needs of another person

In today’s era, everyone clearly knows how to further their own interest and ascertain their benefits first. During negotiation one should focus on the needs of the other person and should show how those needs can be fulfilled by this negotiation. Knowledge of the product or the deal is of no use for them if it cannot meet their needs or is not beneficial for them at all.

If the other person feels the importance of his needs in the ongoing discussion he/she will show more interest and will try to figure out ways to talk about more on same and how fast it can be done. All you have to do is to show the opponent a WIN-WIN situation out of this negotiation.

Listen more

A good negotiator should know how to listen more rather than talking as listening allows you to get the appropriate catch and let you know the whole story of the other’s side without putting too much effort. To know the needs of the other person and to play on those needs it is important that one should listen properly and to everything the other party has to share. Put a question, maintain a silence for a moment and let the other party concede.

Assert and express your needs

You should never forget your interest, one should know how to put it on the other side of the table, don’t be afraid to ask what you want. Remember successful negotiators believe that everything is negotiable or there is nothing which cannot be negotiated.

One should always know how to tell the other person what they need without being aggressive i.e. in a non-threatening way. Being assertive means putting your needs in front of the other party and showing due respect for other’s needs as well. There should be nothing which implies disregard to the needs of the opponent. Don’t forget in a negotiation you are representing yourself so the other party has to give you the thing you want and then only can take one thing from you, therefore feel free to express what you feel and what you want out of this discussion.

Look for common good not area of conflicts

When two parties have agreed to discuss then there must be some common grounds, even very less, for which they have agreed to try to settle it. One should know the seek of common interest for both of them and then proceed further. If the parties agree to take stance on the common grounds which gives the negotiation a positive start only then you should move forward to accelerate negotiation and try to talk about the things the other party needs to adjust or deal with the specific or individual needs of the parties. By looking into the common grounds and not conflicts the negotiation is seen from a positive perspective by both the parties and they become more willing to settle it further and feel productive outcome out of the negotiation.

Have the courage to walk away

Remember that both the parties have some interest in concluding and if the negotiation does not end with a positive result it’s not only your failure or you will be the one losing but the other party also has something to lose, so be careful before you agree and if you don’t feel like agreeing then don’t. Never show what will you lose if the negotiation does not end well rather show to the opponent what will they lose if they do not collude and ask them to imagine what could be the situation if they walk out from this discussion, they will realise the importance of the conclusion for their benefit and will show their inclination towards settlement. Walking away is not walking away from the solution but a way of asking the other party to negotiate more.

Don’t consider walking away as an option but never feel hesitated to walk away if the settlement is against you.

Don’t take anything personally

Negotiations often fail as the parties forget their professional responsibility and get sidetracked by their personal feelings and concerns which are not at all related to the subject matter of the negotiation. Remember you are negotiating on behalf of a very big management of your company not for your personal reasons. Don’t get affected by the other side’s behavior and never take anything personally during negotiation as the party on the other side is acting solely out of professional accountability.   

Above mentioned were the key rules to be kept in mind while negotiating.

Here are some professional tips to make the negotiations more effective and constructive

How to ask a question

• I have something to ask if you allow me?
• I am willing to understand this matter fully, so tell me?
• What you have to say on this …?
• Let me come up with this?
• Here’s something I have been wondering about?
• I am stuck can you help me out here?

How to avoid anything

• This is a very interesting point it deserves a clear answer.
• Good point! I need to gather my thoughts to answer that.
• I am glad you brought that up.
• Now here what the problem is.
• You raise very interesting points.
• I need to ponder the ramifications before I speak.

How to emphasize a point

• Please take special note of this point.
• I think you might understand the importance of this.
• I have to say this as it has significant value in it.
• Let me be very clear about this.
• Please pay attention!
• This seems very important to discuss.

How to convince

• You got what you wanted and even more.
• I think this is the best deal which you can avail.
• Let’s get it done.
• I think you deserve it.
• Take a call go ahead this is best for you.
• Leaving it will be insane.
• This seems worth your efforts and time.

How to bargain, or open the path for a new/expanded discussion

• There has to be a midway for both of us.
• Meet me in the middle.
• We can work out something better.
• The proposal is good, but I think we should discuss more.
• We both need WIN-WIN.
• I have got a better deal, sorry! (makes the other party move from his position out of fear of losing out on the deal)
• You will need to lean forward a bit.

How to reject a proposal

(You can use this to walk away or slow down the progress of the deal, especially if the other person is being overeager, asking you to skip steps or cut corners)

• Unfortunately, this is not the best for me.
• I can’t accept it right now.
• I think we should not move forward with this.
• I would love to say yes, but I can’t get it past my superior.
• I apologize, but I can’t accept this.

How to call for a compromise

• Compromise is the best way to go.
• I am willing to listen to you if you do the same.
• We have to arrive at a compromise.
• Let’s do it together.
• Let’s get this done once and for all.
• Let’s not stretch it further and get over with it.
• You need to cooperate with me, please.
• Let’s start it from now.

The post Negotiate like a leader – How to negotiate effective deals appeared first on iPleaders.

In this article, Kunal Ahuja of Vivekananda Institute of Professional Studies discusses how Letters of Credit Work.

Limitations to international trade and role of inland letter of credit

• With the intervention of globalisation and international trade into the import-export industry, it is not possible for the parties to meet on regular basis and do business by traditional methods of payment with which it becomes difficult for the parties to present their creditworthiness and to develop a relationship of trust amongst each other.
• When an international business is taking place between the parties the recourse of payment becomes difficult due to the difference in their currencies which again complicates the process of payment and every party thinks twice before getting involved in such commercial transactions.
• It is an instrument which allows the buyer and seller from different nations come together or without coming together and pursue a business of their interest without being suspicious or risk factor about the trust amongst each other which used to be a major reason in hindering the international trade.

To overcome the above obstacles in the way of international trade and to do business at global level the letter of credit plays a significant role and makes the international trade more efficient as well as credit worthy for parties.

• Inland letter of credit is a document of commitment to make the payment by the buyer’s bank to the seller’s bank rather than from the buyer to the seller directly. It is a term which is commonly used in the transactions which are of trading nature.
• Inland letter of credit is a modern recourse of payment applied to reduce the risk of losing the funds or not getting the payment on time or not even receiving the payment at all as it transfers the liability of making the payments from the buyer to the bank who takes the guarantee to make the payment in case the seller defaults.

Understanding Letter Of Credit

• Commitment document – Letter of credit is an instrument of commitment issued by the buyer’s bank on the request of the buyer and handed over to the seller or seller’s bank to secure his payment once the terms agreed by the buyer and seller has been fulfilled by both the parties. It is a monetary document which entitles the seller to get his payment from the bank after submitting the required documents to the bank to prove that the terms of the deal have been fulfilled by the seller and now he has the right to get the payment.
• Banks as intermediaries – As per the contract between the buyer and seller the buyer once receives the goods as promised by the seller, then buyer is liable to pay the amount to the seller in lieu of deal entered by both of them. It is issued by the buyer’s bank i.e. issuing bank as a payer of the amount on behalf of the buyer and seller receives the payment from his bank i.e. confirmation bank to which the letter of credit is presented and is obliged to honour the payment to the seller. Here transaction including a letter of credit is settled through the banks rather than directly between buyer and seller.

• Secured payment – In an international business or trade between the buyer or importer and seller or exporter there is high probability of fraud and exporter does not receive the payment on time or payment at all. To curb this risk the letter of credit is issued in which bank undertakes the guarantee to make the payment to the exporter and his efforts to do a business doesn’t go in vain. Risk factor in normal course of transaction is very high which almost vanishes with the issue of letter of credit where the payment is made by the banks and letter of credit. Involvement of bank as a neutral party through letter of credit allows the seller to trust the contract and buyer which helps him to with which get his payment on time from the bank.

• Business in any currency – Earlier when any international business used to take place the funds transfer and currency change was a bigger task but with the letter of credit this hurdle has been pulled down and letter of credit can be honoured in any country as per their currency rates as the payment is made at the place where the seller resides or has a place of business.

Essential elements of letter of credit

1. Undertaking by a bank for the payment
2. On behalf of the buyer
3. Payment to be made to the seller
4. Of certain amount
5. Payment to be made only after submission of certain documents by the seller
6. Within a particular time period
7. Bank shall verify the compliance with the terms and conditions of the contract by the seller.

How does a letter of credit works

There are several steps which are followed while issuing a letter of credit and using it as a mode of the payment:-

1. Contract – The parties i.e. the buyer and seller enter into a contract and negotiate upon the terms of the contract. This contract determines the nature of the business and mode of payment by the buyer to the seller if the buyer has received the goods for which both parties entered into the contract. Normally the letter of credit is issued in international trade or between importer and exporter.
2. Buyer approaches for issuance of letter of credit – After the contract the buyer approaches his bank, which is also called the issuing bank, to apply for issuance of the letter of credit in the favour of seller and seller’s bank i.e. confirmation bank according to which the issuing bank undertakes the responsibility to pay to the seller on behalf of the buyer.
3. Issue of letter of credit – It is issued by the issuing bank in the name of the buyer which is further issued to the seller as the consideration.
4. Issued to the seller – Issuing bank issues the letter of credit to seller either by its branch or any correspondent bank in the seller’s country.
5. Letter of credit when honoured – Letter of credit is issued to the seller and seller is entitled to the payment from the confirmation bank only on the submission of the required documents which are necessarily submitted to prove that the terms of the contract have been fulfilled by the seller, the documents can be any invoice, bill of lading, promissory note or any receipt etc.
6. Transfer of document – The prerequisite documents are submitted to the confirmation bank and which are the later on forwarded to the issuing bank and the buyer gets the document after the payment made to the issuing bank by the buyer. Finally, the documents are transferred to the buyer only when he makes the payment to the bank and the buyer can use the documents to procure the goods.

Types of Letter of Credit

• REVOCABLE CREDIT LETTER OF CREDIT – This is the letter of credit in which the issuing bank or buyer can change the terms of the contract without the consent of the seller.

• IRREVOCABLE CREDIT LETTER OF CREDIT – This is the letter of credit in which neither the issuing bank or buyer can make changes to it unless consented by the seller.

LIMITATIONS

Although letter of credit has uplifted the international trade and business, apart from its positive interventions letter of credit also lacks in its efficacy in various strata.

• Quality of goods not taken care of – With the issue of letter of credit banks are only responsible to check the documents and fulfillment of terms of the contract based upon what bank releases the payment but quality of the goods is not verified in this state. If the quality of the goods is not upto the mark buyer has to suffer as he cannot stop the payment.
• More expensive – Letter of credit involves the charges which are paid to the bank as well which makes this mode of payment more expensive.
• Complex – Issuance of letter of credit functions with certain degree of complexities the more rules and regulations to be followed by the parties as well as their banks which makes this recourse a complex one.
• Foreign currency – Letter of credit allows the seller to receive the payment in its territory and in case of international trade factors like difference in currencies and currency fluctuations adds more risk in this.
• Default of bank – The letter of credit transfer the creditworthiness of buyer to the bank, if bank defaults in making the payment then the risk on the seller’s payment still exists.
• Specific time period – Letter of credit is issued with the time limit specified in it and if the letter of credit is not presented within that certain period it gets lapsed. The documents submission has to be done within that period of time only otherwise the time to receive the payment and make use of letter of credit gets expired due to which a new process has to be followed and again adds to the business cost.

The post Inland Letter of Credit – How does a Letter of Credit works appeared first on iPleaders.

In this article, Nivedita Arora discusses Unconscionable Contracts under the Indian Contract Act.

Introduction

Unconscionable contracts are drafted in such a manner that they favor one party and impose, harsh, unfair, unjust conditions on the other party. An unconscionable contract is one that is so gross and unreasonable in the light of the business practices of the time and place that it should not be enforced. The doctrine of unconscionability allows the court to intervene into the contractual relations of parties and modify such agreements.

Unconscionability is a contract defense used in cases where there is combination of unfair contract terms and deficient bargaining. This paper clarifies the distinction between the forms of unconscionability and how the doctrine of unconscionability is applied in Indian Law. Also, the article identifies the issue of Unconscionability with respect to the Uniform Commercial Code and Restatement emphasising how unconscionability is used as a ground for avoiding an agreement.

Types of Unconscionability

Unconscionability is categorized into procedural and substantive unconscionability.

Procedural Unconscionability can be understood by examining how each term became a part of the contract and the actual bargaining process at the time of making the contract. This arises due to difference in the bargaining position of the parties, absence of meaningful choice, unfair surprise. In Weaver v. Am. Oil Co, the Court explained various factors that can be considered while evaluating procedural unconscionability such as real and voluntary meeting of the minds of the contracting parties, age, educational qualifications, intelligence, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, the deceptive appearance or language to the contract.

Substantial Unconscionability can be understood by referring to the contract or few unfair terms of the contract such as unfair price of the contract, the limitations of remedies and disclaimers of warranties, which make the contract very harsh, oppressive, unworkable or one sided.

Contract Unconscionability in India

Unconscionability is not defined anywhere in any Indian Law. There have been various debates on this issue and the Law Commission of India in its 103rd and 199th Reports recommended that there should be changes in the existing laws to protect the citizens of our country against unconscionable contracts. However, we can look at various other provisions of the Indian Contract Act to understand the doctrine of unconscionability and how it is used for avoiding the contract.

Section 16 of the Act explains that a contract is obtained by undue influence if one party dominates the other party and uses this unfair position to obtain unfair advantage over the other party. According to Section 19, such contract is voidable at the option of the party whose consent was so obtained.

According to Section 23, the agreement is void if the object of the agreement is unlawful, fraudulent, immoral, or opposed to public policy.

199th Law Commission Report explained procedural and substantive unfairness in Proposed Bill and laid out guidelines to find if a contract is procedurally or substantially unfair. It proposed that courts should be vested with sou moto power to enquire into substantive unfairness even if it is not pleaded by the parties and provide reliefs to the parties if the contract is proved to be unfair and unconscionable.

Unconscionability of Contracts in India – Employment Agreement

There are plethora of case laws available on the subject of Unconscionability of contracts. Most prominent of all relates to clauses of Employment Agreement wherein the contract, in most of the cases, are poorly drafted, thus favouring the employer.

The employers provide unreasonable clauses in employment contracts and impose very unfair conditions on the employees. In Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, the Supreme Court held that a clause providing for termination of the services of a permanent employee by serving a three months notice on him is arbitrary, unreasonable, opposed to public policy and thus unconscionable. In a similar case, the Supreme Court held a clause unconscionable as it conferred unbridled and arbitrary power on the authority to terminate the services of a permanent employee without recording any reasons for such termination.

The employment contracts contain clauses where one party is allowed to modify or cancel the contract at his will even though there is no breach of the contract by the other party. Such clauses are held to be unfair, arbitrary and unconscionable.

There are various other judgments where Courts have held such arbitrary and unreasonable clauses in the contracts unconscionable and held that the principle of arbitrariness should not be extended to employment contracts to safeguard the interests of the employees.

The Uniform Commercial Code (UCC) and Restatement

There was no doctrine of unconscionability in the United States till 1952. However, American courts had the equitable power to set aside a contract if it shocks the conscience of the court even in the eighteenth century.

The Uniform Commercial Code (UCC) gave courts explicit authorization to rule that a contract was unconscionable in 1952. Substantive imbalance and unacceptable conduct are the prerequisites elements of unconscionability in English law.

According to Section 2-302 of UCC, the Court can refuse to enforce a contract or few terms in a contract to avoid any unconscionable results if it thinks that such contract is unconscionable.

“The main aim of Section 2-302 is to prevent oppression and unfair surprise. The basic test of unconscionability of a contract is to find out whether the clauses involved are so one-sided so as to oppress or unfairly surprise the other party. These clauses need to be analyzed depending on the circumstances that existed at time of making of contract, general commercial background and the facts and circumstances of the particular case.”

Article 2 of the U.C.C. applies only to the sale of goods. However, various transactions other than the sale of goods such as transactions between a customer and his bank, commercial leases, the termination of dealership franchise agreements, contracts for personal services can also be unconscionable. In Section 208 of Restatement (Second) of Contracts, the doctrine of unconscionability has been broadened for protection for consumers in various types of transactions and not just limited to a provision in a UCC for sale of goods.

Though, on a plain reading of Section 302 UCC and 208 Restatement (Second), the provisions appear to be similar, however, under Section 208, unconscionability is not a vitiating factor per se. Section 208 allows the court to refuse a whole executory contract denying both specific performance and damages.

Unconscionability is still not clearly defined in either the UCC or the Restatement. Thus we look at various case laws understand the doctrine of unconscionability in UCC and Restatement.

In Williams v. Walker-Thomas Furniture Company, the court considered the circumstances surrounding the transaction and held that the rule should be set aside due to procedural misconduct. The court described unconscionability as absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. The Supreme Court of New Jersey also held a particular clause of the contract invalid because it was the against the public good, there was unequal bargaining power between the parties and the clause was hidden from the attention of the buyer.

The arbitration agreements are misused so much they allow employees to arbitrate their wrongful termination claims against the employer but not the employer’s potential claims against the employee. In Ferguson v. Countrywide Credit Industries, Inc., an arbitration provision in an employment contract was held unconscionable because it allowed the parties to arbitrate all claims, however, excluded remedies such as unfair competition, and use or disclosure of trade secrets and confidential information that the employer would likely pursue.

Conclusion

Courts have held various contracts unconscionable due to the unfair and unreasonable clauses in the contracts. Various clauses related to damages, arbitration, class action waivers, termination in employment contracts, construction contracts and real estate agreements are against public policy and give unfair advantage to the one party due to the unequal bargaining position.

Thus, it is the need of the hour to implement the suggestions proposed in 103rd and 199th Law Commission Reports. Our legal system needs to consider the provisions of UCC and enact a law allowing the courts to refuse enforceability of an unconscionable contract. The guidelines suggested in 199th Law Commission report related to procedural and substantive unfairness should be followed and a law should be enacted to safeguard the interests of the parties, to ensure more fairness in the contracts and equal bargaining position of the parties.

The law related to unconscionability should not be restricted to contracts. Some of the instances where undue influence is exercised outside contracts are influencing Pardanashin women, forcing an ill person to transfer his estate to someone. Such enacted law should be applicable to all transactions because there are various transactions apart from commercial contracts where undue influence is used.

The post Contract Unconscionability in India appeared first on iPleaders.

In this article, Tarun Gaur, Advocate, Delhi High Court discusses Section 8 of the Arbitration and Conciliation Act, 1996.

Introduction

The trend of arbitration has increased tremendously over the past decade, at both national and international level. Arbitration is a mechanism whereby which the parties enter into an agreement, either in advance or after the dispute crops up, to resolve their dispute privately and expeditiously. But the key to a successful arbitration is restricted interference by judicial courts in the arbitration proceedings. When it comes to judicial intervention in arbitration proceedings, the reputation of Indian judiciary is undistinguished which has time and again proved to be a major roadblock for many things including but not limited to, getting FDI, India being chosen as a suitable seat in International Commercial Arbitrations etc.

Keeping all that in mind, the parliament, enacted the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “act”) by virtue of which, the parliament made sure that the unnecessary intervention of judicial authorities in arbitration proceedings be restricted at all times. The biggest proof of which lies in section 5 of the act.

“Section 5 of the Arbitration and Conciliation Act, 1996: Extent of judicial intervention — Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

This clearly stipulates that, irrespective what is mentioned in any other law for the time being in force, no judicial authority shall intervene in the matters governed by part 1 of the act, and the only exception to this is when the said intervention is provided by the part 1 of the act. Therefore, it becomes clear that the power of courts to intervene has been curtailed completely except for when it is expressly provided in the act.

Now, despite having such express exclusion of judicial intervention in the arbitration proceedings, the courts have time and again usurped more power than what is provided to them under the act which has led to unnecessary interference in the arbitration proceedings. One such example is of section 8.

Section 8 states as follows:

“8: Power to refer parties to arbitration where there is an arbitration agreement.—

Section 8 (1) – A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Section 8 (2) – The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy
thereof is not available with the party applying for reference to arbitration
under sub-section (1), and the said agreement or certified copy is retained by
the other party to that agreement, then, the party so applying shall file such
application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

Section 8 (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

Section 8 clearly stipulates that whenever a suit is filed in a civil court and the cause of action of said suit emanates from a contract in which the parties had voluntarily and willingly agreed to settle the dispute via arbitration, then, if the essentials of section 8 are met, it is the bounden duty of court to refer the parties to the arbitration.

The position of Section 8 of the act becomes further clear when it is compared with the Uncitral Model Law as section 8 of the act differs from Article 8 of model law. Article 8 enabled a court to decline to refer parties to arbitration if it is found that the arbitration agreement is null and void, inoperative or incapable of being performed. Section 8 has made a departure which is indicative of the wide reach and ambit of the statutory mandate.

Section 8 uses the expansive expression “judicial authority” rather than “court” and the words “unless it finds that the agreement is null and void, inoperative and incapable of being performed” do not find a place in section 8. This distinction clearly dictates that the legislature has intentionally endowed less power on judicial courts with respect to section 8 applications to make sure the arbitration process is facilitated and unnecessary intervention by courts be avoided.

Despite the position being this crystal clear, this section has been subjected to various interpretation by our courts time and again which has led to a lot of confusion.

There have been instances where Courts have adopted the literal interpretation route and hence construed the section in the way it is meant to be and has referred the matter to arbitration, when the essentials of section 8 are fulfilled, irrespective of the prevailing circumstances. Yet, there had been instances where the courts had completely neglected valid precedents and had tenuously interpreted the section in a manner it is not meant to be and has denied the reference thereby deviating from the valid line of precedents. Further, it is not just the deviation alone, in one matter the SC has actually gone to the extent whereby which it has laid down certain exceptions to this rule, which in my opinion is wholly erroneous. If there would have been some need for such exceptions, the legislature would have done that by adding such exceptions in the act itself.

Judicial Decisions

In Swiss Timing Ltd v. Commonwealth Games 2010 Organising Committee[1], the court categorically, held that even if a criminal case is pending against a party, that in itself does not disentitle said party from taking recourse under section 8 and referred the dispute to arbitration.

The dispute arose because the respondent failed to make the payment towards petitioner’s services after the commonwealth games. The petitioner tried to resolve the dispute in accordance with the procedure mentioned in clause 34 of their agreement but the respondent denied the payment and when petitioner filed petition under section 11 of the act, the respondent contended that the amount is not payable as the petitioner has violated clauses 29, 30 & 34 of the agreement as the petitioner has engaged in corrupt practices on the basis of complaint bearing, CC no. 22 of 2011 u/s 120B, 420, 427, 488 and 477 IPC R/w Ss 13(1)(d) and 13(2) of the PC Act, registered against it.

The main contention of the defendant was that since a complaint case has been filed against petitioner for corruption, hence the reference of dispute to arbitration is not tenable.

The court rejected this argument of the respondent and held that such allegations as are mentioned in the criminal case, are such which have to be proved in a proper forum on the basis of the oral and documentary evidence, produced by the parties, in support of their respective claims and existence of such allegations does not disentitle the petitioner to resort to the arbitration with respect to the dispute arose on the basis of the contract.

Further, the respondent tried to contend that since the allegations of corruption is levied on the petitioner, which is in contravention to the representations and warranties undertaken by the petitioner in the contract, the contract becomes void ab initio and hence the arbitration clause dies then and there.

To support this contention, the respondent placed reliance on N. Radhakrishnan V. Maestro Engineers[2]. In the said case, even after finding that the subject matter of the suit was within the ambit of arbitration, the court refused to refer the dispute to arbitration by holding that once the contract is held to be void ab initio, the arbitration clause dies then and there.

In response to this, the court held that, the law laid down in the Radhakrishnan runs counter to the ratio laid down in Hindustan Petroleum Corpn Ltd v. Pinkcity Midway Petroleums[3], where the court in para 14 observed that if in an agreement the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to arbitrator. In the said case, the existence of arbitral clause was not denied by either of the parties and hence in accordance with the mandatory nature of section 8, the court referred the dispute to arbitration.

The court in the present case held that, the law laid down in Hindustan Petroleum is correct law on the point and not the ratio of Radhakrishnan’s judgment. The court gave two reasons on the basis of which it invalidated Radhakrishnan’s judgment i.e. (a) the judgment in Hindustan Petroleum though referred, was not distinguished nor followed and (b) provisions mentioned under section 16 of arbitration act were also not brought before the court.

Section 16 provides that Arbitral tribunal would be competent to rule on its own jurisdiction including ruling on any objection with regard to existence or validity of the arbitration agreement. The arbitration act emphasizes that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It further provides that the decision by the arbitral tribunal that the contract is null and void does not entail ipso jure that the arbitration clause is invalid. Hence Radhakrishnan’s judgment does not lay down correct law and hence cannot be relied upon.

Further, the court mentioned another matter i.e. Today Homes & infra pvt ltd v. Ludhiana Improvement Trust[4] in which the Punjab & Haryana High Court refused to refer the dispute to arbitration under section 8 on the basis that underlying contract is void. An SLP was filed against this decision of the Punjab & Haryana High Court in the Supreme Court and the Court held that the Ld. Judge of High Court has erred in not referring the dispute to the arbitration by going into detailed scrutiny of the agreement as at the stage of section 8, the Judge is only required to decide such preliminary issues as of jurisdiction to entertain the application, existence of valid arbitration agreement, whether a live claim existed or not for the purpose of appointment of an arbitrator. By not referring the dispute to the arbitration, the judge has sought to do more than what is required under section 11(6) of the act without any evidence being adduced by the parties. The issue regarding the continued existence of the arbitration agreement, notwithstanding the main agreement itself being declared void, was considered by the seven-judge bench in SBP & Co.[5] and it was held that an arbitration agreement could stand independent of the main agreement and did not necessarily become otiose, even if the main agreement, of which it is a part, is declared void.

In view of Today Homes & infra pvt ltd v. Ludhiana Improvement Trust, the court held that the submission of respondent that a criminal case is registered against respondent and hence court cannot refer it to the arbitration is wholly tenuous and not maintainable.

The court further held that, it is mandatory for the courts to refer disputes to arbitration, if agreement between the parties provides for reference to arbitration and the ground that a criminal case is registered with reference to the execution of the agreement is not an absolute bar to refer the disputes to arbitration.

The court held that there is no inherent risk of prejudice to any party in permitting arbitration to proceed simultaneously with criminal proceedings since findings recorded by arbitral tribunal are not binding in criminal proceedings and in an eventuality where ultimately the award is rendered by arbitral tribunal, and criminal proceedings result in conviction rendering the contract void, such conviction can be placed on record to resist the enforcement of the award. But if the criminal proceedings end up in acquittal and the dispute is not referred to arbitration, it would result in undesirable delay in the arbitration.

After Swiss Timing Ltd, in Sundaram Finance Ltd & Anr v. T. Thankam[6], the question as to ‘what should be the approach of a civil court when an application in terms of section 8 is filed before the said civil court’ again reached Supreme Court.

The court, citing P. Anand Gajapathi Raju V. PVG Raju[7] and Hindustan Petroleum Corpn. Ltd v. Pink City Midway Petroleums (Supra), held that language of section 8 of the act is peremptory in nature and therefore in cases where arbitration clause is there in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore it is clear that if as contended by a party in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator.

The court further referred to Magma Leasing and Finance Ltd. V. Potluri Madhavilata[8] in which it was again reiterated that no option is left to the court, once the prerequisites of section 8 of act are fully satisfied.

In the end, the court held that once an application in due compliance of section 8 is filed, the approach of civil court should be not to see whether the court has jurisdiction, but to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction is barred by virtue of procedure under a special statue, the civil court should first see whether there is an ouster of its jurisdiction in terms of compliance with the procedure under the special statue.

The basic principle of our jurisprudence is generalia specialibus non derogant i.e. a general law should yield to the special law. In such a situation, the approach shall not be to see where there is still jurisdiction of civil court under general law but whether it has been ousted by the special law.

Exceptions

In A. Ayyasamy V. A. Paramasivam[9], the court though accepting the fact that provision in section 8 is pre-emptive and mandatory in nature and hence the court should refer the dispute to arbitration when existence of arbitration clause is not disputed, went a step ahead and laid down certain exceptions to this rule. The court carved out exceptions on the basis of which a court can refuse to refer the dispute to arbitration even when essentials of section 8 are fulfilled.

These exceptions are

1. Where court finds very serious allegation of fraud that makes a virtual case of criminal offence, or
2. Where allegations of fraud are so complicated that it becomes essential that such complex issues can be decided only by civil court on appreciation of voluminous evidence, or
3. Where serious allegations of forgery/fabrication of documents in support of the plea of fraud, or
4. Where fraud is alleged against arbitration provision itself, or
5. Where fraud alleged permeates the entire contract, including agreement to arbitrate where fraud goes to the validity of contract itself or contract that contains arbitration clause or validity of arbitration clause itself.

The court carved out these exceptions after considering Radhakrishnan’s judgment and in my opinion, this judgment is not correct in the eyes of law for two reasons.

One is presence of section 16 of the act, which enables arbitrators to decide on its own, the jurisdiction and on the question of validity of arbitration clause and second, the reliance placed on the ratio of Radhakrishnan’s case is in itself not correct as in an earlier decision i.e. Sundaram Finance, the court categorically invalidated ratio of Radhakrishnan’s judgment, hence placing reliance on said judgment even after it being invalidated by Supreme Court is incorrect.

In a recent judgment, Sasan Power Ltd. vs North American Coal Corporation India Private Ltd.[10], the Supreme Court has held that:

During section 8 proceedings, the court cannot go into the question of validity of entire agreement and can only look at the question of validity of arbitration clause/agreement i.e. whether the arbitration clause/agreement is null and void, inoperative or incapable of being performed.

Arbitrability

Besides accepting objections like ‘since the contract is void hence the arbitration clause is void as well’, the courts have also started entertaining objections on the arbitrability of the dispute as well, at the stage of section 8 application. The worst part of entertaining such objections is, that the courts have even accepted such objections in certain cases and had denied reference in such cases. The courts should keep in mind that first of all, there is no such classification as arbitrable or non arbitrable disputes in the entire act and second, if based on the common law principle, the parties feel that their disputes fall in one such exception where it cannot be resolved via arbitration, then they can raise the said objection before arbitrator as the arbitrator, by virtue of section 16 of the act, is competent to rule on such objections. Therefore, the interference of courts especially on the basis of objections regarding dispute being arbitrable or not arbitrable, in my opinion, is totally unjustified.

Further Sec 8(3) stipulates that pending application under section 8 will not affect proceedings under section 11. According to this, there’s always a risk of reference being denied under section 8 on the basis that the court agreed with the objection that the dispute in question is non arbitrable, and on the flip side, arbitrator gets appointed under section 11 of the act as the court deem it fit to refer the dispute to arbitration. Now, in such a case, what will be the fate of that case? Wouldn’t it become travesty of justice then?

Conclusion

From above discussion, it can safely be deduced that after Sasan Power Ltd. judgment, the question of referring the dispute under section 8 is somewhat resolved for now but this conundrum of whether to refer or not to refer under section 8 still needs a proper ruling by a larger bench of SC on this issue so that the position will settle once and for all.

Further, in my opinion, this conundrum of whether to refer or not to refer a dispute to arbitration under section 8 of the act be put to an end and the courts should work towards fostering the arbitration by referring the dispute to arbitration when all the essentials of section 8 are fulfilled instead of halting the entire arbitration process for no reason or on unjustified reasons like accepting objections on arbitrability of dispute or existence of other proceedings against one party etc.

References

[1] (2014) 6 SCC 677

[2] (2010) 1 SCC 72

[3] (2003) 6 SCC 503

[4] (2014) 5 SCC 68

[5] SBP & Co. V. Patel Engg. Ltd., (2005) 8 SCC 618

[6] (2015) 14 SCC 444

[7] (2000) 4 SCC 539

[8] (2009) 10 SCC 103

[9] (2016) 10 SCC 386

[10] SLP (c) No. 33227 of 2015

The post Scope of Section 8 of the Arbitration and Conciliation Act, 1996. To refer or not to refer? appeared first on iPleaders.

This article is co-authored by Akshay Anurag of NUSRL, Ranchi and Soumya Ranjan Barwa of BVP, Pune. The article is a discussion on all you need to know about child custody rights.

– The children are not mere chattels nor are they mere playthings for their parents.

Introduction

Marriage, as a social institution, has a significant role to play in the societal setup.”Marriage acts as an outlet for sexual needs and also regulates it. It also prevents individuals from becoming slave to his/her desires. Marriage is a social need because through marriage, families are established and the families are the fundamental entity of our society. It also helps in procreation of children which are the essentials of the family.

‘Hedaya’ has recognized marriage as a legal process by which the several process and procreation and legitimating of children between man and women is perfectly lawful and valid. However, in the recent era, The institution of marriage is collapsing. Personal difference between the spouses is increasing, also coupled with various other factors. Legal frameworks were very true speculation of such situations, therefore the concept of Divorce was well introduced. Divorce not only adversely affects the spouses but it also influences the life the children. One of the prime concern for a long pendency of divorce cases in India is, with whom the custody of the child will rest.

“Though nobility and self-denial coupled with tolerance mark the greatest features of Indian womanhood in the past and the cry for equality and equal status being at a very low stake, with the passage of time and change of social structure the same is however no longer dormant but presently quite loud.”Mothers and fathers both have a prominent role to play in supporting the growth and development of their children. Generally, the wish of the minor child and the mother is highly ignored while determining the custody of the child. This is because the earning ability of father. In India, it is well common that father earns more than a mother. But this cannot be the sole ground to entitle the father to take undue advantages. This should not entitle him to get the custody of the child in the event of a divorce. However, the Judiciary have been vigilant in this regard and this situation is changing in recent times. Now the court while awarding Child custody to the parent considers the best interests of the child.[1]“

Earlier only male Hindus had the right to adopt or to give in adoption. But now it has been recognised that even Hindu women can also adopt or give in adoption. In the case of Githa Hariharan v. RBI[2], the court has very liberally interpreted the word Guardian and court has arrived to the conclusion that the Hindu women are very much entitled to adopt or take the custody of the child irrespective of that the father is alive.

This paper deals with the motivation of the parents to adopt a child and various aspects relating to adoption under the Hindu law and the Muslim law.

Child Custody And Protective Laws

Child custody is the legal terminology which is most commonly used to describe the legal and practical nexus between parents and his or her child. This includes various rights some of them are, right of the parent to make decisions for the child, and the parent’s duty to care and nurture for the child. Not only the common legal frameworks have recognised such principles rather the religion-based distinction of the personal laws is also evident and accepted fact.

Child custody can refer to where your children will live after divorce (physical custody), or who has the legal right to make decisions about their upbringing (legal custody).

Personal laws in addition to the secular laws have been zealously guarding and fiercely protecting as well as justified by the various religious communities.[3]

In re Mc Grath[4] Lindley, L.J., observed, “The dominant matter for the consideration of the Court is the welfare of the child. But the welfare of a child is not to be measured by money only, nor by physical comfort only. The word `welfare’ must be taken in its widest sense. The moral and religious welfare of the child must be considered as well as its physical well being. Nor can the ties of affection be disregarded.“

Types Of Child Custody Arrangements

Physical Custody

“Physical care is the privilege to have your kids live with you after a separation. The privilege might be shared by the two guardians in a joint physical care game plan or conceded to just a single parent in a sole physical care game plan.[5]“

Joint physical guardianship

“Courts, by and large, want to grant joint physical guardianship to ensure the kids will keep up contact with the two guardians. In a few expresses, this is the default determination, and may require a differing guardian to demonstrate why their youngsters ought not invest energy with the two guardians.

Joint physical guardianship expects guardians to impart time to their kids. It is not a 50-50 split, however, in the event that the guardians can’t achieve an assention, the courts may force a timetable. Normal game plans incorporate substituting weeks, months, as well as occasions at each parent’s home.

Joint physical guardianship empowers the two guardians to be fundamental parts of their youngsters’ lives. Research underpins that in low-clash divorces, kids passage preferred in joint guardianship courses of action over sole authority. In any case, for high-clash divorces with debating guardians, joint physical authority may trap youngsters amidst a passionate clash zone “

Legal Custody

“Legitimate authority is your entitlement to settle on choices about your kid’s childhood, for example, training, restorative care, and religious guideline. Like physical guardianship, legitimate care might be mutually shared between the two guardians or exclusively vested in one parent.[6] By and large in many states, the two guardians keep on having joint lawful authority after separation, which means the two guardians have parallel rights to settle on kid raising choices. Nonetheless, courts may grant sole lawful authority to one parent under some uncommon conditions. A parent with sole legitimate guardianship has the one-sided lawful ideal to settle on youngster raising choices.”

Child Custody Under Personal Laws

Under Hindu Personal Law

For Hindus, the law governing custody of a child is the Hindu Marriage Act. For Hindus, the parent law governing custody of child is the Hindu Marriage Act, 1955. In addition to this Hindu Minority and Guardianship Act, 1956 also takes care of this issue. Judiciary has manifested its activism basically in three ways in the matters related to custody of the child born out of wedlock among Hindus and they are[7] –

1. Imposition: The right of custody from time to time. While choosing the factor with respect to who will have the care of the child, child’s desire is frequently dealt with wherever conceivable. Court now and again intervene with the custodial privileges of the youngsters. The Court investigates the issue with most extreme care. Answer for the inquiry in the matter of who will have the care of the youngster after separation or legal division depends on the factor in the matter of what will be most helpful for the child and the court comes to the conclusion that,
2. Alteration: The right of custody from time to time. If care with the father is more appreciable and encouraging then the father will have the care. If under mother’s authority child’s future is more secure then care will go to the mother or any other relatives with whom the interest of the child seems to be more secure. Here court is vigilant about the interests of the child and court alters its pronouncement in due course of time.
3. Revocation: This scenario arises after the court has passed the order of child custody. On certain circumstances, if the finding of the court subsequent to going off the request of child guardianship, court may revoke the care and allow it to the inverse party. For instance, when a mother was given care of her child and she didn’t play out her obligations towards the child legitimately and in an efficient manner, the court denied the authority and offered it to child’s father.”

Hindu Minority and Guardianship Act

The Dharmashastras have never dealt with the law of guardianship. During the British regime, the law of guardianship was mainly developed by the courts based on the rules of equity. It came to be established that the father is the natural guardian of the children and after his death, mother is the natural guardian of the children and none else can be the natural guardian of minor children. The concept of guardianship has changed from paternal power to the idea of protection in modern times and the Hindu Minority and Guardianship Act, 1956 very well identified the necessity and codified the laws regarding minority and guardianship with the welfare of the child at the core. Custodial matters of a child are decided according to the natural guardian of the child“. Natural guardian is defined in Section 6 of HMG Act which defines only three natural guardians:

• For a legitimate boy or a girl, the father, and after father, the mother, provided that the custody of a child less than 5 yrs of age will be with the mother.
• For an illegitimate boy or a girl, the mother, and after mother, the father.
• For a married woman, the husband.

Also, In divorce situations, the parent with custody is considered the natural guardian. This act also gives the will of the child paramount consideration. After analysing various judicial interpretations it can be concluded that the courts, Before deciding the issue as to whether the custody should be given to the mother or the father or partially to one and partially to the other should –

• Take into account the wishes of the child concerned, and assess the psychological impact, if any, on the change in custody, after obtaining the opinion of a child psychiatrist or a child welfare worker.[8]
• Also, In the case where the mother was living with a stranger, custody is awarded to the father and not the mother.

“There is an assumption that a minor’s parents would do their best to promote their child welfare and if necessary, would relinquish their own advantage and joy for the sake of their children. This assumption emerges in view of the common and natural affection anticipated from the guardians for their children. There is no division between the wellness of the father to be depended with the care and welfare of his minor child. The father’s wellness must be viewed and decided in terms of welfare of his minor youngsters with regards to all the applicable conditions. If the guardianship of the father can’t advance the child’s welfare equal or superior as compared to the authority of the mother then he can’t assert a right to their care only in light of the fact that there is no imperfection in his own character and he has the emotional attachment for his kids which each ordinary parent has. However, the father has been assumed by the statute as well as by the society that he is better fitted to care for the children, as he is the major or sole earner and leader of the family. Yet another duty has been casted upon the Court to analyse each situation as to the welfare of the kids.”

As in the case of J.V. Gajre v. Pathankhan and Ors.[9] while affirming the view of English courts, the Apex court has reiterated that, to deal with the issue of custody “The Courts have to consider, the whole of the circumstances of the case, the position of the parent, the position of the child, the age of the child, the religion of the child so far as it can be said to have any religion , and the happiness of the child. Prima facie it would not be for the welfare of the child to be taken away from its natural parent and given over to other people who have not that natural relation to it. Every wise man would say that, generally speaking, the best place for a child is with its parent. If a child is brought up, as one may say from its mother’s lap in one form of religion, it would not, I should say be for its happiness and welfare that a stranger should take it away in order to alter its religious views. Again, it cannot be merely because the parent is poor and the person who seeks to have the possession of the child as against the parent is rich, that, without regard to any other consideration, to the natural rights and feelings of the parent, or the feelings and views that have been introduced into the heart and mind of the child, the child ought not to be taken away from its parent merely because its pecuniary position will be thereby bettered. No wise man would entertain such suggestions as these.”

Under Muslim Personal Law

“The source of law of guardianship and custody are the certain verses in the Koran and a few ahadis“. In addition to this In all schools of both the Sunnis and the Shias, the father is perceived as the guardian which term extends till his death. In contrast to this, mother in all schools of Muslim law isn’t considered as the natural guardian, even after the demise of the father means that women are excluded from taking the custody. The father’s privilege of guardianship exists notwithstanding when the mother, or some other female, is qualified for the authority of the minor. Also when the father is alive, he is the sole and incomparable custodian of his minor children.[10] However, The father’s exclusive right of guardianship is only extended to the minor and legitimate childe but not to the illegitimate child. Muslim law is quite liberal towards women as the mother is although not qualified to the natural guardian yet she is qualified for his/her custody.[11]

Among the Sunnis, the father is the sole custodian of the minor youngsters. After the demise of the father, the custody passes on to the agent. Shias, have departed from such view as after the father, the guardianship has a place with the grandfather, regardless of appointment of the agent by the father. No other individual can be regular custodian, not even the Childs sibling.

Testamentary Guardian/Custodian

“Among the Sunnis, the father has full authority of making a testamentary arrangement of custodian. Without the father and his agent, the grandfather has the authority of delegating a testamentary custodian. Among the Shias, the father’s arrangement of testamentary custodian will come into force only in case of absence of grandfather. No other individual has any such power. Among both the Shias and the Sunnis, the mother has no authority of delegating a testamentary custodian of her children. It is just in two cases in which the mother can delegate a testamentary custody of her property of her minor child, First being, when she herself has been authorised by the will of the child’s father, she can name an agent by her will; and in second case, she can name an agent in regard of her own property which will decay after her passing on her kids.”

Among the Sunnis, the arrangement of a non-Muslim mother as testamentary custodian is substantial, however among the Shias such an arrangement is not legitimate, as they hold the view that a non-Muslim can’t be a custodian of the individual and in addition to the property of a minor. The Shias additionally take a similar view. It gives the idea that when two people are selected as custodian, and one of them is excluded, the other can go about as guardian. Also, a man who is famously and well known as bad character, can’t be named as Custodian.

Muslim law does not set out a particular established rules for the appointment of testamentary custodian. Infact, such Arrangement might be made in orally. However, in every situation the authority to delegate a testamentary custodian should be clear and equivocal. The agent of the testamentary custodian is assigned differently by Muslim lawgivers, showing his position and powers. He is ordinarily called, wali or watchman.

Custody Under Secular Law

The Guardians and Wards Act, 1890 was a law to supersede all other laws regarding the same. It became the only non-religious universal law regarding the custody of a child. This is a secular law which can be resorted by any religion but the recourse of this law is mainly taken by the Christians. Other religions can also in addition to their personal law can take the recourse of the same. Section 17 of the act imposes a liability on the courts for appointing a guardian. The provision is well quoted below,

The authority to name any individual as custodian is given on the District Court. The District Court may choose or proclaim any individual as the custodian of a minor as an individual and property at whatever point it thinks of it as essential for the welfare of the minor, contemplating the age, sex, wishes of the minor too.

Summing Up

Basically, the paper first tried to define, who is the natural guardian of the minor which is defined with various Personal as well as the secular laws. Further, an analysis has also been done regarding the hierarchy of two natural guardians, i.e. the father and the mother. Also, the judicial activism has also been noticed. The judiciary has always tried to break the social barrier by providing equal opportunity to the mother too, irrespective of the earning capacity of the mother. As the mother is the preferred custodial parent when the child is less than five years old.

In addition to the above points, courts have always tried not to blindly follow the statues rather they have taken the pragmatic approach. The wish of child is the paramount consideration and also the future of child too. The primary issue dealt in the paper is the interest and the custody of the child after the parents have abandoned. Although it is accepted that the spouses have to undergo mental distress but if we closely analyse the fact, the child is also the ultimate sufferer. Being mentally incapable to understand the situation, it is difficult for them to react in the situation it is difficult to safeguard their future. So to protect the interest of the children various legislations have been very well enacted. Every religion has given due importance to this issue. However, As a stark reality, this issue has not addressed, the children are still the not safeguarded completely and also it is well known that women are given less representation in the society when it comes to custody and guardianship of children after divorce.

References

[1]Child Custody & Guardianship: Indian Scenario Compared to the West, Available at : http://www.legalservicesindia.com/article/article/child-custody-&-guardianship-204-1.html( Accessed on Oct, 26, 2017).

[2] 1999 (2) SCC 228.

[3] Mulla, Principles of Hindu Law, (New Delhi, Butterworths India,2001)PP-233.

[4] (1893, 1 Ch.143).

[5] Available at: http://www.divorcenet.com/resources/divorce/divorce-and-children/legal-and-physical-custody-children. (Accessed on Oct, 24, 2017).

[6] Available at: http://family.findlaw.com/child-custody/legal-custody.html (Accessed on Oct, 26, 2017).

[7] Available at: Legal Custody of Child Born after Divorce or Seperation of Parents in India, Available at : https://blog.ipleaders.in/legal-custody-child/(Accessed on Oct, 26, 2017).

[8] Mamta v. Ashok Jagannath Bharuka, (2005) 12 SCC 452.

[9] 1970 (2) SCC 717.

[10] Imambandi v. Mutsaddi, (1918) 45 Cal 887.

[11] Gohar Begum v. Suggi, (1960) 1 SCR 597.

The post All you need to know about child custody rights appeared first on iPleaders.

In this article, Kunal Ahuja of Vivekananda Institute of Professional Studies discusses how to crack your first job interview.

Job interviews are like first dates. Good impressions count, awkwardness occurs. Outcomes are unpredictable.

How to crack your first job interview

There are some ground rules which one need to follow to crack their first job interviews.

Remember the interview is a one-shot exam one never gets an opportunity to have a review or take a look, in the end, answers given have been recorded by the interviewer and you cannot edit them or change your stand but after every interview you can learn from every interview and avoid same mistakes in next interview.

Proper conduct is necessary to crack your job interview as your interview is an analysis on how your professional conduct will be during the job tenure.

Let’s discuss some of them so that you don’t miss out your initial kick start of your career

Know about the company

Before attending an interview you must do some homework i.e. research about the company and the employer for whom you are going to work for a very long period of your professional life.

By having proper knowledge about the company you can answer well to questions scuh as,

• What do you know about the company?
• What do you know about the company’s competitors?
• What do you know about the products and substitutes?  

By asking these questions interviewer get to know about your seriousness for the job and your awareness about the profession you are entering in. Don’t just get an overview of the company but have a proper knowledge about company’s last 3 years achievements and downfall so that the interviewer can ask your suggestion for the same which means they know you can add value to their company.

Proper dress and professional outlook

The first impression is the best impression so better be conscious about the way you dress up and carry that professional outfit as the first impression in most of the cases depends upon your dressing sense. More or less your dressing sense and professional look tell about your hygiene, seriousness about the job and the interviewer will consider a good profile for you once you are through the technical qualifications required for the job.

For men must always shave before they go for the interview and for women it is not necessary to wear western outfits.

First impressions are lasting; give special thought to your dress, your grooming, and accessories.

-BRIAN TRACY

Walk in with confidence

I can and I will watch me, the moment you walk into the office your interviewer should get this impression about you. Your confidence is very much visible so greet your interviewer with a smile and give him a firm handshake. Respond to every question by looking into the eyes of the interviewer let him watch what you are answering is right and you are very much confident about yourself. Don’t just say yes to every opinion if you got one, say it if you are confident about it as the interviewer might trick you into giving some wrong opinion. Confidence is what imprints in the other’s mind so never lose it.

Punctuality counts

Arrive early at the venue it helps you settle down and relax, interviewer always expects you to be punctual and with this habit, the interviewer gets more impressed as one who is early to work will definitely add on to the value of their company and tells about the seriousness of the interviewee towards his job.

Listen carefully, Don’t argue

To answer correctly you must first listen, be attentive to whatever interviewer is saying as your presence of mind is one of the most important characteristics which he requires in his company. If you are not able to connect or understand his questions and rather than asking him to pardon you directly answer to his question which he finds even a little bit vague he is never going to like it.

Respect his experience and position because there must be some quality that he is on the other side of the table therefore never get into an argument with the interviewer. Be willing to clarify his questions and learn from him whatever he has to tell you about his experience this quality of yours will make him feel like a mentor and he will be comfortable in mentoring someone like you in future.

Try to fit in

Always think that if you need this job you have to prove them that you deserve it. The organization requires the candidate who has the required set of skills for this particular job for which you have to show them that you have all of them or most of them and the rest is easy for you to adapt as per their requirement. Before proving them you should understand the job requirement and tell them what are you bringing to the table. Make yourself worth their investment and teachings, they will be willing to hire you only if they see some benefit to the organization and are sure that you will be an asset to the company.

Honesty is the best policy

Yes, this moral value plays a major role in creating an impression in your interview. Be honest about yourself and the answers you are giving, the interviewer is fine if you don’t know the answer and you are ready to accept it but he will not like any wrong or faulty answer. Learn to say ‘ Sorry! Sir, I don’t know’, may I know what would be the best source for the answer to this question?’

Any wrong answer delivered with hastiness will create a negative impression on the interview which is bad for your professional start.

Pen down your strength and weakness

By telling them about your strength and weakness the interviewer gets to know your attitude of how much you know about yourself. You can share the incidents or object on which you worked and got to know about your strengths and weaknesses. Don’t forget to add on that you are working on your weaknesses by doing this you tell them how flexible and self-aware you are.

Don’t be afraid to lose your job interview

Understand that why you fear interview. You don’t fear the interview but fear the thought of rejection so to overcome the fear of interview it’s important that you overcome the fear of rejection.

Ask few questions to yourself before attending interview-

• What if you don’t get this job?
• What will be worse if you don’t crack this interview?
• How important is this interview, is it the last one of your life?
• Where will you be after you get this job and even if you don’t get it will that future change?
• What will you do if you fail in the interview?

Enter into the interviewer’s room with one perspective ‘ you don’t need this so badly ‘ yes you heard right. If you need something you will chase it and the moment you start chasing anything you will not show the right attitude it requires. It does not matter how much it is important for what matters is you took your first chance and you were so close. Remember not a single success story starts with ‘I DID’ but most of them start with ‘I failed to do this.’

End your interview on a positive note

No matter how it went ask for interviewer’s feedback, it leaves a positive impression in the mind of the interviewer and he will appreciate your positive attitude. Ask him few questions like-

• Do I need to know something more about the work culture?
• I would love to be in touch with you.
• Ask something related to the job.

Your queries speak a lot about your priorities so be very professional in questions you ask, never show your concern about the salary or leave benefits. Show him the passion with which you will be working in their firm.

Now let’s have an analysis of the types of interviews which are undertaken nowadays, once we know what type of job interview do we have to undertake then only we can prepare ourselves for that interview.

Every interview is set to test some of the other qualities in an interviewee and to nail every such interview the interviewee has to have a different set of skills as well as perspective.

Telephonic interview

This kind of interviews takes place for initial screening and narrow down the broad list of the potential candidates. Telephonic interview is set as a qualifying round for personal interview to check your communication skills and your genuineness. You will be informed about the telephonic interviews in advance so be certain about your schedule and agree for a particular time period as per their requirement.

Some key tips for telephonic interviews-

• Clear your schedule 30 minutes prior to the interview so that you can settle down and recall your resume.
• Answer on point, don’t exaggerate.
• Don’t interrupt unless you need to ask something important.
• Keep a copy of your resume in front of you.
• Maintain a list of achievements and keep it in front of you.
• If conversation exceeds the time limit be flexible as it is a good sign
• Before signing off, ask about the next step. This is a professional way to get a feedback.

Personal interview

When you are called to the office for the interview it is the personal interview. Get a good professional dress up and walk in with a confidence. Carry whatever is required to show your professionalism like the pen, original as well as the copy of the documents, a professional pad etc. everything is under observation during this interview so be careful about your communication, body posture or the way you carry yourself.

Video conferencing interview

In this era of global hiring, video conferencing interviews are very common so to save from the travel cost these interviews are arranged. There are many things about which you have to be more careful during video conferencing interviews.

• The bandwidth of the internet should be good so that image and audio are clear if it is not that good at home to visit a private room in cyber cafes.
• You should be dressed the same way as you would have during the personal interview.
• The table in front should be clean.  
• No disturbance or noises in your background.
• Make sure you don’t get the feeling that you are at your home and do anything randomly like having without permission or something like that.
• Make eye contact otherwise, the camera will be focused on your head.
• Use picture-in-picture feature so you can see how your appear.

Stress interview

Stress interviews are set to test how you handle the stressful situations which nowadays has become important for an organisation to check how well can a candidate handle a stress. So, during stress interviews, you will ask tricky questions and the interviewer will also try to provoke you or may also become rude or loud upon you in those situations you need to be patient and don’t get furious or aggressive at all.

Campus interview

During your final semester in your college, you will be attending many on campus interviews for which they will first conduct a written examination and which if you qualify you will be eligible for the personal interview. Organisations come to your college and hire a good number of job seekers some consider it beneficial for their beginning of their professional career.

Technical interview

This kind of interviews is set to test your technical skills which are with the regard to your particular course or field you have studied in.

Apart from all of the above tips there are many other strategies which you may apply for your situation and prepare yourself for your interview and nail your dream job.

Few questions generally asked during an interview

• Tell me about yourself?

• Why do consider yourself as a good candidate for this job?]

• Tell about your strength and weaknesses?

• Where do you stay? How will you manage to commute to the office?

• What are your top three strengths and weaknesses?

• What do you know about the company?

• What are your expectations from the company?

• Are you willing to relocate to another city?

• Where do you see yourself in five years from now?

• What are your plans for further studies?

• Are you a team player or wants to work individually on projects?

• How many hours can you put into work?

• What is my time according to you?

• What are your expectations in terms of compensation?
• Describe your dream job? Does this job qualify to be the one? if yes, how?

Questions you need to ask the interviewer

At the end of the interview, every interviewer gives you the time to ask some questions, these questions tell a lot about your professional concern and your priority. So, you should be asking questions which pose you as a professional for which the interviewer is willing to answer happily.

Some of them are,

• What are future plans of the company?

• What would be my top three deliverables if I fit in for this role?

• May I have a look at the work area?

• Any specific quality which suits this job?

• Can you tell some more about the company’s work culture?

• Who will carry out my appraisals if I am recruited?

• When will a decision be made on the successful candidate?

• How can I add more value to the firm beyond the job requirements?

• May I contact you if I have other questions? Can you share your contact details?

• How long have you been in this company?

• How good has been your experience in this company so far?

• Apart from the interview, it was a good experience with you.

The post How to crack your first job interview appeared first on iPleaders.

In this article, Kunal Ahuja of Vivekananda Institute of Professional Studies does an overview of Insolvency and Bankruptcy Code.

INSOLVENCY

When an individual or a business entity is unable to meet its outstanding debts to the investors, creditors or lenders that person or business entity is termed as insolvent and this whole state is called insolvency. Insolvency can also take place when the liabilities/debts of the company surpass the assets/income of the company. A person is declared insolvent when any creditor, lender or investor submits an application with respect to the same.

Insolvency can get resolved by two ways

1. Modifying the repayment plan to the creditors or investors.
2. Selling off the assets of the company and paying back to the creditors or investors from the sale proceeds of the assets.

BANKRUPTCY

Bankruptcy is more or like insolvency but when a person declares himself as an insolvent and submits same to the juridical authorities. On being bankrupt it is the responsibility of the court to liquidate the assets and distribute the sale proceeds to the creditors.

INSOLVENCY RESOLUTION PROCESS

Initiation

When any corporate or business entity is not able to pay back the amount to its creditors or investors or lenders on time and this goes on for a very long period of time, this leads to the process of insolvency for which the application of insolvency is submitted to the National Company Law Tribunal (NCLT).

The insolvency resolution process can be initiated by any one of out of following three

• Financial creditor
• Operational creditor
• Corporate debtor himself

Provided operational creditor has to send a prior notice of demand for 10 days to the corporate debtor before the initiation of insolvency resolution process.

Before initiating with the insolvency resolution process creditors analysis whether the inability of the corporate debtor has occurred because of the financial crisis or business crisis. If the creditors are certain that the corporate entity is unable to fulfill its outstanding debts because of the business stress and there is no possibility of it getting better than any of the above creditors or corporate debtor can initiate the insolvency resolution process.

Insolvency resolution process by creditor under section 7 of Insolvency and Bankruptcy Code, 2016

1. Financial creditor himself or jointly will initiate by filing an application for the insolvency proceedings against the corporate debtor before NCLT.
2. Along with the application, he has to submit the proof of default and the name of the proposed resolution professional to be appointed
3. If NCLT is of the opinion that there is no default on the part of the corporate debtor or there is a proceeding pending against the proposed resolution professional NCLT may reject the application.
4. NCLT has to entertain the application within 14 days of making the application.

Initiation of insolvency resolution process by operational creditor under section 8 of the code

Before initiating insolvency resolution process operational creditor will serve the corporate debtor with a prior notice of 10 days to the corporate debtor asking him to pay back the dues.

If the corporate debtor does not pay back in that time period or does not bring to the attention of the operational creditor about any dispute or any arbitration proceeding pending against the business or any record of repayment of unpaid operational debt, then the operational creditor can file an application for the insolvency resolution process.

Resolution of insolvency by the corporate debtor under section 10 of the code

Where the corporate debtor is at fault, the corporate debtor or any corporate applicant can file an application for the initiation of the insolvency resolution process along with the books of accounts and other financial documents of the business. The corporate debtor shall also file the name of the proposed resolution professional along with the application.

Time period for the completion of the insolvency resolution process under section 12 of the code

Insolvency resolution process will have to be completed within the time period of 180 days after the admission of the application and can extend the time period to 90 days in addition to 180 days only if NCLT thinks fit that the resolution process will take more point of view.

In all the above three situations NCLT has to either admit or reject the application for initiation of insolvency resolution process within 14 days.

Within 14 days of admitting the application, NCLT will appoint the interim insolvency professional with the consent of the insolvency and bankruptcy board.

Public announcement and moratorium under section 13 & 14 of the code

Public announcement

Once the application for the insolvency resolution process has been admitted the NCLT will make a public announcement for the submission of claims by the creditors also the adjudicating authority i.e. NCLT will appoint the interim resolution professional.

Moratorium

NCLT will declare the moratorium for prohibiting the following

1. The institution of any suit or pending suit including execution of any judgment or decree against the corporate debtor.
2. Transferring, encumbering, alienating or disposing of any property or right or beneficial interest.
3. Any action to foreclose, recover or any security interest created by the corporate debtor in respect of its property.
4. Recovery of any property by the owner or lessor which is in the possession of the corporate debtor.
5. Terminate the supply of goods and services to the corporate debtor.

The moratorium shall cease to have the effect on the date on which the resolution process is approved or on the date of the liquidation order.

Appointment of interim resolution professional and his role under section 16-20 of the code

Role of insolvency professional

• Interim insolvency professional will have the control over the assets and the financial details of the corporate debtor.
• Interim insolvency professional is empowered to admit or reject the claims based on the verification of the claims from the database of the corporate debtor held by the insolvency professional with the claims submitted by the creditors.
• Interim resolution professional shall manage the affairs of the corporate debtor.
• He will have the powers of the board of directors or partners of the corporate debtor.
• He shall have access to the books of accounts of the corporate debtor.
• He will act as a supervisory body for the officers and managers and the financial institutions of the corporate debtor.  
• Any other function which is deemed necessary for proper appropriation of assets of the corporate debtor.
• The interim professional resolution shall be appointed for the tenure of 30 days.

Appointment of resolution professional and committee of creditors including their functions under section 21-25 of the code

Formation of the creditor’s committee of the code

After submission of the claims, the insolvency professional shall form a creditors committee and all the creditors whose claims get admitted shall be the part of creditors committee. The creditor’s committee will decide upon the question of the reason for the inability of the corporate debtor to pay back its debts and if they are justified that the reason is a business crisis but not the financial crisis, then creditors committee shall either go for restructuring repayment plan to the creditors or for the liquidation process.

• All the members of the creditor’s committee will be allotted the voting rights as per their voting share that will be based upon the financial debts owed to the corporate debtor.
• Creditors committee will hold their first meeting within seven days of appointment and may appoint a final insolvency resolution professional or may give their affirmation to the interim insolvency professional to be appointed as insolvency professional with the approval of 75% of votes of the creditors of creditors committee.
• All the meetings of creditors committee will be conducted by the resolution professional.
• The partners, directors shall attend the meeting but won’t have the voting rights.
• One representative of the operational creditors shall also join the meeting but without any right to vote. Only the operational creditors whose aggregate dues is not less than 10% of the total debt.

Resolution professional have to prepare an information memorandum to enable the resolution applicant to form a resolution plan. A resolution applicant will submit the restructuring of repayment plan to the resolution professional and the resolution professional after its satisfaction will present the same plan to the creditor’s committee for approval. The plan will be confirmed only if it gets the affirmation of 75% of votes of the creditors of creditors committee in favor.

If the above approval has been obtained then NCLT will order the execution of the restructuring plan in a prescribed manner.

After the order of approval by NCLT, the moratorium shall cease to have an effect and resolution professional will forward all the records and documents to the board of directors to conduct the insolvency resolution process effectively.  

Liquidation under section 33 of the code

Liquidation is the process of acquiring the assets of the corporate debtor and releasing them in the market and then distributing the sale proceeds to the creditors as per their priority list described under Insolvency and Bankruptcy Code, 2016.

There are several reasons to the liquidation of the corporate debtor –

1. That the resolution plan was not presented to the NCLT within prescribed time period i.e. 180 days and if the extension of 90 days was provided including those 90 days.
2. When NCLT does not approve the resolution plan and rejects it.
3. If the resolution plan is contravened by the corporate debtor or any other person whose interests are prejudicially affected by such contravention files an application for liquidation.
4. If committee of creditors before giving approval to the resolution plan orders for the liquidation process.
5. If a corporate debtor fails to comply with the resolution plan then NCLT can order for liquidation process.

After the affirmation to the liquidation process, NCLT shall order for the liquidation of the corporate debtor in accordance with the prescribed rules and shall make a public announcement regarding the liquidation of the corporate debtor.

PROCESS OF LIQUIDATION

• Resolution professional will act as a liquidator if not replaced by the approval of 75% votes of the committee of the creditors.
• The liquidator will form an estate of assets of the corporate debtor which will include all the properties, rights or interests of the corporate debtor.
• The liquidation process will take place in accordance with the rules and regulations as prescribed under this code.
• The liquidator will verify all the claims submitted by the creditors and then he will either approve or reject the claim.
• Liquidator after verifying the claims will sell the immovable or immovable assets of the corporate debtor through public auction or private contract.
• The liquidator will satisfy the claims of the creditors as per the priority list of the creditors or debts to be satisfied under the section 53 of Insolvency and Bankruptcy Code, 2016.

FAST TRACK CORPORATE INSOLVENCY

Fast track corporate insolvency can take place in case of following corporate debtors:-

1. The corporate debtor having income and assets below a certain level ascertained by the central government.
2. A corporate debtor with such class of creditors or such amount of debt notified by the central government.
3. Any other corporate debtors which the government may time to time notify.

Fast track corporate insolvency process usually takes place with the small scale or medium sized enterprises. Fast track insolvency has to be completed within the time period of 90 days from the commencement of the corporate insolvency resolution process and if required NCLT can extend the time period but not more than 45 days.

VOLUNTARY LIQUIDATION PROCESS

Voluntary liquidation process can take place if the corporate debtor intends to voluntarily liquidate the company or occurring of an event which was mentioned in articles of association will result in a liquidation of the company.

If the corporate debtor desires to liquidate its company and does not intend to defraud any of its creditors he can voluntarily liquidate the company.

For voluntary liquidation process, the corporate debtor has to submit a declaration stating that the corporate debtor does not intend to defraud anyone and either the company has no debts or he will be able to satisfy all the debts from the proceeds of the assets of the company.  

Through a resolution by the members of the company, an official liquidator will be appointed and NCLT on the application of the liquidator shall pass an order that the corporate debtor shall be dissolved. Corporate debtor will be declared dissolved from the date of such orders

The post Insolvency and Bankruptcy Code, 2016 – Key Highlights appeared first on iPleaders.