In this article, Darrelene Dias pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses Arguments against Uniform Civil Code.

Introduction

The Uniform Civil Code is mentioned in the Article 44, Part IV of the Indian Constitution in the Directive Principles of State Policy. The Article states that the state shall endeavour to secure for the citizens a UCC throughout the territory of India.

Uniform Civil Code is an endeavour to replace personal laws which are enforced throughout India.

These personal laws are founded on various religious customs and scriptures which are interpreted by religious leaders. Uniform civil code tries to establish a common set of laws for people belonging to all communities. These laws cover laws related to marriage, divorce, inheritance, maintenance and adoption. Different personal laws (Codified and Uncodified) practised in India are discussed below.

• The Indian Christian Marriage Act of 1872 (applicable to whole of India except areas of erstwhile Travancore- Cochin, Manipur and Jammu & Kashmir),
• Anand Marriage Act, 1909 (For Sikh marriages),
• Cochin Christian Civil Marriage Act of 1920 (applicable for Travancore-Cochin areas),
• Muslim Personal Law (Shariat) Application Act, 1937 (making Shariat laws applicable to Indian Muslims),
• The Parsi Marriage and Divorce Act, 1937
• Hindu Marriage Act, 1955 (applicable to not merely Hindus, Buddhists and Jains but also to any person who is not a Muslim, Christian, Parsi or Jew, and who is not governed by any other law). Hindu Widow Remarriage Act of 1856, Hindu Inheritance (Removal of Disabilities) Act, 1928, which is a significant move and paved way for Hindu woman’s right to property. Hindu Women’s Right to Property Act of 1937 was a significant step for assuring rights to women.
• Married Women’s Property Act of 1923

The Muslim religious and social bodies have primarily opposed any move towards the implementation of Uniform Civil Code. These are some arguments which are placed against the implementation of Uniform Civil Code.

Arguments against Uniform Civil Code

Secularist perspective

It is argued that implementing the Uniform Civil Code would destroy the secularism and diversity which is the cornerstone of India’s rich heritage. Implementation of the Uniform Civil Code will distort the right to practice and profess one’s religion freely.

This would also mean that the authority held by various religious leaders would be taken.

It is believed that individuals should be given the right to choose freely on how they would like to make important life decisions like marriage and inheritance.

Feminist perspective

It is very important to have the female voice representative while forming and implementing the Uniform civil code. It has been argued that while drafting the policy and implementation of the act the female voice from every community and class have to be considered. The crux of UCC is women’s rights. However, taking into consideration too many different standpoints may get complex. It has also been argued that a female voice will not be considered at all which causes more risk to the implementation of UCC.

Hence, implementation of UCC in a country like India will not be possible.

Religious perspective

Most Indian customs and practices are guided by their personal laws. This gives a sense of Identity. By the implementation of the UCC there will be a sense of loss to the religious and cultural sentiment of individuals. Hence, they will lose their sense of identity.

Customs like the dowry system is seen as “laxmi” or good fortune to the family the girl gets married into. Customs are not seen as detrimental to individuals. Hence, implementing the UCC is also seen as un-necessary and intrusion of the government in the private life or the family life of Indians.

It has been argued that individuals who wish to follow laws that are not religious in nature are free to do so but personal laws which are already implemented shouldn’t be meddled with.

Economic perspective

Many personal laws are economic in nature. As mentioned in the Section 3(1)(a) of the Muslim Women (Protection of Rights on Divorce) Act, 1986 which states that “a reasonable and fair provision and maintenance to be made and paid to her within the iddat period by her former husband”. Here, in cases like the Shah Bano case in the landmark decision held that a Muslim woman could obtain maintenance under Section 125 of the Code of Criminal Procedure. Uniform civil code will have to be implemented keeping in mind gender equality. If the woman is supposed to bring up the children the husband could pay for maintenance of the children. It is difficult to implement and draft a law that is fair to all gender.

Political perspective

India has a majority of Hindu population. With about 79.8% population of Hindus, it is believed that while drafting the Uniform Civil code it will cater to its majority.

The arguments against implementation of UCC are that the bill will be a guise to challenge the faith of the Non-Hindu population. It is also argued that it will propagate the very core of political influences which has a stronghold in India. These influences will try to spread the Hindu faith across India, making India, a complete “Hindu” nation. As idealized by many political parties. To quote Senior Congress leader Jairam Ramesh,

“The demand for UCC is a cloak for imposing Hindu Personal Law, which is actually deeply anti-women and has been made progressively more and more pro-women,”

Conclusion

The idea to implement a uniform civil code is to empower women to live out of their religious personal laws. The UCC is also implemented to do away with many archaic laws. If the UCC is implemented then India can match up to the cultural and social standards of developing countries that empower women.

Most importantly India needs a mindset change and an attitude change. It starts from empowering our women to live lives the way they choose to live. We have to encourage women to compete with men in their careers, encourage women to educate themselves and encourage households with shared responsibilities.

It is also important to educate children on the ideas of a progressive world. The education system and the media play a crucial role in the shaping of young minds. It is important to develop an education system based on modern ideas yet deep rooted in our traditional beliefs. The implementation of the policies will only happen when people and community see a need for it to happen. This need can be developed once the individual what is right and wrong. This mismatch between the existence of good laws and their actual implementation is itself a commentary on state capacity in India.

But despite many rightful laws in place, non-constitutional decision-making bodies like the khap panchayats and kangaroo courts have a greater influence on the implementation of personal laws. The khap panchyats overrule law implementation at the village level. While the social media like radio and newspaper try their best to influence their modern ideas at the village level the final say will always be of the ‘elders’.

The government has to keep a check on the khap panchayat and define their limitations and extent to implementing laws. The khaps are also functional due to stronger political forces which are difficult to do away with.

Uniform Civil Code should also cater to the rights of LGBT community. It should include the rights of marriage and re-marriage, property, adoption rights etc. By including the LGBT community the UCC moves beyond the religious personal laws making it inclusive in nature.

It is also important to understand that India is a country that has diverse cultures and religions. Religions are also a basis for identity and it is very difficult to do away with religious identity. If people sense that the state is taking away their sense of identity then there will be a rise in tension between the people and the state. The 2016 report on caste-based discrimination by the UN special rapporteur on minority issues noted that caste-affected groups continue to suffer exclusion and dehumanization.

Hence, the government needs to focus on two things, developing the education system and using the social media platform to bring out a mindset change in adults.

It is very important to shape the young minds of tomorrow. The ideas shared in textbooks should be liberal in nature. The teachers should encourage both young girls and boys to see themselves as equals. Every individual should be given enough opportunities to pursue their careers. The schools should focus on methodology and teaching mechanisms when dealing with young boys and girl at different age group. The staff and teachers should be sensitized to this need.

The government can use social media to give out strong messages. The government can tie up with local NGO’s to conducting short programs and activities for adults during village panchayat meetings. The NGO volunteers can perform skits based on the need for cultural change. During such interventions, the idea of Uniform Civil Code could be introduced. Adults literacy and cultural change go hand in hand.

India has to be ready both socially and culturally to accept this change. Only when we are culturally ready to implement the Uniform Civil Code law will the law be implemented in the rightful nature.

References:

1.http://www.business-standard.com/article/current-affairs/uniform-civil-code-what-kicked-up-the-issue-and-why-are-some-opposed-to-it-116101400374_1.html

2.http://scroll.in/article/730642/arif-mohammad-khan-on-shah-bano-case-najma-heptullah-was-key-influence-on-rajiv-gandhi

3.http://educoncours.com/2017/07/20/uniform-civil-code/

4.http://www.opindia.com/2016/10/this-is-why-bodies-like-muslim-personal-law-board-oppose-uniform-civil-code/

5.http://www.indiaonlinepages.com/population/hindu-population-in-india.html

6.http://www.thehindu.com/opinion/lead/good-laws-bad-implementation/article5639799.ece

7.https://www.hrw.org/world-report/2017/country-chapters/india

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In this article, Debarati Tripathi pursuing M.A, in Business Law from NUJS, Kolkata discusses legal framework and procedure for establishing a foreign company in India.

Introduction

The economic development of a country can be catalyzed by the influx of Foreign Direct Investment (FDI) as it can fuel growth in GDP by investing capital through FDI in various resources like infrastructure, manufacturing, technology, transport, services, productivity. India is an attractive hub for foreign investments in the manufacturing sector. With impetus on developing industrial corridors and smart cities, the government plans enormous development of the nation.

Key Advantages of Doing Business in India

Here are some key advantages of doing business in India,

1. Growth Potential: The world’s largest democracy and the 2nd fastest-growing major economy.
2. Stability of Government and Pro-Business: Political stability is vital to foreign investments. A pro-business work culture of the Government machinery with the business sector to promote economic growth.
3. Extensive Trade Network: Trade network backed by regional and bilateral free trade agreements with numerous trading partners helps leverage investor’s RoI.
4. Competitive Tax System: Competitive tax regime and comprehensive network of Tax Treaties, further modified by the introduction of Direct Taxes Code and the Goods and Service Tax – single tax for the whole nation.
5. Skilled Workforce: Highly-rated human capital base sought globally for – talent, knowledge and skills.
6. A Well – Developed Financial System: Well regulated financial system with access to developed capital markets as an alternative source of financing.
7. Robust Legal System: Efficient legal and judicial system, improved enforcement of laws.
8. Great Work Ethics: Professional manner of working and willing to learn.

Business Ventures in India

To set up a business venture in India, a foreign company has the following choices :

Form an Indian Company

To Form an Indian company, incorporation of a company under the Companies Act, 1956 through

1. Joint Venture with an Indian partner, for example, strategic collaborations with Indian partner organizations
2. Wholly owned subsidiary, set up a wholly-owned subsidiary in sectors which permit 100% Foreign Direct Investment [FDI] under the FDI policy. 100% foreign equity in such Indian companies is permissible, subject to equity caps prescribed in the FDI policy concerning the various areas of activity and depending on the investor’s decision.
3. Limited Liability Partnership (LLP), a new form of business structure in India, that combines the advantages of a company (a separate legal entity having perpetual succession) with the benefits of organizational flexibility associated with a partnership. The FDI policy for LLPs has been notified recently making this a possible viable entity form for Indian business operations of foreign investors.

For registration and incorporation, one has to file an application with the Registrar of Companies (ROC). Once such a company has been incorporated and duly registered as an Indian company, it is subject to Indian law and regulations as applicable to all other domestic Indian companies.

As a Foreign Company

The entry into India for a business venture via the mode of Registration of Liaison Office, Branch Office or Project Office requires RBI and/or Government approval. Hence, the cost and time taken for registration of liaison office, branch office or project office for a foreign company are higher as compared with the incorporation of a private limited company. Also, to open a branch office, liaison office or project office, one has to be an Indian, foreign nationals cannot do so, thus limiting the scope for foreign nationals.

Liaison Office/Representative Office

A Representative office acts as a communication channel or liaises between the headquarters or the principal place of business and offshore entities in India. Collecting information about business opportunities in the present market and providing information about the parent company and its products to prospective clients in the region, ie,. India is the main function of this office. The office can not undertake any commercial activity directly or indirectly and therefore cannot have any income/earnings in India. Examples of permitted activities are the promotion of export/import from/to India and also facilitation of technical/financial collaboration between the parent company and companies in India.

The Reserve Bank of India (RBI) is the body that approves establishing a liaison office in India.

Project Office

Temporary project/site offices are frequently set up by foreign companies when they expect to execute specific projects in India. Project offices cannot take up or initiate on any activity other than those relating to the execution of the project. A general permission to foreign entities to establish Project Offices is granted by the RBI, subject to specified conditions. The offices may remit any surplus funds outside India once the project gets completed, general consent for which has been granted by the RBI.

Branch Office

Typically Branch offices of a foreign company carrying out manufacturing and trading activities abroad are set up in the region/market of manufacture for the following purposes:

• Import/Export of goods/merchandise – raw material and finished product.
• To bring about better technical/financial collaborations between Indian companies and the parent or overseas group company.
• Providing consultancy, advisory or professional services.
• Supplementing research work and experimentation, in which the parent company is engaged – more economical.
• Catering to software development and Information Technology services.
• Authorized buying/selling agents in India for the parent company.
• Providing technical support to the products coming from the parent/ group companies and troubleshooting any local issues.

The Reserve Bank of India (RBI) is the authority responsible for approving Branch office permissions.

Manufacturing activities have certain restrictions. A branch office is not permitted to carry out manufacturing activities by itself but are prescribed to subcontract these to an Indian manufacturer. The profit of the branch may be remitted outside India for Branch Offices subject to the approval from RBI. The remittance is net of applicable Indian taxes and subject to RBI guidelines.

Branch Office on “Stand Alone Basis”

Standalone Branch offices are those that are isolated and set up in the Special Economic Zone (SEZ) or Export Oriented Unit (EoU). Due to the specific nature and purpose of setting up and demarcation of the EoU/SEZ, approval from RBI shall not be necessary for a company to establish a branch/unit in the SEZs for manufacturing and service activities, subject to specified conditions. No business activity/transaction will be allowed outside the EoU or SEZs in India, including with branches/subsidiaries of its parent office in India.

Foreign Direct Investment (FDI)

The entry of FDI by non-residents into India is controlled by the Government through two routes –the automatic route and approval route. The automatic route is less restricted and more liberal and aimed for prescribed sectors and levels of investment. While in the case of approval route, FDI is allowable in all sectors and activities specified in the consolidated FDI policy of the government, however, requires prior approval from the RBI/Government and is scrutinised depending on the sector and the nature of the investment.

New Ventures

FDI investment up to 100% is possible in new ventures, under the automatic route, except 

• Proposals outside the purview of notified sectoral policy
• Foreign partner having a previous venture in India
• Proposals under a sector in which FDI is prohibited
• Proposals that require Industrial License namely;
  • Distillation and brewing of alcoholic drinks.
  • Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
  • Electronic Aerospace and defence equipment of all types.
  • Industrial explosives including detonating fuses, safety fuses, gunpowder, nitrocellulose and matches; Hazardous chemicals.
  • Drugs & Pharmaceuticals (according to modified drug policy issued in September ‘Foreign Investment in Existing Companies for Expansion Plans

• If they are engaged in industries under the automatic route.
• If the increase in equity level is for expansion of equity base.
• If the foreign equity is in foreign currency.

FDI in Small Scale Industries (SSI) Sector

The current FDI norms restrict a ceiling of 24 percent FDI for companies in the small scale industries sector (SSI) having capital investment in plant and machinery not exceeding Rs. 50,000,000 (USD 1,250,000). Further, SSI units with foreign investment exceeding the notified sectoral cap are liable to lose their status as SSI units, but there is no bar on higher foreign equity holding as such. Under the relaxed norms, SSI units are eligible to raise foreign equity in accordance with the caps/limits governing the sectors in which they operate, thereby improving their access to technology and capital and assisting in the growth and modernization of the sector.

If SSI manufactures items reserved for SSI, foreign investment beyond 24% would require an industrial license with a 50% mandatory export obligation.

Foreign Direct Investment (FDI) Procedure

Automatic Route

• FDI under automatic route is now allowed in quite a few sectors, including the services sector, except a few where the existing and notified sectoral policy prohibits FDI beyond a ceiling limit for Indian companies to accept investment without prior approval of RBI.
• To file required document and report in Form FC-GPR with concerned Regional Office of RBI within 30 days after the issue of shares to foreign investors.
• The facility is available to NRI/OCB investments also.

Government Approval

All FDI proposals other than those under automatic route are considered for Government Approval on the recommendations of the Foreign Investment Promotion Board (FIPB)

• The prescribed application is to be submitted to the Secretariat of Industrial Approvals (SIA), in New Delhi.
• Applications can also be submitted to Indian Mission abroad who in turn forward them to SIA.
• The Proposal received by SIA is placed before FIPB within 20-30 days.
• The FIPB has the flexibility of purposeful negotiations with the investors.
• RBI has granted a general permission under FEMA(Foreign Exchange Management Act) with regard to proposals approved by Government.
• Indian companies do not require separate clearance from RBI for receiving inward remittance and issue of shares once FIPB approval is available.
• An Indian company, issuing shares as prescribed in the Regulations should submit the details of advance remittance to the RBI, no later than 30 days from the date of receipt of the amount of consideration, giving the following details
  • Name and address of the foreign investors
  • Date of receipt of funds and their equivalent in Indian rupee
  • Name and address of the Authorized Dealer(Authorized Banks) through whom the funds have been received, and
  • Details of the Government approval, if any.
• Once the shares are issued, the company is required to file a report in Form FC-GPR no later than 30 days from the date of issue of shares with the Regional Office of RBI in the place where the registered office of the company is situated.

Documents and Information Required for FIPB Application

The FIPB application requires a comprehensive project report – executive summary (ES) to be submitted. The contents of the ES and further information may follow later,

1. The ES should be accompanied by the copy of the Annual Report (Balance Sheet and Profit and Loss Account) of the Foreign company.
2. Copy of the foreign company’s profile, product/service profile also required.
3. Board resolution of the Board of the foreign company agreeing to the sale of shares and consideration thereof.
4. Declaration by the foreign company that it has no other collaboration, financial or trade agreement or technical assistance agreement in India with another company under the same or allied subject.
5. This declaration should be replaced with no objection from the Indian Company, expressing it has no objection to the shares being acquired by the overseas company.
6. An authority Letter, to apply, follow up and obtain the FIPB approval from the foreign company.
7. These documents should be filed under the Cover letter of the acquirer company requesting approval of the Secretary (Chairman) Foreign Investment Promotion Board.

Process & Documentation required for Incorporation of a Company, to open a Branch Office/Liaison Office in India

The Process of Incorporation of a Company in India

1. An application in Form 1A of the Companies (Central Government’s) General Policy Forms, 1956 setting out the names of the company in order in preference, is to be filled with the Registrar of Companies along with the prescribed fee. (Rs 500/- presently).
2. The Memorandum and Articles of Association of the proposed company is required to be drafted.
3. There should be at least two subscribers to the Memorandum and Articles of Association in case of a private limited company and minimum of seven subscribers in case of public limited company. As per the Indian laws at present foreign nationals and foreign companies, through authorized representatives, can subscribe to the Memorandum and Articles of Association of a company without the prior approval of the Reserve Bank of India.
4. If the name of the Parent Companies is proposed to be part of the name of the company, then a No Objection Certificate addressed to the Registrar of Companies is required to be submitted, by way of Board resolution.
5. The subscribers shall obtain the name approval and subscribe to its Memorandum and Articles of Association. The minimum capital to be subscribed by the Memorandum of Association is Rupees 100,000/- (Rs. One hundred thousand only)(US$ 2000 approx) in case of private limited company and Rupees 500,000/- (Rs. Five hundred thousand only)(US$ 10000 approx )in case of public limited company.
6. Authorized Capital would be dependent on the Funds requirement of the new Company. Filing fees depend on the proposed Authorized Capital of new Company.
7. The Memorandum and Articles of Association is required to be stamped as per the Indian Stamp Act, and signed by the subscribers at the relevant page in their own handwriting.

Following documents are required to be filed, signed and filed along with the Memorandum and Articles of Association of the proposed company :

1. Declaration of compliance in Form 1.
2. Notice of the location of the registered office of the company in Form 18.
3. Particulars of Directors (name of the Directors, father’s name, address, age and nationality of the nominee directors) in Form 32.
4. Consent of the Directors in Form 29 (in case of a public limited company).
5. Power of Attorney to make corrections and submissions.
6. Approval for Foreign Investment (if applicable).

All the documents referred to above are required to be filed for registration within six months from the date of availability of name along with registration fee, which is calculated on the basis of the authorized capital of the company. The Registrar of Companies after scrutinizing the documents registers the company and issues certificate of incorporation. Private Company is eligible to commence its business immediately after obtaining the certificate of incorporation. However, public companies are required to obtain a certificate of commencement of business before initiating any business activity.

Documents Required for the Incorporation of Indian Subsidiary of a Foreign Company

At the Time of Filing Application for “Availability” of Name

1. No objection by way of Board Resolution from “FOREIGN COMPANY” for Incorporating the Joint Venture Company in India duly notarized and certified by Indian Embassy/Consulate in the Foreign Company.
2. Memorandum and Articles of Association (Charter) of “FOREIGN COMPANY” duly translated into English.
3. Name, address and father’s name of proposed Equity Shareholders and Directors of the Indian subsidiary.

Points to note – At the Time of Incorporation of a Company 

1. Authorization vide Board Resolution, for the signing the Memorandum and Articles of Association and other documents for Incorporation of the company in India, translated into English, duly notarized and certified by Indian Embassy/Consulate in Foreign Country.
2. Memorandum and Articles of Association (charter) of “FOREIGN COMPANY” to be duly translated in English, duly notarized and certified by Indian Embassy/Consulate in Foreign Country.
3. Authorization by the attorney/representative vide Board Resolution, for representing the Company before the Registrar of Companies and making corrections if any at the time of Vetting of Memorandum and Articles of Association and other documents for Incorporation of the company in India duly notarized and certified by Indian.
4. Embassy/Consulate in Foreign Country.
5. No objection vide Board Resolution, of “FOREIGN COMPANY” for Joint Venture Company in India, translated into English, duly notarized and certified by Indian Embassy/Consulate in Foreign Country.

Requirements to Open a Branch/Liaison Office of a Foreign Company in India

The Reserve Bank of India considers the track record profitability, existing business in India and Financial position of the applicant company while approving. It may sometime give conditional permission, so the Branch or Liaison Office shall have to operate in India subject to compliance with such conditions.

Documents Required to be Filed along with the Application

• English version of the Certificate of Incorporation / Registration or Memorandum & Articles of Association of the applicant company attested by Indian embassy and Notary public in the country of registration.
• Latest audited Balance Sheet of the applicant (preferably Last 3 years).
• Power of attorney /authorization in favour of Chartered Accountant/Consultant in India to follow up the approval matter and to represent the applicant company with the Reserve Bank of India.
• Board Resolution of the applicant company covering,
  • Decision to open an office in India.
  • Authorizing official /director of the applicant company to sign the application for approval and follow up /represent the applicant before the Reserve Bank of India.
  • Details about the operation of proposed bank account in India.

Following Information would be Required

• Name and address of the applicant.
• Date and place of incorporation /registration of the applicant.
• Details of Capital of the company i.e paid up capital and free reserves as per the last audited balance sheet.
• Description of the activities of the applicant.
• Details of the activities /services proposed to be undertaken in India.
• Place where the office would be located in India.
• Details of Staff who will manage the office.
• Particulars of existing arrangements, if any, for representing the company in India.
• Further the Liaison office is required to file an undertaking to the fact that all expensed in India by such office shall be met out of inward remittance received from the parent company abroad.

Requirements to Open a Project Office of a Foreign Office in India

A foreign Company may open a Project Office/s in India provided.

• It has secured from an Indian company a contract to execute a project in India, and.
• % of the project is funded directly by inward remittance from abroad; or
• The project is funded by a bilateral or multilateral International Financing agency; or
• The project has been cleared by an appropriate authority ;or
• A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
• Project office shall not undertake or carry on any other activity other than the activity relating and incidental to execution of the project.

Documents Required to be Filed

• English version of the certificate of incorporation/registration of Memorandum & Articles of Association attested by Indian Embassy/Notary Public in the country of registration.
• Latest Audited Balance Sheet of the applicant company/firm.
• Documentary evidence that the Project is funded by bilateral or multilateral International Financing Agencies OR the project has been cleared by the concerned regulatory authority, OR the Indian company has been granted term loan for the concerned Project by a Financing Institution or a Bank in India.
• Power of attorney /authorization in favour of Chartered Accountant/Consultant in India to follow up the approval matter and to represent the applicant company
• Board Resolution of the applicant company covering
  • Regarding decision to open a Project office in India.
  • Authorizing official /director of the applicant company to sign the documents and follow up / represent the applicant before the Reserve Bank of India.
  • Details about the operation of proposed bank account in India.

Following Information would be Required

• Name and Address of the foreign company.
• Reference No. and date of letter awarding the contract referred to in clause (ii) of Regulation 5.
• Particulars of Authority awarding the Project/Contract.
• Total amount of contract.
• Address and tenure of Project Office.
• Nature of Project undertaken.

Conclusion

In conclusion, registration of a Company had been a major hassle for entrepreneurs looking to set up their businesses in India, was ranked 142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business. However, the introduction of INC-29, a five-in-one form introduced by the Ministry of Corporate Affairs (MCA) in May 2015, is an active step to address the ease of doing business matter.

The INC-29 significantly reduces interaction with the authorities through the clubbing of forms for DIN allotment, name reservation, incorporation, PAN & TAN, as well as ESIC registration. Supporting documents and information need to be submitted on the MCA’s e-biz (ebiz.gov.in) portal, as these are yet to be integrated electronically.

A report released by tax consultancy giant EY in October 2015, highlights that India is considered the most attractive market by international investors, ranking India as the premier choice for investors worldwide, with 32 percent of respondents ranking it the most attractive market. India’s outlook among investors has improved, that India would be among the top three economies by 2020, is the view of 37%, against 29 percent last year. Existing investor experience has been encouraging, with 70 percent of businesses, which already operate in India extending support to that idea.

References

http://www.icec-council.org/wp-content/uploads/2015/12/POLICIES-PROCEDURES-TO-START-A-COMPANY-IN-INDIA.pdf

https://www.iaccindia.com/userfiles/files/Doing_Business_in_India-%20A%20Business%20Guide.pdf

https://www.mea.gov.in/images/pdf/DoingBusinessinIndiaGuide.pdf

http://www.cgitoronto.ca/documents/Setting%20up%20Company%20in%20India.pdf

https://www.pwc.de/de/internationale-maerkte/assets/doing-business-in-india.pdf

http://www.iberglobal.com/files/2017/india_dezan_shira.pdf

http://www.ey.com/Publication/vwLUAssets/India_-_Doing_Business/$FILE/Doing%20Business%20in%20India.pdf

http://www.leadingedgealliance.com/thought_leadership/Top%2010%20Things%20to%20Know%20About%20Doing%20Business%20in%20India.pdf

http://www.indialegalhelp.com/files/doing_business_india.pdf

http://www.startupentity.com/pdf/procedure_for_Branch_office.pdf

http://www.business-standard.com/article/economy-policy/india-most-attractive-investment-destination-globally-says-ey-report-115101400204_1.html

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In this article, Parth Sarthy Kaushik discusses how can a foreign company access Indian securities market to raise funds.

A foreign company desirous of accessing Indian securities market for the purpose of raising funds is not permitted to directly list its equity shares on an Indian stock exchange and can only issue Indian Depository Receipts (IDRs). IDR is a rupee denominated negotiable financial instrument which can be listed and publicly traded on an Indian stock exchange. It represents the underlying equity shares of a foreign listed company. Thus, IDRs allow Indian investors to diversify their investments by providing access to the shares of foreign companies at a lower cost and better terms. Further, it provides foreign companies with brand recognition in the Indian market and opportunity to expand their investor base.

Eligibility to Issue IDRs

A company shall, in addition to the directions issued by SEBI and RBI from time to time, meet the following criteria to be eligible to make an issue of IDRs:-

As per Rule 13 (2) of the Companies (Registration of Foreign Company) Rules, 2014

• Its pre-issue paid-up capital and free reserves are at least USD 50 million and it has a minimum average market capitalization (during the last three years) in its parent country of at least USD 100 million.
• It has been continuously trading on a stock exchange in its parent or home country (the country of incorporation of such company) for at least three immediately preceding years.
• It has a track record of distributable profits in terms of section 123 of the Companies Act, 2013 for at least three out of immediately preceding five years.
• It fulfils such other eligibility criteria as may be laid down by the Securities and Exchange Board of India from time to time in this behalf.

As per Regulation 97 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR)

• The issuing company is listed in its home country.
• The issuing company is not prohibited to issue securities by any regulatory body.
• The issuing company has track record of compliance with securities market regulations in its home country.

As per Rule 4 of the Companies (Issue Of Indian Depository Receipts) Rules, 2004 (IDR)

• Its pre-issue paid-up capital and free reserves are at least USD 100 million and it has had an average turnover of USD 500 million during the 3 financial years preceding the issue.
• It has been making profits for at least five years preceding the issue and has been declaring dividend of not less than 10% each year for the said period.
• Its pre-issue debt equity ratio is not more than 2:1.

Process of Issuance of IDRs

As per Rule 13 (3) of the Companies (Registration of Foreign Companies) Rules, 2014 the process for the issuance of IDRs is very similar to an initial public offering (IPO) by a domestic company and broadly involves the following procedure:

1. Preparation of draft prospectus which is to be filed (along with a due diligence report) with the Securities and Exchange Board of India (SEBI) at least ninety days prior to the opening date of the IDR issue.
2. Once SEBI grants principal approval to the issue, a prospectus, which shall incorporate all the changes and suggestions made by SEBI, is required to be filed with both SEBI and the Registrar of Companies (RoC).
3. Appointment of an overseas custodian bank and a Domestic Depository for the purpose of issue of IDRs.
4. Deliver the underlying equity shares to the Overseas Custodian Bank which in turn shall authorize the domestic depository to issue IDRs to the investors through a public offer.
5. Obtain listing permission from one or more stock exchanges having nationwide trading terminals.

It is to be noted that the Trading and settlement procedure for IDRs is similar to the one prescribed for Indian shares.

Who can Invest in IDRs?

Any person who is a resident of India as defined in Section 2 (v) of the Foreign Exchange Management Act, 1999 can invest in IDRs. As per Regulation 98 of ICDR Regulations, 2009 the minimum application amount in an IDR issue shall be Rs. 20,000 and at least 50 % of the IDRs issued shall be subscribed by Qualified Institutional Buyers (QIBs). Further, a minimum of 30% of IDRs being offered in the public issue are required to be allocated to retail individual investors (However, exemption can be given in the case of under subscription in retail individual investor category).

Rights of IDR Holders

IDRs are similar to equity shares and IDR holders are entitled to same rights (such as entitlement to bonus issues, dividends and rights issues etc.), except attending Annual General Meeting and voting on special resolutions, as are enjoyed by the shareholders of the issuer company in its parent country.

The rights available to an IDR holder are exercised in accordance with the depository agreement (which is also summarised in the draft prospectus) through the domestic depository and overseas custodian bank.

Distribution of Benefits

The process is similar to distribution or corporate action by any domestic Indian company. On the receipt of dividend or other corporate action on the IDRs, the Domestic Depository notifies IDR holders of such distributions and follows the following process:

1. Bonus Issue – The proportionate IDRs are credited into the dematerialised account of the IDR holders.
2. Rights Issue – The Domestic Depository makes application forms available to the IDR holders and IDR holders are required to apply for their proportionate rights. Thereafter, the Domestic Depository credits the IDRs to the dematerialised account of the relevant IDR holders.
3. Dividend – The cash dividend is either credited to a bank account or warrants are dispatched to IDR holders.

It is to be noted that if, for any reason, it is not possible to distribute underlying equity shares then such underlying equity shares or interest in such underlying equity shares is generally sold by the Domestic Depository and the resulting cash (excluding certain fees and expenses) is paid to the IDR holders.

Conversion of IDRs into Equity

IDR holders can convert/redeem IDRs into the underlying equity shares after one year from the date of issuance, subject to the compliance of the Foreign Exchange Management Act, 1999 and regulations issued by SEBI and the Reserve Bank of India (RBI).

However, IDR holders are permitted to convert only up to 25% of their originally issued IDRs into underlying shares in a financial year (See, SEBI Circular dated August 28, 2012) and this option can be exercised during the Fungibility Window i.e. the time period specified by the issuer company during which IDR holders can apply for conversion/redemption of IDRs.

Further, SEBI requires the issuer company to fix and declare the total number of IDRs available for conversion/redemption before the opening of the fungibility window and 20 % such IDRs are required to be reserved for retail investors.

It is pertinent to note that the SEBI norms on Redemption of Indian Depository Receipts (IDRs) into Underlying Equity Shares provides for two-way fungibility i.e. fungibility is not restricted to just conversion of depository receipts into equity shares but also provides for underlying shares to be converted into IDRs.

Conclusion

Indian Depository Receipts allows foreign companies to access Indian capital and provide tremendous opportunities in terms of branding by becoming part of the Indian growth story. Further, foreign companies looking to expand their business operations in India can use IDRs as a tool to raise acquisition currency (i.e. the money raised through IDRs can be used to structure various investments and acquisition transactions in India). Therefore, it is expected that a surge in the popularity of IDRs is inevitable as Indian economy keeps on improving and creating a tremendous interest among foreign companies to step up their business operations in India.

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In this article, Kashish Sinha pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses Limitation of Liability clause and its enforcement under Indian contracts.

A contract executed between two parties consists of a certain set of promises in lieu of consideration. But parties can choose to perform and provide consideration without any existence of a contract as well, so what purpose does a contract serve? The essence of any contract between two parties is liability which may be enforced upon the party which defaults on its obligations under the contract. This liability allows a party to recover costs for any defective or incomplete performance as may have been set out. Absence of affixation of liability would have resulted in the contract having no legal, or practical, value whatsoever.

But can a contracting party seek to limit its liability, or absolve itself in certain circumstances? For instance, if a dry-cleaning service accidentally damaged an expensive dress, seeking full compensation for such service for the dress would, in effect, bankrupt such a service provider. In such situations, parties to a contract may choose to include limitation clauses within the contract. These limitation clauses seek to limit the liability which can be imposed upon the party contravening the contract. An example of such a clause existing within the contract includes:

For a dry cleaning service

“XYZ Dry Cleaners shall be liable for a maximum compensation of Rs. 1,000/- for any damage which may have been caused as a result of the service provided”.

The existence of such a clause ensures that even if the dress may cost in thousands, or lakhs, the liability of the service provider is limited to only Rs. 1,000. The limitation, incorporated on part of the dry-cleaning service provider, ensures that he or she does not lose commercial value in providing such a service. It ensures that the service provider is liable for the damage in proportion to the service provided and not for the entire transaction of purchasing the dress. Incorporation of such a clause in the contract (which may include a receipt in the present instance) also ensures that the party using such a service cannot feign ignorance and accepts the risk which may be associated with the service itself.

Liability can be limited in two ways: in terms of money by ensuring liquidated damages are agreed upon, as was the case in the dry cleaning instance or by the time period, i.e. by limiting the time period in which the damage caused in service can be remedied. We shall be attempting to go through the legal understanding of these type of limitations, and also understand the difficulties that may actually arise in enforcing these clauses.

Limitation of liability in terms of money

If the “limitation of liability” clause exists within the contract which stipulates a certain sum of money which is to be paid when the contract is breached, such stipulated penalty can be enforced under Section 74 of the Indian Contract Act, 1872. However, the penalty being enforced in this situation would not exceed the penalty which has been stipulated within the clause of the contract.

For instance, if the clause of the contract stipulates that the maximum compensation provided will be Rs. 10,000/-, then the penalty cannot exceed Rs. 10,000/-.

An important thing to understand while drafting such a limitation of liability clause is that the penalty is to be determined keeping into account a fair estimation of damages which would amount from the breach. The money stipulated cannot reach exorbitant levels such that the penalty would exceed the damage caused.[1] For instance, one cannot claim a penalty of Rs. 10,000/- on a damage caused on a dress which itself cost only Rs. 500/-.

This leads us to the second principle of drafting such a clause, that it should specify a maximum amount, but state that the penalty shall not exceed that particular amount. This is to ensure that the balance between the breach actually caused and the penalty to be levied is actually maintained, and the courts on their discretion can determine the value of the penalty to be levied to the breach actually caused. If the clause includes “not exceeding Rs. 10,000”, it allows any amount less than 10,000 to be levied as well depending upon the circumstances of the breach. But if the clause is worded as “Rs 10,000 shall be paid for breach” it would result in Rs 10,000 being levied for even the smallest of breaches, thus causing a disproportionate penalty to be levied.

Thus the two important requisites which always have to be considered include (i) a reasonable amount actually being stipulated as the penalty. (ii) an upper threshold being attached to such an amount.

Additionally, limitation clauses may be specific for breaches for specific nature. For instance, a dry cleaner can specify a sum of money of unclean laundry or a higher sum for excessive bleaching etc.

Limitation of liability in terms of timeline for damages to be enforced

Limitation clauses which restrict liability only for the timeline in which breach is to be enforced are under contemplation of Section 28 of the Indian Contract Act. In its initial version, it was held that such clauses which sought to reduce the time available for enforcement of rights under the Contract Act would not violate the Act and hence can be upheld. This proposition was also affirmed in the case of The New India Assurance Co Ltd v Radheshyam Motilal Khandelwal[2] by the Bombay High Court.

However, the 97^th Law Commission Report clarified that Section 28 did not allow the parties to stipulate their own time for limitation, which the Courts were allowing through the ‘prescription’ route, i.e. a situation where parties were allowed to extinguish a right to sue if not exercised within a certain time. The earlier Section 28 provided for contracts to be held void only if it barred exercising of a legal right, and did not bar extinguishing an entire right in itself, if not exercised.

The prescription of a time duration merely extinguished a ‘right’, it did not interfere with the ‘remedy’, as Section 28 sought to prohibit.[3] However, Section 28 itself was amended in 1997, which then disallowed parties to stipulate time within which such rights would be extinguished which would result in the discharge of the liability of the parties themselves. A number of decisions since then have resulted in clauses limiting the time in which such rights can be enforced as void.[4]

However, a new amendment (Banking Laws Amendment Act, 2012) provides for an exception to this section, which provided for allowing banking and financial institutions in agreements for guarantee to provide a time limitation clause as long as it is one year within the date of occurrence of such an event.

As a result, liability cannot be restricted in terms of time for the contracting parties, unless one of the contracting parties is a bank or a financial institution which is carrying out a guarantee contract. Even in such a scenario, the bank or financial institution cannot stipulate a time which is less than one year post the occurrence of event on which such a guarantee was provided.

Limitation clause application in various other provisions

Under the Consumer Protection Act, a limitation of liability clause has been considered to be valid to which the parties have specifically agreed.[5] However, if the clause is considered to be unconscionable in nature, i.e. that it does not balances the interests of both the parties, then such a clause may not be enforced.[6]

Standard form contracts in e-commerce

A growing concern in this arena arises through the existence of standard form contracts which are constantly used by the e-commerce players. These contracts may consist of certain limitations of liability which would reduce the liability the platform may have to incur in case of deficiency of services from such players. The reluctance of the consumer to read and understand these contracts makes such liability susceptible to be accepted without understanding of actual implications.

As a result, it has been suggested on various forums mechanisms which would impose timelines before the customer is allowed to agree the contract, so as to ensure that he or she attempts to read such a contract, or placing such limitation clauses near the agreement part of the contract.

Conclusion

Limitation of liability clauses are one of the best sources of indicators of what the contracting parties intended to execute as a part of their contract. For contracts which may be considered unconscionable or unbalanced between both the parties, the nature of such a clause helps in understanding the balance existing between these parties. But a lot regarding such clauses depend upon how they are actually executed between the parties, and how well they are drafted. It is important to understand the significance of both determining the liability proportional to the breach caused and ensuring that the liability is an upper limit while drafting a limitation on liability. It is also a keen concern to avoid ambiguities and nullities in contract by not drafting any time limitations unless one of the contracting parties is a party eligible under Section 28, Limitation on liability of contract is here to stay!

References

[1] ONGC v Saw Pipes (2003) 5 SCC 705.

[2] The New India Assurance Co Ltd v Radheshyam Motilal Khandelwal AIR 1974 Bom 228.

[3] National Insurance Co. Ltd v Sujir Ganesh Naik AIR 1997 SC 2049.

[4] Explore Computers Pvt Ltd v Cals Ltd 131 (2006) DLT 477.

[5] Bharathi Knitting Company v DHL Worldwide Express Courier (1996) 4 SCC 704.

[6] Maruti Udyog v Sushil Kumar Gabgotra (2006) 4 SCC 644.

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In this article, Nakul Sharma pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses Jurisdiction of Indian Courts on International Commercial Arbitration.

ARBITRATION

• Arbitration is the settlement of disputes between the parties, in which the parties by mutual consent agree to submit the dispute to the one or more number of arbitrators who tries to settle the dispute between the parties by making a binding decision on the dispute. Arbitration is a way of settling the dispute outside the courts.
• According to section 2 (1)(a) of The Arbitration and Conciliation Act, 1996 “arbitration” means any arbitration whether or not administered by permanent arbitral institution.[i] The arbitrator is the neutral third party and the arbitration proceedings are conducted privately unlike courts.
• Arbitration and Conciliation Act, 1996 (amended in 2015) is an act that deals with domestic arbitration, international commercial arbitration and with the enforcement of foreign arbitral awards.

INTERNATIONAL COMMERCIAL ARBITRATION

• As per section 2 (1)(f) of The Arbitration and Conciliation Act, 1996 (amended in 2015), “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is,
  • An individual who is a national of, or habitually resident in, any country other than India; or
  • A body corporate which is incorporated in any country other than India; or
  • An association or body of individuals whose central management and control is exercised in any country other than India; or
  • The Government of a foreign country.[ii]
• International Commercial Arbitration is an arbitration where the matter involved is a cross-border dispute and the parties do not want to get into filing of case in national courts. International Commercial Arbitration, in this manner helps the parties get rid of the long and technical procedure of the courts.
• International Commercial Arbitration, unlike the pre-established rules and procedure of the law, works on the terms and the manner previously decided by the parties in the arbitration agreement. The whole procedure of arbitration revolves around the arbitration agreement previously signed between the parties and revolves around the same.

ARBITRATION AGREEMENT

• As per section 7 (1) of The Arbitration and Conciliation Act, 1996 (amended in 2015) “arbitration agreement” is an agreement that is submitted by the parties for the purpose of arbitration of all or some of the specific, which have arisen or which might arise between the parties. The relation between the parties has to be a legal relationship, which may or may not be a contractual relation. [iii]
• As per section 7 (2) of the aforementioned act, here can be a whole separate agreement for the arbitration agreement or it can be in the form of an arbitration clause in an arbitration agreement.[iv]
• As per section 7 (3) of the act, the arbitration agreement has to be in writing.[v]
• As per section 7 (4) an arbitration agreement is considered to be in writing if it is contained in-
  • A document signed by both the parties
  • An exchange of letters, telegrams, information through electricity, which also includes telecommunication.[vi]
  • If in a contract, a reference has been made to the document to make the arbitration clause part of the agreement, then the part that consists of arbitration clause is considered to be arbitration agreement, as a whole, provided that the contract is in writing and the intention is to make the arbitration clause part of the agreement.

International Commercial Arbitration – The Indian Perspective

• As mentioned above, international commercial arbitration is an arbitration that deals with commercial matters, wherein the parties may be of a foreign nation or a resident there or an association or a company incorporated there.
• The same analogy is followed by Indian law. When the seat of arbitration is in India but at least one of the parties is a foreign national, then such matters would be dealt under the provisions of ICA, i.e., International Commercial Arbitration and are dealt under part 1 of “The Arbitration and Conciliation Act”. However, if the seat of arbitration is outside India, then part 1 would not be applicable and such matters would come under the ambit of part 2 of the act.

WHEN THE SEAT OF INTERNATIONAL COMMERCIAL ARBITRATION IS IN INDIA

The following laws would apply to ICA (International Commercial Arbitration), when the case falls under part 1 of the act, i.e., when the seat of the arbitration is in India.

Notice of the Arbitration

It is the first step in any arbitration proceeding. One party sends notice to the other party, asking for the settlement of the dispute through arbitration. Therefore, it implies the requirement of the following elements:

• There should be an intention of the party submitting the notice to refer the matter to arbitration.
• The party notifying should ask the other party to settle the dispute through arbitration

Court’s reference for arbitration

As per section 8 of “The Arbitration and Conciliation Act, 1996”, if the party before the judicial authority, applies for referring the case to arbitration by submitting an application along with the original copy of the arbitration agreement on the date of submitting its first statement itself, then the judicial authority is bound to accept such application and refer the parties to arbitration. If these requirements are complied with then such judicial authority would not give any negative judgment, i.e., it cannot deny the parties to refer to arbitration in spite of any judgment, decree or order of the Supreme Court or any Court, unless the court feels that prima facie there is no arbitration agreement. However, if the party fails to submit the original arbitration agreement or a duly certified copy thereof, then such application can be dismissed.

If the original arbitration agreement or the certified copy is not available with the party or is retained by the other party, then in such a situation the party applying will submit the application along with the copy of the agreement and shall file a petition, praying to the court to order the other party to submit the original arbitration agreement or its duly certified copy, to the court. If the application that has been submitted under sub-section (1) is pending before the judicial authority, the parties may commence or continue the arbitration and an arbitral award can also be made.[vii]

Interim reliefs in Arbitration

Interim relief is available to the parties under section 9 and section 17 of The Arbitration and Conciliation Act, 1996. Under section 9, interim relief is granted to the parties by the court and under section 17, interim relief is granted by the arbitral tribunal. The objective of this provision is to provide security to the party seeking relief until the final decision is given.

Appointment of arbitrators

Section 11 of the act provides for the appointment of arbitrators. The arbitrator can be of any nationality unless otherwise agreed by the parties. The parties have to appoint one arbitrator each and both the arbitrators have to further appoint a third arbitrator, within thirty days, since the arbitrators are required to be an odd number. However, if there are even number of arbitrators, for example there are two arbitrators and both the arbitrators give the same decision, then, in that case, there is no boundation of having a third arbitrator.[viii]

Grounds for challenging the appointment of an arbitrator

An arbitrator is required to act in an independent and impartial manner. These are the basic two requirements that have to be there in an arbitrator. If he is found to be partial and dependent, then his appointment can be challenged. Moreover, if he does not possess the qualifications that are agreed to by the parties then in that case also his appointment as an arbitrator can be challenged. The arbitrator is also required to solve the dispute in a time bound period.

Basics of the proceedings

The parties are needed to be flexible in terms of the procedure, place and language of the arbitration. The arbitral tribunal has the power to decide that in what sequence the evidence are to be examined. The parties can also settle the dispute through a mutual consent or it can be settled by the arbitral tribunal a well. After the decision is given it is recorded as an arbitral with the consent of both the parties and the arbitral tribunal as per section 30 of “The Arbitration and Conciliation Act, 1996”.

Cost of the arbitration

The arbitral tribunal decides the cost of the arbitration and that how much amount each party has to pay. If a party refuses or fails to pay the legal and administration fees, then the tribunal in such a case refuse to give the award. After refusing to pay, the parties can approach the court and the court can further give its decision on the cost.

Application for setting aside arbitral award

If a party is not satisfied with the decision of the tribunal then it can make an application to the court under section 34 of the act to set aside the arbitral award. For example, if the party making the application was not given proper notice of the appointment of the arbitrator, or if a party was under some incapacity, or if the arbitration agreement is not valid, or if the arbitral award is not related to the dispute, or is against the terms of submission to arbitration, or the matters that are not appropriate to submit to the arbitration.

As per section 34 (2-A), an arbitral award arising out of arbitrations other than international commercial arbitration may also be set aside, if the award made is illegal in nature.

The application to set aside the award has to be made within three months from the date of receiving of the award, unless there is a sufficient reason due to which the party could not apply within the required time. In such a case the court can entertain the application to set aside the arbitral award within a further period of thirty days.[ix]

Appeals

An appeal can be filed for the following situations:

• Refusal to provide interim relief under section 9 and section 17
• To set aside the arbitral award under section 34[x]

Finality and Enforcement of arbitral award

The arbitral award becomes binding on both the parties under section 35 of the act and is considered to be the same as an order passed by a court of law based on the provisions of the Code of Civil Procedure, 1908.

WHEN THE SEAT OF INTERNATIONAL COMMERCIAL ARBITRATION IS OUTSIDE INDIA

Bhatia International v/s. Bulk Trading ((2002) 4 SCC 105)

• In the case of Bhatia International v/s. Bulk Trading, it was held that Indian courts can exclusively use their jurisdiction in order to test the significance of an arbitral award made in India, even if the actual law of the contract/agreement is the law of another country.

Facts

• In this case the parties had referred the case to arbitration as per the rules of the ICC of arbitration in Paris, with a sole arbitrator.
• The foreign party wanted to ensure that they receive the recovery of their claim from the Indian party and for that purpose it moved to Indian court for interim relief so as to secure its property.
• The same was opposed by the Indian party on the ground that as per the New York Convention (Convention on Recognition and Enforcement of Foreign Arbitral Awards, concluded on 10^th June, 1958), there is no provision to claim interim measure through a court, other than the one where arbitration is taking place. Therefore, in this case the arbitration is taking place in Paris, thus the Indian court cannot be approached to claim the interim relief. [xi]

Held

• The High Court set aside the plea of the Indian party. The matter went to Supreme Court. The Supreme Court upheld the decision of the High Court.

Rationale

• In its reasoning, the court said that Part 1 of “The Arbitration and Conciliation Act, 1996” gives effect to UNCITRAL (United Nations Commission on International Trade Law) Model Law and gives power to the court to grant interim relief even when the seat of international commercial arbitration is outside India.

Bharat Aluminium v/s. Kaiser Aluminium Technical Services (BALCO) (Civil Appeal No. 7019 of 2005)

• The doctrine laid down in the case Bhatia International v/s. Bulk Trading was overruled by the judgment of Bharat Aluminium v/s. Kaiser Aluminium Technical Services.

Facts

• The parties signed an agreement with respect to the supply of equipment, modernization and up-gradation of production facilities.
• However, disputes started arising and the dispute was referred to arbitration. The seat of the arbitration was in England and therefore the proceedings took place in England and the award was made in favour of the Respondent.[xii]
• Dissatisfied with the decision, the appellant filed application against the award in India, before the Chhattisgarh High Court under Section 34 of the act, i.e., under Part 1 of the act.

Held

• The court held that Part 1 of the act would not apply to the cases where the seat of arbitration is outside India. It shall be applicable to only those arbitrations where the seat of the arbitration is India.
• No suit can be filed for interim relief in India under Part 1, when the seat of arbitration is not in India.
• This judgment will be applicable to the cases in which dispute took place after the decision of this case. The judgment will not have a retrospective effect.[xiii]

Rationale

• The rationale behind the judgment is that it is the sat of arbitration that administers the jurisdiction and if the parties decide to conduct the arbitral proceedings outside India, then Indian courts don’t have any jurisdiction to grant interim relief to the related parties.

CONCLUSION

With the changing time, there has been an increase in the international dealings and contracts. Thus it also increases the need of the international arbitrations, since with the increase in businesses on international level there is an increase in the disputes pertaining to international arbitration. It also provides a sense of protection to the parties and because of this parties can easily enter into agreements on international level. The judgment of the BALCO case holds importance with the view that parties while entering into arbitration do not want to face any inconvenient procedures. It is important that the judicial process is followed in the country where the arbitration is taking place in order to simplify the procedure for the parties in the cases of international commercial arbitration.

References

[i] The Arbitration and Conciliation Act, 1996, pg.3 (ed. 2016).

[ii] Supra note 1, pg.4

[iii] Supra note 1, pg.6

[iv] Supra note 1, pg.7

[v] Supra note 1, pg.7

[vi] Supra note 1, pg.7

[vii] Aparajita, International Commercial Arbitration- Indian Perspective, (August 31^st, 2017, 09:27 PM), http://ijldai.thelawbrigade.com/wp-content/uploads/2015/09/4.pdf

[viii] Ibid note 7

[ix] Supra note 7

[x] Supra note 1, pg.31

[xi] The case of Bhatia International and its Overruling, (August 30^th, 2017, 08:15 PM), http://lawmantra.co.in/the-case-of-bhatia-international-and-its-overruling/

[xii] Niyati Gandhi and Vyapak Desai, India: What Finally Happened in Bharat Aluminium Co. (BALCO) v/s. Kaiser Technical Services, (August 30^th, 2017, 09:30 PM), http://www.mondaq.com/india/x/467264/Arbitration+Dispute+Resolution/What+Finally+Happened+In+Bharat+Aluminium+Co+BALCO+v+Kaiser+Technical+Services

[xiii] International Commercial Arbitration, (August 30^th, 2017, 09:45 PM)

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In this article, Navonil Datta pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses Liabilities of directors after dissolution of a company.

Understanding the meaning of director of a company

The Companies Act, 2013 defines a director in section 2(34) as a director appointed to the board of a company. A company is a juristic person and therefore needs an agent to act on its behalf. A director of the company plays the role of an agent and acts a trustee for the assets of the company. The directors along with the board of directors, act as a face for the company and take decisions on behalf the company keeping its interests in mind.

Bad Corporate governance by companies in cases such as Satyam or Kingfisher, highlighted the need for more stringent provisions to ensure the good management of a company. The Companies Act, 2013 has introduced provisions for the same. Enhancing the roles and responsibilities of directors, clearly defining their duties and imposing stringent liabilities for the violation of such duty has improved the standards of corporate governance.

Duties of a director

The duties of a director are mentioned in section 166 of the act. The duties mentioned under the section provide a general guideline for the conduct of a director. The director is not supposed to act in a manner which is inconsistent with the articles of association of the company.[1] He shall exercise his duties with due and reasonable care[2] and act in good faith for the promotion of the object of the company for the benefits of its members and its interests.[3] He shall not be involved in a situation where his interests directly or indirectly are in conflict with the interests of the company[4] and shall not try to achieve any undue gain for himself or his relatives, partners and associates.[5] A director cannot assign his office to any other individual and such assignment would be invalid.[6]

Thus broadly, directors are supposed to act with diligence and care for promotion of the interests of the company and discharge a fiduciary duty towards the company. As a fiduciary, a director is supposed to put his personal interests after the interests of the company.

Civil and criminal liability of a director

A breach in discharging the duty, whether statutory or fiduciary, exposes directors to liability. The liability imposed on a director may be civil or criminal in nature. Certain examples of such liability imposed on directors by the act are:

1. For misstatements in prospectus[7]
2. For breach of solvency declaration[8]
3. For fraudulent trading[9]
4. For breach of directors’ duties [10]

Dissolution of a company means that the company ceases to exist legally. The dissolution of a corporation under the Companies Act, 2013 can be brought about in two steps. The two steps being winding up and striking off.

Winding up is the process that brings about the dissolution of the company. The assets of the company are collected and used for the payment of the company’s debt to its creditors. Chapter XX of the Companies Act, 2013 deals with winding up of a company. Under the act, the winding up of a company may be done voluntarily or by the order of the tribunal.[11] A petition for winding up may be instituted by the company, creditors, contributories, registrar or any person authorized by the central government.[12]

The tribunal has the authority to look into the merits of the petition and pass an order as it deems fit. It may dismiss the petitions, appoint a liquidator till a winding-up order is passed, pass a winding-up order or pass an interim order as it thinks fit.[13] If a company liquidator has been appointed, then he can make an application to the tribunal for dissolution under section 302. If the tribunal is convinced, then it may pass an order for dissolution of the company. An application may be made to the tribunal or the central government. On order of the tribunal or the central government, the Registrar shall strike off the name of the company.[14]

During the winding up process, the directors can be held liable for certain actions. If in the process of winding up, it is discovered that a director has misapplied or retained or become liable for any money or property of the company or has been guilty of misfeasance or breach of trust in relation to the company, the liquidator can submit an application to the tribunal for looking into the conduct of the director. However, such an application has to be made within five years of the date of winding up order or the first appointment of liquidator.[15]

A similar application can be made by the official liquidator to the tribunal, if it found that the business of the company was carried out in a manner to defraud the creditor or any other person for fraudulent reasons.[16] The liability in such a case extends to the director.[17]

Another way of dissolving a company is the striking off the name of the company by the Registrar under section 248. If the Registrar is of the opinion that the company has not commenced its business within one year of its incorporation, or the subscribers to its memorandum have not paid their subscription within 180 days or the company is not carrying on business for a period of two immediately preceding financial years, then he shall send a notice to the company conveying his intention to strike off the name of the company from the register of companies and ask them to make their submissions.

Sub-section 7 of the section talks about the liability that can be imposed upon directors and other officers of the company. It states that the liability, if any, of every director, manager or other officers who was exercising any power of management in the company dissolved, shall continue and can be enforced as if the company had not been dissolved.

A bare reading of this provision points out that the continuance of existing liability of a director, member or an officer of a company which was subsequently dissolved seems to have been the legislative intent. The dissolution of a company cannot be used an excuse to escape liability the rests on a director. A director, member or an officer are not usually held liable for the acts of the company. Directors of a company owe no fiduciary or contractual duties or any duty of care to third parties who deal with the company.[18] The dissolution of the company cannot be seen as a reason to escape personal civil or criminal liability. The effect of section 248(7) is only to continue the liability of a director which existed before the dissolution. It does not enhance the liability such as making them personally liable, when they were not so liable before.[19]

In the case, Re: U.N. Mandal’s Estate Private Ltd.,[20] the High Court of Calcutta observed:

“Section 560(5) of the Companies Act, 1956 provides that when the name is struck off the register, and the notice thereof published in the official Gazette, then the Company stands dissolved on the publication in such official Gazette. But such dissolution of the company does not affect the liability, if any, of any director, managing agent, secretaries and treasurers or manager or even any other officer who was exercising any power of management or of any member of the company & it is expressly provided by proviso (a) of that sub-section that for enforcement of such liability it will be deemed in law to continue and may be enforced as if the company had not been dissolved. The special statutory provisions of Section 560(5) of the Companies Act 1956 appear to indicate that the dissolution of the Company thereunder does not mean a total and complete extinction of the Company for all purposes but that it exists for the special purpose expressly mentioned in proviso (a) of Section 560(5) of the Act as if the company had not been dissolved.”[21]

Section 560 of the Companies Act, 1956 dealt with the striking off the name of a company from the register of companies. The section is analogous to section 248 of the new act. Even though they are two separate acts, the court’s interpretation of section 560(5) of the old act could be considered to be providing some insight towards the interpretation of section 248(7)

In the United States, section 105 of the Model Business Corporation Act states :

The dissolution of a corporation shall not take away or impair any remedy available to or against such corporation, its directors, officers, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceedings thereon is commenced within two years after the date of such dissolution.

The existing jurisprudence regarding the interpretation of the section offers varying views. In the case of Bishop v. Schield Bantam Co.,[22] the defendant had been dissolved as a corporation in 1964. In 1965, a post dissolution crane manufactured by the defendants injured the claimant in 1965. The claim was brought before the court against the corporation and its directors in 1967. The court observed that the claim was barred by law. While barring the claimant’s action, the court observed that it did not bar the action initiated by the claimant because it was post dissolution but only because it was after the statutory period of two years.

In a different case of Stone v. Gibson Refrigerator Sales Corp.,[23] the court interpreted the section to include shareholders and directors but to exclude corporations. The court held that post dissolution claims could give rise to a cause of action against shareholders and directors but not against corporations.

In another case of Chadwick v. Air Reduction Company[24], the court refused to entertain post dissolution cases. It observed that “it is, therefore, quite clear that under the Model

Business Corporation Act and those state statutes patterned after it, a corporation may be sued for pre-dissolution torts only.”[25]

References

[1] Companies Act 2013, Section 166(1)

[2] Id., Section 166(3)

[3] Id., Section 166(2)

[4] Id., Section 166(4)

[5] Id., Section 166(5)

[6] Id., Section 166(6)

[7] Id., Section 34

[8] Id., Section 68

[9] Id., Section 339

[10] Id., Section 166(8)

[11] Id., Section 270

[12] Id., Section 272

[13] Id., Section 273

[14] Id., Section 365

[15] Id., Section 339

[16] Id., Section 340

[17] Id., Section 341

[18] Tristar Consultants vs. M/s. VCustomer Services India Pvt. Ltd. & Another, AIR 2007 Delhi 157.

[19] A RAMAIYA, Guide to the Companies Act, Vol 3, 18^th edn.

[20] AIR 1959 Cal 493

[21] Id., Para 32

[22] 293 F. Supp. 94

[23] 366 F. Supp. 733

[24] 239 F. Supp. 247

[25] D. Gilbert Friedlander; P. Anthony Lannie, Post-Dissoulution Liabilities of Shareholders and

Directors for Claims against Dissolved Corporations, 31 Vand. L. Rev. 1363, 1422 (1978)

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In this article, Janvi Ahuja discusses the legal precautions to take while advertising your business.

Introduction

The advertising business has evolved itself from small-scale business to full-fledged dynamic industry. Earlier it was a way for promoting sales and marketing, it was designed to deliver personalized interactive commercial message and now in the western markets, the industry is quite ahead where there is more experimentation in new media, new customer interface and all of this is integrated with the help of technology.

Indian advertising business is moving with an accelerated growth rate of 11.5% in 2017 according to IPG media report, this is lower than revised estimate of 16.2% put out in 2016. After the effect of GST, it is likely to create a disruption in short term. Within offline it is estimated to grow at 9.7% while digital will grow at 25.5% over next five years. But with these growing needs of the society and advancement in this field, there is an emerging threat to the companies. Digital platforms tend to be far more comprehensive than traditional marketing vehicles. 

Digital marketing paradigm

Advertising revolution is data collection and measurement, which is specific and more precise form for gathering and assessing user interaction and response, yielding response of individual customer’s. Advertising is done to attract more and more customers, but while attracting customers they forget to take some precautions. While advertising they need to be aware that the ad does not infringe a right of an individual or the ad which is posted is in favor of the society.

Intellectual Property in advertisement

Like the elements of a good product, a good advertising is likely to be imitated by others. So there are some IP rights that comes into play, while developing an advertisement.

• An advertisement needs to be creative, means it should have some layout of advertisement.
• A web design is likely to be protected by advertisement.
• Signs slogans and sounds are protected under circumstances, by trademark and copyright laws.
• Some forms of advertising technique or means of doing business may be protected by utility models;
• Unfair advertising methods, including false advertising claims, false endorsement of products, deceptive packaging, dishonest promotion or marketing are prohibited under unfair competition law.

Precautions to be taken while advertising

Advertisements are one which lasts longer, longer than the words of mouth or networking. An advertisement has greater potential to reach to a large number of people, and can affect many people and so it is subject to many regulations. While an advertisement is telecasted it has its fear of being copied and the creative inspiration efforts and skills are vain. Therefore it is advised to maintain an appropriate strategy to protect your creation by using the legal method available through IP system.

• Make sure your advertisement is registered and there is no similar advertisement to it. Registration includes any other copyright material including your website with national copyright office. By registering an ad and protecting it by copyright material it alerts the competitor of a new advertisement and gives customer assurance that the ad is true and not false.
• The advertisement should not infringe the privacy rights of other party; it must be taken care that an advertisement is not copied or the idea when an advertisement is made.
• You can use material owned by other in your advertisement if you are using e-commerce system, computer program advertising technology, or any other technical tool for creation of advertisement make sure you have a written license agreement.
• Make sure when you are advertising your product or service do not compare it with those of the competitors. E.g. it is always seen that coca-cola and Pepsi are challenging each other in taste test. Comparative advertising may be direct or indirect. In direct advertisement a product is described as superior to named competitors on specific features or benefits, in indirect claims the competitors are not named and advertisement brand is simply described superior but not clashes with the competitor’s brand.
• Not false or misleading, make sure the advertisement which is broadcasted is not vague of fictitious, it should not be deceptive and not unfair. When promoting a product or service, you need to ensure that any branding, statement or quote is not false and true to your belief and it should always have evidence available to the backup claims they make. False or misleading advertisement also includes bait advertisement where a product is advertised at a certain price and is not available in the market. These categories of advertisements are illegal and are against the trade customs. It is illegal if a business sells the product knowing that they cannot meet expected demand.
• While direct marketing it is most important to make sure that the company complies with the federal or state laws. Before conducting a direct marketing check that you comply with the privacy legislation and spam regulations.
• Make sure that the competitor’s confidential information is not disclosed, as it is generally protected by trade secrets. It is generally known as readily ascertainable by public. Although the owner does not need to provide protection to his confidential information, if it is independently obtained, the owner is entitled to the court relief against who has stolen or divulged the confidential information in violation of duty or a written non-disclosure agreement.
• All the advertisement should comply with the local laws of the area the advertisement target. There are some local requirement which ads need to take care of, in India, there are some ads which are not allowed like prohibited medical services, pre natal gender discrimination (Supreme Court Order (PDF) but this is not an exhaustive list.

Advertising Standards Council of India

It aims to maintain and enhance the public’s confidence in advertising. It is a self regulatory voluntary organization of the advertisement industry, which ensures the protection of interest of consumers.

Aim

• To ensure the truthfulness and honesty of representations and claims made by advertisements.
• To ensure that advertisements are not offensive to generally accepted standards of public decency.
• To safeguard against the indiscriminate use of advertising for the promotion of products regarded as hazardous to society or to individuals.
• To ensure that advertisements observe fairness in competition so as to inform the consumer on choices in the marketplace while observing the canons of generally accepted competitive behavior in business

Legal issues in advertising

With liberalization and globalizing the Indian economy firms have vigorously been promoting their product and services. In the changing proliferation of advertisement, the law needs to be further strengthened. There are many laws which deals with advertisement like:

1. Consumer protection act, 1986 section 6 grants consumer to be informed of quality, quantity, potency, purity, standards of goods and services as the case may be to protect the consumers from unfair trade practices.
2. Drugs and cosmetic act, 1940 section 29 of the act imposes penalty upon whomsoever uses a report or analysis made by central drug lab, or extracts such report, for the purpose of advertisement.
3. FSSAI act, 2006 section 53 provides penalty upto 10 lakhs for false or misleading ads relating to nature of good, description, substance or quality.
4. Young person’s harmful publication act, 1956 section 3, imposes a penalty for advertising or making known by any means whatsoever that any harmful publication as defined under the act can be procured from or through any person.
5. IPC, 1806 widens the array of provision, it prohibits defamatory publication, obscene or statement creating disharmony in the society.
6. Competition act, 2002 deals with comparative advertising.

In the recent case of HUL vs. P & G the petitioner claimed TV commercial of respondent is in respect of Fairness cream and it is disparagement, as it communicates that other products lack something. The court held that such comparison is permitted as there is no direct attempt to defame HUL’s product and there is no economic loss established. Similar was the dispute between RIN &TIDE.

Conclusion 

Advertisement is whole and sole of a business. It is a part of service industry.  Companies try to compete while advertising where they forget to take legal precautions. As justice Markandeya Katju has pointed out that media shall be given freedom at the same time they need to be controlled. The basic principle of wrongs and crimes are the same, and the laws dealing with that. But the technology may change and you must keep pace with the technology.

Advertisements are common framework for infringement of lawsuits. This article provides some tips that can help while advertising your business. As it is wisely said precaution is better than cure. So before advertisement there are some points which need to be taken care off both from general perspective and legal perspective.

References

• http://www.livemint.com/Consumer/B22ShRuwGMr4daQtdrdoCN/Indian-advertising-spend-to-grow-at-115-in-2017-says-IPG.html
• https://www.ibef.org/industry/advertising-marketing-india.aspx
• http://www.indianmirror.com/indian-industries/advertising.html
• https://support.google.com/adwordspolicy/answer/6023676?hl=en
• https://www.business.gov.au/info/plan-and-start/develop-your-business-plans/marketing/legal-obligations-of-marketing
• https://yourbusiness.azcentral.com/list-ethical-legal-issues-advertising-16861.html
• http://www.wipo.int/sme/en/documents/ip_advertising_fulltext.html#types
• https://www.legalindia.com/the-legal-framework-of-comparative-advertising/
• https://www.lawteacher.net/free-law-essays/commercial-law/advertising-laws-in-india-law-essays.php

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In this article, Salma Jennath discusses the issue of corporate governance and social responsibility.

Corporate Governance is to conduct the business in accordance with owner or shareholders desires, which generally will be to make as money as possible while conforming to the basic rules of the society embodied in law and local customs.[1]

What is Corporate Social Responsibility or CSR? What all work does a corporation have to undertake in order to become socially responsible? Does a body corporate derive any benefit from being socially responsible other than moral satisfaction? How does it affect the governance of the corporation? These questions are answered briefly in this paper. In addition, a comprehensive comparison between India, UK and US with regard to their CSR policies, their development, impact and effectiveness is incorporated.

Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.[2] This is in contrast with the Friedmanite assertion that the only responsibility of businesses is to make money.[3] The four principles of good governance: Accountability, Transparency, Responsibility and Fairness are related to corporate social responsibility.

There are certain issues that have to be addressed by good corporate governance. These include creating sustainable value and performance, increasing credibility, increasing stakeholder satisfaction, keeping a balance between economic and social benefit, keeping the Board independent from management, etc. [4]

Correspondingly, there are certain benefits that can be derived from socially responsible corporate performance. In the long term, a corporate shall achieve an enhanced reputation with the public and the business community and there will be lesser government regulation and therefore, time and energy can be saved. It has been shown that there are improvements in financial performance, increased customer loyalty, boosted productivity and performance from workmen, etc.

India

The Indian government felt the need to introduce various reforms in corporate governance and create a system of ethical, transparent and accountable corporate functioning[5] after various scams in the corporate sector manipulated by Ramalinga Raju[6], Harshad Mehta[7], Ketan Parekh[8], etc.

In 1998, the Confederation of Indian Industry (CII) came up with a voluntary code of corporate governance, which was followed by the formulation of Clause 49 of the Listing Agreement as per the recommendations of the SEBI^* appointed Kumar Mangalam Birla Committee on Corporate Governance. Subsequently, there were many revisions to Clause 49[9], which focuses primarily on: Board composition and procedure, Audit committee responsibilities related party transactions, subsidiary companies, risk management, CEO/CFO certification of financial statements and internal controls, legal compliance and other disclosures.[10] Subsequently, in 2002, the Naresh Chandra Committee Report examined the Auditor-Company relationship and the role of independent directors, defined punitive measures for auditors committing irregularities and introduced CEO/CFO certification.

Other guidelines for good corporate governance include Corporate Governance Voluntary Guidelines (2009),[11] etc. In addition to all this, the National Stock Exchange of India (NSE) set up an independent expert advisory body called the NSE Centre for Excellence in Corporate Governance (NSE CECG) to encourage the Indian corporate to maintain standards of Corporate Governance.[12] The Companies Act, 2013 deals with several aspects of corporate governance such as director’s duties and related party transactions.

Corporate Social Responsibility can be divided into four: Economic, Legal, Ethical and Discretionary. It is practised by businesses to address stakeholder expectations and enhancing shareholder value. It is mandatory for every company having net worth of Rs 500 crores or more, or turnover of Rs 1000 crores or more or a net profit of Rs 5 crores or more during any financial year to constitute a Corporate Social Responsibility Committee of the Board consisting of a minimum three directors, of which at least one should be an independent director.[13] The main functions of the Committee include formulating a Corporate Social Responsibility Policy as specified in Schedule VII, recommending the amount of expenditure to be incurred and monitoring the said policy. The Board has to ensure that the mentioned duties are carried out. Supplementing this, there is Voluntary Guidelines for Corporate Social Responsibility, 2009.[14] The CSR Guidelines envisage the assimilation of social and environmental issues into businesses’ decisions, goals and operations and in interactions between corporations and their stakeholders.[15]

There are certain international instruments like the United Nations Global Compact Principles[16] and ISO 26000 Standard on Social Responsibility[17] of the International Organization of Standards, which identifies the contours of CSR and gives guidance to organizations for the integration of social responsibility within themselves respectively.

The emergence of all the new laws, regulations and guidelines has had a positive outcome. This is clearly laid out in a study[18] analyzing the corporate governance practices in three prominent Indian firms, namely, ITC Ltd., Reliance Industries Ltd., and Infosys Technologies Ltd. The companies have a very satisfying approach to Corporate Governance and CSR and they are doing very well. In addition to these companies, one of the companies that is leading in this respect is Tata, which was the pioneer of CSR activities in India.

United Kingdom

In the UK also there were many frauds that shook the corporate world, including that of Polly Peck[19], BCCI[20] and the Maxwell[21] group of companies, linked with corporate governance failures. A committee chaired by Adrian Cadbury prepared a report[22], which made three recommendations:

1. Separation of CEO and Chairman,
2. Inclusion of at least three non-executive directors (two of whom should have no personal or financial ties to executives), and
3. Creation of an Audit Committee composed of non-executive directors.

Later, there was the adoption of the UK Corporate Governance Code, which was a Cadbury Code, the Greenbury Report, the Hampel Report, Higgs Review, the Walker Review, etc. The contents of the code can be divided into five sections: Leadership, Effectiveness, Accountability, Remuneration, and Relations with shareholders.

The UK government seems very enthusiastic in developing CSR policies. British CSR minister Stephen Timms has drafted a global framework that will use British embassies and diplomatic staff ‘to promote CSR principles to governments, companies and civil society and explain the role they can play in promoting sustainable development.’ The government has recognized the need to raise social and environmental issues at international forums like the G8, the Doha Development Agenda and the Commission on Sustainable Development, as they would be encouraged to integrate CSR considerations into their actions. It seeks to form a CSR Academy to train them to practice good governance and wants to create partnerships with the businesses to help them to work on poverty eradication. In addition, the London Stock Exchange is also creating a centralized database to collect information on the social, environmental and ethical performance of companies.[23]

Fujitsu Services Ltd, Imperial Tobacco Group PLC, Jaguar Land Rover, etc have taken up CSR practices that are commendable.[24]

United States

The Foreign and Corrupt Practices Act was passed in 1977 followed by Securities and Exchange Commission in 1979 for the tightening of mandatory reporting of internal financial controls. Later, in 1987, the Treadway Commission submitted a report highlighting the need for a proper control environment, independent audit committees and an objective internal audit function.[25] In 1998, the New York Stock Exchange and the National Association of Securities Dealers jointly established the Blue Ribbon Committee on Audit Committee Effectiveness. However, even this did not prove to be very effective as there were many scams like the Enron and WorldCom, which led to the passage of the Sarbanes-Oxley Act (SOX) in 2002 to regulate auditing and corporate financial reporting.[26]

CSR practices in the United States was not voluntarily taken by the corporates but was a reaction to public responses to issues, which were not considered as part of their business responsibilities. There are four points put forward by the proponents of CSR, i.e., moral obligation, sustainability, license to operate, and repute. [27] One of the guidelines available is the OECD (Organization for Economic Cooperation and Development) Principles.[28]

There is a Corporate Social Responsibility team in the Bureau of Economic and Business Affairs, which promotes responsible and ethical business practices. It is their mission to provide guidance and support to companies and encourage them to adopt corporate policies that help companies “do well by doing good”.[29] There is a body called the US National Contact Point, which works with the Bureau to promote the OECD Guidelines for Multinational Enterprises.[30] An Award for Corporate Excellence program carried out by the Secretary of State to encourage corporates to conduct good governance. A few corporations, like Ben & Jerry’s, Patagonia, Microsoft[31] and the Body Shop have made a difference by taking up social responsibility.[32]

Analysis

• In all the three countries, the need for corporate governance arose due to some failures in the management of companies and various frauds that were conducted by officers and board members.

Each country has a statutory law, which sets out the principles of corporate governance.

• In the UK, it is mandatory to have a Nomination committee while in India it is not so. There is a distinction made between small and large quoted companies with regard to Audit committee in the UK while no such distinction is made in India. In both countries, there should be a Remuneration committee.[33] In US, the Sarbanes-Oxley Act makes only the Audit Committee mandatory.
• Clause 49 of the Listing Agreement was a transplant of governance reforms adopted in the US and the UK into the Indian context without any comprehensive analysis of Indian corporate structures. This is why Clause 49 was criticized a lot.[34]
• Unlike in India and UK, exchanges in the US have shown no movement to increase corporate governance and social responsibility.[35] The US seems more reluctant to take up CSR activities compared to the other two.

Corporate Governance and Corporate Social Responsibility are complementary and are closely linked with market forces. CSR operates in a free-form manner while CG operates within well-defined and accepted structures.[36] In India, UK and US, the importance of CSR and CG are being increasingly recognized and this had had a positive impact on the society as well as the corporates in general.

 “If you want to build a million-dollar enterprise, one can take all the shortcuts; but if you are keen on building a billion-dollar enterprise, there is no other way than to run your business rightly. Honesty has to be accepted as an axiom, which is the only way to do business. It gives you the mental and moral strength and ability to do it the right way.” N.R. Narayana Murthy

References

[1] Definition given by Economist and Noble laureate Milton Friedman

[2] Lord Holme and Richard Watts, Making Good Business Sense, The World Business Council for Sustainable Development publication

[3] See Richa Gautam, Integrating CSR into the Corporate Governance Framework: The Current State of Indian Law and Signposts for the Way Ahead

[4] See Güler Aras, David Crowther, Culture and Corporate Governance (2008, Social Responsibility Research Network, UK)

[5] See Afra Afsharipour, Directors as Trustees of the Nation? India’s Corporate Governance and Corporate Social Responsibility Reform Efforts.

[6] Satyam Computers Scandal (2009). The chairman, Ramalinga Raju, of Satyam Computer Services falsified the company’s accounts it make a change of US $1.47 billion. http://in.reuters.com/article/2015/04/09/satyam-computer-fraud-idINKBN0N00CQ20150409 last visited on 28^th September 2015.

[7] Mehta triggered an escalation in the Bombay Stock Exchange by trading in shares at a premium across any segments and scammed at good amount of Rs. 40 billion in 1992. http://indianeconomyataglance.blogspot.in/2009/03/harshad-mehtas-scam.html last visited on 28^th September 2015.

[8] Parekh swindled crores of rupees from banks and bought shares in smaller exchanges in fictitious names.

^*Securities and Exchange Board of India. http://www.icmrindia.org/free%20resources/casestudies/ketan-parekh-scam3.htm last visited on 28th September 2015.

[9] The Narayana Murthy Committee Report 2003 made revisions to Clause 49. Later, the original provisions were adopted again. The last amendment applicable w.e.f October 1, 2014 to comply with the provisions of Companies Act, 2013.

[10] http://taxguru.in/sebi/clause-49-listing-agreement-corporate-governance.html last visited on 26^th September 2015

[11] http://www.mca.gov.in/Ministry/latestnews/CG_Voluntary_Guidelines_2009_24dec2009.pdf last visited on 26^th September 2015.

[12] Corporate Governance in India: Development and Policies, ISMR, www.nseindia.com

[13] Section 135 of the Companies Act, 2013.

[14] www.mca.gov.in/Ministry/…/CSR_Voluntary_Guidelines_24dec2009.pdf

[15] supra note 5

[16] http://www.unglobalcompact.org/AbouttheGC/TheTENPrinciples/index.html

[17] http://www.iso.org/iso/socialresponsibility.pdf

[18] Debabrata Chatterjee, Corporate Governance and Corporate Social Responsibility: The Case of Three Indian Companies, International Journal of Innovation, Management and Technology, Vol. 1, No. 5, December 2010 ISSN: 2010-0248

[19] The CEO of Polly Peck International, Asil Nadir, stole more than £150m from Polly Peck and faced trial on 13 specimen charges and was found guilty on 10 counts of theft. http://www.theguardian.com/business/2010/aug/26/polly-peck-business-asil-nadir last visited on 28^th September 2015.

[20] This was one of the biggest banking scandals in UK. The money of money launderers and drug dealers flowed through the bank’s accounts. See http://news.bbc.co.uk/2/hi/business/3383461.stm last visited on 28^th September 2015.

[21] Robert Maxwell took money from the pension funds and channeled it to companies he was connected with outside of Britain to buy stock from MCC, which later became bankrupt. http://articles.baltimoresun.com/1991-12-22/news/1991356032_1_robert-maxwell-daily-mirror-britain last visited on 28^th September 2015.

[22] The Cadbury Report of 1992, which led to the formation of the Cadbury Code of Best Practices.

[23] Nathan E. Hurst, Corporate Ethics, Governance and Social Responsibility: Comparing European Business Practices to those in the United States, Santa Clara University.

[24] CR Index 2015: Company Listing available at www.bitc.org.uk/node/355077 last visited on 28^th September 2015.

[25] Speech delivered by Shri Vepa Kamesam, Chairman, Governing Council, Institute for Development and Research in Banking Technology (IDRBT), Hyderabad at the top management workshop on Corporate Governance & Corporate Social Responsibility in Public Enterprises, organized by ICFAI and Indian Institute of Public Administration at New Delhi on 8^th July, 2004.

[26]See L. Murphy Smith, Audit Committee Effectiveness. Did the Blue Ribbon Committee Recommendations make a difference? Int. J. Accounting, Auditing and Performance Evaluation, Vol.3, No.2, 2006.

[27] Michael E. Porter & Mark R. Kramer, Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility, Harvard Business Review (December 2006).

[28] The OECD Principles of 1999 and 2004 http://www.oecd.org/corporate/principles-corporate-governance.htm last visited on 26^th September 2015

[29] http://www.state.gov/e/eb/eppd/csr/ last visited on 28^th September 2015

[30] http://www.state.gov/e/eb/oecd/usncp/index.htm last visited on 28th September 2015

[31] Microsoft was ranked the corporation with the best CSR by Forbes magazine in 2012 http://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/ last visited on 28^th September 2015.

[32] Supra note 27

³³http://www.grantthornton.co.uk/en/insights/corporate-governance-in-india-and-the-uk-a-comparative-analysis last visited on 28th September 2015

[34] Supra note 5

[35] Supra note 23

[36] Lawrence E Mitchell, The Board as a Path toward Corporate Social Responsibility in Doreen McBarnet, Aurora Voiculescu and Tom Campbell, The New Corporate Accountability: Corporate Social Responsibility and the Law (2007) 279 in M.M. Rahim, Corporate Social Responsibility, Corporate Governance and Corporate Regulation, Legal Regulation of Corporate Social Responsibility, Springer-Verlag Berlin Heidelberg 2003.

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In this article, Janvi Ahuja of SLS Pune discusses what happens when an IPO is oversubscribed and how can one profit from IPOs.

Introduction

When a company wants to become a part of shareholder family, they offer shares or convertible securities to new investors and it is called public issue. When these public issues are given for the first time, publicly selling of shares in market is known as Initial public offering. It is done when a company believes that they are not financially viable to take up the business and they are unlisted in SEBI. They make a fresh issue of these shares or convertible security or offers existing shares or convertible security for sale or both for the first time to public, it is an IPO (Initial Public Offering). IPO is also known as Going Public as it paves the way for the investors for issuing of shares. It gives early investors a chance to make high profits by cashing their stockholding.

IPO is mainly used by startup companies, seeking a source of capital for growth and expansion. It was introduced by underwriting investment bank, which aids the issuing company by soliciting potential investors. IPO also helps in public sale of stock. For an investor, IPO is significantly at higher risk as opposed to trading stock, as it is issued in primary market where the investor can get first crack at new security insurance.

An IPO is different from FPO that is further public offering or follows on offer. An IPO is issued by a company newly entering the market which is not listed in SEBI, whereas an FPO is an already listed company either making a fresh issue of shares or convertible security to the public.

Issue of share is done in two ways

Fixed pricing– Where a prospectus is made and all the details are given, price and quantum of share is mentioned. The company goes public, already determines a price is mentioned at which its shares are offered to investors. The investors know the share price before the companies go public. This price is issued by issuer in consultation with merchant banker on the basis SEBI guidelines. Then the issuer at the outset decides the issue price and mentions it in the offer document. Here the offer document contains full disclosures of the parameters which are taken into account by Merchant Banker and the issuer for deciding the price.

Book building– In this the issue of shares is done on the basis of bid, where the price band and the quantum of good are decided in the red hiring prospectus, it can be equal to above the floor price. When the price of an issue is discovered on the basis of demand received from the prospective investors at various price levels, it is called book building. In this the floor price is decided by merchant banker on the basis of SEBI guidelines, when the price is decided, the investors in same trick size are issued shares at par and the investors in the next trick size are issued share at premium, the company can issue a share more than the nominal value. There is no restriction on the sale of shares at premium.

Green‐Shoe Option- Green Shoe Option is a price stabilizing mechanism in which shares are issued in excess of the issue size, i.e., a maximum of 15%. It is a mechanism to stabilize the issue price post listing. In this a provision is contained in an unwritten agreement that gives the underwriter the right to sell investors more share than originally planned. It is an overall allotment option which can provide additional price stability to a security issued because the underwriter has the ability to increase supply and smooth out price fluctuation. It is only one type of measure permitted by SEBI.

When oversubscription comes into play

When the investors asks for the shares more than the value, it is the term used for the situation in which the security issue is underpriced or is in great demand by investors. When a new security issued is oversubscribed, underwriters or others offering the security can adjust the price or offer more security to reflect the higher than the anticipated demand. It is good to invest in a company whose IPO is Oversubscribed, as it indicates how keen the market players are in the company. It is a reconfirmation of the interest in such a stock. At the same time the oversubscription of shares means exceeding the total number of shares issued by underlying company. If the shares which are oversubscribed, where the permission of stock exchange has been taken, the oversubscription portion money is given back to the applicants forthwith.

Allotment to Qualified Institutional Buyer

A merchant banker holds the authority to allot shares with regard to QIBs. The shares, in any case, are allocated proportionately to applicants. So, if the shares are oversubscribed by four times like the QIB applied for 10, 00,000 shares then he will receive 2, 50,000 shares.

Allotment to Retail Investors

There is an upper limit of INR 2 Lakh for any retail investor who is investing in an IPO. The total numbers of candidates are calculated and if the applicants are more than the number of shares offered for retail investors, the maximum investors who are eligible for the allotment of the minimum bid lot are determined. The total number of equity shares available for allotment to investors is divided by the minimum bid. Example: if shares worth 2 lakh need to be allotted to individual investor and the minimum lot size is INR 10,000/- only maximum of 200 applicants will be allotted the shares with minimum lot of INR 10,000/-

Allotment to non-institutional Buyers

There are individual, trust, companies who bid for more than 2 Lakhs are known as non institutional Bidders. They have an allocation of 15% of shares of the total issue size in Book Building IPO’s.

Guidelines for investing in Newly Formed Company

• If the company is new make sure you study the performance of the previously established company by same promoter, if they have done well, then chances of new one doing well are also high.
• Before investing in a company checks its reputation and market standing of the foreign collaboration, if there is any, as the company with foreign collaboration are often good investment.
• Make sure you invest in a company that have something new to offer, they are introducing new product or industrial process for the first time, or introducing a technologically advanced or better quality product.
• Invest in a company that operates in high growth sectors of the economy, as incident to failure is likely to be lower for such companies.

How can an investor profit from IPO

Public issues provide for shares at relatively low prices. A newly formed company usually offers for shares subscription at par value, whereas existing companies price their new issues more than 20% to 30% lower than the market price of their existing share.

Similarly, the shares issued at par by new companies also quote at higher premiums soon after being listed in stock exchange. This is the main reason why the public issues are so popular with the investors. They offer opportunities for making easy and quick money in market bull’s phase. So you should feel yourself lucky enough if you get small number of shares, it is with this background in mind that you should calculate the pros for applying in this IPO.

Conclusion

An IPO is when the company gives its share to public. If a company convinces investors to buy certain shares, it invests a lot of profit for future. IPO’s is often issued by smaller, young companies seeking capital for their expansion. An IPO is basis for allotment, where there are two ways for issuing the share Fixed price issue where the price and quantum of shares is pre decided and is fixed, where as in book building the investors bid in the price and then it is fixed, the investors whose price matches with the bidding gets shares on par basis, and the shares in which the investors invested more than the floor price will get the share at premium. In this, one gets profit as when a person initially invests they give a minimum purchase price which later gets increased.

References

• http://www.businessdictionary.com/definition/initial-public-offering-IPO.html
• http://www.investinganswers.com/financial-dictionary/stock-market/initial-public-offering-ipo-1076
• https://www.nseindia.com/products/content/equities/ipos/ipos.htm
• http://www.investopedia.com/terms/o/oversubscribed.asp

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In this article, Priyadarshini Sinha, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses whether arbitration clauses can oust the jurisdiction of consumer courts or not.

Arbitration clauses cannot oust the jurisdiction of Consumer Courts

It is a well-established legal principle that the presence of arbitration agreements cannot bar the jurisdiction of consumer courts such as the National Consumer Disputes Redressal Commission (NCRDC) and other similar consumer fora constituted for the benefit of consumers and for protecting their rights. This stands despite the provisions given in section 8 of the Arbitration Act, which states that, on the basis of the arbitration agreement between the parties, a judicial authority can instruct the parties to go for arbitration.

Let us briefly refer to the Consumer Protection Act. According to the Act, a consumer dispute is one in which the entity against whom there is a complaint denies the allegations that have been cast on it. The Act gives consumers/customers convenient safeguards against various types of exploitation such as faulty goods, bad customer service or unfair trade practices. Prior to the establishment of the Act, the primary piece of legislation related to consumer protection was the Sale of Goods Act, 1930.

The Consumer Protection Act, 1986 safeguards the interests of consumers by setting up a three-tier quasi-judicial consumer dispute redressal machinery at the national, state and district levels, in order to settle consumer disputes. Section 9 of the Consumer Protection Act calls for setting up a three-tier structure of consumer disputes established at the national, state and district levels. These will be referred to as Consumer Fora and they will be bodies of a quasi-judicial nature. It is applicable to the whole of the country except Jammu and Kashmir which is armed with its own Consumer Protection Act. The Dispute Redressal Agencies consist of the District Consumer Disputes Redressal Forum (DCDRF),  State Consumer Disputes Redressal Forum, and National Consumer Disputes Redressal Commission (NCDRC). The NCDRC is the highest forum in the country for resolving consumer disputes. It entertains cases where the value of the claims is more than 1 crore. It consists of both appellate and revision jurisdiction.

Arbitration Clauses and Consumer Protection Act

Let us also take a look at arbitration. Commercial arbitration is quite popular in India, especially with regards to large commercial contracts. The majority of arbitrations in India are related to construction and infrastructure contracts. There are also arbitrations with regards to import-export transactions. Stock exchanges also have provisions for arbitration. In India, the arbitration process has been pretty weak. However, they are considered more convenient than civil suits in India which can take up a huge amount of time, and therefore, arbitration is the preferred mode. They are also considered useful with reference to matters which are technical in nature. Arbitration is also recommended in advanced construction projects. However, some challenges remain as they are considered expensive and time-consuming, and even after an award has been given the parties frequently come up with challenges. The parties can agree regarding the number of arbitrators who will be assigned to the case. However, an odd number must be maintained. In the case there is a failure on the part of parties to finalize the number of arbitrators, the tribunal will have one arbitrator. The parties have full freedom to finalize the nationality and qualifications. Parties can approach the court for interim measures either before, during or after the award is given. If the parties cannot appoint an arbitrator, the court may be approached to nominate one. The arbitral tribunal can request the court for help in collecting evidence with regards to witnesses. The court which has jurisdiction over arbitration applications is the principal civil court of original jurisdiction in a district. The High Court takes over in the case of international arbitrations.

Generally, judicial intervention regarding arbitration is confined to the purposes mentioned in the Act. There have been instances where the courts have approached parties to refer to an existing tribunal. Also, courts have also interfered in cases of independence or impartiality of arbitrators.

Can a consumer complaint be filed despite the arbitration clause, specifically restrains the parties from approaching the forum?

In the case of Aftab Singh v Emaar MGF Land Limited & Anr, this issue of how far Section 8 of the Arbitration Act can be stretched with respect to various consumer forums that have been established by the Consumer Protection Act 1986 was examined by a Full Bench of the NCDRC (dated 13.07.2017). It was emphasized that the provisions of the Arbitration Act do not apply to Consumer Courts which are special acts that have been established for a public purpose. This case had its origins in a set of complaints brought by a group of home-owners before the NCDRC against Emaar MGF Land Private Limited (Builder) who did not deliver the plots to the purchasers according to the timeline which had been set down in the Buyers’ Agreement. The Builder retorted by filing applications under Section 8 of the Arbitration Act and argued that the Commission is a judicial authority according to Section 8 of the Arbitration Act. As a result, it is acceptable to refer the parties to arbitration on the basis of the arbitration agreement mentioned in the Buyers’ Agreement which had been executed by the home-owners and the builders.

The prime argument made by the petitioners was that the remedies given by the Consumer Protection Act are not in exclusion of other existing laws and are in addition to it. The basis of this was derived from the ratio set down in National Seeds Corporation Limited v M Madhusudhan Reddy [(2012) 2 SCC 506]. Additionally, it was argued that the Act is a piece of legislation intended to confer benefits and therefore, this purpose should be advanced. As a result, a consumer complaint can be brought before the consumer forum taking the assistance of Section 3 of the Act. This is regardless of the existence of an arbitration clause mentioned in the Arbitration Act. It was argued that the intention of the legislation was never to do away with the jurisdiction of the Consumer Courts.

The builder asserted that the Consumer Courts are a ‘judicial authority’ within the meaning of section 8 of the Act. As a result, if a valid clause exists, they are required to refer the parties to arbitration. Furthermore, according to the Act, the judicial authority was required to bring forth disputes to arbitration, irrespective of the High Court’s or Supreme Courts’ decisions.

The Full Bench of the NCRDC ruled that the Arbitration Act did not bar the jurisdiction of Consumer Courts. The Full Bench relied on the Supreme Courts’ judgments which have provided disputes that are non-arbitrable. In Booz Allen Hamilton Inc v SBI Home Finance Ltd [(2011) 5 SCC 532], the Supreme Court put forth 7 categories of disputes which are non-arbitrable. The Court referred to this. The Court also referred to Vimal Kishore Shah v Jayesh Dinesh Shah [(2016) 8 SCC 788], which put down that cases under the Trust Act 1882 are considered non-arbitrable.

The Commission also took support from the Supreme Court judgment in A. Ayyasamy v A Paramasivam [(2016) 10 SCC 386], where the Court had observed that a dispute would not be arbitrable if the jurisdiction of the ordinary civil court is done away with by giving exclusive jurisdiction to a tribunal or special court.

The Consumer Courts were established to create a system for disputes between players who are unequal in terms of power. There is public policy involved as we are referring to consumers and large corporations.

Additionally, the Commission made reference to Section 2(3) of the Arbitration Act where special categories of disputes are protected from being referred to arbitration. It was ruled by the Full Bench that under this provision, consumer disputes were protected. The Commission finally stated that if the builder in the aforementioned case was to win, it would lead to a defeat of the goals and purpose of the Consumer Act.

This topic is especially relevant to the question of whether arguments which involve serious fraud allegations will continue to be non-arbitrable under the Arbitration Act. This matter is pending before the Supreme Court of India. It is quite established principle of law that the jurisdiction of consumer courts such as the National Consumer Disputes Redressal Commission and other similar fora related to the interests of consumers is not barred by the presence of arbitration agreements.

This stands despite the stipulations given in section 8 of the Arbitration Act which contains that a judicial authority can communicate to the parties to go for arbitration. We can safely say that the presence of an arbitration clause does not oust the jurisdiction of Consumer Courts. As we can see, the Consumers Court can act as they would and their functions cannot be cut short by an arbitration clause. The Consumer Courts continue to hold and enjoy jurisdiction, despite the presence of an arbitration clause mentioned anywhere in the relevant agreement.

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In this article, Roshni Ranganathan pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the process to get the status of Dormant Company under Companies Act, 2013.

Understanding the concept of Dormant company

The idea of a dormant company is a newly introduced concept in the Companies Act 2013, previously absent in the 1956 Act. The Indian legislature seems to have borrowed it largely from the legal principles of company law applicable in the U.K. However, certain significant differences exist such as the duration of dormancy, etc. In line with India’s investor-friendly policies, the provision regarding dormant companies can be seen in the light of promoting and facilitating the procedure of incorporation and functioning of a company.

1. What is a dormant company?

A dormant company is a company that has been registered under the Companies Act but is not carrying out any “significant accounting transaction.” As per Companies Act 2013, a company that has been formed and registered under the Act,

a) For a future project or to hold an asset or intellectual property and,

b) Has no significant accounting transaction, is permitted to make an application to the Registrar to obtain the status of a dormant company.

2. Why go for Dormant status? What are its benefits?

The immediate question that arises upon understanding the meaning of a dormant company is this – why would anyone create a company and register it only to get it declared as dormant? The main purpose of obtaining or retaining the dormant status of a company is so that the company retains its corporate status despite not carrying out any business.

The benefits derived from such a status may be summarized under the following heads –

1. Protection of the Company Name – The intellectual property that the dormant company holds includes trademark of the company name. The name of the company is protected so that others are prevented from trading under the name of the dormant company.
2. Future Project – A company may have been formed in preparation of a future project. This signifies the intention of the promoters to trade and therefore retain the domain name. A good example of this as stated in Ramaiya is a company that has obtained a lease of land but waiting further approvals before commencing the business. (p. 5755)
3. Company History – Although this is not a very significant benefit, by establishing a company that is initially dormant and later begins business, can claim to be have been well-established since its incorporation though it may have started its business much later. It helps a company to project a better image to prospective clients and/or creditors.

4. When to apply for a dormant status?

As per Section 455 of the Companies Act, 2013, a company which has not been carrying out any business or has not had any significant accounting transaction may apply to the Registrar for granting of the status of a dormant company. The Explanation to the provision defines “significant accounting transaction” and “inactive company.”

The relevant portion of the provision reads as follows:

“Explanation For the purposes of this section,

1. “Inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
2. “Significant Accounting Transaction” means any transaction other than–

• Payment of fees by a company to the Registrar;
• Payments made by it to fulfil the requirements of this Act or any other law;
• Allotment of shares to fulfil the requirements of this Act; and
• Payments for maintenance of its office and records.”

Therefore, if a company carries out any transaction that does not fall within the above-mentioned four heads, it stands the chance of losing its dormant status.

According to the renowned author Ramaiya, a newly incorporated company can also apply for the status of a dormant company if it has not carried out any business or operation since its inception, except for filing of returns with the Registrar of Companies or any other payments to comply with the conditions under Company Law or any other law.

4. How to get status of Dormant Company

The below-mentioned steps are followed while granting/acquiring a dormant status:

1. The Company must pass a Special Resolution in the general meeting of a company or notify its shareholders and obtain the consent of at least three-fourths of shareholders in value.
2. The Company must file an application through From MSC – 1 to the Ministry of Corporate Affairs and pay the prescribed fees under Companies (Registration Offices and Fees) Rules, 2014.
3. Upon satisfaction, the Registrar will issue the certificate of Dormant Company. (Note that the Registrar must be satisfied that the company fulfills the criteria laid down under Section 455 and the relevant Rules prior to granting of the certificate.)
4. The Registrar shall maintain a Register of Dormant Companies.

An existing company that has not had any significant accounting transaction or carried on any business for the last two years or has not filed its financial statements or annual returns in the last two financial years/last two years will be termed as an inactive company for the purpose of Section 455. Under the Act, the Registrar can declare a company as dormant upon suo moto action as well. The Act also empowers the Registrar to strike off the name of the company from the Register if it remains dormant for five consecutive years. This is different from the situation in U.K. where a company is permitted to remain dormant for an unlimited period of time. However, such a provision would invite trouble too and prone to be misused in India’s corporate scenario that is gradually moving towards a more investor friendly economy.

5. What are the conditions to be fulfilled for acquiring a dormant status?

The proviso to Rule 3 of Companies (Miscellaneous) Rules 2014 lays down several conditions that a company must fulfil before it can acquire the status of a dormant company.

The conditions laid down under the Rules are discussed below.

• No inspection, inquiry or investigation should have been ordered or taken up or carried out against the company.
• No prosecution should have been initiated and pending against the company under any law.
• The company should neither have any public deposits which are outstanding nor should it be in default in payment thereof or interest thereon.
• The company should not have any outstanding loan, whether secured or unsecured.
• There should be no dispute in the management or ownership of the company and a certificate in this regard should be enclosed with Form MSC-1.
• The company should not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.
• The company should not have defaulted in the payment of workmen’s dues.
• The securities of the company should not be listed on any stock exchange within or outside India.

Another requirement under the Companies (Miscellaneous) Rules 2014, Rule 6 is that that a dormant company should have a minimum number of 3 directors in case of a public company, 2 in case of private and one in case of a One Person Company.

6. What is the procedure for suo moto action by the Registrar?

Step 1- The Registrar must issue notice to the company that has not filed its financial statements for two consecutive years.

Step 2- The Registrar must record /enter the name of the company in the register of dormant companies.

Step 3- The Registrar shall strike off the name of a dormant company from the register of dormant companies maintained by him if the company fails to comply with the requirements of Section 455.

It is to be noted, nevertheless, that a dormant company is not exempt from conducting audit of its books of accounts, holding meetings or other compliances under the Companies Act, 2013.

7. Once dormant, can it become active again?

Yes. The Act of 2013 provides for converting a dormant company into an active company, for which an application under Section 455(5) must be filed, seeking the status of an active company. The said application shall be made in Form MSC-4 together with the prescribed fees and also with a return in Form MSC-3 with respect to the financial year in which the application seeking active status is being filed. As per Rule 8 of the Companies (Miscellaneous) Rules 2014, the Registrar shall issue a certificate recognising the active status of the company under Form MSC-5.

In case the dormant company does or omits to do an act under the Grounds of application in Form MSC-1 (submitted while seeking dormant status), the directors have a duty under the Act to file an application under Rule 8(1) for obtaining active-company status, within 7 days of such an act or omission.

Besides this, the Registrar is empowered to take suo moto action in case he is satisfied that the dormant company has been functioning directly or indirectly. In such a case, he can initiate proceedings for enquiry under Section 206 of the Companies Act, 2013 and provide the company with reasonable opportunity of being heard. If after such hearing, he finds that the company has been functioning, he has the power to remove the name of the company from the register of dormant companies and treat it as an active one.

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In this article, Deepshikha Sarkar discusses how to file a Provision Patent application in India.

What is a Provisional Patent Specification?

According to Section 9 of Indian Patent Act 1970, there exist two types of patent specifications,

1. Provisional Patent Specifications
2. Complete Patent Specifications (Non-Provisional according to USPTO)

A provisional patent specification is a preliminary application before filing a usual patent. It explains the invention in a broad manner but not completely. It is the document which may be filed before a Complete Specification in the Office of the Controller of Patents pertaining to a prospective patent.

It gets the word “provisional” in its name from being incomplete and a predecessor of a complete specification which comes later. Also, although it is not mandatory, it is highly recommended as it has a lot of benefits for the inventor.

Why should an inventor file a Provisional Patent Specification?

Earlier Patent Filing Date

On filing of the Provisional Patent Specification the inventor is entitled to an earlier filing date. This is key as it secures the priority date for the applicant. The benefits of this are numerous

• The fact that similar inventions which are filed after the filing date of the provisional cannot become prior art for the applicants invention.
• If any dispute regarding the ownership of the invention arises, the Patent 8Office will accept the provisional patent’s earlier filing date as the date of filing.

Cost Effective

1. The upfront cost of a Provisional Patent Specification is much lower than that of a complete patent application which saves thousands of rupees for the inventor in terms of professional fees.
2. Also, as it is technically more lucid (does not contain claims, prior art search and exhaustive and detailed drawings) as compared to the Complete Specification it costs less money and resources to prepare. Provisional Patent Specification can also be prepared by the in inventor himself.

Buffer time period to further develop claims based on industry research

When an invention is new, you will not know what to claim protection for. There is a pendency period of twelve months between the provisional patent specification and complete patent specification. This may be used for

• Researching on the invention regarding its value in the market and commercial viability
• Improving its features and making it technically more sophisticated.

“Patent Pending” tag

Once the Provisional Patent Specification has been filed the inventor can legally use the tag “Patent Pending” or “Patent Applied” for his or her invention. This tag aids in obtaining funds as the credibility of the invention increases while the business model is being set up in the background. It can be used as a selling proposition.

Scope of Abandonment (economical)

If the Applicant goes for a provisional specification and then realises that it is not commercially viable or chooses not to get a patent, he might abandon it. But if in the same scenario if he had gone for a complete specification he would have already spent a lot of money on it and the abandonment would have been expensive.

Secrecy

As there no publication of the patent application, the priority date is reserved by maintaining the secrecy.

What should an inventor keep in mind while filing a Provisional Patent Specification?

An Applicant should remember the following things

1. It is not a rough draft of the Complete Patent Specification. Whereas it defines the scope of the invention and it is the Provisional Patent Specification on which the following Complete Specification and finally the grant of Patent will be based upon.

All the elements of the invention which are born during the 12 months between the Provisional Patent Specification and Complete Patent Specification filing will not get the earlier priority date. Any addition/development to the invention after filing PROVISIONAL PATENT SPECIFICATION which is outside the scope which is set by provisional application will not have the advantage of priority date of provisional application.

2. The inventor/applicant should keep in mind that this is not the ‘final’ or ‘conclusive’ step towards securing a patent. It is the initial step in the procedure towards patent registration.
3. It has to be kept in mind that if the time period of twelve months within which the applicant has to file Complete Patent Specification is not adhered to then the patent application will be deemed to be ‘abandoned’.
4. Although the confidentiality is maintained after the Provisional Patent Application, complete and adequate disclosures should be made in the Provisional Patent Application as incomplete applications will be disadvantageous for the applicant in the future and his scope of securing a patent may considerably reduce.
5. A rough set of claims should be designed even though they need not be a part of the Provisional Patent Application. This should be done in order to conceptualize the invention and understand the implications of the invention completely.

What are the documents required to file a Provisional Patent Specification?

The following documents must be in proper order for a Provisional Patent Specification

1. Form 1 ( Application for grant of patent), THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003.
2. Form 2 (Provisional Specifications), THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003.
3. Form 5 ( Declaration of Inventorship) THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003.
4.  Form 26 (Power of Attorney). THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003. If your patent is filed by a Patent Agent then this form is necessary, otherwise not.
5.  E-filing fees (Patent Statutory fee) THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003 (Electronic Payment).
6.  Form 3 (Corresponding foreign patent application statement and undertakings) THE PATENTS ACT 1970 (39 of 1970) and THE PATENTS RULES, 2003.
7.  Priority Document ( This is used for convention applications if priority date is claimed).
8. Illustrations/Drawings of the invention.

What are the components of a Provisional Patent Specification?

The two broad divisions are Title and Description of the Patent.

TITLE

The Provisional Patent Specification should begin with the title of the invention. The title should fairly capture features of the invention and should be short and to the point. It should be under fifteen words. The inventors’ name, the word “Patent”, the abbreviation “etc.”, words in various languages or any fancy words should not be used in the title.

An illustration of patent TITLE is given below.

• “a steering mechanism incorporating an automatic feed-back circuit…”
• “an insecticide consisting X,Y,Z; or”

DESCRIPTION

The description begins with the Preamble and contains the field and object of invention. It begins on a fresh page after the Title. The Provisional Patent Specification does not need to have “claims”

PREAMBLE

The description of the invention in a Provisional Patent Specification starts with the Preamble ‘The following Specification describes the invention’.

FIELD

The technical field to which the invention belongs to should be mentioned in this section. It should be crisp to the point that it can be easily identified that what is the nature of the invention and classification of its technology. While mentioning the field it should be kept in mind that it does not ‘limit the scope’ the invention in any sense.

For example, the term “liquid dispensing machine” should be used in the place of “coffee dispensing machine” in which case it would limit the scope and eliminate dispensing soda, tea, etc.

OBJECT

The point of having this section is in showing the necessity of the invention. The advantages that the invention would bring about should be primarily solutions made by the invention.

The statements which can be used in this section include “the principle object of this invention is …”; “Another object of the invention is …”.

Important differences between a provisional and a complete application

1. A Provisional specification may be filed even in the case where the idea of the invention is not completely mature. But in the case of a complete specification there remains no scope for further development as it requires filing of detailed claims.
2. A provisional patent application is relatively inexpensive as compared to a complete application as the provisional specification doesn’t include all the parts of a patent application and doesn’t require the same amount of time as a complete and so as a result the professional fee charged is lesser although the statutory fees is the same.
3. As opposed to a complete specification which needs to include all the parts of a patent application, a provisional specification need not include the claims and abstract.
4. A complete specification is mandatory in order to secure a patent and can exist independently. A provisional patent application has no existence if a corresponding complete application is not filed within 12 months as the patent application is considered to be abandoned.
5. Though, both the provisional and complete application can be used for claiming priority, however, any foreign application filing like PCT application or a convention application needs to be mandatorily accompanied by a complete specification only.

Is it advisable for inventors in India to file a Provisional Patent Specification?

Patent attorneys in the India are of the opinion that a Provisional Patent Specification may not be of high utility. However it does save money in terms of only professional fee of agent/lawyer involved but the statutory fees as per First Schedule under The Patents Rules, 2003 is the same case of both Provisional and Complete Patent Specifications.

Also, inventors may file a 1-2 page provisional patent application themselves, and comfortably assume that they will come back a year later and pay a patent attorney to write a complete patent application. Entrepreneurs often think that they are “protected”, so they go out and freely discuss their inventions with customers, investors, and the general public during the one-year period which does more harm than good. This is because there are high chances that a part of such discussions includes the developments made during the 12 month interim period and they do not have the earlier priority date hence, there lies no claim with the inventor if someone copies the idea.

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In this article, Leepakshi Rajpal of SLS Hyderabad discusses the primary difference between criminal and civil negligence.

Introduction

Negligence is both civil as well as criminal wrong. This blog will initially explain the theoretical part of negligence followed by what people actually face in the real-life scenario. It is vital for us to know and understand that the concept of negligence is derived out of the basic word that we all have been subject to.

Understanding the concept of Negligence in law

So, we commence with the meaning of the word negligence which means “carelessness”. So it is basically a situation where one person is injured or is harmed due to the carelessness of the other person. The other person does not harm directly but due to an act that he committed negligently is the tort of negligence committed. It is when one person owes another person, the duty of care, which means that any other ordinary person would have taken care if he would have been there in his place, therefore negligence is where due to the failure of one person to take care, another person suffers harm, damage, injury or loss. Sometimes, situations arise in which there exists no contractual relationship between two parties, neither written nor implied. These situations are civil in nature and where there exists a contractual relationship that is where the concept of the criminal liability arises. For example in a case where doctor is treating a patient in the surgical room, if the patient has signed the contract where it is mentioned that the doctor will not be liable in case of death, then there exists a contract but if the patient dies not because of the disease but because of the negligent act that the doctor committed then it is criminal negligence.

Elements or essentials of Negligence

There are few essentials of negligence that need to be fulfilled before one can claim that negligence has been committed. They are appended below:-

Duty of Care

This means that there exists a duty of care in everything you do. The action of a person is tested upon whether any prudent man would have done the same in the similar circumstances, therefore duty of care means to take reasonable care of what you are doing.

Breach of Duty of care

It is the breach of the duty of care which should be present in the negligent act, which means that if the act is done with the reasonable care and protection as any other prudent man would do, then there arises no question of the negligence being into question.

There must be an injury or harm caused

Now, the third important element that needs to be taken into consideration is that there needs to be an injury, harm or loss to the person because of the breach of the duty of care on the part of the other person. Therefore, negligent act will come to the cognizance of the court only when the injury is caused to the person.

The injury or harm caused must be as a result of the breach of duty of care

This means that the previous act of the injury being caused is complete to be called as negligent act when it done because of the breach of the duty to take care on the part of the other. So, it is when the other person fails to perform his or her duty towards the other, which any other prudent man would do in ordinary course of situation, and injury is caused to the person because of the failure to take care of the other, negligence is said to have been committed.

Defences to Negligence

Negligence can always be an appropriate trick to target anyone, therefore, there are defences available which prove that it is not always that the act has to be negligent. These defences are appended below:-

Inherent Risk

So, when we talk about inherent risk, it means when the act itself is dangerous enough that it is dangerous and any prudent man would not engage in such an act, or any other prudent man would have done the same thing as the defendant has done, therefore in such cases the defendant would not be liable of the negligence of which he is charged in the court.

For instance, when some dangerous animal approaches towards me, I run and while I Run, I take the knife from your cake shop and ruin your cakes, because of which you suffer losses and damage. So, I cannot be negligent because the animal that is running behind me is dangerous and if I do not take the knife from your cake shop, I would have died, therefore my act of picking the knife from your cake shop was not a negligent act and was an intentional act. The circumstance involved an inherent danger. Therefore, I cannot be charged with negligence.

Obvious Risk

So, in this kind of defence we talk about something that is very obvious. Where the act done by the defendant was an obvious reaction to the primary action, the defendant cannot be blamed for negligence.

For Instance, where due to the spillage of oil, I slipped holding onto you and then you got hurt, I will not be held liable for negligent act.

Voluntary Assumption of Risk

I see a gun-shot approaching towards me and I jump pushing you ahead of me, in that case, I presumed that the gun-shot is coming towards me and the sudden reaction to the presumption was me jumping at you. In that case, I will not be held liable.

Dangerous Recreational Activity

Dangerous recreational activity is when we participate in an activity for recreational purposes, but that activity is inherently dangerous and the participation in which would be a voluntary act, I will not be held liable for negligent act.

So, where I participate in a sea diving activity, and drown and die, the person who took me for sea diving will not be held liable for any negligent act or my death because it was me who went for that activity, therefore he cannot be held negligently liable for injuries caused to be or harm caused to me.

Exclusion of Liabilities

In this what happens is that the defendant tries to modify their exposure to liability by stipulating a reduction or even an exclusion from liability. Exclusion of liability means that the defendant tries to maintain a relationship with the plaintiff, so as to avoid the liability on them. Therefore, when the defendant tries to enter the premises of the plaintiff according to the will of the plaintiff that is exclusion of liability. There lies an exception to this, i.e. when the term is used in the broader sense, reliance cannot be placed upon it because it loses its essence.

Illegality

This defence means that there is illegality in the action done by both the plaintiff and the defendant, which means that there exists a common action based on illegal terms and therefore, if the plaintiff sues the defendant for causing harm negligently, then the defendant can claim that the act itself was illegal and therefore, the suit does not stand.

For instance, when both the plaintiff and the defendant together keep a tiger to tame in their house, and one day the defendant opens the cage and the tiger destroys the lawn, the plaintiff cannot sue the defendant for opening the cage of the tiger, because keeping the tiger for taming purpose or for any other purpose is illegal according to the law of the land.

Inevitable Accidents

This means that accidents which are inevitable and over which the defendant has no control of, he cannot be sued for the same.

For instance, If I am travelling through toy train and buy a ticket from the ticket counter, and that train gets de-railed in between because of which I get hurt. So, I cannot sue the ticket distributors for not informing me about the derailing, even they were not aware of this inevitable accident. Therefore, they are not liable.

Contributory Negligence

So, contributory negligence means where both the parties are involved, no one party can be blamed for it. This means that when both the parties contribute to an action, and that action turns the table for one of them, the other one cannot be sued, because it was both of them who contributed for the negligence of the act and therefore, it was contributory negligence.

Now that we know what negligence means, what its essentials are, and what its defences are, let us get into the practical aspect of the negligence and what people really face in their daily lives.

Now, negligence can be of any type but what our blog is focussing on are the major areas where people find themselves to be trapped. So negligence can be of criminal nature or civil nature. Let is discuss both of them below:-

Cases of Criminal Negligence

1. When a person is driving a car and texting at the same time, and in the meanwhile breaks someone else’s car, he is criminally negligent because the criminal laws of the land, do not allow texting and driving.
2. Similarly, in a case where a person is drinking and driving, and kills someone on the road, he can be held criminally negligent. The reason is that killing is a crime and similarly drink and driving is also a crime, therefore he can be sued and held criminally liable.
3. When a nurse in a nursing home forgets to feed the patient and the patient dies because of the negligent act of the nurse that is when the nurse can be held criminally liable because it is because of her criminal negligence that the patient is put forward for a risk to life.
4. A caregiver in a hospital who is not paying attention and who provides someone with a deadly dose of medication could be considered criminally negligent.
5. A person who is supposed to be a caretaker of the nursery and fails to take care, in lieu to which someone takes away child of another, can be held criminally negligent.
6. A doctor who prescribes additive drugs to a patient knowing that he is allergic to it can be held criminally negligent.
7. A doctor in lieu of making money from the services he provides, if exchanges the lungs of a person during a surgery or leaves a tool or any hazardous substance inside his patient’s body, is criminally negligent.
8. A parent who leaves their child of two years, at home for going to a pub can be held criminally negligent. This is because it is their breach of duty to take care which is exposing the child to substantial risk.

Procedures and Best Practices Involved in Filing of a Criminal Case

So, now that we have seen certain cases where negligence can turn into a criminal act, we need to know how to file a criminal case.

1. File an FIR – Make sure that you file an FIR with the police at the police station after the happening of the criminal event with you.
2. Vakalatnama – Once you have filed an FIR, know that the Vakalatnama has to be filed because the lawyer or the advocate will need to represent you on your behalf.
3. Investigation– the process of investigation starts after the cognizance of the case to the court and sometimes even before that if the nature of the offence is serious in nature.
4. Laying of charges – If the crime is heinous then the police will frame the charges in the police diary and then report the same to the court. The court will then decide whether to prosecute based on the witnesses and the statements provided in the court.
5. Enquiry – Inquiry will be conducted by the court to determine the guilt of the offender and if no such guilt is found, then the statements will be recorded under the Section 164 of the CRPC, where the accused will be required to say whether he feels he is guilty or not and he can admit the guilt.
6. Trial- The process of trial starts when the investigation is over and the court now needs to decide upon the facts and the evidences upon whether the accused is guilty of the offence or not.
7. Arguments– both the lawyers put forth their arguments for the determination of the guilt of the accused.
8. Judgement– The judgment is given on the basis of the arguments put forth and taking into consideration the result of all the steps involved in a criminal case.

Advocates liability for Negligence in criminal cases

Indian position on advocates liability for negligence is defined under Section 5 of the Legal Practitioner’s (Fees) Act, 1925. No legal practitioner who has acted or has agreed to act shall, by reason only of being a legal practitioner be exempted from liability to be sued in respect of any loss or injury due to any negligence in the conduct of his professional duties.

Civil Negligence

Civil Negligence can be of different kinds, just as the way criminal negligence is. There are various common day examples which prove that the negligence even in the ordinary sense can take us to courts. Some of the examples of civil negligence are as follows:-

1. A store which is very popular for the beers, and usually has a lot of traffic inside the store, holds a sale in the mid-season without any security can be held negligent in his acts.
2. A pharmaceutical company if launches a drug without testing it on the humans can be held negligent.
3. A driver who runs a stop sign and goes beyond the prescribed speed limit can be held negligent.
4. A person who owns a dog and leaves him open in the courtyard of another, and the dog destroys the garden of another. The person can be held negligent.
5. If a person who owns a dog, leaves a dog open in the playground and the dog attacks the cat of another and injures her, the person can be held negligent.
6. An office where mopping is in process and does not put a sign of wet floor, can be held negligent.
7. A company which does not gets incorporated according to the SEBI guidelines, can be held negligent.
8. A doctor who operates on the wrong patient can be considered negligent.

Ten best practices and Procedures for filing a Civil Suit on negligence

1. Filing of a suit or a plaint

This means that you actually take down time and everything involved in the civil action that happened against you, in the above context, negligence. Then you write and give a written statement of the facts and whatever happened.

2. Vakalatnama

In vakalatnama what happens is that the person filing the suit authorises the advocate on behalf of the person to file a suit and in civil cases, this is not really necessary. This is done as the requirement of the time and the need is. The person can himself go and file the case and fight the case as well, the requirement of the vakalatnama, therefore is not a compulsion.

3. Filing

In this step what happens is that you file your plaint which is a written statement with the Chief Ministerial Officer or any other officer as the requirement may be and pay the prescribed fee for filing and the procedural fee and get going with the following steps. The fees may be different according to the officers you approach to.

4. Hearing

In this stage of hearing what happens is that the judge will listen to what you want to say and what the other party wants to say and then it will ask for substantial documents supporting the case and then fix a date.

5. Written statement

Written statement means that the statement by the judge that is given for the hearing on the next date. Also, within that period of time the defendant is required to record his written statements proving himself to be free of whatever charge the plaintiff has put against him.

6. Replication by plaintiff

Replication by the plaintiff means, that the person who has put the charges against you of any civil nature, he will reply to the recorded written statement of the defendant substantiating himself in the court of law of the various practices and actions that prove himself to be the right and the defendant to be actually guilty of the charge of the civil action against him.

7. Filing of other documents

Filing of other documents mean that the other documents required to substantiate the arguments by each of the parties involved. Both the parties collect and give the collected documents for substantiating their arguments and prove that they are rightful in the court of law.

8. Framing of issues

Framing of Issues means that once the documents have been put forth across the table, the judge will now consider the issues and the parties will have to fight their case upon the issues so framed according to the substantiated documents and evidences.

9. List of witnesses

List of witnesses means that the documents that substantiated by the parties, need also to be accomplished by a witness who will prove in the court that he saw or witnessed the event happening for which the case has been filed.

10. Final Hearing

Once the witnesses, documents and issues are looked into, the judge decides as to in whose favour the judgement should be and acts as an empire in the adversary system of the Indian Courts. The judgement is either given in the form of paying damages, compensation, injunction or remuneration for the losses suffered.

Conclusion

Therefore, in the above-mentioned circumstances, different levels of negligence can be traced. Some negligence may be civil in nature while the other may be criminal in nature. If we stop doing negligent acts, we will stop tolerating them too and then only we will become careful about our actions about what we speak and what we do.

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In this article, Raghav Ajmera of Shri Navalmal Firodia Law College, Pune discusses how to get a license to set up a liquor store in Delhi.

Introduction

Delhi is among the few cities in India which is famous for its nightlife. We all know that alcohol is the most consumed intoxicant around the world. The sale of alcohol usually takes place at liquor stores, bars, pubs, discos, clubs and restaurants. As compared to the other states Delhi comparatively has a cheap alcohol rates with a high demand for it. But to set up a liquor store it is not as easy as a setting up a general store. To operate a liquor store you need to have a license which allows you to sell alcohol in the country. To get a license for a liquor store it can take up to a year.

• In India, the laws governing alcohol which regulates the sale and buy of alcohol varies from state to state. They vary because the subject of alcohol is included in the state list which comes under the seventh schedule of the constitution of India.
• The excise department in Delhi regulates the liquor head. For the consumption of alcohol, there is a legal age for every state which is known as the consumption age.
• Consumption age is that age when a person can consume alcohol.

In Delhi, as per the Delhi Excise Act, 2010-SECTION 23 and Delhi Liquor License Rules, 1976 the legal age to consume alcohol is 25.

What is a liquor license?

A liquor license refers to the license which is required to sell alcohol at a certain place. It is produced by a legal authority. The liquor is supplied by the L-1 licensee to the holders of L-2, L-3, L-4, L-5, L-19 and L-19 A, L-52, L-53 licences in the National Capital Territory of Delhi. Every state has its different rules and regulations governing the sale of alcohol.

Kinds of Liquor available in Indian market

There are two types of liquor available in the Indian market.

1. Indian made foreign liquor (IMFL): It refers to ‘Hard Liquor’ manufactured in the country.
2. Imported foreign liquor (IFL): This refers to the liquors which are produced outside of India and later on imported to India. IFL is usually expensive than the IMFL.

Implementation of liquor laws in India

In Constitution of India, Article 47 it has been clearly mentioned that “The State shall endeavour to bring about a prohibition of the consumption except for medicinal purpose of intoxicating drinks and of drugs which are injurious to health.” In India there are 5 states where there is a strict ban on sale, purchase and consumption of alcohol.

Types of Licenses required to serve liquor

There are several rules which are called Delhi Liquor Licence Rules, 1976 which states about the types of licenses required to serve liquor in Delhi and alo describes the do’s and don’t to provide safe and quality liquor to the consumers in Delhi. There are 5 categories under which the license to sell the kinds of liquor are mentioned, those categories are as follows:

• Indian made foreign liquor (IMFl)

• Country liquor

• Denatured & Special Denatured Spirit

• Rectified spiri

Liquor licenses are of different kinds. These kinds of licenses are subject to sale of liquor at various places like the retail shops, bars, hotels, restaurants, pubs, clubs, and discos. For instance, if a person wants to sell liquor as a wholesaler then he/she need to obtain the license L-1 which prescribes the ‘Wholesale licensee of Indian Made Foreign Liquor’.

Granting of License

Grant of L-1 License

This is in regarding the granting of all liquor license for the wholesale vending to the company or a society or a partnership firm or proprietorship firm provided the applicant owns distillery/breweries/manufacturing units/bottling plants. The applicant has to follow the terms and conditions prescribed by the authority.

Grant of L-3 License

To get this license the state government issues tenders which are being issued to the distilleries or bottling plants which must be licensed by the state government or central government if the bottling plants follow the terms and conditions.

Grant of L-6 License

The L-6 license is in regarding the license for retail vend of foreign liquor/beer are granted only to selected undertakings of the Delhi government namely DTTDC, DSIDC, DSCSC and DCCWS. Any proposal in respect of premises for opening of a vend would come from above Corporations.

Grant of L-9 (Previously L-52 D)

The state government for the purpose of retail sale of various brands of Indian liquor and foreign liquor grants the license in collaboration with L-1. There are certain terms and conditions which are mandatory to be done after which only a person gets granted a license.

Grant of L-10

Licenses in form of L-10 is also for the purpose of retail sale of various brands of Indian liquor and foreign liquor as approved by the competent authority but the terms and conditions is not same as the L-9.

Grant of P-10 and P-13

This is in regard to the temporary license for service of liquor in parties/ functions/ conferences. The terms and conditions of the temporary license varies for the residences, For Licensees allowed for onside Consumption Hotels/Clubs/Restaurants, at any other premises.

Grant of L-15 and L-16

The authority grants licenses to the hotels holding star classification and approval of department of tourism, Govt. of India which are necessary for the conditions for grant of license. The guidelines laid down by the authority needs to be fulfilled.

Grant of L-17 and L-18

This is given to the independent restaurants approved by Department of Tourism, Govt. of India. One of the mandatory terms and condition is that the restaurant should be in a commercial area with an adequate parking space.

Grant of L-28

This is granted to a club registered with the registrar of firms/registrar of cooperative societies for service of the foreign liquor to it’s members. Any eligible club can apply here in accordance with the terms and conditions prescribed by the authority.

Grant of L-29

This is granted for service of Liquor/Beer at a club/mess whose membership is exclusively for Government Servants and which does not follow commercial rates and rules. The documents/procedure required for granting L-29 License is similar to the grant of L-28 license.

Apply online for liquor license

This is the world of technology where the work should be done on one click and same has been introduced by the Delhi government. The government of Delhi launches the portal to apply online for wine and beer shop/liquor license in Delhi. Now after the introduction of the portal there is no need for a person to visit the excise department.

The online liquor license program is launched by Delhi chief minister in excise department. This decision was taken by the Delhi government to make the work easy for the people applying for liquor license.

You can visit the official portal for apply online in Delhi for liquor license.

Choosing the right business structure

The purpose of setting up of any business structure is a person should shield themselves from liability and protect their assets from creditors. These days some of the business structure are very common and some of them are sole proprietorship, partnership, limited liability company (LLC), and corporation. Whatever the structure you’ll choose will help you to increase your money and assets and decrease your liability. For instance, if we choose the option of setting up a sole proprietorship we’ll have to invest it on our own and all risk should be suffered by us and also all the profits to be shared by the sole proprietor himself.
Paperwork, licenses and business permits are required to operate a business. The sole proprietorship is the best suited business form.

Legal framework and licensing required for setting up a liquor store in Delhi.

Part A – Understanding what type of license you need

Get knowledge of your state liquor laws

Every state in India has its own rules and regulations regarding the consumption, purchase and sale of alcohol. Before applying enquire as much as you can at your nearby liquor shops regarding the terms and conditions prescribing the regulations also you can go to the authority granting licenses.

• Every state has an Alcoholic beverage control (ABC) that governs the conditions of the sale, purchase, consumption and distribution of alcohol.
• Some of the states have license quotas which limits the number of places to sell alcohol within the state at any point of time.

Find out if you need an on-license or an off-license

There are two types of licenses which is required by the premises that offers liquor.

• The on-license refers to the kind where the alcohol is sold and consumed in the same premises. This type of license includes bars, restaurants, discos, etc.
• The off-license refers to the kind where the alcohol is consumed outside the premises. These are usually shops.

Figure out the specific kind of license you need

• Tavern license: It might be required in some states by business organisations that serves food but enjoy half of the benefits from the sale of liquor.

• Beer and wine: Some smaller restaurants are allowed only to sell smaller drinks like beer and wine and are not allowed to sell hard drinks.

• Restaurants: This helps and enables the sale of liquor in the premises which also helps in the profits of the restaurant.

Part B – Navigating the application process

Step 1 – Start as soon as possible

In case if you are thinking to open a bar or a restaurant serving alcohol you should be two steps ahead from all the events because getting a liquor license is not an easy job.

Step 2 – Consider the cost

The cost of obtaining the liquor license may vary from state to state and also from case to case. In some of the cases the price is very low but sometimes the price may go very high. Unfortunately because of the license quotas you may have to buy the license from an existing bar, liquor store, or restaurant.

Step 3 – Write a clear outline of business you are running

As explained in the above part -A you need to determine what kind of business you are running so that you may get the license accordingly.

• So as part of your application you need to write down what kind of business you would be running and whether you ought to sell liquor on your premises.
• You should also mention what kind of liquors you would be serving. Whether it is wine, beer or hard drinks or all the three.

Step 4 – Fill in all the necessary forms and complete the required documentation

Whatever asked in the form should be properly filled with the necessary information.

• The application should be prescribed with your personal details, business experience, your age, and your clean personal image.
• With your personal documents you also need to attach a personal agreement, a certificate of incorporation, with a municipal corporation approved building plan, a code compliance certificate and a copy of the certificate of title for the premises.

Step 5 – Be prepared to defend your proposal

After giving your documents and everything, a notice will be posted in the proposed area of business, including your name and sort of permit you are applying for.

• This notice must be publically displayed for a particular time in your area. During this time, anyone from the local community can come forward and contest your application.
• Depending upon the state or city laws you may also be required to post an announcement of your liquor license application in the local newspaper, and in some places, reach out to local neighborhood organizations such as schools, places of worship and nearby parks.
• If there are no objections to your application, local government will proceed with reviewing your application as normal.If there are objections, you may be called forward to defend your proposal at a public hearing, before a final decision is made.

Part – C Maintaining your liquor license

Renew your license yearly

If you wish to maintain your liquor license, you will need to renew it yearly by paying a certain amount of fees.

• If you stay at a good standing in your locality throughout the year, you may be entitled to reduction in fees.

Be aware that your license can be revoked

Your license can be revoked if you go against the rules and regulations of the authority.

• It can be revoked if you sell alcohol on dry days, or sell alcohol to minors or not incorporate according to the guidelines by the authority.

Conclusion

India is amongst the biggest manufacturer of liquor around the world. With time the consumption of liquor has increased and it is not a good thing. There have been instances where a person not having the legal capacity is drinking and which is not good for a country’s future. The process to get a liquor license is not an easy job it has very hindrances and obstacles also it requires a lot of capital but it is a profitable business. As per Delhi excise rules, no person can stock more than 18 liters of liquor, wine, cider, alcopop and beer and 9 liters of Indian and foreign alcohol (rum, whiskey, vodka, gin) at home or for parties.

References

• https://blog.ipleaders.in
• https://www. wikihow.com
• http://delhi. gov.in/wps/wcm/connect/doit_excise/Excise/Home/Frequently+Asked+Questi
• http://www.delhi. gov.in/wps/wcm/connect/doit_excise/Excise/Home/Licences/Licences
• https://blog.ipleaders.in/liquor-laws/

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In this article, Sarthak Modi of ILS Law College Pune how to obtain a Liquor license in Mumbai.

Liquor license in Mumbai

Liquor is a nontoxic liquid which contains Ethyl Alcohol. It is produced by distillation of grains, fruit, or vegetables that have already gone through alcoholic fermentation. All liquids containing alcohol are known as liquor. There are mainly three types of liquor produced for consumption in India.

• Indian Made Foreign Liquor (IMFL) – This term is used to determine western-style hard liquors such as whisky, rum, vodka, etc., which are manufactured in India.
• Beer
• Country Made Liquor – These are indigenous recipes such as fenny, toddy etc.

A liquor license is a permit to sell alcoholic beverages. States don’t want just anyone selling liquor. That is the reason they require restaurants and businesses to apply for a liquor license. Purchasing, possessing, transporting, and consuming liquor without a valid permit is an offence under the Bombay Prohibition Act, 1949. In Mumbai the excise department issues licence for buying and selling of Liquor.

The licenses can be broadly classified into two

• Wholesale Liquor License – means a person holding a licence in Form C.I.W. II under these rules to sell duty paid country liquor by wholesale. TOD/III under the Maharashtra Country liquor Rules, 1973, to sell country liquor by retail.
• Retail Liquor License – “ retail licence ” means a person holding a licence in Form C.L.III or C.L./F.L/

General guidelines for obtaining Liquor license

What Specific class of License you want?

Wholesale Liquor License

1. Wholesale license for wine : Trade and Import Licence for removal a custom frontier.
2. Licence authorising the storage and wholesale sale of duty paid country liquor to retail shop.
3. Wholesale sale of foreign Liquor.

Retail Liquor License

1. Permit room license
2. Club License
3. Beer Shoppe Licence
4. Mild Liquor and wine bar License
5. Wine bar License
6. Wine Shoppe License

Determine whether you need an on license or an off license

1. You will need a license if the liquor you sell is intended to be consumed on the premises. Examples of businesses needing a license include bars, restaurants etc
2. You need an off license if you don’t intend alcohol to be consumed at the place of selling it. Examples of businesses that require an outside license include liquor stores, grocery stores and drug stores.

Start as early as possible

• If you intend to open a pub or restaurant serving alcohol, it is important that you start your liquor license as early as possible.
  To get approval for a liquor license it takes time in some places as long as a year. Therefore, this should be one of the first considerations when planning your new business venture.

• Complete the required form and provide any required documentation.
• The application will contain details about your business and your personal background.
• Details of your age, your business experience, and a clean personal record may affect the state’s decision to grant you a license.
• You must also include a number of important documents in your application. These include: a certificate of incorporation, a partnership agreement, your company’s constitution, a copy of your proposed food menu, photos or drawings of the exterior of the building and a floor plan of the interior, a code compliance certificate, a copy of the title certificate for the premises.
• Renew your liquor license annually. You must renew your liquor license on an annual basis, which means you have to pay a renewal fee.
  
• Keep in mind that if you stay with your local agency during the year, you may be entitled to a reduced fee.
• Be aware that your license can be revoked. Understand that your license may be revoked if you violate your local agency’s terms of service. Ordinary offenses include the sale of alcohol to a minor, the supply of alcoholic drinks to customers and to stumble an employee on the premises.

Conditions under which authority grants license

Section 34 – Vendor’s licenses

1. The government may, according to rules or a written order give an official permission to give a vendor license for the sale of foreign liquor.
   
2. An entrepreneurial license is granted under the following conditions:
   

(i) The stock of foreign liquor from the licensee (except for disposal at the store) will be held by him at 12 godowns approved by the government.

(ii) The license holder pays all leases, costs and expenses related to warehouses and surveillance.

Section 35 – Hotel licenses

The government may, by rules or an order in writing, authorize an officer to grant licenses to the managers of hotels to sell foreign liquor to the holders of permits under this Act:

Provided that the government is satisfied that such a hotel usually has a sufficient number of staff members eligible to hold permits.
Such licenses are issued under the following conditions:

1. Liquor will be sold to the permit holders living or boarding at the hotel.
   
2. Consumption of liquor sales will not be allowed in any of the rooms of the hotel to which any member of the public has access.
   
3. The hotel license holders must pay the expenses of any officer of the excise institution, if any, for the grant and control of permits on the premises or for the supervision of the issue and consumption of foreign liquor in the hotel.

Wholesale License

• The procedure to obtain wholesale licence for selling liquor is mentioned in Part-III of Bombay Prohibition Act ,1949.
• Anyone who wants to obtain the wholesale licence shall make an application to the Commissioner through the Superintendent of the district in which he desires to establish a warehouse for the purpose of storing the country liquor.
• Then superintendent shall verify the particulars given therein and satisfy himself that the building or rooms of the warehouse for the purpose of sale of liquor conform to the requirements of rule 15.
• The requirements of warehouse premises are also mentioned in the act.

Renewal of bar/shop license

In Mumbai City Restaurants with Grade 1 have been given the facility of obtaining the Bar Licence i.e. Permit room licence for “ON- Consumption” and FL II licences have been given to the shops to sale sealed Bottles for “OFF- Consumption”. The duration of these licences is for one year.

Under what Rule/Act the license is issued

Bombay Foreign Liquor Rules 1953. The license is issued under the Rule 24, 44, 47 and Special Permit Rules 1952 for Beer Bars.

How to Apply

Any person desiring to renew a license shall, thirty days before the date of expiry of license, apply for renewal thereof. Every application shall be accompanied by a challan, evidence of payment of application fee of Rs.25/- and renewal fees as fixed by the State Govt. from time to time.

What documents are to be submitted along with the application

• The licensee desiring to renew the license should apply in the prescribed form along with Rs.1/- Court fee stamp.
• Application fee of Rs.25/- in challan
• Licence fee challan as fixed by the State Govt. from time to time
• Income tax/Sales Tax clearance certificate or affidavit.
• Partnership Deed copy or Declaration regarding no change in the Partnership or status of the institution
• Documents regarding Ownership/Tenancy of the premises
• Licence in Original

License for purchasing, consuming and transporting alcohol

• If a person in Maharashtra is buying alcohol than he needs to be a major (i.e. above 18); as per Bombay Prohibition Act, 1949 Section-18. However he cannot consume the alcohol, because the consumption age in Maharashtra is 25 (as per Bombay Prohibition Act,1949- Part VI-A Rule 70D).
• Such a law becomes difficult to enforce as there are very limited ways to ensure that any person who is under 25 do not consume the alcohol.
• Even if he is caught with alcohol he cannot be punished if he is above 18.
• If an individual wants to buy alcohol he first need to get a license from the government.
• He needs to show that license to the vendor before making a purchase.
• A person is allowed to possess only 12 units of alcohol at a time.

Cost of obtaining liquor license

• The temporary club licence or party permit fees for bigger parties (more than 100 people) is Rs15,000. But smaller parties (below 100 people) is Rs10,000.
• For temporary club licences for liquor parties in smaller towns, such as Navi Mumbai, where the population is below 20 lakh, the mandatory licence will cost Rs10,000 for above 100 members and Rs7,000 for below 100 members.
• As per excise department rules, the FL-4 licence is needed to host a private liquor party in a flat or at a resort that presently costs Rs13,000 across cities in the state.
• Consumers must have this licence even if they are drinking with friends in an apartment or a house party organizer can be booked for illegal possession of liquor if he does not have permission to host the party.
• While only if a few friends are together, the consumer should at least have a Rs5 daily drinking permit.
• License fee for permit rooms is Rs. 544,000 and that for beer shops is Rs.150,000.

Digitalisation of Licensing process

• The state excise department also has an online portal and an app ‘excise.maharashtra.gov.in’ to grant liquor consumption permits.
• the permit could be obtained by simply keying your Aadhar Card number on the website or the app.
• A digital permit will be provided within few minutes of the application. The applicants can even check the application status online.
• Those applying for liquor permits must be aged 25 and above.
• A one-day drinking for foreign liquor costs Rs 5, country liquor costs Rs 2 whereas the annual permit costs Rs 100 and a lifetime one costs Rs 1,000.
• One can apply only one permit in a day.
• Earlier, applicants needed to go to the excise office to submit documents and pay fees, for getting the drinking permits.

Places where Liquor shops are prohibited

• The Supreme Court in December 2017 had banned the sale of liquor within 500 metres of state and national highways across the nation from April 1,2017 but this order does not prohibit licensed establishments within municipal areas.
• No liquor shop should be established in municipal corporations and municipalities within a distance of 50 metres from an existing place of worship or educational institutions and that a minimum distance of 100 metres should be maintained between such places in all other local bodies .
• No liquor shop should be established within 100 meters of a hospital.

Penalty

Possession, consumption, or transportation of alcohol in Maharashtra without a permit can get you fined to Rs 50,000 and/or a prison sentence of up to five years.

References

http://mumbaicity.gov.in/htmldocs/liquor.htm

https://www.lawfarm.in/question/licence-for-liquor-store

http://wineshoplicense4sale.blogspot.in/2014/08/wine-shop-license-in-maharashtra-mumbai.html

This was all about how to get Liquor license in Mumbai. Do you have anything to add to the procedural aspect of how to get a Liquor license in Mumbai? Comment below and let us know.

The post How to get a license to set up a liquor store in Mumbai appeared first on iPleaders.

In this article, Ruchika Daga of Shri Navalmal Firodia Law College discusses whether the court should impose a permanent ban on crackers in Delhi or not.

Introduction

Ban on crackers means a legal or official prohibition on sale and manufacturing of crackers. Bans are usually implemented keeping in mind some goals to be achieved.

Ban on Crackers is a hot topic for discussion every year during Diwali and Dussehra though firecrackers are not the only reason for pollution but is one of the concerning reason of pollution. Air pollution levels had dangerously spiked after Diwali last year. In order to curb the pollution Supreme Court canceled all the licenses that permitted sale of wholesale as well as retail of firecrackers in delhi last year on November 11. However, the ban was lifted on 12 September this year as Supreme court says that graded and balanced and not radical and extreme approach was required to deal with pollution in the city.

The states in Delhi are restrained from granting more than 50% of the number of temporary licences which has been granted in 2016. The area of distribution of the temporary licences is entirely on the authorities to decide.

There are enough of crackers available for sale in Delhi and the transportation of fireworks in Delhi and NCR from outside the region is prohibited and the concerned law enforcement authorities will make sure that there is no further entry of fireworks into Delhi and the NCR till further orders.

It has been directed that the police authorities and district magistrates to make sure that firecrackers do not burst in “silence zones”, that is an area of at least 100 metres from courts, hospitals, educational institutions and religious places or any other area that has been declared a ‘silence zone’ by the concerned authorities.

Court appointed a committee headed by chairman of central pollution control board(CPCB), National Physical Laboratory, Defence Institute of Physiology and Allied Sciences, Fire Development and Research Centre, National Environment Engineering Research Institute (NEERI) and scientists from the State Pollution Control Boards to conduct a research on the impact of bursting firecrackers during the festival of Dussehra and Diwali on the impact of health of the people.

Keeping in mind the detrimental effects of air pollution, the human right to breathe clean air, The Central Government and other authorities should consider encouraging display of fireworks through community participation rather than individual bursting of fireworks,” encouraging display of fireworks through community participation rather than individual bursting of fireworks,”.

Citizens of Delhi have been suffering because of high pollution levels every year after Diwali up till spring season. During Diwali last year, the city’s air pollution levels were 15-16 times beyond the safety limits.

Have you ever wondered how many harmful effects do these firecrackers create for the environment?

Air pollution

Smog

Smog results in reduction of visibility which lead to accidents as well as it is toxic to be inhaled. winter season has not even begun in the capital city, the air is filled with smog already. Particulate matter, when mixed with smoke from automobiles, is choking Delhi enough. During Diwali, the pollution goes up by more than 30% due to bursting of firecrackers. It is said that one big firecracker can produce up to 250cc of smoke. It also cause water contamination and acid rains and results in air pollution that creates carcinogenic sulphur compounds and airborne arsenic effect.

Harmful gases in the air

Busting of crackers emit nitrogen dioxide, Sulphur dioxide and matter which are so minute that they have the ability to get lodged in the lung and can even enter the bloodstream. Patients with asthma and other respiratory disorders report discomfort and worsening of conditions during Diwali. Which are dangerous to health and cause lot of health problems like asthma attacks, heart attacks, Chronic bronchitis, Common Cold etc.

Global warming

Oxides and dioxides of sulphur and nitrogen are released during the burning of firecrackers. These gases are very harmful to human health and also to the environment. It causes Global warming and Global warming has many harmful effects on our health.

Land pollution

Garbage

The main problem that comes to our sight is the garbage that is lying on the roads after Diwali. This garbage is garbage which is full of chemicals and it is effective on people’s health that lives near to the garbage. would you like to see garbage all over when you wake up on the day of Diwali? The crackers bursting not only pollutes by contaminating the air, but also pollutes the air.

Noise pollution

Noise pollution is as dangerous as air pollution. It not also affects human beings but also more dangerous for animals around as they have ears which are more sensitive than that of humans. Also, animals are not able to communicate they tend to get confused and terrified seeing the light changing and listening to the sound of crackers. Standard level set for humans is 60 decibel. Increase in that will cause various problems like restlessness, Fidgetiness, High Blood Pressure, Anger, Heart Attacks, Sleep Disturbance, Impulsiveness, temporary or permanent hearing loss.

Every year a lot of cases are reported in delhi related to burn injuries, as well as 20% to 40%, increased cases of wheezing, respiratory diseases, exacerbation of bronchial asthma and bronchitis patients have been reported during and after Diwali.

Therefore, the government took up this issue seriously and enacted various legislations, including the Supreme Court giving out certain judgments and orders to curb this increasing level of pollution.

Laws and regulations

Over the years, none of us paid attention to any of the laws restricting over the kind of crackers which can be sold and manufactured because of this none of the laws restricting the use of crackers have been implemented strictly so far which led to lack of awareness among citizens.

1. As per the “Environment Protection Act, 1986 and the Environment Protection Rule, 1986 and 1999 (amendment) rules”;
2. Rule 89 lays down “The manufacture, sale or use of firecrackers generating noise level which exceed 125 dB (AI) or 145 dB(C) at 4 meters distance from the point of bursting shall be prohibited.”

To Determine dB (decibel) level an expertise is required and it must be the manufacturer to follow to and duty of the citizen not to buy crackers which violate this provision.

Bursting crackers is against DPSP (DIRECTIVE PRINCIPLES OF STATE POLICIES)

As the state swears to protect the environment under Article 48A. It talks about Protection and improvement of environment and safeguarding of forests and wildlife. The State shall endeavour to protect and improve the environment and to safeguard the forests and wildlife of the country.

How to identify such crackers which violate laws and Regulations?

The Explosives Rules 2008 (Rule 14) STATES that “every manufacturer shall on the box of each firecracker shall mention details of its chemical content, sound level and that it satisfies requirements laid down by the chief controller” Hence, one must keep in mind the above provisions mentioned before purchasing any firecrackers to ensure highest standards of safety.

Prohibition on sale of imported crackers

The Department of Industrial Policy & Promotion, Ministry of Commerce & Industry has banned the illegal imports, possession and sale of firecrackers of foreign origin. The manufacture, possession, sale etc of any explosive containing sulphur or sulphate mixed with any chlorate is banned in the country.

Central Government recently instructed the state governments to take action against the Chinese crackers sale and ordered a strict crackdown on any such sale, as these crackers are more harmful and contain certain chemicals which are beyond the permissible limits of safe standards.

Legal arguments against banning crackers permanently

Customary Practices and Right to profess one’s religion

The bursting of firecrackers has been a Hindu tradition for years and suddenly implementing a ban on it permanently might hurt their religious sentiments. Fireworks have been an inherent part of the Diwali celebrations and not just Hindus, but people of other religion equally participate in this festival.

Instead of banning the fireworks, there could be measures which can be taken for reformation to lessen the amount of these crackers that could be burnt in a single day. Some areas near hospitals and old age homes should have firecracker prohibition rules which should be strictly implemented.

Might violate right to profession

Right to profession is a fundamental right guaranteed by Indian constitution under article 19 which says everyone have equal right to practise any Profession, or to carry on any occupation, trade or business subject to reasonable restriction.

The ban ordered at a very late stage without adequate notice puts in jeopardy the firecracker industry which includes wholesalers, retailers and many small vendors which by some estimates may stand to lose business around Rs 1,000 crore. A report in Business Standard noted that the judgment will immediately affect around 2,500 shops, close to 250 big and small wholesalers and deal a cruel blow off to the Rs 4,000-crore industry there will be a great problem of unemployment because of this ban. It is also unclear whether the spike in Delhi’s pollution levels is caused by Diwali crackers alone. An IIT Kanpur study in 2016 found that “the total PM10 emission load in the city” to be 143 tonnes per day and according to a The Indian Express report, “listed the top contributor as road dust (56%) and vehicles (20%), followed by domestic fuel burning and industrial point sources.” Also included among pollutants’ list are construction dust, municipal solid waste burning and diesel generator sets.

This is not to forget stubble burning in neighboring Punjab and Haryana where 35 million tonnes of crop will contribute anywhere between 12 to 60 percent of Delhi’s air pollution.

Whether there should be a complete ban on crackers in Delhi or not?

Supreme Court with a petition to take strict action against the rise in level of air pollution, which has led to dangerous levels of toxic in the environment, which is directly affecting the youngest of the population.

The Supreme Court dismissed this petition which aimed at putting a complete ban on bursting of crackers on Diwali or designating a particular area for bursting crackers. The SC said that such a blanket ban would be lethal and would cause an unnecessary chaos in the society. The court, however, has directed the government to spread awareness about the hazardous and poisonous effects of crackers.

“Prevention of Envn. & Sound Pollution v. Union of India”

In this landmark case of 2005 the supreme court laid down some guidelines related to crackers and other problems of sound pollution.

• The Department of Explosives divide the firecrackers into two categories:

• Sound emitting firecrackers

• Colour/light emitting firecrackers.

• There shall be a blanket ban on bursting sound emitting firecrackers between 10p.m. and 6a.m. It is not necessary to impose restrictions as to time on bursting of light emitting crackers.
• Every manufacturer shall on the box of each firecracker mention details as of its chemical contents and that it satisfies the requirement as laid down by Explosive Department.

Cancellation or suspension of licenses issued under explosive act

The mechanism of the law in this regard is very clear. Rule number 118 of the Explosive Rules,2008, framed under the Explosives Act, 1884, provides for the manner in which licenses issued under the Explosives Act to store and sell explosives could be suspended or canceled. Sub-Rule (5) thereof specifically confers on the Central Government a power to suspend or cancel a license if it considers that it is in public interest. This provision also makes it clear that an opportunity to hear the licensee could be dispensed with if the Central Government considers that in public interest. This Court finds that the grave air quality situation in NCR is one such case, where this Court, can intervene and suspend the licenses to store and sell fireworks in the NCR. We direct the Central Government to:

1. Suspend all such licenses as permit sale of fireworks, wholesale and retail within the territory of NCR.
2. The suspension shall remain in force till further orders of this Court.
3. No such licenses shall be granted or renewed till further orders.

Conclusion

Bursting of firecrackers has been a tradition in our society which is now proving to be dangerous for the future generations. Article 21 of the Indian constitution-Right to Life, is a basic human right and subsequently a Fundamental Right provided to Indian Citizens, and to breathe clean air constitutes the same. Therefore, it is necessary to exercise certain standard and cautions in this situation and one must give precedence to various rights in terms of their necessity. Total eradication on the sale and manufacturing of crackers is not the most efficient solution – it does not fully accomplish its aim of reducing pollution. The high demand for crackers and easy supply from neighboring states make the enforcement of prohibition futile. In such circumstances, the more feasible method of reducing the use of crackers would be regulation through taxation coupled with the policies of harmful effects burning crackers education. In the long run, these policies will decrease the demand for crackers and in doing so we will achieve the aim of reducing the use of crackers.

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In this article, Janvi Ahuja of SLS Hyderabad discusses why it is a terrible idea to not address and resolve problems of your upset customers if you are in a law practice.

Introduction

A lawyer is one who is licensed by Bar council of India to practice law, and whose obligation is to uphold the dignity of law, and also to protect the client’s right. A lawyer is one who is certified by Indian National Bar Association (INBA) which regulates the lawyers. A lawyer is also called an Attorney. He is one who has strived to attain the highest level of skills, to improve the law and the legal profession, and to exemplify the legal profession ideals of public service.

What is a Lawyer’s Job?

A Lawyer’s job is not as simple as it seems to be, his daily task depends on his client’s need and whether he is specialized in that area. A lawyer is bound by some norms of Court, he has to work according to the court proceedings, and simultaneously convince his clients to work accordingly. The work of a lawyer is not limited to the court but it continues beyond the bars, a lawyer has a duty to listen to his client and to make a consensus between the parties. The work varies with the field, from criminal law to divorce law, to patent law, navigating the legal system on the behalf of clients. A lawyer’s job includes counselling of clients about legal options and tries to provide their parties complete justice.

Some other tasks:

• Attend the court hearings, and doing the preparations beforehand.
• Drawing up of contracts and other legal documents.
• Explaining the laws and giving general legal advice.
• Researching and gathering Evidence
• Analyzing legal Documents.
• Supervising Legal Assistants.
• Bringing the party to Negotiation

Lawyers advertising largely depends on word of mouth

In today’s world where we have Internet and emails, people seeking a lawyer still gets the attorney name from a trusted acquaintance in a face to face, or phone conversation. When a lawyer promises a client to take up his case then they promise to bind themselves to give their best, besides this a lawyer assure the client to bring him justice. A word of mouth is most powerful advertising and biggest compliment. In the midst of working on and managing cases, going to the court, managing staff, and many other hats the law firm owners and managers wear, they forget to focus on their client relationship and to encourage referrals through word of mouth.

When people are in a need of a lawyer they often ask their family and friends rather than trusting an advertisement, word of mouth referrals are more likely to be successful because they seem natural and organic.

Why a lawyer should entertain his/her clients religiously?

If you keep your clients happy and satisfied, they will most likely refer your service to other family or friends or colleagues. The existence of a durable relationship between lawyer and a client can make and break an individual’s case. A client’s satisfaction is most important for a lawyer, it is a most valued performance indicator, it builds the level of trust between a client and the lawyer, it shows the extent to which the client feels heard and understood by the lawyer.

It further highlights that the client gets value for their money. It is a responsibility of lawyer to take the case of the client in serious mode and make the client’s experience a positive one. Beginning to think about a client relationship management strategy that is going to help you build loyalty and improve your firm’s reputation, it is the first and very important step in growth of firm. When a lawyer has a client they should not just involve in work and not just talk when his client comes to office. Take a few minutes to talk about their lives and how they’re doing. It may not be your job description, but it helps your client see you as a person and not just an intimidating attorney. A lawyer should treat his client as a God, because a client is the one because of which he is earning for his livelihood. Clients are like bread and butter, if there are no clients there is no bread and butter. Even after a lawyer’s job is complete he should be in touch with his client, just because his client doesn’t have an open case doesn’t mean you should ignore them. Send a monthly or a quarterly newsletter to keep them up to date on your services. That will build your reputation in the eyes of the client.

Why is it important for a lawyer to resolve the problem of upset customers?

A lawyer job is to deal with his clients, it is the client which makes him employed as the clients pay the lawyer, and without clients there will be no lawyer. A lawyer should know how to handle their clients and how to counsel them. Client counselling is an art and a basis for establishing a good career in law. When dealing with a client a lawyer needs to maintain strong professional relationship in order to get closed to client, to build a trustworthy relationship and to bring them to a comfort zone.

A Lawyer-client relationship is a fiduciary relationship. Lawyers are problem solvers, they act as a help to the client in case of a dispute. A client’s perspective of thinking might differ from the opposite party, it may create dispute, but this does not means that they end up their professional relationship. It is the duty of lawyer to console his client to negotiate with his spouse to bring back the matrimonial relation. It all depends on the lawyer that how effectively he conveys his message to clients and brings them to consensus.

There are many responsibilities a lawyer has, which goes beyond court trial. A lawyer is a hope for their clients. When a client comes to a lawyer, he comes with a belief that the lawyer will do something to provide him justice. A client comes with a firm faith in the lawyer, believing that the lawyer ensures them a proper administration of Justice. There are two main task of a lawyer that is to protect the dignity of law and to protect clients right. So a lawyer is bound to resolve to problems of the upset customers. As when a customer is satisfied he believes in law, and the justice mechanism.

What should a lawyer do when the client is annoying and makes frequent visits and phone call?

It is a common lament among lawyers: “clients constantly call and ask me the same questions. I am tired of repeating myself, what to do? The answer is to understand and manage the client’s anxiety, communicating proactively, and training clients. For a client a case is a big thing for him, a criminal case, divorce, and a lawsuit are all stressful and can affect the client’s entire life, family or business. This creates an anxiety which results in repeated calls from clients and creating disturbance of lawyers. But the clients who are constantly calling does not have an intention to cause trouble to you, they just want to end the problem in a smooth and steady manner. A client might think that that the time give to his case is not enough, or the set expectations are not fulfilled regarding your availability.

When you prepare for a new client introduce them to a new policy and definitions of legal terms, make them aware of the court proceedings and the expected time a case may take, this will prepare a client mentally and they might not disturb you unnecessary. The client call is an opportunity for a lawyer to gain his trust and confidence. Clients who call constantly are engaged and looking for their answers. Instead of treating it as a nuisance, think how to improve your work to give your best to your clients. Setting clients expectation at the outset of the engagement, supplying the written information, giving regular updates and employing proactive communication practices can help combat clients anxiety and reduce calls, but some hand holding just goes with the ‘trusted advisor’ territory. Consider it a cost of doing business.

How should a lawyer tackle situations where a case is slipping out of hand? What should a lawyer do to uphold his faith on clients in such situations.

Think like a client, a client approaches you to settle his case in his favor, or the case may be. And he trust you, this is the reason he approached you. So now if the situation is slipping out of your hand it is your duty to make assure your client that he will give his best to bring him justice. A client comes to you for what you do, but also for who you are. The clients stay for what they want, which means we have to consistently meet their needs and fulfil our commitments we make to them. In a situation where the lawyer feels the case is slipping out of their hand, they must disclose the facts to their clients and must make sure that they are giving their best. Explain the client what is going wrong and assure them that you will bring back the case in his favor. It is important to uphold the client’s faith to maintain them as a client.

The golden rule of trust

• Make decision Promptly- no one trusts indecisiveness
• Respect Opinion- You don’t have to agree, but do show respect for differing views.
• Walk the talk- Don’t overpromise and underdeliver
• Communicate- keep channels of communication open, even when there is not much to report.

Duty to the client.

An advocates duty is as important as that of a judge. Advocates have large responsibility towards the society. A client’s relationship with his/her advocate is underlined by utmost trust. An advocate is expected to act with utmost sincerity and respect, his conduct should be diligent and should conform to the requirements of the law. A lawyer is under an obligation to uphold the law and to ensure that the public justice system is enabled to function at its full potential.

• An advocate is bound to accept any brief in the court or tribunal or before any other authority, in case he is his client.
• An advocate shall not ordinarily withdraw from engagement, once accepted, unless there is a reasonable cause or sufficient notice given.
• It is the duty of client to fearlessly uphold the interest of his client by all fair and honourable means.
• He shall defend the person accused of a crime regardless of his personal opinion as to the guilt of accused, bearing in mind that he is loyal to the law which requires that no man should be convicted without adequate evidence.

References

• https://www.indianbarassociation.org/
• https://learn.org/articles/What_Does_a_Lawyer_Do.html
• https://www.totaljobs.com/careers-advice/job-profile/legal-jobs/lawyer-job-description
• https://www.actlawsociety.asn.au/public-information/the-lawyerclient-relationship
• http://www.legalblog.in/2011/05/duties-and-conduct-of-advocates-supreme.html
• http://www.unitedworld.in/school-of-law/client-counselling-a-young-law-students-experience/
• http://www.lawsociety.com.au/community/thelawyerclientrelationship/
• http://www.lawtechnologytoday.org/2016/03/word-mouth-powerful-advertisement/
• https://lawyerist.com/clients-call-too-much/
• https://www.legalmarketingblog.com/tag/client-satisfaction/
• https://www.attorneyatwork.com/golden-rules-building-client-trust/

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In this article, Janvi Ahuja of SLS Hyderabad discusses how should I complain against illegal construction to MCD and get the property sealed.

Introduction

Illegal construction is building or doing a construction work which is not authorized or legally valid. This illegal construction is the consequence of urbanization, overpopulation and expanding slum areas and shanty towns. Even the Delhi High Court observes that illegal construction is rampant in national capital and needs to be stopped. Public officials need to ensure that the law is strictly complied with. Judicial notice can be taken of the fact that when a building is illegally constructed, it impacts not only the physical enjoyment of the property of the neighbors but also results in illegal intervention in water circulation and the sewage system, which has been rampant in the city. The development in the city has to abide by the statutory master plan of the city. This was observed in a PIL by All India Anti-Corruption and Crime Prevention Society.

Illegal and unauthorized construction has made Delhi a dangerous city to live. There is a need to unify the three municipal bodies as the splitting of MCD into three had not improved the situation. Pulling up the three municipal corporations of Delhi, a bench at HC said that the court was flooded with PIL against illegal and unauthorized construction which showed no regulation was being followed by civic bodies. The need to unify MCD’s was observed, MCD reunification had not improved the situation. There is a need to unify the truncated MCD’s, to get rid of illegal and unauthorized construction going out.

Order of demolition and stoppage of buildings or works in certain cases and appeal.

Where the erection of any building or execution of any work has been commenced, or is being carried on, or has been completed without or contrary to the sanction referred to in section 336 or in contravention of any condition subject to which such sanction has been accorded or in contravention of any of the provisions of this Act or bye–laws made thereunder, the Commissioner may, in addition to any other action that may be taken under this Act, make an order directing that such erection or work shall be demolished within such period not exceeding thirty days as may be specified in the order, by the person at whose instance the erection or work has been commenced or is being carried on or has been completed and on the failure of that person to comply with the order, the Commissioner may himself cause the erection or the work to be demolished and the expenses of such demolition shall be recoverable from such person as an arrear of tax under this Act.

Provided that no such order shall be made unless the person has been given an opportunity of being heard.

Which all places comes under the preview of MCD

Municipal Corporation of Delhi is an autonomous body which is one of the three municipalities in the national capital territory of Delhi, others being National Delhi Municipal Council and Delhi Cantonment. Within its jurisdiction is some most densely populated area in the world. It has unique distinction of providing civic services to rural and urban villages, resettlement colonies, regularized unauthorized colonies, slum settlement etc.

Municipal Corporation of Delhi covers 12 Zones which are spread across three smaller municipal corporations:

1. City
2. Karol Bagh
3. Sadar Paharganj
4. Civil Lines
5. Narela
6. Rohini
7. Central Delhi
8. South Delhi
9. West Delhi
10. Najafgarh
11. Shahdara South
12. Shahdara North

Intervention by Common Cause

The High court of Delhi has issued directions to Municipal Corporation of Delhi for removing illegal construction, encroachments of public land and commercial establishments from residential area. The Act may be called as Delhi Laws (Special provision) Act, 2006 which prohibits illegal and unauthorized construction. A notice can be issued by local authorities for initiating action against the categories of unauthorized development referred in subsection (1) shall be deemed to have been suspended and no punitive action shall be taken till one year.

Institutional Structure and Regulation

Since there is already a move in India to bring in a Construction Law, it may now be a good idea to speed it formulation and then further enactment. This would essentially form the legal basis for the entire construction sector and would be essentially a compendium of all laws which have direct impact on construction business with necessary revisions to reflect latest developments and international best practices. This would further pave the way for declaring the construction activities as an industry.

How to check whether the property I am purchasing is built legally or not

1. Check for the clear title papers.
2. Check a proper sales deed (to know that the property has a clear title).
3. Check for the power of attorney.
4. Check to see if it is approved by leading bank.
5. Check for the construction area and sanctioned area (so as to know if the construction is illegal or not in accordance with the plan.
6. Check for the encumbrance certificate (it contains details of previous registrations which can be availed from sub registrar’s office.
7. Check if the property has a registered society (in case it’s not a new construction).

What if the illegal construction already did some personal damage to you? Can you claim Compensation for the damage?

If the lease area is constructed illegally or without the permission of the society and causes damage to person, that damage may be factual or non-factual the owner is liable to compensate the parties to such damage. and in the case where local authority fails judiciary will come to rescue of affected party. A petition can be filed under Article 226 of Constitution of India in high court against the state and municipal corporation if they owe some compensation to the aggrieved party. you can claim for liquidated damages with a proof of harm caused, and negligence on the part of the owner. The owner of the illegal construction is legally liable to pay demolition cost and charges, and you can recover for damages suffer and the loss caused due to the act.

What to do when threatened by the parties involved in illegal construction

If an illegal construction is going on and you have filed a complaint in MCD, and without taking any action they dispose off your complaint, and the illegal construction owner is threatening you and warning you to stay away from their work, and you feel that they are powerful, your family is under pressure and scared the you can lodge a fir against that construction owner and the file a petition under 226 of constitution of India against MCD in Delhi High Court and a complaint about illegal construction in the form of PIL.

Where to lodge a complaint about illegal construction

Every city has some municipal corporation act, if any unauthorized construction takes place notice is issued to encroacher as to why the illegal construction should not be demolished, an opportunity is given to the shop owner/ resident to file a reply. Only then the reasoned order is passed, then the option is available to the resident owner to move to the court and obtained stay against demolition. Also a legal notice can be issued to municipal corporation and claiming damages for loss caused due to the property.

Making a complaint online

Lodging an online complaint is a tough job, as the grievance they face is not properly registered. There is an online portal launched by state government for launching complains of illegal sand mining. the main issue arises in filing this complaint is that many people there are uneducated. so there is another system of filing a complaint one can request to local administrative body to come into action to stop the unauthorized act of construction. A complaint can be made online and offline, the procedure is entirely transparent, right from reporting complaint to disposal action. An online complaint is filed through whatsapp (858 888 7773) or calling a toll free number (1533) or a complaint can be mailed or texted. MCD Commissioner K. S. Mehra said: “Since Internet is required to access Facebook, which has a limited spread in the community, we have tied up with an organisation at the Foundation for Innovation and Technology Transfer (FITT) at Indian Institute of Technology, Delhi, to develop a voice application through which any mobile user can post their complaints on the MCD Facebook page.”

• Download Complaint Letter (DOC format)- h
• ttps://www.complaintletter.net/preview/Illegal_Construction_Complaint_Letter

Complain to police

What if your complaint has fallen on deaf ears. If you have requested a local administrative body to come into action to stop the unauthorized act of construction but the local body is not taking any action, and they are allowing them to carry on unauthorized construction by becoming mere spectators. Then the complain about it to police and municipalities. They will surely look at it. You need to make sure that immediate action takes place to stop ongoing illegal construction and to demolish unauthorized structure that they have already built.

How can an appeal be made at MCD tribunal

Appeal at MCD Tribunal is to be filed in the format prescribed under the DMC AT (Procedure) Rules, 1986. Appeal at MCD Tribunal can be filed against any demolition/ ceiling order in MCD which falls within the ambit of Section 344, 347, 349 of the MCD Act. At present, the MCD Tribunal is located at Tis Hazari District Courts in Delhi and the court follows the procedure prescribed under the MCD Act for staying or quashing any demolition /ceiling order in MCD within the parameters prescribed under the law.

Process:

1. The copy of the order of demolition or sealing passed by the MCD/NDMC is to be annexed at first if the same has been received otherwise exemption for the same is to be sought from the court specifically.
2. An advance copy of the appeal before the Appellate Tribunal MCD is to be served on MCD either at the office of the Chief Legal Officer or through the post.
3. One extra set of the Appeal before the Appellate Tribunal MCD is also to be filed.
4. Registration fees for the Appeal before the Appellate Tribunal MCD of Rs 100/- is to be paid in cash at the office of the Registrar.

How are Illegal and unauthorized property sealed

Illegal construction in Delhi is targeted. And to ensure that builders do not dupe innocent people, municipalities demolished the property. Not only this central zone of civic agency demolishes several property that are carried on by owners and are illegal. After a complaint is filed, the authorities go for investigation, and then is it deems that the property is illegally or unauthorized then a reasonable time is given to them, time being a letter to the registrar is sent to them, ensuring the owner of the property can’t sell them. After a reasonable time if a person is unable to prove him right then the property can be confessed.

Power to seal unauthorized construction

Delhi High Court said that it is High time officials enforce the law, High Court declined to order a CBI probe and demolition of illegal construction, observing that it would do so only when correct and complete picture is brought before it.

The directions to seal the unauthorized construction was given during the hearing of PIL by People All India Anti-Corruption and Crime Prevention Society, which had sought direction to the authorities to demolish 75 illegal constructions in the south Delhi Municipal Corporation.

The bench at the High Court said that the commissioner shall not prepare any report against the illegal construction without hearing the owner of the property. “citizens must follow the law and officials must do their duty,” the court said adding that the construction that is not according to the law will not be protected from demolition at any cost.

References

• https://timesofindia.indiatimes.com/city/delhi/hc-enforce-law-on-illegal-construction/articleshow/59377495.cms
• http://www.thehindubusinessline.com/news/real-estate/unauthorised-constructions-have-made-delhi-dangerous/article9803056.ece
• https://en.wikipedia.org/wiki/Municipal_Corporation_of_Delhi#MCD_zones_and_employee_list
• http://siteresources.worldbank.org/INTSARREGTOPTRANSPORT/1858446-1195115524464/22256832/MainReportNov08_final-withdisclaimerJune09.pdf
• http://www.commoncause.in/publication_details.php?id=361
• https://www.kaanoon.com/13363/notice-period-before-demolishing-illegal-construction
• http://www.thehindu.com/news/national/other-states/illegal-properties-in-unauthorised-colonies-get-a-breather/article7453769.ece
• http://www.hindustantimes.com/delhi-news/now-report-unauthorised-constructions-online/story-melJFsmg1XHLwnEL4wmzDI.html
• http://www.hindustantimes.com/delhi-news/10-illegal-properties-sealed-7-demolished/story-GifpbT9ctQwOvO16pQdJpL.html
• http://indiatoday.intoday.in/story/delhi-reduced-to-slum-hc-forms-panel-on-illegal-construction/1/955399.html
• http://www.smartmoneygoal.in/blog/documents-to-check-avoid-fraud-buying-house-property/

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In this article, Raghav Ajmeria of Shri Navalmal Firodia Law College, Pune CVC guidelines with respect to government contracts.

Introduction

Public Procurement is a part of government operations for the smooth functioning of a country, but it doesn’t create a situation of corruption less procurements because we know that businessmen today can go to any extent to make profits in his/her business. Procurement is one such area which is vulnerable to fraud and corruption. No one knows here who can initiate the fraud it can be a contracting public officer or a goods supplier. According to the World Bank, it has estimated that roughly $1.5 trillion in public contract awards are influenced by corruption.

To be a developed nation, the country has to overcome the problem of corruption. Corruption reduces the quality of the goods and services rendered, so the CVC in this matter works and regulates so that the businessmen can’t just gain unnecessary profits. The commission has always ensured regarding the fair play of all procurements. The CVC’s main feature is taking into account the practices and procedures, being followed by various organisations are effective for the economy or not.

What is CVC?

The Central Vigilance Commission (CVC) is the agency that is endorsed with the responsibility to oversee the promotion of good governance. The CVC has examined public procurements and works accordingly to improve the practices. According to a study of the Central Vigilance Commission, the Indian Railways adopts well-defined procedures governing the open tender and limited tender systems.

What is public procurement?

Public procurement of goods, services and constructions on behalf of public by government agencies. The government procurements comprise about 25 to 30 % of its gross domestic production(GDP). To achieve economic strengthening the government has adopted the method of procurement.

Why CVC has made guidelines regarding public procurement?

School, colleges, houses, hospital, roads, dams, and bridges these are the kind of public projects which is a great opportunity to corruption as it takes lots of money. Public procurement isn’t just about corruption, it is more than that because public procurement reduces the quality of the products which can cost lives of any individual. According to a research corruption can add as much as 50 percent to a project’s costs.
Good procurement system works with transparency and clear regulations of the commissions that work above them. To meet the definition of a good procurement the government has introduced an apex body to bound the bidders by certain guidelines which can prevent corruption and give us a better quality of goods and services.
In this matter the Central Vigilance Commission has issued guidelines to increase transparency and objectivity in public procurement.

Review of regulatory framework for public procurement in India

The constitution of India does not have any properly stated article on public procurement in India but however, the article no.299 states that all contracts made in the exercise of executive power of the union or state shall be supposed to be made by the President or by the Governor. There is no national legislation regarding the public procurement in India. Certain states like Karnataka and Tamil Nadu have framed legislation regarding public procurement. Public procurement today in India is a major activity to develop the nation’s security, economy, better infrastructure, defence.

Key Issues in Regulatory and Legal framework

Multiple guidelines

There is no single body defining the regulations regarding the policies and rules of public procurement in India. There are many loopholes and gaps regarding procurement as the there are various guidelines and models issued by the CVC regarding public procurement. In addition, not all these guidelines are available at a single source.

Absence of Standard procedures, contracts, and tender documents

Just because of the absence of an act with respect to public procurement allows the government to tweak the guidelines intentionally or unintentionally to benefit the stakes.

Present monitoring system – A weakness

CAG audits the tendering process. However, these audits are carried out after the damage is done. External audits fail in their effectiveness as the findings often do not attract the requisite attention of the Parliamentary Accounts Committee. The external audits usually fails in their effectiveness as the findings often do not attract the attention of parliamentary accounts committee.

Need for a public procurement law

Till today there has not been a single law or act regarding the public procurement. The CVC sometimes issues notifications regarding the procurement for the clarification process but there is not central department for the same. Accordingly, basic rules and regulations regarding the public procurement should be introduced for the better work.

Barriers to entry in public procurement in India

There is a tendency among the procurers to not to choose the big firms and this is done to ensure the quality of supply and reduce the cost of bids. However, this may lead to the entrance of new entities and which may result in an inefficient outcome.

Bureaucratic Hassles and complex procedures

A very dull process for participation sometimes creates severe barriers to the procurement. New firms are usually dependent on the approving authority but approval is not that easy as it seems. The approval takes a lot time and lot of corruption as the new firms have to go through a lengthy administrative procedure. The procedure is that’s why a complex one.

Identification and listing of anti-competitive provisions and practices

In India, the major laws and regulations belong to the pre-independence era and various amendments has to be made in regarding that. There has not been a proper policy regarding the procurement in India. The competition regulation may appear different in India because of the coming of Competition act, 2002 first and its policy after. The rules regarding the procurement have been proven weak from the competition angle. If we see according to the competition angle the concerned law has gone against the spirit of competition in the given area.

Guidelines on Tenders

Proper consultancy

• The first and foremost feature of a consultant is that he/she should draw attention towards the guidelines of CVC, GFR issued by ministry of finance, relevant and extant instructions of government of India. Any consultant before giving any consult or advice to the department/organisation, the consultant should have knowledge about every little detail.
• The issue of role and professional liability of consultants in government contracts has been under consideration in the commission for quite sometime
• There should be an advisory to the consultants to keep in view the transparency and to provide equal opportunity to all the bidders and tenders.
• The consultants shall avoid any kind of conflicts while discharging the contractual obligations and bring beforehand any possible instance of conflict of interest to the knowledge of the employer.

Before reaching the conclusions an employer must be fully consulted so that accordingly he would be accepting the advice and rendering the services.

Notice inviting offers

• The tender applications regarding the notice invitation could be rejected without assigning any reason.
• This clause is apparently incorporated in tender enquiries to safeguard the interest of the organisation in exceptional circumstance and to avoid any legal dispute, in such cases.
  

Shortcomings in the bidding process

• Before the time of bidding, everyone should be aware of the evaluation criteria which the organisation is adopting should be made explicit at the time of inviting the offers so that the basic concept of transparency and equality is satisfied.
• The acceptance and rejection of the proposal must be on justified grounds according to laid down prescriptions, leaving no rooms for complaints.
  

Requirements for e-procurement systems

• The commission has been advocating regarding use of the technology for activities prone to corruption in 2006 and one of the remarkable initiative was adopting the e-procurement for goods, services, and works by all ministry/organisations commissions/departments advised all the organisation for the security of e-procurement systems and to get their system certified by Department of information technology (DIT).
• The e-procurement system was basically introduced to reduce corruption and the organisations more effective and fast.

Consideration of Indian agents

• The commission throughout the years have been stressing on the need to observe transparency and determination of fair prices while dealing with the tender services.
• There has been number of references received in the commission citing certain situations and difficulties being faced in dealing with traders.
• After the references received the commission has decided that in all cases of procurement, the following guidelines may be followed:
• In a tender, either the Indian agent on behalf of the principal/OEM or principal/OEM itself can bid but both cannot bid simultaneously for the same item or product in the same tender.
• If an agent submits bid on behalf of one principal/OEM, he cannot submit bid on behalf of another principal/OEM, in the same tender or same project.
• The tender conditions must be carefully prepared keeping in view the above guidelines.

Projects funded by the world bank and other international agencies

• It is clarified that the commission’s guidelines would not be applicable to projects funded by the World bank, IMF, etc. as part 2 of the commission’s circular.

Mobilisation advance

• The mobilisations advance should not be paid in advance of more than 2 months.
• To keep check on the contractor mis using the advance when the work is delayed.

Post-tender negotiations

As per circular the post tender negotiation could be a source of corruption. According to the commission, there cannot be any post tender negotiations except under certain circumstances.

E-tendering systems

• It is clarified that while ensuring fair play, transparency, and open tendering procedure for e-tendering solutions, the organisations must take due care to see that effective security provisions are made in the system to prevent any misuse.

The Integrity Pact

• The pact is basically between the bidders and the buyers committing the persons/officials of the both side to not to commit any sort of illegal practice or corrupt practice at any stage of the contract .
• The Commission has, through its Office recommended adoption of Integrity Pact and provided basic guidelines for its implementation in respect of major procurements in the Government Organizations.

Time-bound processing of procurement

• The Commission has observed that at times the processing of tenders is inordinately delayed which may result in time and cost overruns and also invite criticism from the Trade Sector. It is, therefore, essential that tenders are finalized and contracts are awarded in a time bound manner within original validity of the tender, without seeking further extension of validity

Details regarding tender on notice board or websites

• The commission has directed the organisations to adopt the practice regarding the publications that they’ll publish as soon as the details of all such cases regarding tenders or out of turn allotments or discretion exercised in favour of an employee/party.
• All organisations must post a one month summary regarding their tender.

Pre-qualification criteria

• The Commission has received complaints regarding discriminatory pre qualification criteria incorporated in the tender documents by various Deptts./Organisations. It has also been observed during intensive examination of various works/contracts by CTEO that the prequalification criteria is either not clearly specified or made very stringent/very lax to restrict/facilitate the entry of bidders.

Tender Sample Clause

• The Commission has received complaints that some organizations. The offers are rejected on the basis of tender samples not conforming to the requirements of feel, finish and workmanship as per the ‘master sample’ though the bidders confirm in their bids that supply shall be made as per the tender specifications, stipulated in the bid documents.

Conclusion

The context of corruption in public sector is very wide. Corruption is the key to public losses because the money created through the corruption is that amount of ineffectiveness or inefficiency used in the projects that is projected outcomes are of inferior quality. Proper checks on methods and regulations by the government authorities will create a situation and environment for a corruption-free procurement.
Good public procurement is a method that will boost the economic strength and it will also reduce the problems of unemployment, low education rate, sex ratio.

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In this article, Mishika Bajpai discusses how effective is the legal aid service in India.

The exposition of A.V. Dicey propounded in 1885 still holds true today, because Rule of Law reflects a person’s sense of justice and order. While the court is possessed with the power to prevent acts of interference of justice, it is equally dutiful towards the protection of the rights and interests of every litigant and indeed, the public in general. Judiciary plays a special role in the society and “as the guarantor of justice, a fundamental value in a law-governed State, it must enjoy public confidence if it is to be successful in carrying out its duties. [1]

Further, it is undeniable, that the administration of justice is the court’s duty alone, rather this administration also requires the able efforts of a resourceful and a competent lawyer, who, as an officer of the court ought to assist the court to the best of his knowledge and competence. Thus, a truly stable system of administration can only be achieved when all the stakeholders in the legal system are taken care of. Any form of denial of the same would defeat the purpose of judicial proceedings and circumvent the fair trial guarantees.

Right to Legal Aid – A Constitutional Commitment

Legal aid was introduced by way of the Forty-Second Amendment under Article 39A, of the Constitution of India. It obligated the State to provide free legal aid, by introducing legislation and to promote justice equality before law. This constitutional promise reads as under –

“The State shall secure that the operation of the legal system promotes justice, on a basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities.”

Every person who has to file and defend a case becomes entitled for legal services under the Legal Services Authorities Act, 1987 if that person is–

1. A member of a Scheduled Caste or Scheduled Tribe;
2. A victim of trafficking in human beings or begar as referred to in Article 23 of the Constitution;
3. A woman or a child;
4. A mentally ill or otherwise disabled person;
5. A person under circumstances of undeserved want such as being a victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or industrial disaster; or
6. An industrial workman; or
7. In custody, including custody in a protective home or in a juvenile home
8. Of in a psychiatric hospital or psychiatric nursing home within the meaning of clause (g) of section 2 of the Mental Health Act, 1987; or
9. A person whose annual income less than nine thousand rupees or such other higher amount as may be prescribed by the State Government, and less than twelve thousand rupees or such other higher amount as may be prescribed by the Central Government if the case is before the Supreme Court.

The above categorisation ensures that the opportunities for securing justice, are not denied to any citizen, by reason of economic or other disabilities. Legal aid assistance is thus, premised on the two contingencies that the party is unable to pay for the legal assistance and it is in the interest of justice that the party may receive legal assistance, nonetheless.

Legal Services Authorities Act, 1987

Amendments were also introduced in the Advocates Act, 1961, for instance by providing for constitution of legal aid committees. Our Apex Court has, thereunder, constituted a Supreme Court Legal Services Committee (SCLSC) under Section 3A of the Legal Services Authorities Act, 1987 (as amended by the Legal Services Authorities (Amendment) Act, 2002) to ensure free legal aid to the weaker and marginalised sections of the society approaching the Supreme Court.

Headed under the Chairmanship of a sitting judge of the Supreme Court of India, the committee includes such other members possessing such experience and qualifications prescribed by the Central Government, and nominated by the Chief Justice of India. The panel at SCLSC comprises of competent lawyers on record with certain minimum number of years of experience who handle the cases in the Supreme Court.

Upon receiving completed application forms along with the requisite documents, the SCLSC refers the matter of the applicant to one of the Screening Committee’s for scrutiny and evaluation as to whether the litigant is entitled for legal aid and whether prima facie case is made or not. Under the aegis of National Legal Services Authority (NALSA), the SCLSC also organises Lok Adalats (People’s Court) in the Supreme Court premises for different categories of matters such as property requisition, financial disputes, and matrimonial issues.

The Lok Adalat takes up matters which may be pending before the Hon’ble Supreme Court. This provides for yet another way of uncomplicated, free of cost and amicable way of settling disputes. Similarly, there is the Delhi State Legal Services Authority which constituted Committee in High Court of Delhi called High Court Legal Services Committee under Section 8A of the Legal Services Authorities Act 1987. It has opened 137 Legal Services Clinics i.e. 104 Legal Services Clinics in Gender Resource Centres in association with Mission Convergence, 09 Legal Services Clinics in Colleges and Universities, 24 Legal Services Clinics in JJBs, CWCs, All India Legal Aid Cell on Child Right, Central Jails in Delhi and Observation Homes.

Critical Analysis

Despite such flexibility and mechanisms in place, the underfunded legal aid only receives hollow support. The issue, though fortified by the aforementioned provisions for the benefit of indigent litigants, is only bolstered with insubstantial legal services. This may be the resultant of inattention that is faced by the bar which is rarely incentivised for providing the much-needed legal support. Because legal aid counsels and panellists are remunerated insufficiently, the standard of legal aid service never receives its well-deserved attention and assistance. This in fact worsens in the lower courts. In reality, the legal aid fees that a lawyer merits would be impossible to make a decent living. Those who do take work and accept it for meagre remittances are the young and inexperienced ones. The entire system of justice delivery is therefore, eschewed of its benefits when there is missing deployment of meaningful legal services.

The onerous responsibility of a lawyer to provide free legal assistance to indigent applicants cannot be overlooked in light of the right to access courts and due process. Therefore, while importance ought to be assigned to applicants approaching the court, one cannot forego the other side of the coin i.e. the assistance. Since lawyers play a key role in conducting judicial proceedings, from preparing briefs to presenting arguments, any oversight of this inseparable relationship of the legal community and lawyers can cripple the entire system of justice. This is when we bring in the concept of quid pro quo which could become a legally accepted way of providing rightful remuneration to committed advocates in lieu of the services provided by them to their litigants.

For instance, the Supreme Court has adopted the stance and allowed the levy of additional court fee in respect of appeals and revisions to appellate authorities (other than civil and criminal courts). The Court not only gave legal sanction to the additional court fee which was in fact meant for a Legal Benefit Fund operated under the Kerala Legal Benefit Fund Rules, 1991, but also observed that this fund would essentially provide efficient legal services for the people. Since the purpose of the fund was to be utilised for providing competent legal services, this amounted to quid pro quo. The additional court fee was perceived to be levied for an effective, efficient and robust legal assistance. Moreover, it had direct nexus to the laudable objective sought to be achieved in the context of services available to the public at large seeking redressal before the courts.

While, the above provisions of legal assistance to the indigent parts of our society are reassuring, legal aid is mostly deprived of commensurate legal services. Such supplementary funds could be reasonably utilised by courts in order to recompense lawyers assisting litigants with meagre financial means. This can be beneficial when neither the state would be willing to subsidise nor would the litigant be able to bear the costs. This way even experienced lawyers would not resist in carrying out the demanding responsibility. There is no gainsaying that a sound stable system of administration is not only a harbinger of justice but is also a common law right stirring effective access to it. The above is only a step towards attaining access to justice and fair trial even if one does not have the means to pay for it. The goal is not only to palliate the issue of inconsequential legal aid services but to additionally provide commensurate services by supplementary funding by the Court itself towards legal aid assistance and its far-reaching consequences.

[1] Partly dissenting opinion of Judge Morenilla, In the case of De Haes and Gijsels v. Belgium, case numbered 7/1996/626/809 before the European Court of Human Rights

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