This article is written by Shreyaa Chaturvedi. The article is a discussion on the Monopolies and Restrictive Trade Practices Act, 1970 (MRTP Act).

The British East India Company ruled India for almost 200 years. They exploited India’s resources for their own selfish purposes and ruined the indigenous industries prevailing in India at that point of time – handicrafts, etc. Prior to Independence, there was no competition regime existing in India. There were only policies and resolutions made by the government that aimed at just and equitable distribution of resources[1]. However, the World Wars that took place led to the initial industrialization of the Indian economy. Although India did not actively participate in the wars it was the major source for the supply of arms and ammunition to the British army. This led to the formation of large Business Houses – Tata’s, Birla’s, etc. Initially this was seen as a positive sign for the blooming Indian economy[2].

Post Independence, India adopted a centralized planning system – 5 year plans that laid down how the resources of the country were to be used in the coming 5 years. During the initial 5 year plans, the primary focus was on achieving the Industrial and Economic development. In 1956, Industrial Policy Resolution was passed wherein all the industries of the country were classified into 3 categories – Schedule A; Schedule B and Schedule C industries. The government was primarily responsible for the pattern of industrial development. Most of the laws and policies that were passed during that time were based on the Principle of Command-and-Control[3].

There was high scale of government intervention in the affairs of the private industries and businesses. The thrust was to promote the public sector of the county which only could lead to the growth of the economy. This era is also termed by many as the period of License Raj wherein, the Private Industries were required to take approval licenses from the government in order to function; there were high tariffs and quotas imposed on the import of goods[4].

The government used to support the Big Business Houses as they largely contributed to the growth of the economy. For them, obtaining licenses and permissions became a cakewalk. Soon it led to concentration of economic power in the hands of few. These monopolistic industrialists started indulging anti-competitive activities which were detrimental to the general public interest. It was also against the sacred principles that governed the formation of the Indian Constitution, the bible of the Independent India[5].

This scenario ultimately led to the formation of the Monopolies and Restrictive Trade Practices Act, 1969 [MRTP, Act].

Constitutional Background

The introduction of Competition Law in India has been inspired by the Directive Principles of State Policy [DPSPs] that form the Part IV of the Indian Constitution. Articles 38 and 39 of the Constitution, inter alia state that the State shall strive to promote the welfare of its people and shall secure social, economic and political justice for its people. The state shall ensure that –

1. The nation’s resources are distributed judicially and effectively in a manner that best serves the interest of the people.
2. The operation of economic system should not result in the concentration of wealth in the hands of the few, leading to the common detriment.[6]

Objective of this Project

This research article aims at the critical analysis of the MRTP, Act from various aspects. The article studies the performance and the reasons for its failure which ultimately led to the formation of Competition Act, 2002. The researcher has also taken the help of various case laws to chart down the loopholes that emerged in the MRTP, Act which made the legislation redundant in the current Indian scenario.

Overview of MRTP, Act, 1969

During the reign of Indira Gandhi, there was a reign of socialism that ran through the country. Big Businesses began to be treated with suspicion. The government therefore appointed a series of committees all aimed at formulating a mechanism to check the concentration of power in the hands of few[7]. Let us take the brief background of committees that helped in shaping the MRTP Act, 1969 –

1. Hazari Committee (1951) – This committee was appointed under the Chairmanship of Mr. Hazari to study the licensing procedure under the Industrial Policy. In its report, the committee found that Big Businessmen have succeeded in thwarting the Industrial Policy regulations to meet their own selfish interests. Further, the States have become biased in granting Industrial Licenses to Big Business Houses.[8]
2. Subimal Dutt Committee – This committee was appointed to study the institutional design and the pattern of work of various Business Houses. The committee in its report found that 73 business houses were controlling around 56% of the economy; it therefore suggested introduction of MRTP Bill.[9]
3. Mahanlobis Committee on the Distribution of Income and Levels of Living (1964) – This committee headed by PC Mahanlobis also found concentration of wealth and power in the hands of few wealthy entrepreneurs. It was further observed that the economic model of the country was planned in such a manner that only supported the wealthy few and the same should be reformed.[10]
4. Monopolies Inquiry Commission [MIC] (1965) – This committee was headed by Justice K.C Das Gupta. It found that there was high concentration of power in private hands and the industrial licensing policy as well as IPR was not effective in addressing the same. Moreover, there was also not any law to govern and regulate the irregularities that were prevailing in the market. MIC therefore drafted a bill to curb the monopolistic and restrictive trade practices. This Bill later became the MRTP Act, 1969.[11]

The new MRTP Act was greatly influenced by its foreign counterparts such as Sherman Act and Clayton Act of USA, the MRTP (Inquiry and Control) Act, 1948 and the Resale Prices Act, 1964 of the UK, etc. Following are some salient features of MRTP Act, 1969.

Salient features of MRTP, Act, 1969

As has been explained earlier, this research is aimed at the critical analysis of the MRTP Act, 1969. However, we cannot correctly analyze a particular legislation without understanding the principles that run at its core. Therefore it is important here to analyze in brief, the salient features of the Act.

Primary Aim

MRTP Act came into force on 1 June 1970. The law was enacted with the sole purpose of –

“Achieving the highest possible production with least damage to people at large while securing maximum benefit”[12]

Concepts Addressed under the Act

It is important to first understand the salient features that govern the Act in order to truly understand the scope of their applicability and the practical difficulties that arose in their implementation. Following are the concepts addressed under the Act –

• Command and Control Approach – The Act made it mandatory for enterprises having assets exceeding Rs. 20 crores to take approval of the Central Government before any kind of corporate restructuring or takeover. The criterion for identifying the dominant undertakings was also fixed. Enterprises having assets of more than Rs. 1 crore were automatically considered as dominant.[13]
• Monopolistic Trade Practices – MTPs as covered under the Chapter IV of the MRTP Act are the activities undertaken by Big Business Houses by abusing their market position that hamper or eliminate healthy competition in the market. Such practices are anti-consumer-welfare.
• Restrictive Trade Practices– RTPs are activities that block the flow of capital or profits in the market. Some firms tend to control the supply of goods or products in the market either by restricting production or controlling the delivery. MRTPA discourages and prevents the firms from indulging in RTPs.[14]
• Unfair Trade Practices – UTP is basically an act of false, deceptive, misleading or distorted representation of facts pertaining to goods and services by the firms. Section 36-A of the MRTPA prohibits firms from indulging in Unfair Trade Practices (UTPs). This provision was inserted by the landmark 1984 Amendment to the MRTPA.[15]

MRTPA also provided for the establishment of MRTP Commission which shall be a regulatory authority to deal with the offences under the MRTPA. At the time of its enactment, the MRTPA being the first legislation addressing the competition law issues in India seemed to be a perfect law to catch the defaulters. However, with the passage of time, the wave of globalization that entered the country changed the whole scenario[16]. There arose a need for modifications in the existing MRTP Act in order to keep it at pace with the changing economic scenario. There were many loopholes that arose in the law. Some of them have been briefly discussed below.

MRTP, Act: A Damaged Legislation in Need of Repair

Uptil 1984, MRTP was successfully regulating the competition in the Indian market. However, by 1984, certain amendments were required to update the act as per the needs of the society. Following are the major amendments made to the MRTPA –

• 1984 Amendment – This amendment was based on the recommendations of the Sachar Committee. The amendment inserted Section 36A to the Act to protect the final consumers against the unfair trade practices so that an effective action can be taken against them. Thus, claims against false advertisements, deceptive representation of goods, false guarantees came under the purview of the Act[17].
• 1991 Amendment – This amendment allowed the MRTP Act to be extended to the public sector and the government owned companies also. After this amendment, the private players functioning in the market were no longer required to take special approvals or permission from the government before carrying out any corporate reconstruction. This amendment to the MRTPA came to effect in the light of the New Economic Policy which led to the opening of Indian economy. The License Raj which restricted the growth of the Indian economy was thus abolished[18].

It should be noted here that despite the above amendments to remedy the shortfalls of the MRTP Act, there were many loopholes left which catalyzed its repeal. Let us have a brief discussion on the same.

Why did it fail? Researcher’s Critical Assessment of the MRTP, Act, 1969

Following are the reasons that led to the failure of MRTP Act, 1969 –

1. Excessive Government Control – Under the MRTP Act, both small and big businesses were subjected to excessive government control. It was mandatory for the enterprises to take approvals from the government before carrying out any kind of corporate restructuring or takeover. The presence of such complex procedures, many firms found it difficult to survive, thereby affecting the final consumers.[19]
2. Vague and ambiguous law – Section 2(o) of the MRTP Act defined the term ‘restrictive trade practices’ which covered any activity that prevented, distorted or restricted competition. There was no specific provision that defined the various kinds of anti-competitive activities that would be termed as offences under the Act. Anti – competitive practices such as cartels, bid rigging, abuse of dominance, collusion, price-fixing, predatory pricing etc were nowhere defined[20]. Section 2(o) thus included all types of possible offences within its ambit thereby leading to a large variety of interpretations by various courts wherein the core essence of the law was lost.
3. Per se rule instead of Rule of Reason – In the MRTP Act there were as much as 14 offences that were considered as per se illegal. The concept of Rule of Reason was not applied. Though the Supreme Court in the Telco case[21] recognized the Rule of Reason, but this development was again frustrated by the passage of the unfortunate 1984 Amendment which mandated that all listed RTPs under Section 33 shall be treated as per se illegal.
4. Dominance per se bad – Under the MRTP Act, dominance was in itself considered as bad, it didn’t matter whether the party has abused it or not. There was a mathematical formula for determining dominance i.e, the undertaking as to have 25% or more control over market share of goods or services. However, the catch here was that that if a firm acquired 20% or 23% of the market share at a particular time; the same was not considered as dominant.[22]
5. Promotion of exports at any cost – Under Section 38 of MRTP Act, if any project enterprise had a high potential for exports in future, it would cause the authority to simply blindly approve all its applications under the Act without considering the any anti-competitive or monopolistic shadow that it might have. Due to its excessive stress on exports, it ignored all possible drawbacks that a project might have. In many cases, it led to more costs being incurred than the foreign exchange earned through exports.[23]
6. A Policy of Voluntary Disclosure – The MRTPA machinery was highly depended upon voluntary disclosures made the enterprises as there was no agency that could keep a 24*7 check on the market control and structuring of the companies. This proved as a big leeway to the companies leading to late registrations or sometimes no-registration of any change in the company structure. This acted as a means to keep the company out of the purview of the Act.[24]
7. Inefficiency of the MRTP Commission – MRTP Commission was set up to regulate the anti-competitive practices in the country. However, even though MRTPC had both administrative and judicial functions, the members of the Commission were appointed by the government itself which created a doubt upon the independence of its functioning. Moreover, the Commission was not able to perform its functions efficiently and effectively due to –

• Unnecessary delays in replacing the members of the Commission.
• Unwillingness of the government to appoint members promptly or in opening new branch offices.

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Also, the government had the final say on a proposition and it was on the discretion of the government whether it wanted to refer the matter to the Commission. It happened that most of the time the government unilaterally used to pass the decisions without seeking the consultation of the special expertise body of MRTPC constructed for this purpose. All this led to the body becoming redundant.[25]

8. Obsolescence – With the dynamic movement of the Indian trade market towards an open and more globalised economy, especially after the New Economic Policy Reforms, led to the MRTP Act soon becoming obsolete. It could not stand the tests of time which required an overhauling of the competition law policies in India in consonance with the new issues arising due to the entry of the large scale foreign firms in India.[26]
9. No Extraterritorial Application – The MRTP Act, had no extraterritorial application i.e, it could not be applied to business undertakings outside India even if their anti-competitive conduct had a detrimental effect o the Indian market, unless one of the parties were of Indian origin. Thus, when it came to activities such as international cartels, MRTP Act was impotent.[27]
10. No penalties for offences – Section 12 of the MRTP Act dealt with the powers of MRTP Commission and the types of orders that it can issue in case of taking place of any anti-competitive activities. On a plain reading of the provision, we can infer that the Commission did not have the power to impose harsh penalties or fines on the defaulters. The best it can do is to issue ‘cease and desist’ orders or charge nominal fines. Jail terms, though provided for, were rarely imposed.[28]
11. Concurrent Jurisdiction under Consumer Protection Act – Post 1984 Amendment, Section 36A was inserted in the Act with the aim to protect the customers from UTPs. As a result, the Commission was soon piled up with consumer complaints for defective goods and inefficient services which were already provided for in the Consumer Protection Act. The consumers were thus left with an option whether to approach the Consumer Court or the MRTP Commission as they both had concurrent jurisdiction. The majority of the time of the Commission was spend resolving consumer disputes while in reality the primary purpose for which the Commission was set up was to regulate anti-competitive practices. A backlog of these cases was subsequently transferred to CCI.[29]

Thus it was clear that MRTP Act, 1969 failed in fulfilling the object for which it was created in the first place. The Commission did not have many powers and was most engaged in consumer cases. Moreover, the various amendments that took place weakened and liberalized the government’s attitude towards monopolistic and anti-competitive practices, rather than strengthening it.

Judicial Attitude towards MRTP Act: A Study of Important MRTP Cases

In order to understand the true context of the limitations of MRTP Act, 1969 that led to its abolishment, we need to study these landmark cases that exhibit the judicial attitude towards these loopholes –

Tata Engineering and Locomotive Co. Ltd vs. Registrar of Restrictive Trade Practices Agreement[30]

Facts – In this case, TELCO entered into an agreement with its dealers wherein the dealers were assigned certain fixed territories within which they had to sell Tata’s vehicles. This territorial restriction was challenged to be a ‘restrictive trade practice’.

Held – Supreme Court in this case for the first time in India applied the Rule of Reason and held that such territorial restriction was not an anti-competitive practice as it was meant for equal distribution of goods throughout the country. The positive effect of this judgment was undermined by the 1984 Amendment, Section 33 of which made territorial allocation a per se RTP.

Director General of Investigation and Registration [DG (IR)] vs. Modi Alkali and Chemicals Ltd[31]

Facts – The Commission received an anonymous complaint that some enterprises have formed a cartel to create virtual scarcity of goods and the prices of chlorine gas and hydrochloric acid have risen by 200% in last 4 months. After investigation, DG reported that there was no case of cartel and no action should be taken. MRTPC then conducted further enquiry.

Held – Even though the term ‘Cartel’ was not defined under the MRTP Act, it was laid down that “cartel is an association of producers who by an agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity”. Although in this particular there was not enough evidence to hold anyone liable so the case was dismissed. However, this case brought into light an important category of anti-competitive agreements which were till now not even identified in India.

Sirmur Truck Operator’s Case[32]

 Facts – In this case, the company fixed high freight rates for non-member truck operators while the rates were much lower for the members. This thus increased the cost of transportation for non-members. They alleged that this was an RTP.

Held – It was held that this was indeed an RTP under Section 2(o) of the Act. The MRTPC issued ‘cease and desist’ orders. This case however brought into light the fact that the Commission did not have powers to impose penalty or high monetary fines. The best it could do was to issue cease and desist orders.

American Natural Soda Ash Corporation (ANSAC) vs. Alkali Manufacturers Association of India (AMAI) and others[33]

Facts – ANSAC were trying to export soda ash consignments to India. AMAI filed a complaint with MRTPC to prevent these cartelized consignments from being shipped into Indian Territory.

Held – SC held that MRTPC cannot exercise extraterritorial jurisdiction and therefore it cannot take any action against foreign cartels unless the anti-competitive agreement involves an Indian party. This case thus highlighted another loophole in the MRTP Act.

Thus, it can be very well inferred from these cases that the shortfalls of the MRTP Act were inescapable even from the eyes of Indian Judiciary. This is what ultimately led to the formation of the Current Competition Law.

Conclusion and Recommendations

When problems arose in the functioning of MRTP Act, 1969 there arose a need for a new, revised competition law policy. However, the question that arose was that whether we need to amend the MRTP Act itself or there was a need to create an altogether new legislation. For this purpose, many committees were set up. The most important among them is the Committee headed by S.V.S Raghavan.

Raghavan Committee Report, 1999[34]

Raghavan Committee was set up to suggest changes in the Competition Policy in India. It gave the following recommendations –

1. Setting up of CCI and winding up of MRTPC.
2. Bring Government monopolies, foreign companies under the ambit of Competition Law.

• Setting up of new limits and rules governing mergers, predatory pricing and abuse of dominance.

1. Transfer of all pending MRTPC cases to CCI

Enactment of Competition Law, 2002

Competition Law, 2002 was announced by the then Finance Minister of India in his budgetary speech of 1999. The new law covers all the major loopholes that were present in the old MRTP Act. The Competition Act, 2002 primarily deals with these aspects –

• Anti – Competition Agreements
• Abuse of Dominance
• Combinations Regulation.
• Competition Advocacy

The new Act also provided for establishment of a quasi-judicial body called Competition Commission of India (CCI) for registering of all the complaints and also a Competition Appellate Tribunal (COMPAT) to hear the appeal cases against CCI orders.[35]

Brahm Dutt v Union of India[36]

In this case, the constitutional validity of the appointments made under newly enacted Competition Law, 2002 were challenged. It was contended that since CCI had adjudicatory functions as well, then the Chairman of CCI should be a retired judge of Supreme Court or High Court and not an expert in any field as provided for under the Act.

It was held by the Supreme Court that the practice of appointing an expert as the Chairman of the Committee was a set practice across many jurisdictions. Moreover, the Competition Act also provided for an appellate body – COMPAT which was presided over by a retired judge. So in case a party is not satisfied with the orders of CCI, they can approach the appellate tribunal. The writ petition was thus dismissed.

Future Scope and Recommendations

As has been rightly said the positive effects of any law can only be realized when it is effectively enforced. A weak enforcement of law would be no different than not having the law itself. The same applies for the newly enacted Competition law whose jurisprudence is currently at its very nascent stage. However, as a researcher, I would like to give some of my own suggestions –

1. CCI should try to focus more on the competition law violations that affect the common majority of people. Most of the cases that this authority has decided till now involve niche markets that are mostly controlled by the richest 10% of the country.
2. It should also strongly deal with anti-competitive activities of the firms located abroad and the ill effects it has on the Indian market.

Thus we can conclude that we need a good competition policy and an efficient and effective competition law in order to confidently face the challenges posed by globalization in Indian markets.

[1] Amit Kapoor, Competition Regulation-history, Insights and Issues for the Way Forward, 2009 Manupatra (2009).

[2] Aditya Bhattacharjea, India’s New Antitrust Regime: The First Two Years of Enforcement, 57 Antitrust Bull. 449 (2012).

[3] Dorothy Shapiro, A Competition Act by India, for India: The First Three Years of Enforcement under the New Competition Act, 5 Indian J. Int’l Econ. L. 59 (2012).

[4] S. Chakravarthy, India’s New Competition Act 2002 – A Work Still in Progress, 5 Bus. L. Int’l 240 (2004).

[5]UK Essays, MRTP Act: Rise Fall and Need for Change: Eco Legal Analysis, November 2013.

[6] Leela Kumar, MRTP COMMISSION and COMPETITION COMMISSION of INDIA, SSRN Publicaions .

[7] Dr. S. Chakravarthy, Why India Adopted New Competition Law, 2008 CUTS Int’l (2008).

[8] R.K Hazari, Industrial Planning and Licensing policy Report, Government of India, Planning Commission, 1951.

[9] INDIA, & DUTT, S. (1969). Report of the Industrial Licensing Policy Inquiry Committee. [New Delhi], Dept. of Industrial Development.

[10] INDIA, & MAHALANOBIS, P. C. (1964). Report of the Committee on Distribution of Income and Levels of Living. New Delhi, Government of India, Planning Commission.

[11]Kulshreshtha, V. D. “REPORT OF THE MONOPOLIES INQUIRY COMMISSION: AN EVALUATION.” Journal of the Indian Law Institute, vol. 8, no. 3, 1966, pp. 413–427. JSTOR, JSTOR, www.jstor.org/stable/43949911.

[12] Preamble, Object and Reasons, Monopolies and Restrictive Trade Practices Act, 1970

[13]Mohammad Asad Mahmood, Critical Analysis of Competition Law in India, Latestlaws.com.

[14]R. Shyam Khemani, India’s Competition Policy Reforms, 30 Int’l Bus. Law. 7 (2002).

[15]Shiju Varghese Mazhuvanchery, The Indian Competition Act: A Historical and Developmental Perspective, 3 Law & Dev. Rev. 241 (2010).

[16] CUTS International, National Law University, Jodhpur & , Study of Cartel Case Laws in Select Jurisdictions – Learnings for the Competition Commission of India, COMPETITION COMMISSION of INDIA, Apr. 25, 2008.

[17]Narayana Rao Rampilla, Developing Judicial Perspective to India’s Monopolies and Restrictive Trade Practices Act of 1969, A , 34 Antitrust Bull. 655 (1989).

[18]Sarbapriya Ray; Ishita Aditya Ray, Emergence and Applicability of Competition Act, 2002 in India’s New Competitive Regime: An Overview, 1 J.L. Pol’y & Globalization 15 (2011).

[19]Sahil Parikh, Background and Basics of Competition Law, S.H. Bathiya & Associates, Sept. 21, 2012.

[20]Haridas Exports v All India Foat Glass Manufacturers Association (2002) 6 SCC 600.

[21]Telco v. Registrar of Restrictive Trade Agreements 1977 AIR 973, 1977 SCR (2) 685; Mahindra & Mahindra Limited v/s Union of India 1984 (16) ELT 76 Bom, 1982 138 ITR 670 a Bom; Continental T.V. v GTE Sylvania; Voltas Ltd v/s Union of India 433 U.S. 36 (1977).

[22] Ministry of Human Resources and Development (MHRD), Evolution of Competition Law and Policy in India, E-Pathshala .

[23]Rahul Singh, Shifting Paradigms, Changing Contexts: Need for a New Competition Law in India, 8 J. Corp. L. Stud. 143 (2008).

[24] Vijay Kumar Singh, Competition Law and Policy in India: The Journey in a Decade, 4 NUJS L. Rev. 523 (2011).

[25] S. Chakravarthy, India’s New Competition Act 2002 – A Work Still in Progress, 5 Bus. L. Int’l 240 (2004).

[26] Dorothy Shapiro, A Competition Act by India, for India: The First Three Years of Enforcement under the New Competition Act, 5 Indian J. Int’l Econ. L. 59 (2012).

[27] Aditya Bhattacharjea, India’s New Antitrust Regime: The First Two Years of Enforcement, 57 Antitrust Bull. 449 (2012).

[28]Amit Kapoor, Competition Regulation-history, Insights and Issues for the Way Forward,  2009 Manupatra (2009).

[29]UK Essays, MRTP Act: Rise Fall and Need for Change: Eco Legal Analysis, November 2013.

[30] 1977 AIR 973, 1977 SCR (2) 685.

[31]2002, CTJ 459 (MRTP).

[32](1995) 3 CTJ 332 (MRTPC) 74 Truck Operators Union vs. Mr. S.C. Gupta & Mr. Sardar AIR 1986 SC 991 (1995) 3 CTJ 70 (MRTPC).

[33](1998) 3 CompLJ 152 MRTPC.

[34]Report of ‘The High Level Committee on Competition Policy and Law’ – Dept. of Company Affairs, Govt. of India, New Delhi, 2000.

[35]Preamble, Statement of Objects and Reasons, Competition Act, 2002.

[36](2005) 2 SCC 431; MANU/SC/0054/2005.

The post Monopolies and Restrictive Trade Practices Act, 1970 appeared first on iPleaders.

This article is written by Mohona Thakur, Team iPleaders

Over the past week, we have been writing about why law students prefer working with law firms, why do lawyers quit their law firm jobs, life-changing realisations that lawyers have over the course of their career; it was only natural that we talk about the mistakes we lawyers have made as freshers.

How many of you have screwed up the first due diligence report you had to prepare? Not looked up whether the case law you found was overruled by a larger bench? Didn’t proofread the final contract that went for signatures?

As freshers in the legal industry, we lawyers have all made mistakes on the job, some small ones and some embarrassing ones that we may not like to recall. Let’s discuss a few mistakes most freshers make once they join law firms:

• Not Understanding The Work

Most of the times the instructions that the associates receive is limited to the exact research that needs to be done. Nothing more, nothing less. For instance, this one time I was asked to find out the jurisdiction of courts for a case under Section 138 of the Negotiable Instruments Act. And that is all that I was told. I received no other information, until I went ahead and requested the boss for more information.

The point I am trying to make here is that the associates at law firms are expected to work on a piece of a huge jigsaw puzzle. Most associates end up working long hours finding answers to vague research propositions with limited information. As a result,, the associates end up doing incomplete or superficial work.

Let me give you another example.

Your senior has asked you to make a note on how foreign investor can invest in the e-commerce space in India, and you send him the relevant notification of the FDI Policy. You also send a couple of Press Notes which are old and no longer valid. The associate expected you to distil relevant information from the latest policy, cite it and prepare a short note on it. You’ve missed the point. (Who knows, maybe your senior intended to send this as an email, or or include it in a larger note to be sent to the client).

What freshers are expected to do is provide a detailed and full-proof work. That can only happen if freshers ask for more information. The onus lies on the associates to ask questions. Ask all relevant questions in order to give work that is not only detailed, but also precise. Don’t you think you would be able to provide better, if you knew everything that is to know about a particular piece of work and/or the client?

• Giving Incorrect or Incomplete Information

As freshers, many of us have had the tendency to finish the assigned work quickly. It’s almost as though we are competing on how quick one can finish the assigned task. Maybe it is to prove our mettle to the reporting Partner, or at times to prove that we are better than our contemporaries.

In this very rush, freshers forget to proofread their own work product. At times, they end up coming with incomplete work, or with work full of discrepancies. Gunjan Chhabra, an arbitration lawyer, mentions this to be a huge problem with freshers. She says, “Efficiency cannot be a substitute for quality,” pointing out that freshers prefer being quick at the cost of doing thorough research.

For instance, your senior asks you how Apple is able to open single-brand retail stores in India, and you tell your senior that 100% FDI is permitted under single-brand retail, which he or she already knows. Your senior was expecting you to let him or her know that Apple is benefiting from a 3-year exemption from local sourcing, which is included as per a 23rd January, 2018 Press Note. This information can also obtained by another company, by making an application to a specific Committee of the Department of Industrial Policy and Promotion.

While you maybe giving the correct information, the above example demonstrates that you did not dig deep enough and your research is not upto the mark. Seniors at law firms notice the effort that is being put in. Look at it from the bigger picture perspective. Put yourself in their position and see what they would expect. If you were your own boss, would you expect yourself to do half-hearted work?

In fact, if I were to be my own boss, I would expect myself to not just ‘do the job’ but do it thoroughly. If possible, know the consequences to the worst case scenario, and have a probable plan of action for the same. Just doing the job won’t help you retain a job. Being better than what your boss expects you to be is what will impress them and make you stand out.

At law firms, with multiple teams working on various sectors of corporate law, it is absolutely important to understand what corporate law is. While I was in law school, I always used to ask myself and others “What exactly do you mean by corporate law? What is it? Is it Companies Act? Then why name it corporate law specifically?” Sandhya Biswas, an associate with Ernst and Young emphasises on “how freshers simply follow the herd mentality and do not understand what they mean when they say corporate law. It’s as broad as saying I want to do law.”

If I were in your shoes, I would have tried to figure out the answer to this question and figured out what did everyone mean by corporate laws. Thereafter, if I really enjoyed it and believed that I could have a future in this field, I would have ensured that I have enough knowledge in order to secure a job at a corporate law firm. A course on companies act, sebi regulations and M&A would help you understand the nuances and nitty gritties of these subject areas – something that law schools forget to teach, especially in practice.

Click here for free materials!

• Client Expectations – How to Deal With it

Freshers are the newest lot to join law firms, and naturally they do not understand what the clients expect.

For example, a client has asked your senior to support him or her with everything required to establish business presence in India, and your senior asks you to prepare a note. You look up the FDI Policy and RBI circulars, and specify the routes of establishing business presence in India, that is, through FDI into an Indian company or opening up a project, branch or liaison office. However, you do not specify how to incorporate a company in India, how to transfer funds into the Indian company, what licenses and registrations (tax, shops and establishment, etc.) are required to start business in India. If your memo is sent out directly by your senior, the client will not be able to establish business presence in India. It will be very similar to the information found online for free (which is just formatted and presented in a better way by you), but for which a client would be unwilling to pay legal fees at corporate law firm rates.

It is extremely important to ask questions and figure out what results the client expects, and how would your research fit in the bigger piece of the puzzle. If you know what is required to be done by the client, you would be able to deliver to their expectations, and do precise research. In turn, you present the client with exactly what they need.

Another part of this problem is that associates do not understand the firms way of dealing with a particular client. What kind of work has happened for this client previously? Were there other deals closed on behalf of the client previous to you joining the firm? Have you seen a previous work product that was sent to this client? Could you possibly figure out through this previous work product, as to the quality of work that was given to the client?

These are major and important questions that associates need to ask. Ask the right colleagues at law firms. It is pertinent to understand that asking certain questions, for specific information may not necessarily portray you as clueless. The smart ones in the lot will figure out where you are heading, and more often than not appreciate the effort that you are taking. In fact, these small steps that you take towards understanding the needs of your client vis-a-vis the firm’s approach towards the client, will help you scale up the ladder. Because law firms value their clientele and appreciate associates that understand the need of the clients and deliver as expected.

It is best advised that freshers stay ahead of the curve, and do more than just the bare minimum. Yes, it is absolutely great that one makes it to these corporate law firms. However, it is important acknowledge the harsh reality – that doesn’t mean that you’ve landed in life. In fact, on the contrary, it means – this is where your career begins.

Keep learning, from your mistakes, and others and make the best of every opportunity that life presents you with!

The post 3 Common Mistakes Made By Freshers Right After They Join Law Firms appeared first on iPleaders.

This article is written by Utkarsh Nigam of New Law College, Bharti Vidyapeeth University, Pune. The author through this article discusses the consequences of defaulting on a personal loan. This article was written by the author while pursuing M.A in Business laws from NUJS.

Personal loan is a type of unsecured loan which is taken to meet the current financial needs of any type. The need for urgent cash is fulfilled by this type of loan whether it is a medical emergency, money required to buy a house or to meet day to day expenses. The biggest benefit in taking a personal loan is that no questions are asked by the bank where the money will be put to use, along with it no security or collateral or guarantor is required to acquire the loan thus making it the favourable type of loan in case of a dire need. But this type of loan has drawbacks too.  Money without any security would mean high interest rates are charged by the banks on these types of loans as this would in future become a risky situation for a bank. The banks do not give these types of loan to everybody the banks give personal loan to a person who has a good track record in repayment of the loans. There can be cases where a default can be done, in cases of personal emergencies or death or bankruptcy etc. In these types of cases banks have certain rights or recourses through which they can recover the amount which they issued to the defaulter.

Remedies Available Under Code of Civil Procedure

The first option available to a bank as a plaintiff is to file a Summary suit under Order 37 of the Civil Procedure Code, 1908. The Rule 1 Sub rule 2 states that the order 37 is applicable to all suits upon bills of exchange, hundis, and promissory notes or the money payable in written contracts or enactment in which a plaintiff seeks to recover a debt or demand which is a liquidated one. The condition for this order to be applied is that the sum to be recovered is a fixed a sum of money or is in nature of any debt except a penalty or guarantee in respect of a debt or liquidated demand. Rule 2 of Order 37 requires the suit which is filed under this order to be under the ambit of reliefs granted under this order only and not any other such relief which is not mentioned. Under Order 37 the decree for the suit filed can be get in two ways, first being under Rule 2(3) which states that the defendant is given 10 days from the service of the summons on him to appear. After he has entered in appearance the plaintiff which is the bank in cases of loan default taken from the banks serves on the defendant summons for judgement within ten days from date of service which is supported by an Affidavit verifying the cause of action, amount claimed and that in his belief there is no defence to the suit filed by him.

Rule 2(5) states that the defendant may within ten days from service of such summon for judgement, by affidavit or disclose such facts as may be deemed sufficient to entitle him a chance to defend or apply for leave to defend. This may be granted to him unconditionally or on such terms as the court may deem fit. The proviso to the rule further provides that leave to defend shall not be refused by the court unless it is satisfied that the facts disclosed do not indicate substantial defence or that it is frivolous.

The other way is to get the decree under Rule 2(6) which states that in case if the defendant does not apply for a leave to defend the plaintiff shall be entitled to a judgement immediately or the court may direct the defendant to give such security as it may deem fit. The delay in entering an appearance may be excused under clause 7 of the rule if sufficient cause is shown.[1]

The real benefit to a plaintiff of Order 37 suit is that where the defendant is not able to come out with a substantial defence in his case the plaintiff will be entitled to a judgement immediately. This procedure simply means that the long procedure followed in civil suits gets eliminated starting from filing a written statement to framing issues by court, cross examination etc. The long process affected the plaintiffs. Under Order 37 a plaintiff just have to show that the case falls under the ambit of this order and once the summons is issued it is now the duty of the defendant to show to the court with substantial proof that he is entitled to a leave to defend and if the leave is granted then Order 37 becomes an ordinary civil suit and then the defendant is directed to file his written statement within 30 days.

The Crux of order 37 was summarised in Sunil Enterprises & Anr. v. SBI Commercial & International bank Ltd. where the court summarised the points under Order 37, which were-

1. If the defendant satisfies the court that he has a good defence to the claim, the defendant would be entitled to unconditional leave to defend.
2. If the defendant is successful in indicating that he has a fair or bona fide or reasonable defence although not a good defence then also the defendant is entitled to unconditional leave to defend.
3. If the defendant discloses such fact which entitles him to a leave to defend, that is if in the affidavit he discloses that at the trial he may be able to establish a defence to the plaintiff’s claim, the court may impose conditions at the time of granting leave to defend the conditions being as to time of trial or made of trial but not as to payment into court or furnishing security.
4. If the defendant has no defence or if the defence is moonshine the defendant is not entitled to leave defend.
5. If the defendant has no evidence or the defence is moonshine, the court may show mercy to the defendant by enabling him to try to prove a defence but at the same time protect the interest of the plaintiff imposing the condition that the amount claimed should be paid into the court or otherwise secured.

In case of Precision Steel & Engineering works v. Prem Deva Niranjan Deva Tayal the court pointed out that mere disclosure of facts not being substantial one the facts are nothing and what is particularly a substantial evidence depends upon the facts and circumstances of each case.

The Court in Neebha Kapoor v Javantilal Khandwala that the main reason behind Order 37 is the expeditious disposal of suits of commercial nature and it provides for such disposal as expeditiously as possible by prescribing the time frame.

Order 37 is best suited for cases in which a defendant does not have a case or does not have a substantial evidence or proof for asking for leave for defence. Cases in which the borrowers disappear with no trace, these type of cases can be moved expeditiously. The decree as executed by the court has a strong effect which tends the borrowers to offer settlements after they are served with the summons.[2]

Remedy Available Under the NI Act

The second option available in cases when the cheque is issued to return the borrowed money and it bounces or is returned by the bank for insufficient balance in the account of the borrower or in legal language when the cheque gets dishonoured then the person would be liable under Section 138 of the Negotiable Instrument Act,1881. The person who is made liable under Section 138 of the Act has a civil and a criminal liability. The Supreme Court in the case of Laxmi DyeChem v. State of Gujarat & Ors. gave the judgement that criminal proceedings because of insufficient balance can be initiated because of lack of sufficient amount in the bank account. If any person is deemed to have committed offence under this particular section the person can be punished with an imprisonment of up to two years along with a fine which can be twice the amount of the cheque.

Remedy Available Under the DRT Act

The third way available with the banks and Non- Banking financial institutions is to go to the Debt Recovery Tribunal which has been established under the Recovery of Debts due to Banks and Financial Institutions Act, 1993. The Government of India through the Act has constituted 38 DRTs and 5 DRATs (Debt Recovery Appellate Tribunal). The provisions of the Act apply to the cases in which the amount involved is not less than 10 lakhs. The prime feature of the Act is that only banks and financial institutions of any type can only make applications under Section 19 of the Act for recovery of debts under this Act. The DRT and the DRAT are not bound by the provisions of the Civil Procedure Code according to section 22 of the Act but are bound by the principal of natural Justice. Summary suit procedure is followed by the Tribunal for recovery of debts. The evidence is accepted through affidavit and cross examination is not allowed except in cases where the court is satisfied. The defendant has the right to file a claim of set off against the application filed by the plaintiff.  The final order is passed by the Tribunal, if it is satisfied, directing the borrower to pay the required amount which is claimed by the plaintiff. If the borrower fails to pay the amount a recovery certificate shall be issued against the borrower under Section 19(7) of the Act which will then be executed by a Recovery Officer of the Debt Recovery Tribunal under Section 25. The Presiding officer of the Tribunal under Section 19(22) shall issue a certificate for recovery of the amount of debt and any other relevant dues to the Recovery officer. The following modes can be taken by the Recovery officer-

1. Attachment of sale of the movable or immovable property of the defendant.
2. Arrest of the defendant and his detention in prison.
3. Appointing a receiver for the management of the movable or immovable properties of the defendant.

 The Tribunal under Section 19(24) shall be dealt by it expeditiously and efforts shall be made to finally dispose of the application made to it within one hundred eighty days from the receipt of the application. The Debt Recovery Appellate Tribunal shall also follow the same provisions under Section 20(6) of the Act and the appeal shall be disposed within 6 months from the date of receipt of appeal. Under Section 20(3) of the Act every defendant (borrower) is entitled to appeal against the order of the Tribunal within forty five days from the receipt of the order of the Tribunal to the Appellate Tribunal subject to the condition mentioned under Section 21 that the borrower should deposit seventy five percent of the debt as determined by the Tribunal.

Under Section 26 of the Act it shall not be open to the defendant to dispute before the Recovery Officer regarding the correctness of the amount specified in the certificate issued by the presiding officer and the borrower cannot make any objection with regards to the certificate on any ground

Where a certificate has been issued under Section 19 of the Act, the Recovery officer without any prejudice to the provisions to the provisions of Section 25 may recover the amount by any other means stated in Section 28 of the Act. These are-

1. If any amount is due to the defendant from any person, the Recovery Officer may require such person to deduct from the amount, the amount of debt due from the defendant and such person shall comply with such requisition and shall pay the amount to the Recovery officer.
2. The Recovery Officer has the power at any time by giving a notice in writing to the person from whom the money is due or will be due to the defendant or to any person who holds or may subsequently hold money for or on account of defendant to pay to the Recovery Officer after the money becoming due such amount which is sufficient to pay the amount of debt due from the defendant.
3. A notice may be served by the officer to the person who holds or subsequently will hold any money on account of the defendant jointly, and until the contrary is proved the shares of the joint holder will be presumed to be equal. The notice would be send to all the joint holders at their addresses and complying with the contents of such notice is mandatory in nature. Where a person whom such notice is sent if proves that he/she does not hold any money for or on account of the defendant then the person will not be required to pay any sum. But if it is found that the statement was false or the proof was false in nature then such person shall be personally liable to the Recovery officer to the extent of his own liability to the defendant or to the extent of defendant’s liability under the suit whichever is less.
4. If the person to whom the notice under this section (Section 28) has been issued fails to make the payment, then he shall be deemed to be a defendant in default in respect to the amount specified in the notice and further proceedings can be taken against him for the realisation of the amount according to the provisions of Section 25,26 and 27.
5. The Recovery Officer also has the power to apply to the court in whose custody the money is belonging to the defendant for payment of the amount of money due towards the debt.
6. The Recovery Officer may recover any amount of Debt due from the defendant by sale of his movable property in the manner laid down in the Third Schedule of the Income-Tax Act,1961.[3][4]

In cases of corporate loans the new provisions of the Insolvency and the bankruptcy Code will be applicable. The Adjudicating Authority in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located.For other persons mentioned in the Act the adjudicating authority will be the Debt Recovery Tribunal incorporated under section 3(1) of the Recovery of Debts due to Banks and Financial Institutions Act,1993.

Insolvency and Bankruptcy Code – Financial Creditor or Operational Creditor may file an application to the adjudicating authority against a corporate debtor

This is only applicable to A financial debt as defined under Section 5(8) of the IBC, or operational debt as defined under section 5(21) of the IBC.

Under Section 7 of the newly passed Insolvency and the Bankruptcy Code,2016 a financial creditor may file an application to the adjudicating authority against a corporate debtor. The adjudicating authority within 14 days from the receipt of application ascertains the existence of any such default mentioned by the creditor. The authority if is satisfied with the application issues a notice to the debtor and if the debtor within ten days from the date of receipt of notice fails to make the payment of the debt then the creditor is entitled to make an application before the authority for initiating a corporate insolvency resolution process. The insolvency resolution process should be completed within 180 days from the date of admission of such application. For this purpose a resolution professional shall be appointed to carry out the process of resolution making. If the Adjudicating authority is satisfied that the resolution plan as approved by the creditors under Section 30(4) that is the resolution is approved by not less than 75% of the creditors then under Section 31 it shall by order approve the plan which shall be binding upon the Corporate Debtor and its members employees, stakeholders, creditors etc.

Where the resolution professional at any time during the corporate insolvency resolution process intimates the Adjudicating Authority, but before the confirmation of resolution plan, of the decision of the committee of creditors to liquidate the corporate debtor, then under Section 33 the Adjudicating Authority shall pass a liquidation order. The resolution professional under this case after the order has been passed will act as an official liquidator for the purpose of liquidation. The creditor under Section 42 within 14 days from the date of such decision has a right to appeal against the decision of such liquidator appointed if he gives a decision.

The same powers are conferred on the National Company law Tribunal as well which are vested with the Debt Recovery Tribunal as an adjudicating authority.

The above discussed ways have punishment of imprisonment if the provisions of these Acts are violated. Along with it, hefty penalties are also incorporated in the provisions of the newly incorporated Acts to make the borrowers aware of the penalties if they fail to comply with the provisions. The Insolvency and the Bankruptcy Code has shifted the existing debtor in possession to a creditor in control regime. The code has introduced the concept of Insolvency Professional as a type of intermediary to oversee the process which has nearly eliminated the process of the court as the decision maker, where a lot of time was consumed in the procedure stage and then on the enforcement stage. There is a surge in the credit market because of this and a sense of stability too. The passing of this Code has given a big boost to ease of doing business in the country. The most important feature which the IBC has brought along with the other ways through which suits of default of loan are settled are the strict timelines which are mentioned in the provisions of the Act. The objective is to curtail tactics of the debtors to delay the enforcement of the decree or the liquidation process. India has a high rate of bad debt problem, the Acts aim to curb that and provide solution to it by creation of a database of the defaulters so the business in the country can flourish easily. As India being a developing country may foreign investors are also coming to the country. The Acts discussed above are a way to bring all the lenders and the debtors on a same line and whether the property is located inside or outside the country the Acts cover it all.[5]

References

[1] Referred https://www.nls.ac.in/lib/bareacts/civil/cpc/cpco37.html

[2]Referred http://www.legalservicesindia.com/article/article/order-37-cpc-summary-suits-1514-1.html

[3] Referred http://www.drat.tn.nic.in/Docu/RDDBFI-Act.pdf

[4] Referred http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/144_2016_LS_Eng.pdf

[5] Referred http://www.indialaw.in/blog/blog/commercialcorporate/summarising-insolvency-bankruptcy-code-2016

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What is real estate law? What do real estate lawyers do and how? This was one of those questions which remained unanswered for a long time for me, until I was sought for advise in a real estate matter myself.

A couple of years ago, a friend’s father contacted me out of the blue. He is a retired marine engineer. His elder daughter had recently been married. So, as a gift to his daughter and son-in-law, he had bought them a flat in Bangalore. He had paid about INR 2.5 lakhs as down payment and signed some papers. He was told that the construction work will start in  about six months. He then went back to his home in Kolkata. About near 6 months later he realised that the construction work has not started. He contacted the parties and learnt that there will be a delay of a couple of months due to some unforeseen circumstances.

But even after few months, the work had not started. That is when he called for clarifications. Upon seeing such a lackadaisical attitude, things got heated and he threatened them with a lawsuit. Then the contractors simply said that he has waived off the right to sue based on one of the papers he had signed. This is when he got in touch with me.

I asked him to share the copies of all the documents. In one of the documents it turns out that this friend’s father had waived off his right to sue among other rights. Now I have next to nothing in terms of experience in real estate law. So I referred him to a friend after initial advice.

While talking to my friend I realised the extent of the real estate laws, rules and regulations involved in these matters. I also realised how much these affect us in our day-to-day lives. It intrigued me to know what do the real estate lawyers do and how? Are there any real estate law courses? So in order to get some insights, I spoke to a couple of real estate lawyers to understand what they do and how.

Here is what I learnt.

What do real estate lawyers do?

Real estate lawyers do everything from title search of a property to dispute resolution. They have to conduct the due diligence for the property to know if the title is clear for development or sale. Then they have to make title search reports or title search certificates as per their client’s requirements. They also check for pending mortgages and litigation on the property, to find a reasonable and amicable solution for their clients. They advise their clients on various property related matters. They draft MOUs, lease agreements, leave and license agreements, etc. They also handle land or property related disputes.

Their clients range from individuals investing in a flat to developers or promoters. So, if you’re a developer trying to get the land to develop a property, you have to get in touch with a real estate lawyer.

Click here to know about real estate law course!

What laws and regulations do they need to know?

While the range of laws applicable to real estate laws is extensive laws, like The Real Estate (Regulation and Development) Act, Transfer of Property Act, Contracts Act, state laws and regulations like Maharashtra Regional and Town Planning Act, Development Control Rules, etc. are what real estate lawyers deal with on a daily basis.

• The Real Estate (Regulation and Development) Act

Recently, with the The Real Estate (Regulation and Development) Act, 2016 [RERDA],  Real Estate Regulatory Authority (RERA) has come into place. This law was introduced to protect home-buyers as well as help boost investments in the real estate industry. The Act establishes Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute redressal. Under RERDA, all builders and developers have a duty to register their new and ongoing projects with the Regulatory Authority in case they are planning to sell the property. Under the law, RERA has to dispose off a complaint within 60 days of filing. With RERA in place in a state, one cannot file lawsuits in civil courts or high courts.

• Transfer of Property Act

The  Transfer of Property Act regulates the transfer of property in India and it classifies property into immovable and movable properties. The transfer of property may be to an individual, company or association or body of individuals. A real estate lawyer needs to be thorough in their knowledge of this act as it governs and regulates the transfer of properties between parties.

• Contract Act

The knowledge of contract law is essential for all lawyers, more importantly the practical experience in the field. Even real estate lawyers have to know how to draft contracts and agreements. They regularly deal with clients who need them to draft the necessary agreements like MoU, lease agreement, leave and license agreement, sale agreement, broker agreement, etc. Therefore, they need to be adept at the subject matter.

• Consumer Protection Act

Prior to RERA, even in states where RERA has not been established post-RERA, usually the lawyers approached the consumer courts whenever handover of a developing property was delayed, or if there was dispute between the seller and buyer of a property. The real estate lawyers need to know the procedural aspects of the law, how to file a consumer complaint, etc.

• State Rules and Regulations

The rules and regulations for states differ from one another in terms of procedure, stamp duty, registration, etc. So, for instance in Maharashtra, a real estate lawyer needs to know the Maharashtra Regional and Town Planning Act, Standardized Building Bye-laws, Development Control Rules, etc. along with the other laws. In West Bengal, RERA was met with pushback from the state government’s legislation West Bengal Housing Industry Regulation Act (WBHIRA) which looks like an attempt to dilute RERA. There are two major deviations in the WBHIRA from RERA. It adds “…or any other circumstances as may be prescribed”, under the provision of unforeseen circumstances that prevent a builder from fulfill his contract,” which makes it ambiguous. Also, a garage is described as any parking space sanctioned by the government authority, which differs from the RERA’s definition of garage requiring a roof and walls on three sides. The real estate lawyers need to know and be able to apply the state laws, rules, regulations, bye-laws, etc. related to real estate.

What are the skills required for a real estate lawyers?

So, one of the questions I posed to the real estate lawyers was what kind of skill sets are required for a successful career in real estate law. Another question was what do potential employers look for in candidate while hiring.

In case of the employers, they look for candidates with experience in the real estate laws. This includes the number of deals the candidate may have closed, the nature and quality of said deals, the number of transactions closed, transaction based advise, dispute resolution, etc.

• Knowledge of real estate laws

A real estate lawyer has to possess a thorough knowledge of the various laws, rules, regulation, bye-laws involved in real estate. These lawyers need to be able to provide end to end service a potential client. A client may come to them for a simple title search certificate or a leave and license agreement. Or a developer may come for understanding his contractual obligations to the client or whether the delay can be justified as unforeseen circumstance.

The thorough knowledge of relevant laws like RERDA, Transfer of Property Act, state rules and regulations like Maharashtra Regional and Town Planning Act, Standardized Building Bye-laws, Development Control Rules, West Bengal Housing Industry Regulation Act (WBHIRA), etc. is essential for real estate lawyers.

You can do a real estate law course to learn more about this field of law.

• Contract Drafting

Every lawyer must know how to draft contract, real estate lawyers are no exception. They need to know the laws as well as how to draft the contracts needed by their clients. For instance, a developer or promoter developing his property, enters into an MoU with the potential party before entering the developer’s agreement.

Similarly, a house owner entering into a leave and license agreement with licensees, party leasing the property from another, all need a real estate lawyer to help them draft the necessary agreements and advise them.  You can learn more about contract drafting here.

• Dispute Resolution

The disputes arising of immovable property has to go to the right court. Prior to RERA, parties had the option of going to civil courts, high courts or consumer forums depending on the nature of the dispute. The real estate lawyers need to know the dispute resolution mechanism, the procedures of each forum, etc.

For instance, if the developer has failed to grant possession of the property for more than a year, a complaint can be filed against the defaulting party, i.e., the developer with RERA. The copies of relevant agreement like MoU, developers agreement, etc. has to be submitted along with the applicable fees. Thereafter within 60 days of filing, the matter is to be disposed off by RERA.

With such laws in place, a real estate lawyer has to find an amicable resolution of the dispute for his client. This requires a thorough knowledge of the laws involved, analysis of agreements involved, procedural knowledge, etc. A real estate lawyer must be able to clearly advise his clients on potential issues cropping up and safeguard them against the same to the best of their abilities.

Real estate law is a lucrative, as well as an interesting field of law as it gives the opportunity for lawyers to develop skills and expertise in a varied range of laws. With the changing legislations and regulations, it keeps the lawyers on their toes and helps them stay on top of their game. The market of real estate is always on the rise for real estate lawyers, as the need for legal advise and disputes with respect to property hardly seems to slow down! Making a career in this field will be highly rewarding.

The post Real Estate Lawyers: The What & How of The Job! appeared first on iPleaders.

In this article, Sakshi Goyal of Symbiosis Law School, Noida discusses Top Law Colleges in Madhya Pradesh.

Law profession is one of the noble profession around the world. A lawyer is considered as an officer of law who help people to fight for their rights and to get justice. Because of globalisation, people are exploring new markets, the government is coming up with new regulations, which indeed creates demand for good and efficient law professionals. Nowadays, the law students aspire to get recruited in reputed law firms, law agencies, administrative sector, multinational companies, etc. Past decade has seen an increase in the emergence of law colleges imparting good quality law education in India. As a result of this, the options for obtaining legal education in India have increased for the students aspiring to pursue a noble profession like law. But, the increase in number of college options for students has raised another problem i.e. to decide that which college is best for them, or in which college they should get enrolled into and to address this issue I will be discussing about the top colleges providing law courses in Madhya Pradesh.

National Law Institute University, Bhopal

The National Law Institute University, Bhopal (NLIU), was established by the Rashtriya Vidhi Sansthan Vishwavidyalaya Adhiniyam, by an Act No. 41 of 1997 enacted by the Madhya Pradesh State Legislature. The college offers both undergraduate and postgraduate law courses.

To support the environment of research and publications, NLUI, Bhopal publishes three journals: Indian Law Review, NLIU Journal of Intellectual Property Law and NLIU Law Review. With this the college  also published research monographs on different topics.

The college has a Placement Coordination Committee (PCC) which handles internships and placements at NLIU Bhopal. The committee arranges for pre-placement talks, written tests, group discussions and interviews can be made as per the requirement of the visiting recruiters. The committee is headed by Dr. Raka Arya

To achieve the objective of providing practical exposure college has Alternative dispute resolution cell, centre of research and international law, CARES: Environmental law cell, legal AID, moot court cell. The college has also established AADRIKA,  a media law cell which provides a forum of meaningful discussions.

Courses Offered

Bachelor of Arts + Bachelor of Law (Hons.), LLM in Human rights, LLM in Criminal Law, Master of Cyber Law & Information Security and PhD in Law.

Fees

Annual fees for five year integrated course is one lakh sixty two thousand and for one year LLM is One lakh Forty Five thousand and for MS in cyber law fees is eighty eight thousand per year and for Ph.D in law is Thirty Two thousand.

Faculty

College has renowned faculty like Dr. Ghayur Alam Professor in Business Law & MHRD Chair of IP, Qualifications: Law LL.M., Ph.D.

Dr. Uday Pratap Singh Professor in Human Rights, Qualifications: M.A., M.Phil & Ph.D.(JNU), LL.B.

Infrastructure

College is has both girls and boys hostel, library, computer labs with 24 hours Wifi.

Sage University Law School   

Sage University, which was recognised by the chief minister as the best upcoming university in Madhya Pradesh, has launched a law school with a very different approach. The university has brought in globally renowned faculty members and a star studded advisory board to create and fulfil the vision of creating the best law school in Central India and give a competition to National Law Universities. Although it was set up with a budget of over 200 crores, the fees charged is one of the lowest in the entire region amongst private universities.

Sanjeev Agarwal, the founder and Chancellor of the University, is a very successful and well known entrepreneur and industrialist from Bhopal. He always dreamt of studying law, but never had the opportunity to do so and became an engineer instead. The institution of the law school is therefore an effort to fulfil his dream. The passion is evident from the excellent team he has gathered and the resources made available to this law school.

Interestingly, the Sage University law school is developing a system to provide specialised training to its students to crack judicial services exams. You can get more information regarding this over here.

Sage University has collaborated and signed an MoU with iPleaders to provide practical training to its students. They have also launched a research report on 7 hottest career opportunities for law graduates that all law students and young law graduates will benefit from.

One of the USP of the law school is that India’s topmost criminal lawyer KTS Tulsi is a chair professor in this university, and he is overseeing research on how India can speed up the criminal justice system. It will be a big benefit for students to learn from a legal luminary like Mr. Tulsi.

Courses offered

BA LLB, BBA  LLB

Fees

INR 50,000 per year

Seats: 300

Prestige Institute of Management and Research, Indore

Department of law of Prestige Institute of Management is affiliated to Devi Ahilya University, Indore. It provides legal education at both undergraduate and postgraduate level. Moreover it regularly conducts Moot courts, Legal Awareness Camps. It has a 24 hours access to online research engines like SCC, Manupatra and other online law journals.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelor of Business administration + Bachelor of Law (Hons.), Bachelors of Commerce + Bachelors of Law (Hons.), Bachelors of Law (Hons.).

Fees

Annual Fees for the integrated course of law (5 years) is One Lakh Eleven Thousand per year and for Bachelors of Law (3 years) is Eighty Seven Thousand annually.

Seats Offered

120 Seats for 5 years integrated course and 60 seats for 3 years Bachelors course.  

Faculty details

Nishant Joshi is the incharge of Department of Law and also an associate professor. He did his Ph.D from Banasthali Vidyapeeth, Rajasthan. He is M.Com and MBA specialized in Foreign Trade from Devi Ahilya University, Indore.

Infrastructure

The campus is spacious and has library, Computer labs, electronic labs, cafeteria, Girls hostel and Boys hostels.

LNCT University, Bhopal

LNCT University, Bhopal  was established in 2015 by the LNCT group. It is a private University approved by All India Council for Technical Education (AICTE), New Delhi, and recognized by University Grant Commission (UGC). The college has an impressive student faculty ratio of 20:1.

The college is also awarded as the Fastest Rising University Of Madhya Pradesh and as the Most Promising University Of Central India. With undergraduate law programs of both three years and five years the college also has diploma courses.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelor of Business administration + Bachelor of Law (Hons.), Bachelors of Law (Hons.), Masters of Law, Diploma in Cyber Law.

Fees

Annual Fees for the integrated course of Bachelor of Business administration + Bachelor of Law (Hons.) (5 years) is Thirty Eight Thousand per year, for integrated course of Bachelor of Arts + Bachelor of Law (Hons.) is Thirty Three Thousand per year and for Bachelors of Law (3 years) is Eighty Thousand annually.

College also provide 100%, 50%, and 25% scholarship based on merits and with this also provides sports scholarships.

Infrastructure

Campus of college is spread over 90 acres with canteen, hostels, wifi, sports ground. It also has transportation facility, auditorium, computer lab and library.  

Indore Professional Studies Academy

College of Law, IPSA, Indore is an exclusive department of law, affiliated with Devi Ahilya University, Indore. It was established in 2009 and provides for a world class course outline. It has a huge campus of 51 acres area. It conducts Moot court competitions and court visits. The college also participates in sports competitions and have hostel and transportation facility.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelors of Law (Hons.).

Fees

Annual Fees for the integrated course of law (5 years) is Forty Five Thousand per year and for Bachelors of Law (3 years) is Thirty Thousand annually.

Seats Offered

IPSA offers 60 Seats for 5 years integrated course and 60 seats for 3 years Bachelors course  

Faculty details

The college is headed by director Prof. S.D. Malviya and also has an eminent personality like Dr. Ankita Nirwani as its associate professor.

ITM University, Gwalior

ITM University is a Private University located in Gwalior, Madhya Pradesh and was established in the year 1997.

For admissions in ITM University Undergraduate programs, the candidates should have passed 10+2 with minimum required marks in relevant discipline. But the final selection of the course will be done on the basis of ITM-NEST Entrance Exam Score.

The college is ranked AAA+ University by Careers360 Magazine in 2018.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelors of Commerce + Bachelors of Law (Hons.), Bachelors of Law (Hons.), Master of Law.

Fees

Annual Fees for the integrated course of law (5 years) is Seventy Six Thousand per year and for Bachelors of Law (3 years) is Thirty Two Thousand annually. And for master of Law, fees is Eighty Thousand per year.

Seats Offered

ITM, Gwalior offers 60 Seats each for 5 years integrated course and 20 seats for 1 years Masters program.

Infrastructure

The college is facilitated with computer lab, library, auditorium, GYm and separate hostels of boys and girls.

Jagran Lakecity University, Bhopal

Jagran Lakecity University is a research oriented University. Jagran Lakecity University focuses on academic research. The college encourages both academicians and students to actively take part in research activities and publish papers.

The college has its own journal “Jagran International Journal on Contemporary Research”, which annually publishes outstanding research papers prepared by renowned academicians. It also conducts open days for students who wants to enroll in the college.  

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelor of Business administration + Bachelor of Law (Hons.), Bachelors of Commerce + Bachelors of Law (Hons.), Bachelors of Law (Hons.)

Fees

Annual Fees for the integrated course of law (5 years) is One Lakh Forty Three Thousand per year, for Bachelors of Law (3 years) is Sixty Three Thousand annually and for masters it is One lakh fifteen Thousand.

The college also provides merit based scholarships of 100% on 1st year tution fee if the CLAT score is above 100.

Faculty details

The college is headed by Dr. Yogender Kumar Srivastava. He is Director and professor of law department of college. He has published 12 Research papers and 3 books. Qualifications: B.Sc. (Gold medalist), MA, LL.M. UGC-NET, LL.D., P.G. Diploma in Human Rights.

Criminal law is taught by Dr. Shobha Bhardwaj. She is an associate professor and has published 4 Research papers and  3 Books. Qualifications: BA, MA, LLB, LLM and Ph.D.

Infrastructure

200 acre campus designed to provide world class learning resource. It has modern lecture theatres, auditorium, hostels, library with access to online journals. It is fully equipped with wifi.

Amity University, Gwalior

Amity University is a private university located in Gwalior, Madhya Pradesh and was established in the year 2010. For both undergraduate and postgraduate program, the college conducts Amity entrance test.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelor of Business administration + Bachelor of Law (Hons.), Bachelors of Commerce + Bachelors of Law (Hons.), Bachelors of Law (Hons.), Masters of Law.

Fees

Annual Fees for the integrated course of law (5 years) is One Lakh Twenty Five Thousand per year and for Master of Law Seventy one Thousand annually.

The college also provides 100%,50%, and 25% scholarships based on merit.

Infrastructure

100 acres campus with hostels of intake capacity 2100, amphitheatre, auditorium, High Tech Labs, Library and parking lot.   

Indore Institute of Law, Indore

The institute is affiliated with Devi Ahilya University, Indore. It provides legal education at both undergraduate and postgraduate level. For the purpose of encouraging students to research and publish. They have started their own journal named Udgam Vigyati. It also has a monthly newsletter “Nyay Disha”. It also conducts moot court competitions, parliamentary debates, client counselling sessions and international law fest. The college provides an access to online research journals.

For the purpose of admission, the college conducts an IILET exam. Student having 45% aggregate in their 12th standard are eligible to appear for the IILET exam.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelor of Business administration + Bachelor of Law (Hons.), Bachelors of Law (Hons.).

Fees

Annual Fees for the integrated course of law (5 years) is One Lakh Fifty Seven Thousand per year and for Bachelors of Law (3 years) is Thirty Four Thousand annually.

The college also provides several scholarships based on 12th class marks and students can also avail scholarship of INR 10,000 if they have scored above 100 in the IILET conducted by the institute.

Faculty details

Dr. Manpreet Kaur Rajpal, is the Head of Department as well as an associate professor.

Educational Qualifications: PhD, LLB, LLM, MBA, MA, B.Com. She has also published several Research papers in different journals.

Infrastructure

The college provides separate boys and girls hostel. It also has computer lab, library and gym.

RKDF University, Bhopal

RKDF University, Bhopal was established in 2012 by the RKDF group. Faculty of Law, department of RKDF University is BCI approved. The college has its own journal SHUDH SANGAM, to promote students interest in research. It also has good faculty to help the students in their research projects. The college has a placement cell and provides an average placement of 3.2 Lakhs. Admission of undergraduate program is based on 12th class marks and of postgraduate program is based on graduation marks.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.), Bachelors of Law (Hons.).

Fees

Annual Fees for the integrated course of law (5 years) is twenty Five Thousand per year and for Bachelors of Law (3 years) is Fifteen Thousand annually.

Faculty details

The department is headed by Dr. Kusuam Dixit Chouhan. She is dean of law. Qualifications: LLM and Ph.D.

Seats Offered

The college offers 60 Seats each for all courses.

Infrastructure

The university is facilitated with football, cricket, basketball and volleyball courts, indoor sports arena with sports like table tennis, carom and chess. It also has separate boys and girls hostel.

Devi Ahilya Vishwavidyalaya

The School of Law is an exclusive department dealing with law of Devi Ahilya Vishwavidyalaya. It was established in 1998 and also provides M.Phill and Ph.D in Law.

Courses offered

Bachelor of Arts + Bachelor of Law (Hons.) at undergraduate level.

Fees

Annual Fees for the integrated course of law (5 years) is Forty Seven Thousand per year.

Seats Offered

The college offers 60 Seats for 5 years integrated course.

Faculty details

Dr. Manish Sitlani, Professor and head of Department.

Educational Qualifications: Ph.D, MBA, LLB and M.Com. He has 21 plus years of experience and have published many Research papers in international journals.

Conclusion

Choosing a college is one of the important decisions of a students life. It is a stepping stone which can either make you or break you. Students should consider all the possible criteria before choosing any college. There are many organisations which come up with the ranks of the college but before considering any rank, a student should look at the basis on which the colleges are ranked. They should also see the credibility of the organisation which is ranking the colleges. Tomorrow is built on the hopes of what we do today. So students should make their college days as beneficial as they can and make your parents, teachers and whole nation proud.

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In this article, Pracheta Verma discusses the obligations of employer under the Payment of Wages Act, 1936.

Introduction

With the growth of industries in India, problems relating to the payment of wages to workmen employed in the industry took an ugly turn. The workers were not paid their wages at regular intervals. There was no uniformity and no regulation in the payment system. The employers made hefty deductions out of the wages of the workers for petty issues. The employees were paid peanuts in the name of wages. To control this menace, the Payment of Wages Act, 1936 was enacted with the object to regulate the regular payment of wages and to keep in check the unlawful deductions for certain classes of employment. This Act came into force on 23rd April 1936. Let us now discuss the obligations of the employer under this Act.

An Obligation to pay wages on time and in an authorized form

a. Who has the responsibility of payment of wages within the organization as per the Act?

According to Section 3 of the Payment of Wages Act, 1936, every employer is responsible to make the payments of wages to all the persons employed under him. Check out the table below in order to understand who will be responsible as an employer in the different establishments.

What wage-period should be fixed by the employer?In Section 4(2) of the Payment of Wages Act, 1939, it is indicated that no wage-period i.e. the period in which a worker receives his or her wage, shall exceed the period of one month. Illustration: X is an employee in ABC factory, his wage period is of 40 days i.e. he receives his wages every 40 days. According to the law, X’s employer shall be liable for fixing a wage period exceeding a period of one month.

When should an employer pay the wages?

As per Section 5,
1. The employer shall pay the wages:

• In the case where there is less than 1000 worker employed in the factory- before the expiry of the 7th day after the last day of the wage period i.e. the day on he should be getting his wages.

Illustration- Anand, an employee works in XYZ factory consisting of 800 workers. He gets his wages on 20th of every month. In the month of January 2018, his wages get delayed. According to the law, Anand should get his pay before the expiry of 27th January which is the 7th day after the last day of the wage period that is 20th january. It should not be delayed later than 27th january.

1. In any other case- before the expiry of the 10th day after the last day of the wage period.
2. In the case where the employee is terminated, the wages earned by him has to be paid by the employer before the end of the second working day from the day of termination. Illustration-Manish, an employee works in ABC factory. His employment is terminated on 10th January 2018 on the grounds of misconduct. According to the above law, it is mandatory that the employer pays him the wages last by 20th January 2018 and not a day later than that.
3. The employer shall make all the payment on working day.

What is the authorised mode of payment of wages?

According to Section 6 of the Act, the employer shall pay the wages in current coin or currency notes and by cheques or by crediting the wages in the employee’s bank account after obtaining his written authority. Thus, payment in kind or bitcoin will not be acceptable. Illustration- X, an employee gets paid Rs.3000 every month by his employer A. In January, X is given 300 kg of sugarcane instead of his wages of Rs.1500. This form of wages is prohibited by the Act.

An Obligation to maintain registers and records:

• As per Section 13(A) of the Act, the employer is obligated to make registers and records in order to maintain a list of the particulars of employees in relation to the following matters:
• The work done by him,
• Wages paid to him,
• The deductions made from their wages etc.
• The employer has to preserve these records for three years from the date on which last entry was done.

Duty not to make any unlawful deductions from the wages

Deductions from wages are not permitted unless they are strict as per the grounds and procedures given under the Payment of Wages Act,1936.

a. What is a deduction under the Act?

Any payment made by the employee to his employer or his agent shall be deemed to be a deduction under this Act.

b. What does not amount to a deduction?

Any loss resulting from the imposition of the following penalties shall not be a deduction under this Act:

• The refusal to provide an increment or promotion;
• The reduction to a lower post or to a lower stage in a scale;
• Suspension.

c. What are unlawful deductions?

Deductions other than those authorised under the section 7 of the Payment of Wages Act,1936 are unlawful deductions. For example, Deduction of Rs.300 from the wages of an employee for buying the supply of raw materials for the factory is an unlawful deduction, since it is the duty of the employer to provide the materials required by the employees to carry on their work.

List of authorised deductions is mentioned in section 7 of the Payment of Wages Act,1936. It is an exhaustive list and any deductions from the wages of the employees made on the ground other than those mentioned under section 7 will be termed as an unlawful deduction. Some of the authorised grounds are:

• Fine,
• Absence from duty,
• Deduction of income tax payable by the employee,
• Deductions for repayment of advances from a provident fund, etc.

d. What is the maximum amount of the deduction that an employer can do? (Section 7(3))

List of deductions for which rules are provided in the Act.

What are the rules for imposing fines on the employee?

An employer can impose fine on the employee through Section 7(2)(a), which is an authorised deduction under the Act. Section 8 of the Act states the obligations of the employer before imposing any fines on the employee, which are:

• The employer can impose only those fines that are mentioned in the list of “acts and omissions” made by him, which must identify acts and omissions from within the list already approved by the state government or the authorised appropriate authority for the entire industry.  
• Notice specifying the employer’s list of “acts and omissions” owing to which fines can be imposed on the employee should be displayed in the conspicuous part of the work premises.
• No fines should be imposed on the employee until he has been given an opportunity of showing cause against the fine.
• The total amount of fine imposed should not exceed 3% of the employee’s wages.
•  No fine to be imposed on any employee below the age of 15 years.
• No fine imposed on any employee shall be recovered from him through installments. Also, the fine shall not be recovered from the employee after the expiry of 90 days from the date on which it was imposed.
• All fines to be recorded in the register maintained by the persons responsible for fixation of wages under section 3. These fines should be credited to the common fund and to be utilized for the benefit of the employees.

What are the rules that an employer should follow before deducting wages for absence from duty?

An employer can deduct wages for absence from the duty through Section 7(2)(b) which is an authorised deduction under the Act. Section 9 of the Act prescribes the mechanism for application of such deduction of wages in respect of employees who are absent from duty. The guidelines are provided below:

• The employer can deduct the amount of wages for the absence from the duty in the same proportion as the employee’s absence bears to the total time he was obliged to do the work. Illustration: If the salary of an employee is Rs.72,000 annually. X (an employee) absents himself from the work for one whole month, then his employer cannot deduct more than Rs. 6,000/- (72,000/12).
• If 10 or more workers, acting in concert, absent themselves

1. Without giving notice that is required by the employment.
2. Without any reasonable cause

Then the employer cannot make deductions more than amount exceeding wages of 8 days.

Anant Ram v. District Magistrate, Jodhpur (AIR 1956 Raj 145) – It was held in this case that the absence of work must be voluntary. Hence no deduction can be made under section 7, clause (2), when the absence from the duty is for the period between employee’s dismissal and reinstatement as such absence cannot be said to be voluntary.

What are the rules that an employer should follow before deducting wages for payments to cooperative societies and insurance schemes?

An employer can deduct for payments to cooperative societies through Section 7(2)(j), which is authorised under the Act. According to Section 13, Deductions shall be made by the employer subject to the conditions as imposed by the appropriate government.

What are the rules that an employer should follow before deducting wages for damage or loss?

An employer can deduct wages for damage or loss through Section 7(2)(c), which is authorised under the Act. According to Section 10,

• The employer shall not deduct the wages exceeding the amount of damage or loss of goods occurred due to neglect or default of the employee. Also, it is to be ensured that the employee had the custody of the goods which were so damaged.
• The employer is bound to give an opportunity to the employee for showing cause before deducting any wages.

M/S Rampur Engineering Co. Ltd. v. City Magistrate (AIR 1966 All 544)– It was observed by Allahabad High Court that the deduction for loss of electric bulbs and tools that were given to the employees for their own personal use is a valid deduction.

What are the rules that an employer should follow before deducting wages for house accommodation or services rendered?

An employer can deduct wages for house accommodation through Section 7(2)(d) and for services rendered through section 7(2)(e), which is authorised under the Act. According to section 11, An employer cannot deduct wages exceeding an amount which is equivalent to the value of house accommodation or any other service supplied. Such deduction can only be made if such service or accommodation has been accepted by the employee.

What are the rules that an employer should follow before deducting wages for recovery of loans?

An employer can deduct wages for recovery of loans through Section 7(2)(ff), which is authorised under the Act.

According to section 12A, The employer is bound to follow the rules made by the appropriate government in this behalf.

What are the rules that an employer should follow before deducting wages for recovery of advances?

An employer can deduct wages for recovery of advances through Section 7(2)(f), which is authorised under the Act. According to section 12,

• For the advances that are given after employment has commenced– The employer is bound to follow the rules and conditions made by the appropriate government.
• For the advances that are given before the employment period begins– The employer shall recover the same from the first payment of wages of such employee. But no recovery shall be done by the employer in the case where the advance is given for travelling expenses.

Conclusion

It is mandatory for the employer to carefully comply with his obligations under the Act in order to prevent himself from being punished under section 20 of the Act. The duties of the employers that were discussed above have significantly curbed the exploitation of the workers employed in the industries. The workers are now in a better position in comparison to the earlier situations of the workers. Though we have come a long way, still there is a need to fully execute, implement and keep a check on the employer in order to ensure the objectives of the Act.

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In this article, Shashwat Sarin discusses leveraged buyouts of distressed Indian companies.

A leveraged buyout, which is commonly referred to as an LBO, is a transaction in which companies acquire other businesses. The buyout involves a combination of equity from the buyer, along with debt that is secured by the target company’s assets or financial institutions like a bank or investment banks or private equity funds. LBO can be initiated and executed in cases of acquisition for restructuring and elimination of variable additional cost to grow the output of the company while making it a profitable venture or if a public company is to be taken private. In other cases, if the target company is to be segregated and sold to existing businesses in separate portions

The amount of debt that a bank is willing to provide to support an LBO varies & depends on

1. The financial strength and cash flows of the target company
2. The quality and resale value of assets meant to be acquired from the target company.
3. The opportunity and growth prospects of the target company.
4. History of financial supporters and creditors
5. Lastly the overall economic background, the regulatory framework, administrative structure, policy initiatives and concessions by the government and other variable factors.

Incentives to invest in or purchase a company or its subsidiary via means of an LBO

• A Stable Cash Flow/ valuation on return on equity – The company being acquired in a leveraged buyout must have sufficiently stable cash flows to pay its interest expense and repay debt principal over time. Such structures are commonly acquired in LBOs.
• Low fixed costs – Fixed costs create substantial amount of risk because companies have no option to delay the payment of fixed cost even in economic hardships.
• Low existing debt – If a company already has a high debt balance then an additional debt to acquire the company would only weaken the financial structure and accounts of the company while further depreciating the economic value of its assets.
• Moderate Valuation – Companies that are moderately valued or under valued are preferred in acquisition compared to over valued and high valuation companies. This also increases the risk and debt of the acquirer. Furthermore, if the equity of the target company Is sold at a very high value compared to its balance sheets and assets then it has a depreciating affect on its assets and further raises the risk on debt.
• Variable factors– Policy changes and regulatory framework of company in target jurisdiction. A strong management team coupled with a detailed ground network are also essential value adding credentials.

Private equity regulation has raised some growing concerns in recent times. For example, the activities that private equity firms indulge in, mainly activities like leveraged buyouts may not be compatible with the corporate laws of the state. For instance the European corporate law views leverage buyouts as fraudulent activities and are banned by Article 23 of Directive 77/91/EEC which states that a company may not provide financial assistance for the purchase of its own shares. In February 2000, the Supreme Court of Italy declared LBOs to be illegal (Bottazzi; 2008). In 2001, the Italian parliament filed a petition to reconsider the buyout regulation and finally in January 2004, a new legislation was issued wherein LBOs were legalized under the purview of stringent regulations and disclosure requirements. The American corporate law, on the other hand, understands the crucial rol of distressing debts and emphasizes on the utility of LBOs. [1]

From Indian Perspective

The regulations prohibit Indian banks to lend money to such an acquisition company for the purchase of shares of the target company. However recently the RBI has permitted banks to auction off the distressed debts to financial institutions, non- banking financial corporations and individual buyers.
Even though the corporate debt market in India is evolving dynamically there still persist some hurdles

1. From the point of view of an acquirer, the assets of the target Indian company cannot be taken as collateral for financing the debt of the acquiring company situated abroad.
2. As the debt and operating asset are a part of two separate entities there is no deduction of interest from operating income.
3. The dividend distribution tax has increased.
4. There is a constant risk of Foreign currency fluctuation since the debt that will raised to buy out the target company will be in foreign currency.
5. The asset buy out structure has higher tax liability for seller. Purchasing shares of a company attracts Securities Transaction Tax (0.125%) for listed shares and Long Term Capital Gains Tax (10-20%). However, sale of assets by the seller is treated as revenue by the Income Tax Act, 1956 and such gain is assessed as business income on which the tax rate is 30% to be increased by a 10% surcharge and an education cess of 3% (34% effective tax rate).
6. In an asset buy out structure where the foreign company incorporates a company for acquisition purpose, the additional VAT charges raise significant challenges.
7. An emerging issue with regards to the regulations is whether there should be a uniform code of regulation for financial institutions, banks and private equity funds on buyouts. Since all these institutions have different work structure, capacity of risk and different financial objectives, a uniform regulation makes it a difficult scenario as it reduces the market liquidity and imposes further restrictions.

Are venture lenders in cases of venture debt able to circumvent the legal restrictions on LBOs?

Venture lenders ease the debt on a corporation in exchange of equity. The loans extended by venture lenders is secured through the below mentioned mechanisms combined with a structured monthly payment system with interest. A company can use the debt equity to raise new equity or complete earlier existing outstanding issuing of equity and leverage it for a higher valuation. Venture debt can finance the fixed costs or purchase assets for the corporation in exchange for their equity in the company. Besides the common practice of extending services in exchange or percentage of equity, venture lenders may contract for more collateral in exchange for securing the loan extended by them. These scenarios obviously depend on the severity of the non-performing assets and debt structure. Venture lenders can collateral the corporation’s patent to secure debt. So technically in case the corporation fails to recover the additional debt owed to the venture lenders, the venture lenders get unrestricted and unique access to the patent for their use. In this scenario the buying value of the venture lenders by extending the loan would be at an unfair disadvantage as compared to the lower valuation of the non-performing corporation.

According to the recent regulations by the reserve bank of India, a SEBI registered Foreign Venture Capital Investor may purchase securities, issued by an Indian company and startups engaged in any sector. These securities can be purchased from the issuer or any person holding it. Foreign venture capital institutions can acquire, by purchase or otherwise, from, or transfer, by sale or otherwise, too, any person resident in or outside India, any security.[2] According to the SEBI regulations, foreign venture capital investor shall make investment in debt or debt instrument of a venture capital undertaking in which the foreign venture capital investor has already made an investment by way of equity.[3]

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The lack of regulatory measures for venture debt lenders circumvents the stringent legal framework and restrictions around leverage buyouts. The regulations which prohibit Indian banks to lend money to such acquisition company for the purchase of shares of the target company in case of leverage buyouts are not equivocal and consistent in case of venture debt lenders whereas the role of venture debt lenders is similar to acquisitions by leverage buyouts as far as leveraging equity for a sum is concerned.

[1] https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2109

[2] https://www.rbi.org.in/scripts/FAQView.aspx?Id=26#Q28

[3]https://www.sebi.gov.in/sebi_data/commondocs/fvci_updated_21December2010.pdf

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In this article, Aditya Sethi & V.S Pravallika discusses Minority Squeeze Out, Judicial Interpretations and Methods under Companies Act, 2013.

The term squeeze out implies compulsory acquisition of equity shares[1] of a company from minority shareholders through cash compensation. This method helps shareholders holding 90% or more shareholding in a company to acquire the shares in the company from minority shareholders. Squeeze Out refers to a transaction where the acquiring party is the controller of the firm to be acquired. The Companies Act, 2013 under Section 236 (Section 395 of Companies Act, 1956) provides for the concept of squeezing out which categorically mentions situations whereby minority shareholders can be bought out by the majority shareholders. Section 236 provides that a majority shareholder of a company holding at least 90% of equity shareholding has a right to notify its intention to buy out minority shareholders who may sell their shares to the majority shareholders at a price to be determined in accordance with the rules under Companies Act, 2013.

Various Methods of Squeeze Out under Companies Act, 2013

Reduction of Capital

Section 66 of the Companies Act, 2013 provides that the paid up capital of a company can be reduced by paying off the minority shareholders. The reduction in such capital is subject to a special resolution which has to be further confirmed by the National Company Law Tribunal (NCLT) of the concerned jurisdiction. Judicial precedents suggest scenarios where selective reductions have been approved, allowing certain members to retain their shares unreduced while shares of others are extinguished.

The Court in Sandvik Asia Limited v. Bharat Kumar & Ors.[2] held th

at ‘once it is established that non-promoter shareholders are being paid fair value of their shares, at no point of time it is even suggested by them that the amount that is being paid is any way less and that even overwhelming majority of the non-promoter shareholders having voted in favour of the resolution shows that the Court will not be justified in withholding its sanction to the resolution.’

The Court took a contrarian view in Chetan Cholera v. Rockwell[3] and categorically observed that companies in India often adopt this method to selectively oust the non-promoter minority. The Court was critical of this observation and reiterated that it is important for Courts while protecting the rights of workman/employees/shareholders/promoters to not only adhere to the procedural and substantive aspects of scheme of arrangement. The Courts should also take into consideration Articles 38 and 39 of the Constitution which assures and secures the citizens a socialist state. The Court emphasized upon the duty of regulators like SEBI to safeguard the interests of the investors.

The Court in Cadbury India Limited[4] approved a squeeze out through reduction of capital at a price determined by the valuer appointed by the Court. The Court denied the objections raised by the dissenting minority shareholders. The Court held that before it could object to a scheme of sanction, the objector must show that the valuation is ex-facie unreasonable. The Court relied on the judgment of Mafatlal v Mafatlal[5] and observed that ‘Courts do not have the expertise, the time or the means to do this. What the Court’s approach must be to examine whether or not a valuation report is demonstrated to be so unjust, so unreasonable and so unfair that it could not result and result only in a manifest and demonstrable, inequity or injustice.

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Acquisition of Shares

This method under Section 235 of the Companies Act, 2013 requires that a transferee company may under a scheme or contract; make an offer to the shareholders of the transferor company to acquire their shares. If such offer is approved by the shareholders holding 90% of the shareholding within two months after the expiry of four months, the transferor company may give notice to the dissenting shareholders, notifying them of its intention to acquire their shares. If a dissenting shareholder does not make an application to the National Company Tribunal within one month from the receipt of such notice, the transferee shall be entitled to acquire the shares of the dissenting shareholders on the same terms of the contract.

The Court in AIG (Mauritius) LLC v. Tata Televentures (Holdings) Ltd.[6]  addressed the question that if offers were received for shares constituting 90 per cent or more of capital of a company, then the remaining shares would be acquired at the same price. The Court categorically observed that the same group that was in the majority could not use to remove the small majority under this provision. The court held that ‘it was this very reason the section is deemed to be constitutional and if this was deviated from, it would amount to violation of fundamental rights and thus be struck down.’

Scheme of Arrangement

Section 230 of the Companies Act, 2013 allows a company to enter into compromises and arrangements with its shareholders and creditors. A company may begin by proposing a scheme that permits the controller to purchase the shares held by the minority shareholders. Under Section 230(1) of the Companies Act, 2013, the High Court can order a company to convene the meeting of the various shareholder classes. Each of the scheme must be approved by 3/4^th majority in value of each class. Once the approval is obtained, the company may apply to the High Court for the sanctioning of the scheme. The High Court will then hold a meeting in which the interested parties may represent themselves and if satisfied, the High Court shall issue an order sanctioning the scheme under Section 230(5) &(6).

Purchase of Minority Shareholders under Section 236 of Companies Act, 2013

Section 236 of the Companies Act, 2013 provides that an acquirer on account of becoming a registered holder of 90% or more of issued share capital of a company by virtue of amalgamation, share exchange or by any other reason shall notify the company of their intention to buy the shares at a pre-determined price on the basis of a valuation by a registered valuer. The majority shareholders are also mandatorily required to deposit an amount equivalent to the value of shares acquired, in a separate account for at least a period of one year for payment to the minority shareholders which shall be disbursed to them within 60 days. Section 236 has to be read with Rule 27 of the Companies (Compromise, Arrangement and Amalgamation) Rules, 2016 to determine the price for purchase of minority shareholding.  This provision also provides an option to the minority shareholders of a company to offer their shares to the majority, thereby assisting them in exercising their exit rights.

Consolidation of share capital under Section 61 of Companies Act, 2013

This option provides the company to consolidate and divide its share capital into shares having face value larger than the existing shares. This option is possible only if an authorization is provided by the Articles of Association of the company. After the consolidation, minority shareholders shall receive fractional shares which stand transferred to the Board or a person appointed by the board, who them in trust for such members.

Regulatory Framework for Minority Squeeze Out in Different Jurisdictions

United Kingdom

The bidder after a takeover offer has the right to acquire minority shareholdings if it has been contracted by not less than 90% in value of shares which are the subject matter of the offer carrying voting rights. The company can further indulge in selective capital reduction.

The United States

An acquirer on completion of a tender offer holds 90% of the target shares, the acquirer can implement a short-form merger without the approval of any other shareholder from the target company. However, on the contrary the acquirer and the target company would proceed towards a long-form merger with the approval of other shareholders of the target company.

Hong Kong

An acquirer intending to acquire the issued share capital of a public or private company by the method of squeezing out may make a general offer followed by compulsory acquisition or through a scheme of arrangement by way of mutual arrangement.

European Union

Articles 3 & 4 of Third Council Directive Concerning Mergers of Public Limited Company

These provisions are applicable to merger by acquisition and in a merger by the form of a new company. The shareholders of both the corporations must receive shares according to an exchange ratio approved by both sets of boards and shareholders.

Article 5& 15 of the Thirteenth Directive on Takeovers

Article 5 provides that anyone intending to acquire control shares of a listed firm must initiate a tender offer known as the mandatory bid. Article 15 provides that a shareholder acquiring 90%or more of the voting shares through tender offers may succeed in squeezing out minority shareholders at a fair price by using cash.

Conclusion

The new provisions incorporated in the Companies Act, 2013 with respect to squeeze-out balance out the rights of the acquirer in achieving the desired shareholding position in the target company and the minority shareholders to be adequately compensated. However, it is important for the minority shareholders to be aware of the implications of the squeeze out provisions in the 2013 Act and be aware of the rights that they have as owners of the company i.e. the right to vote, fair valuation, and oversight of the Court.

References

*4^th Year Students ,BBA LLB(H), School of Law, Christ University.

[1]R. Luthra, et al, Minority Squeeze Out, available at: http://www.luthra.com/admin/article_images/minority-squeeze.pdf.

[2]Sandvik Asia Limited v. Bharat Kumar & Ors., (2009) 3 Bom CR 57.

[3]Chetan Cholera v. Rockwell, [2010] 102 SCL 93 (AP).

[4]In Re Cadbury India Ltd, Company Petition No 1072 of 2009, Decided on 25th February. 2014.

[5]Miheer H. Mafatlal v. Mafatlal Industries Ltd, JT 1996 (8) 205.

[6]AIG (Mauritius) LLC v. Tata Televentures (Holdings) Ltd., (2003) 43 SCL 22 (Del.).

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In this article, Neel Vasant discusses the Inherent jurisdiction of civil courts to try a case of civil nature.

Abstract

“The glory of justice and the majesty of law are created not just by the Constitution – nor by the courts – nor by the officers of the law – nor by the lawyers – but by the men and women who constitute our society – who are the protectors of the law as they are themselves protected by the law”[1]

‘Ubi Jus Ibi Remedium’ is a latin maxim which means where there is a right there is a remedy. The word ‘Jus’ means the legal authority to do or demand something, and the word ‘remedium’ means the right of action in a Court of law.[2] It also expresses that there is no wrong without a remedy.[3] In the case Shiv Kumar Chadha v. Municipal Corpn. Of Delhi it was held that under classical law the position is that where there is a right there is a remedy.[4]

This article is an attempt to critically analyse the cases decided by the apex court relating to the issues related to the inherent jurisdiction of civil courts and the foundations of the law of civil procedure. Some issues remain still in question- Whether the civil courts have the inherent jurisdiction? The author will elucidate upon the same by discussing the object, scope and the extent of applicability of Section 9 of the Code of Civil Procedure. Further, emphasis shall also be given to the different types of jurisdictions of a civil court.

Section 9 – Courts to try all civil suits unless barred

Jurisdiction means the power conferred by law upon the court to try and hear the cases and give appropriate judgements.[5] The Inherent Jurisdiction may be described as the power without which the Court is unable to function with justice and good reason.[6]  Section 9 of the Code of Civil Procedure, 1908 deals with the aspect of jurisdiction of civil courts in India. In the article various judgements and sections will be analysed to ascertain the regulations which govern the jurisdiction of civil courts in India.

“The courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred”[7] In Ganga Bai v. Vijai Kumar[8], it has been held as follows:

“There is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute one may, at one‘s peril, bring a suit of one‘s choice. It is no answer to a suit, howsoever frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit.”

Thus, from this it can be concluded that the civil court has jurisdiction to try a suit if following two conditions are fulfilled: –

• The suit must be of civil nature.
• The cognizance of such a suit should not be barred expressly or impliedly.

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Suit must be of Civil Nature

There is no particular definition given as to which suit is to be classified as a suit of civil nature. But now it is a well settled fact from the judicial precedents that a suit which isn’t criminal in nature is a civil suit. Thus, any suit which is not criminal in nature could be classified as a civil action.[9] As mentioned in the Section 9 right to office or right to property are suits of civil nature unless the dispute is of purely religious nature.[10]

Hence, the current position regarding the jurisdiction of Civil Courts is that they have inherent jurisdiction to hear into the civil natters unless it is expressly or impliedly excluded by a statute.[11] In a landmark decision in the case Rajasthan SRTC and Ors. V. Mohan Singh the honourable Supreme Court has also laid down that the burden of proof for the exclusion of jurisdiction is vested on the party contending it.[12]

Following are some of the examples of the civil suits: –[13]

• Suits relating to rights to property.
• Suits relating to rights of worship.
• Suits relating to rents.
• Suits relating to restitution of conjugal rights

Cognizance not barred

Suits expressly or impliedly barred

A suit is said to be expressly barred when it is barred by any enactment for the time being in force.[14] Suits may be impliedly barred when they are barred by general principles of law as when are barred by any public policy or the policy enacted by the state. It is to be noted that the presumption will always be that the civil court has the jurisdiction to hear the case and this must be strictly construed.[15]

In the case Dwarka Prasad Agarwal v. Ramesh Chandra Agarwal[16], it was held that

“the ouster of jurisdiction shall not be readily inferred. If the matter is of civil nature and if ouster of the jurisdiction is not implied or expressed then the jurisdiction of civil court cannot be questioned”.

As far as expressed bar mentioned in Section 9 C.P.C is concerned it does not create much difficulty. However, the problem arises in the case of implied bar of suit by some other Act. This question has exhaustively been dealt with by the Constitution Bench (5 judges) judgment of the Supreme Court reported in Dhulabhai v. State of M.P.[17]

Factors affecting Jurisdiction

Pecuniary Jurisdiction: Pecuniary literally means ‘related to money’. Pecuniary jurisdiction sets the pecuniary limits on the jurisdiction of a court.[18] Every court is deemed to have a certain monetary limit of which it can entertain cases and decide. This is mainly done to avoid over-burdening of cases in some courts. However, it should be noted here that pecuniary limit does not imply that the higher courts cannot hear or entertain cases of lower monetary value. Districts courts, High courts etc. are given certain monetary limit and can entertain cases the valuation of which falls within their pecuniary jurisdiction. With changing time and scenario, the threshold pecuniary limits may also be changed. In the month of May 2018 an ordinance to widen the pecuniary jurisdiction of commercial courts was notified.[19]

Territorial Jurisdiction: Jurisdiction is the circle or area in which a party has power to do something. Jurisdiction of a court or a statute means the areas in which that court or statute can act or make effect.[20]Territorial jurisdiction is the territorial limit in which the law is applicable or the court has power to decide upon. Thus, the district court doesn’t have the power to adjudicate its power beyond a particular district. The High Court has jurisdiction over the whole state and the apex court can entertain any suite in the territory of India.

According to section 15 suit is to be instituted before the Court of lowest grade. By virtue of Section 16 suit in respect of immovable property may be instituted before the court within whose territorial jurisdiction the property is situate. For such suits, place where cause of action arises or where defendant resides etc. is wholly irrelevant vide Harshad Chiman Lal Modi v. D.L.F. Universal Ltd.[21]

Subject Matter Jurisdiction: Subject matter jurisdiction refers to the nature of the claim or controversy.[22] This means that certain courts are precluded from entertaining suits of particular nature. For example, a criminal court cannot deal with a case related to civil suit. Thus, a small cause court can try only such suits as a suit for money due on account of an oral loan or under a bond or promissory note, a suit for price of work done, etc., but it has no jurisdiction to try suits for specific performance of contracts for a dissolution of partnership. When the court has no jurisdiction over the subject matter of the suit it cannot decide any question on merits. It can simply decide the question of jurisdiction and coming to the conclusion that it had no jurisdiction over the matter had to return the plaint.[23]

Conclusion

It can be concluded from above written context that Section 9 of the Code of Civil Procedure deals with the question of civil court’s jurisdiction over a matter. Further different types of jurisdictions such as Pecuniary, Territorial and Subject Matter Jurisdiction have also been explained. Thus, an overall attempt has been made to explain the concept of “Inherent Jurisdiction of a Civil Court” as lucidly as possible.

References

[1] “Quotes on Jurisdiction”, https://www.brainyquote.com/topics/jurisdiction, Accessed on 19 July 2018

[2] “Ubi Jus Ibi Remedium: Definition”, http://www.duhaime.org/LegalDictionary/U/UbiJusIbiRemedium.aspx, Accessed on 19 July 2018

[3] Leo Feist v. Young, (1943)

[4] Shiv Kumar Chadha v. Municipal Corpn. Of Delhi, 1993 (3) SCC 161

[5] “Jurisdiction: Meaning”, https://dictionary.cambridge.org/dictionary/english/jurisdiction, Accessed on 19 July 2018

[6] “Inherent Jurisdiction”, https://www.lexology.com/library/detail.aspx?g=7759e11e-a49c-4b26-a21c-1c5373f282a5, Accessed on 19 July 2018

[7] Section 9, Code of Civil Procedure, 1908, Act No. 5 of 1908.

[8] Ganga Bai v. Vijai Kumar, AIR 1974 SC 1126 para 15

[9]Haridas Roy v. State of West Bengal, (1987) 1 Cal LJ 247

[10]PMA Metropolitan v. Moran Mar Marthoma, 1995 Supp (4) SCC 286

[11]Dhirendra Nath v. Sudhir Chandra, AIR 1964 SC 1300

[12]Rajasthan SRTC and Ors. V. Mohan Singh, (1988) 2 SCC 602

[13]C. K. Takwani, Civil Procedure with Limitation Act, 1963, 7^th ed.

[14]Umrao Singh v. Bhagwati Singh, AIR 1956 SC 15: 1956 SCR 62

[15]State of Vindhya Pradesh v. Moradhwaj Singh, AIR 1960 SC 796: (1960) 3 SCR 106

[16]Dwarka Prasad Agarwal v. Ramesh Chandra Agarwal. (2003) 117 Com cases 206 (Sc): (2003) 4 Comp LJ 385

[17] Dhulabhai v. State of M.P., AIR 1969 SC 78.

[18] “Pecuniary Jurisdiction”, https://www.legallyindia.com/tag/pecuniary-jurisdiction, Accessed on 20 July 2018

[19] “Ordinance to widen pecuniary jurisdiction of Commercial Courts notified”, http://www.livelaw.in/ordinance-to-widen-pecuniary-jurisdiction-of-commercial-courts-notified-read-the-notification/, Accessed on 19 July 2018.

[20]“Territorial Jurisdiction: Meaning”, https://definitions.uslegal.com/t/territorial-jurisdiction/, Accessed on 20 July, 2018.

[21] Harshad Chiman Lal Modi v. D.L.F. Universal Ltd., AIR 2005 SC 4446

[22]“Subject Matter Jurisdiction”, https://www.law.cornell.edu/wex/subject_matter_jurisdiction, Accessed on 20 July 2018.

[23]Athmanathaswami Devasthanam v. K. Gopalaswami Ayyangar, (1964) 3 SCR 763: (1964) 1 MLJ SC 42

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In this article, T.H.Vishnu discusses marketplace contracts with vendors and customers.

An aggregator platform or marketplace is an online platform where a number of different vendors gather under one roof to market their products or services to their customers. It essentially facilitates the interaction of buyer and seller over a digital platform.  Amazon, Flipkart, Snap deal, and Uber are some of the examples of leading aggregator platforms and marketplaces.  Long gone are the days when one had to leave the house and go to different shops or markets to buy the products necessary for their day to day life.  With the use of aggregator platforms and online market places, any product or service, from an apple to the Apple iPhone, is just a click away from your doorstep.

Considering a lot of start-ups have invested in building aggregator platforms and marketplaces, it is important to understand the legal aspects of building these platforms such as the requisite legal agreements to be entered into with vendors and customers. While there is a small difference between the functioning of an aggregator platform and a marketplace, the contracts to be entered into by both are largely the same.  This article intends to discuss the kinds of contracts entered into by an aggregator platform or marketplace (hereinafter referred to as “online platform(s)” for the sake of brevity and convenience) with its customers and vendors as well as some important clauses of such contracts.

CONTRACTS WITH VENDORS

According to section 2(h) of the Indian Contract Act, 1872 – ‘an agreement enforceable by law is a contract’. Contracts entered into by an online platform with its vendors are very important in inasmuch as they define the commercial understanding and relationship between the parties. These contracts are usually ‘non-negotiable’ or ‘take it or leave it’ contracts from the vendors’ point of view, meaning that the vendors typically have little or no bargaining power with respect to the terms of the contract, and their only option is to choose not to enter into such contract. However, at the same time, the online platforms need to ensure that the terms of such contracts are attractive enough for vendors to want to do business with them instead of choosing other online platforms.

Most of the online market platforms have a standard contract with the vendors with slight variations depending on the kind of business they are involved in. An online marketplace may choose to execute a single contract with a vendor that contains all the necessary terms and conditions required for doing business or it may choose to execute a number of different contracts discussing various terms and conditions like Amazon.

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A contract defines the legal relationship of two parties. It exhaustively details all the aspects regarding the birth, life and death of such relationship between the parties. A well drafted contract is a boon to both parties in the sense that it avoids confusion and gives clarity to the relationship between the parties. Some key points to be considered by the online platform while executing contracts with vendors are –

Who can sell?

This clause basically lays down the requirements that need to be fulfilled by the vendor to start selling on the online marketplace. For example, Flipkart stipulates a condition that vendors should hold a valid GSTIN number, PAN card, and a bank account supported with other KYC documents such as passport, voter’s identity card, aadhar card, and driving license, as also a ‘seller account’ in order to do business with them. Apart from individuals, a partnership firm, a LLP or a company may also be eligible to register themselves as vendors with such online marketplaces.

What products can be sold?

Another important clause to be included in such contracts pertains to the kinds of products which are permitted and restricted to be sold on the online platform. Products are differentiated into the permissible and restricted categories depending upon the domestic laws of the country in which the online marketplace intends to do business. For example, in some countries it is legal to sell tobacco and alcohol online while in others it is forbidden.  Therefore, it is crucial to list out the categories of products and services which are restricted to sold or provided by vendors.

Listing of products

Regulating the listing of products by vendors on the online platform is very important from the perspective of customer experience. High-quality listings help improve customer experience by making it easier for customers to find, evaluate, and purchase a vendor’s products. The setting of certain guidelines for listing vendors’ products, both basic as well as detailed information, such as images, brands, quality etc. are very important for the purpose of enhancing the customer’s experience while using the online platform.

Pricing and payments

Providing a structured mechanism for pricing and payment is another key aspect which is an unavoidable part of the contract between the online platform and the vendor. Vendors are usually given the liberty of deciding the price of the product they intend to sell. With respect to the payment mechanism, online platforms usually charge certain fees for their services. For example, Flipkart charges commission fees, collection fees, shipping fees etc. for the service provided by them depending upon the product and its price. After the deduction of such fees, payments are usually made to the vendor within 7-14 working days from the date on which the order is dispatched.

Shipping and Delivery

Another significant aspect that needs to be covered by the contract between a vendor and an online platform is the method of shipping and delivery. The clause must be precise and unambiguous as to which party has the liability to ship and deliver the product to the customers. For instance, the shipment policy of Flipkart says – ‘Our logistics partner will pick up the product from you and deliver it to the customer. All you need to do is keep it packed and ready for dispatch.’  Whereas in the case of Amazon, the vendor itself must ship and choose a carrier of its own choice to deliver the product to the buyer.

Returns, refund and cancellation

It is very important to discuss in the agreement, the scenarios in which the vendor has to refund, accept returns, offer refunds and cancel the orders placed the buyers. For example, Amazon requires a vendor to accept returns, offer refunds or cancel orders when the vendor cannot fulfil the order, the buyer doesn’t receive the order, or the buyer files an ‘A-z guarantee claim’ etc. A clear-cut mechanism for the same helps online platforms maintain their reputation in the market as well as regain the confidence of buyers.

Seller protection

Considering there are hundreds of online platform start-ups, in order to create a stable and profitable presence in the market, it is important to protect the interests of vendors just as well as customers. Therefore in order to attract vendors, the agreement must include clauses as to ‘seller protection’. For example, Flipkart has a ‘seller protection program’ wherein a ‘seller protection fund’ is created out of which adequate compensation is paid to the vendors in case of fraudulent customer claims, returning of damaged products, loss of goods in transit etc.

CONTRACT WITH CUSTOMERS

Customers are the life source of any successful business. The growth of a business is directly proportionate to the growth and satisfaction of the customer base coupled with other relevant factors. A well-defined contract detailing the legal relationship between customers and the online platform unambiguously and with the utmost clarity is essential to avoid unnecessary confusion, animosity and disputes in the commercial relationship, which may also lead to delayed reliefs. The contracts with customers are usually incorporated as ‘terms of use’ or ‘terms and conditions’ on the website of an online platform. Some of the important clauses in such contracts are discussed below –

• Who can buy?

Under the Indian Contract Act, 1872, a contract can be entered into only by persons competent to contract, i.e. a persons of sound mind above the age of 18 years. A customer, while creating an account and using the online platform, automatically becomes a party to the contract. For example, Flipkart’s terms of use say – ACCESSING, BROWSING OR OTHERWISE USING THE SITE INDICATES YOUR AGREEMENT TO ALL THE TERMS AND CONDITIONS UNDER THESE TERMS OF USE’. Therefore, it is very important to specify in the contract that use of the Website is available only to persons who can form legally binding contracts under Indian Contract Act, 1872. Otherwise, the contract is void-ab-initio, i.e. it is void and unenforceable from the time of its inception.

Platform for communication

Specifying that the online platform is just a platform for communication and interaction between vendors and customers and that the contract of sale is strictly a bipartite contract between vendors and customers is one of the most important clauses to be included in the terms of use of the online platform. Inclusion of such a clause in the contract helps to evade a lot of legal liabilities that the online platform would otherwise have incurred. For example, Amazon in its terms of use specifies that ‘You further agree and acknowledge that Amazon is only a facilitator and is not and cannot be a party to or control in any manner any transactions on the website. Accordingly, the contract of sale of products on the website shall be a strictly bipartite contract between you and the sellers on Amazon.in.’

• Privacy clause

Respecting the privacy of the customer is a fundamental factor for successfully running any business. Since customers provide their personal information including but not limited to their email addresses, phone numbers, and passwords, it is very important to provide assurances in the contract that such personal information will be protected. It must also exhaustively list the scenarios in which the online platform may use and share the personal information of the customers with other entities so as to avoid unwanted future liabilities.

• Representations and warranties

An online platform exists only to facilitate business between vendors and customers. Therefore, it is very important to comprehensively state the scenarios in which the online platform makes no representations and warranties. For example, Flipkart, in one of its ‘representations and warranties’ clauses, specifically states that – ‘Flipkart does not make any representation or Warranty as to specifics (such as quality, value, saleability, etc.) of the products or services proposed to be sold or offered to be sold or purchased on the Website. Flipkart does not implicitly or explicitly support or endorse the sale or purchase of any products or services on the Website. Flipkart accepts no liability for any errors or omissions, whether on behalf of itself or third parties.’ Inclusion of such clauses helps in excluding a lot of liabilities and consequent litigations against the online platform.

• Liability clause

Since an online platform deals with thousands of customers every day, it is pertinent to point out the circumstances in which they are and are not liable to any persons or entities for acts and omissions arising out of the conduct of the business. As an online platform only facilitates transactions between customers and vendors, it is of utmost importance for them to exclude themselves from any liability arising out of any actions or inactions of sellers, any breach of conditions, representations or warranties by sellers or manufacturers of the products and any and all special, incidental, consequential damages of any kind caused to them as a result of such transactions.

• Payment

As mentioned above, an online platform’s role is merely to facilitate transactions between customers and vendors for which they charge a fee as commission or otherwise from the seller.  Excluding themselves from any liability arising out of such transactions, including liabilities related to the consideration (payment) under the transactions is of utmost importance so as to avoid unwanted disruptions to the functioning of the business.  For example, Flipkart excludes themselves from any liability arising out of lack of authorization for any transactions, payment issues arising out of the transaction, decline of transaction for any other reasons etc.

• Buyer protection

Happy customers are at the heart of any successful business. The primary endeavour of any online platform for growing their business should be protecting customers from vendors who are incapable of delivering quality products and resolving disputes raised by customers. Therefore it is essential to include a ‘buyer protection program’ or a ‘buyer protection scheme’ as part of the dispute resolution policy of the online platform in its terms of use. In particular, such a program or scheme should detail the circumstances in which a buyer can avail of such a protection program or scheme, when his order is guaranteed for replacement and refund and the procedure for doing so. For example Flipkart has a ‘Buyer Protection Program’ whereas Amazon has its ‘A-z guarantee claim’ wherein buyers are protected from undelivered orders, and delivery of damaged and defective products.

• Governing law and jurisdiction

This clause is more or less the same in contracts with vendors as well as customers. Defining the governing law as well as the jurisdiction to adjudicate any dispute arising of a contract is one of the most integral parts of any contract. Before adjudicating any dispute between two parties, the first question that arises is which law will apply to such dispute. In order to avoid uncertainty and wastage of time, it is expedient for the parties of a contract to come into an agreement as to which law is to apply in case of any dispute. The jurisdictional clause essentially is an agreement between parties as to where exactly the dispute should be adjudicated. By the inclusion of this clause, the parties agree to adjudicate the dispute in a particular court in a particular area. The parties may also decide to subject the dispute to arbitration by incorporating an ‘arbitration clause’.

CONCLUSION

The world of aggregator platforms or marketplaces seems very plain and simple to an outsider. You open the website and any product is just a few clicks away. Hardly anyone takes the trouble to read the terms and conditions of the website before making a purchase. But once you delve into the technicalities and the legalities of such a platform, you begin to realize that building such a platform can be as complex as building any other business. As mentioned a number of times above, the contracts entered into by an online platform with its vendors and the customers must be of utmost clarity and unambiguity. These contracts must also define exhaustively the legal relationship between the parties and contemplate all future circumstances, both favourable and unfavourable, and consider how the unfavourable can be made favourable. At the end of the day, a good contract means good business and good business means happiness, and therefore, a good contract is vital to happiness.

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In this article Hardeep Singh of Campus Law Centre, University of Delhi has defined what is Arbitration.

Historical Background of Arbitration

Once human beings started to live and trade together as a community, various forms of adjudications begin to emerge. Why the concept of Arbitration emerged as an alternative dispute resolution? For answering this question one has to look back at the history of arbitration.

In India

• The earliest evolution of arbitration in India can be traced back to “Brihadaranyaka Upanishad” under the Hindu Law. It provided for various types of arbitral bodies which consisted of three primary bodies namely:

1. The local courts
2. The people engaged in the same business or profession
3. Panchayats.

• The members of the Panchayats known as panchas, were that times arbitrators, which used to deal with the disputes under a system.
• However thereafter the first legislative council for British India was formed and India got its first enactment on Arbitration known as the ‘Indian Arbitration Act, 1899’ but the Act was applicable to only presidency towns i.e., Calcutta, Bombay, and Madras. This Act was fundamentally based on the British Arbitration Act, 1889.  
• Thereafter came the Arbitration Act, 1940 which applied to the whole of India including Pakistan and Baluchistan. However, post independence the same was modified via ordinance.
• Due to various shortcomings in the 1940 Act like lack of provisions prohibiting an arbitrator from resigning any time during an arbitration proceeding, the rules providing for filing awards differed from one High Court to another, the act was replaced by the Arbitration and Conciliation Act, 1996 that ratified the problems in 1940 Act.

What is Arbitration

“Arbitration is a form of Alternative Dispute Resolution (ADR)”.

• The concept of arbitration means resolution of disputes between the parties at the earliest point of time without getting into the procedural technicalities associated with the functioning of a civil court.
• The dictionary meaning of Arbitration is “hearing and determining a dispute between the parties by a person or persons chosen by the parties”.
• In an English judgement named Collins v. Collins, 1858 28 LJ Ch 184: 53 ER 916 the court gave a wide definition to the concept of Arbitration which reads as follows:”An arbitration is a reference to the decisions of one or more persons either with or without an umpire, a particular matter in difference between the parties”. It was further observed by the court that proceedings are structured for dispute resolution wherein executives of the parties to the dispute meets in presence of a neutral advisor and on hearing both the sides and considering the facts and merits of the dispute, an attempt is made for voluntary settlement.
• Arbitration can be a voluntary one i.e., agreed between the parties or it can be ordered by the court.
• Unlike litigation, arbitration proceeding takes place out of the court and the arbitrator’s decision is final and the courts rarely reexamine it.
• There are several modes of dispute resolution outside the Judicial process. These modes are as follows:

1. 1. Negotiation
   2. Mediation
   3. Conciliation
   4. Arbitration
   5. Mini Trial   

• But Arbitration is considered as an important Alternative Dispute Resolution mechanism and is been encouraged in India due to the high pendency of cases in the courts.

Some Important Terms in Arbitration

Arbitration Clause

• An Arbitration clause is a section of the contract that defines the rights of the parties in the case any dispute arises over the contractual obligation or any other matter related to such contract.
• Generally, an arbitration clause contains that the parties will not sue each other in the court of law, if any dispute arises, instead they will resolve the dispute through arbitration.

Arbitration Tribunal

• According to Section 2(1)(d) of the Arbitration and Conciliation Act, an Arbitration Tribunal means a sole arbitrator or a panel of arbitrators.
• Thus from the interpretation of this definition, the parties are free to determine the number of arbitrators.
• However, if the parties fails to determine the number of arbitrators, then in that case, the arbitration tribunal shall consist of a sole arbitrator.

Arbitration Award

An arbitration award is an award granted by the arbitrator in the proceeding before it. This award can be a money award and it can also be a non-financial award.

Principle Characteristics of Arbitration

• Arbitration is consensual: An arbitral proceeding can only take place if both the parties to the disputes have agreed to it. Generally, parties insert an arbitration clause in the contract for future disputes arising from non- performance of contractual obligations. An already existing dispute can also be referred to arbitration if both the parties to the dispute agree to it (submission agreement).  

• Parties choose the Arbitrators: Under the Indian Arbitration Act parties are allowed to select their arbitrator and they can also select a sole arbitrator together who will act as an umpire. However, the parties should always choose an arbitrator in an odd number.

• Arbitration is neutral: Apart from selecting neutral persons as arbitrators, the parties can choose other important elements of proceeding such as the law applicable, language in which the proceedings should be conducted, the venue for arbitration proceedings. All these things ensure that no party enjoys a home court advantage.
• Decision of the Arbitral Tribunal is final and easy to enforce: The decision or award given by the arbitral tribunal is final and binding on the parties and persons only after the expiry of the time limit prescribed under Section 33 and 34 of the Act.

When the award becomes final it shall be enforced under the Code of Civil Procedure, 1908, in the same manner, one enforces a decree passed by the court.

https://lawsikho.com/course/certificate-arbitration-adr-dispute-resolution-drafting

Advantages of Arbitration in India

• Expertise in Technical matters: An arbitrator can easily deal with technical matters which is scientific in nature because generally arbitrators are appointed based on their expertise and skill in a particular field. Thus the disputes are resolved more effectively and efficiently.

1. The arbitral process is cost effective and less time consuming than the traditional way of dispute resolution in the court of law.
2. There is the convenience of the parties as they are able to decide on the language, venue and time of the proceedings.
3. Privacy and confidentiality of the parties are maintained as there is no unnecessary publicity of the dispute.
4. Arbitral proceeding is more flexible than the court proceeding as under the arbitral proceeding one does not have to follow the strict and rigid rules and regulation as that of the court. This is due to the reason that parties set the rules and regulations of the proceedings.

Conclusion

The growth of arbitration is taken as a healthy sign by many legal commentators as it eases the load on the constantly overloaded judicial system.

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In this article, Rangon Choudhury discusses the Indian Arbitration and Conciliation (Amendment) Bill 2018.

Arbitration and Conciliation (Amendment) Bill, 2018

In March of 2018, The Indian Government approved the Arbitration and Conciliation (Amendment) Bill (the “Bill”) to be tabled in Parliament. Designed to reform the present state of institutional arbitration in India and address some of the lacunas found in the 2015 Amendments, (the “Amended Act”), the Bill constitutes the most recent of initiatives India has taken to revamp its arbitration regime and provide the much-needed impetus for domestic and foreign business to build their confidence in India as a seat for commercial dispute resolution. This piece is an attempt to discuss some of the key features of the Bill.

Establishment of Arbitration Council of India

In what appears to be a systemic transformation for institutional arbitration in India, the Bill has endorsed the establishment of an independent statutory body called the Arbitration Council of India (“the ACI”) in Part 1A of the Principal Act. This body will be entrusted with the responsibility of grading arbitral institutions and recognizing institutions that provide accreditation for arbitrators across the country. It shall also have to frame rules and guidelines for the maintenance of uniform professional standards in respect of all matters pertaining to all ADR mechanisms in India.

While this initiative needs to be lauded for ushering in a new era for the growth of arbitral institutions in India and one that will require them to strive for certain objective minimum quality standards, the provisions in the Bill, as they stand raise a few issues. Firstly, it is imperative to define the powers of the ACI and the scope of such powers in the Bill, particularly to ensure that there is no unwarranted encroachment in the functioning of institutions. Secondly, it is noticeable that majority of the members of the Council are to be nominated by the Central Government. While the ACI is envisaged to be an independent body corporate, the role of the Government in making the aforesaid appointments can pose doubts regarding the independence and credibility of the Council, given that the government itself is a party to many arbitrations.

Changes in the pattern of appointment of arbitrators

Continuing with its attempt to increase the participation of institutions in the process, the Bill has introduced amendments to section 11, which deals with appointment of arbitrators. Under the new regime, the parties will have to approach arbitral institutions in the matter of appointments to the tribunal without having to approach the Court in this regard. The Supreme Court and the High Courts shall designate such institutions, based on their evaluation by the ACI. This also obviates the need for parties to file a formal application for appointment in court, thus speeding up the process by taking away some part of the burden from the court. That being said, the proposed deletion of section 11(6)(A) which requires a court seized to examine the existence of an arbitration agreement before proceeding with an application filed under section 11 does create an environment of uncertainty. The omission makes it clear that the courts will no longer review the validity of an arbitration agreement before making an appointment. This begets the question, as to who will do so, if not the courts. This is likely to become even more problematic when a party contests the validity of the arbitration agreement as a response to one party filing an application. Delegating this task to arbitral institutions will require express rules to be formulated in this regard. There is no guidance in status quo as to the scope of an enquiry into an arbitration agreement by an institution.

A rather interesting provision on confidentiality has been introduced for the first time in Indian Arbitration Jurisprudence. The newly introduced section 42A requires that parties and tribunals maintain confidentiality of proceedings, except the award in situations where disclosure of the award is deemed necessary for its enforcement. Considering that confidentiality as a feature of Arbitration is highly valued by parties who seek to protect their trade secrets in arbitration, an express provision imposing a duty of confidentiality is likely to build India’s image as a secure destination for arbitration.

The Bill however also goes on to suggest that the ACI will maintain an electronic repository of all arbitral awards. This provision, in the absence of an explanation, seems ambiguous and raises a few pertinent issues. Firstly, the Bill does not clarify which type of awards will be maintained in the database. It could be either one or all the three possible categories of awards – all awards passed in arbitrations seated in India, awards passed only in domestic arbitrations and awards passed under the aegis of institutions which are being monitored by the ACI. Secondly the implication is that the awards are going to be published in some form. To this extent, the Bill does not clarify whether the published awards will be full awards or sanitized versions, redacting all sensitive information. The Bill also does not clarify if the consent of parties would be sought prior to such publication and whether they will be given an opportunity to opt out of a system. Lastly and perhaps most importantly, the provision seems to be in conflict with the proposed amendment to section 34 of the Principal Act.

Section 26 of the Amended Act

Section 26 of the Amended Act was criticized for failing to clarify the scope of application of the amended provisions, both to arbitration proceedings and to litigation arising out of such proceedings. The atmosphere of uncertainty was further exacerbated when the Delhi, Bombay, and Calcutta High Courts rendered conflicting judgments on the issue. In order to provide clarity on this subject, the Bill has proposed the insertion of Section 87 into the Principal Act. The Bill endorses prospective application of the Amended Act, both in relation to arbitration proceedings and court proceedings arising out of the former. Only with the agreement of the parties does the provision make the Amended Act applicable to proceedings, which commenced before the Amended Act came into force and to court proceedings arising out of such arbitral proceedings, irrespective of whether the court proceedings were initiated before or after the enactment of the Amended Act.

While this provision seems to have solved the confusion generated by the ambiguous wording of section 26, a recent judgment of the Supreme Court in BCCI v Kochi Cricket Private Limited, delivered on March 15, 2018 (a week after the Bill was approved) has added to this saga. The Court ruled that the Amended Act will apply only to those arbitration proceedings initiated after (and not before) its commencement. With regard to litigation arising out of arbitration, the Court observed that the 2015 amendments would apply to all court proceedings filed after the amendments came into effect (October 23, 2015), regardless of when the arbitration was commenced, including pending proceedings that may have been filed prior to the amendments but were pending at the time they came into force.

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This ruling stands in conflict with section 87. The Supreme Court directed the Center to consider its judgment while taking the Bill forward. Interestingly, however, section 87 as introduced in the Bill fails to reflect the principles drawn by the Judges in the BCCI case. The Bill has further proposed the omission of section 26 from the Amended Act with effect from 23.10.2015. While section 87 clearly renders the aforesaid judgment nugatory, it remains to be seen what course of action Parliament would eventually take. The issue stands unresolved till then.

On a positive note, the Bill has reconciled the inconsistency between sections 17 (which bestows tribunals with the same powers as that of a civil court in the matter of granting interim relief) and 32(3) of the Principal Act (which states that an arbitral tribunal ceases to exercise jurisdiction once the proceedings before it stand terminated) by restricting the jurisdiction of a tribunal to grant interim measures only during the course of the proceedings. In Section 29A, the Bill has recommended that the time limit of 12 months imposed on arbitrators to draft the award start from the date of completion of pleadings instead of the date of reference to arbitration, as introduced in 2015. This will ensure that arbitrators are not pressurized by strict deadlines and that they are able to hear a case at different lengths depending upon its complexities. The Bill however has suggested the exclusion of international commercial arbitration from the purview of section 29A. While this move can be construed as providing an incentive for foreign parties to have their disputes resolved in India without any time constraints, introducing a different set of timelines for international arbitration suggests discrimination against a purely domestic arbitration. It also presumes that cases are always more complex in the former category than the latter, which may not be the case.

Conclusion

With the enactment of the New Delhi International Arbitration Bill 2018 by the Center and the rapid growth made by the Mumbai International Arbitration Center, the time could not have been more appropriate to provide an organizational structure for the robust growth of institutional arbitration in India. In doing so, the present Bill has also made the Principal Act more airtight by addressing the drawbacks recognized in the earlier amendments made.

While these steps are assured to bring in positive changes to the arbitration landscape of India, there were some notable misses that the Bill ought not to have ignored. Firstly, considering the importance assigned to emergency arbitration and incorporation of rules in this regard by institutions like the ICC and jurisdictions like Singapore, the Bill should have defined provisions relating to emergency arbitration under the definition of arbitral tribunal in the Principal Act. Secondly, the newly introduced Eight Schedule, which deals with the qualifications of an arbitrator, does not include foreign qualified arbitrators within its ambit. This means that such lawyers cannot come to India and act as counsel, even in an international commercial arbitration. This omission is nothing, but counter-productive to the main objective behind the Bill, which is to promote India’s image in the International Arbitration Community.

While it remains to be seen how the Parliament reacts to the Bill and its provisions, India needs to continue breaking new grounds in arbitration if it wants to assert its stamp as an arbitral seat along the lines of London or Singapore or New York in the years to come.

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In this article, Siddharth Jain discusses the concept of Transboundary Harm in International Law.

That large scale modern, agricultural, and technical activity, directed in the domain of one nation, can cause adverse impacts in the region of another nation or to territories of the worldwide commons is in no way, shape or form a novel issue in international law. Such transboundary harm has offered ascend to various speculations of State obligation, concentrating on remedial principles.

Transboundary Harm

In the midst of the overall interest for expanded environmental security, international law specialists, scholarly and practicing, have again raised the subject of transboundary harm, encouraging progressively and stricter guidelines of worldwide risk for the “insurance of the environment”. Some contend that strict liability (liability without proof of fault on the part of the actor) should be recognized as a general principle of international law, applicable to all transboundary damage cases, as already accepted by many national laws and as adopted by some international treaties. But actual practice, as witnessed in the aftermath of the Chernobyl nuclear catastrophe, has not sustained such normative claims.

The discrepancy between theory and practice raises basic questions. First of all, as the tragedy of the Chernobyl accident unfolded, international lawyers asked what kind of responsibility a State should bear under international law to prevent and remedy damage caused to other States. If the law is to impose strict liability on States, what legal mechanisms are required? Should these only be specified on an ad hoc basis, in particular contexts, by treaty? Or should customary rules be recognized as applicable on a more general basis, by analogy with the general practice of States at the domestic level in the field of civil liability?[1] Such questions are being raised vociferously as current situations hint the lack of strict rules and the presence of only “soft laws”.

“Transboundary harm” means harm caused in the territory of or in other places under the jurisdiction or control of a State other than the State of origin, whether or not the States concerned share a common border.[2] In practice, this harm can be easily understood by glancing at the much illustrious Trail Smelter case. Almost all discussions of international environmental law and liability take as their foundation the Trail Smelter arbitration, among the earliest expressions of the principle that a state has responsibility for environmental damage extending beyond its territorial limits.

The Trail Smelter arbitral tribunal stated in dicta that, under principles of international law: “No State has the right to use or permit the use of its territory in such a manner as to cause injury by fumes in or to the territory of another or the properties or person therein, when the case is of serious consequence and the injury is established by clear and convincing evidence.” This sic utere tuo concept has become the core rule of international transboundary pollution, and is often known (not entirely accurately) as the “Trail Smelter rule” or “Trail Smelter principle”.

Convention on Biological Diversity and the ILC Draft Articles on Prevention of Transboundary Harm from Hazardous Activities 2001

Coming to the legal aspect, strictly confining the scope to transboundary harm, two laws rule this field, namely, the Convention on Biological Diversity and the ILC Draft Articles on Prevention of Transboundary Harm from Hazardous Activities 2001. While the former is forceful for its binding obligation on nation states, the paramountcy of the latter cannot be ignored, owing to the fact that it has been invoked and alluded to in a number of international cases as well as conventions.

Speaking about the Convention on Biological Diversity, it goes well beyond conservation of biological diversity per se and comprehends such diverse issues as sustainable use of biological resources, access to genetic resources, the sharing of benefits derived from the use of genetic material, and access to technology, including biotechnology. Article 1 sets out as the Convention’s three main objectives: (a) the conservation of biodiversity, (b) the sustainable use of its components, and (c) the fair and equitable sharing of the benefits arising from the utilization of genetic resources, leaving the details of law and policy required to achieve these to be subsequently developed, to the extent that this is not already provided for in existing international and regional agreements and national laws.

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Article 14 of the same convention provides for the remedial measures and confirmed that environmental impact assessments are now required by general international law, particularly in respect of environmentally harmful activities which may have trans-boundary consequences, in order to meet a state’s obligation to ensure that activities within its jurisdiction and control ‘respect the environment of other States or of areas beyond national control’.

Moreover, the interpretations of the ILC, for “transboundary harm” can be regarded to encompass four major elements namely, first, the physical relationship between the activity concerned and the damage caused; second, human causation; third, a certain threshold of severity that calls for legal action; and lastly, transboundary movement of the harmful effects. In light of national limits, the term ”transboundary” stresses the component of border crossing as far as the immediate or prompt results of the act which the source State is considered culpable.

Major International Issues relating to Transboundary Harm

Coming to the issues related to the transboundary, they may be categorised into substantive and procedural issues. To start with the procedural issues, rules of international environmental law have developed within the context of two fundamental objectives pulling in opposing directions: that states have sovereign rights over their natural resources; and that states must not cause damage to the environment.[3]

The international community continuously witnesses a faceoff between outright territorial sovereignty and Limited Sovereignty. Outright territorial sovereignty, as the name suggests, is the hypothesis that a riparian state has full control over all resources existing in its region, and may use those resources without respect for the impacts on the downstream or co-riparian states. As opposed, limited territorial sovereignty is an international law analogous to the Roman law adage sic utere tuo ut alienum non laedas (utilize your property so as not to harm that of another).

Moreover, the substantive issues also ache the international body. As is unavoidable in this style of system arrangement, with expansive targets of especially wide degree, rising up out of exceedingly petulant transactions among spellbound gatherings, the Biodiversity Convention has numerous grey areas. Both its Preambular presentations and its substantive articles are communicated in wide terms, the necessities of which are often additionally debilitated by such extra qualifications. These include such phrases as ‘as appropriate’, ‘as far as possible’, ‘practicable in accordance with particular conditions and capabilities’, ‘taking into account special needs’, ‘likely to’, ‘grave and imminent’, ‘significant’, and such limited requirements as to ‘endeavour’, ‘encourage’, ‘promote’, and ‘minimize’.[4]

So far, it can be safely concluded that there are no substantive rules specific to the transboundary harm, except the ILC Draft Articles, which too have no binding force, thereby making it a part of those “soft law” conventions that are hardly referred back once signed. However, if we scratch to the surface of the ILC Articles, it seems an ideal law framework for transboundary framework, which not only defines the harm within a decent scope but also provides decent remedial measures after such harm has occurred. Moreover, invocation of state responsibility has also been provided in the same draft, making it exhaustive enough to cover all foreseeable situations.

Simply Put – Should strict global risk be forced on States for transboundary harm as a general guideline of international law?

In conclusion, we should maybe return to the exceptionally essential issue which started this examination: should strict global risk be forced on States for transboundary harm as a general guideline of international law? There is no basic ”yes” or ”no” response to this inquiry. Following three decades of legitimate advancement since the 1972 Stockholm Conference, the international group is presently like never before aware of its delicate living conditions, and more prepared to embrace stricter standards of direct for the insurance of its constrained common assets and environment. This motivating advancement likewise shows that transboundary harm is a pragmatic and relevant issue, requiring solid standards and standards, both procedural and substantive.

[1] Xue Hanqin, Transboundary Damage in International Law (Cambridge University Press, 2003, p 2).

[2] Draft articles on  Prevention of Transboundary Harm from Hazardous Activities 2001, art. 2(c).

[3] Philippe Sands, Jacqueline Peel and Adriana Fabra,Principles of International Environmental Law (4^th Edn.,Cambridge University Press 2017) p 191.

[4] Among others, see the American Law Institute, Restatement of the Law Third: The Foreign Relations Law of the United States (St. Paul, American Law Institute Publishers, 1987), vol. 2, § 601, and comment (c), pp. 103—105.

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I write articles on the various popular law related topics like, media laws, cyber laws, business laws, etc. This time I thought of taking up company law as my topic. I was going to write on “What must law firm lawyers know about companies laws”. I figured there must be parts of companies laws that these lawyers must be dealing with more frequently than the other provisions.

So to that end, I called up a couple of lawyers working with the law firms, hoping to get direct inputs and insights. After my conversation, I was at a loss! To my dismay, the conversations left me with way more information than I was looking for. It turns out, all of company laws are important for these lawyers! There is no pick and choose of provisions – they have to know it all!

I had no clue where to begin!

Like most law students I had only studied company laws as part of my curriculum. I learnt enough to write assignments and give the examinations. But without the practical application of my knowledge, the little that I knew became distant knowledge. Without practical application it is difficult to retain the theoretical knowledge. One might do company law course to go beyond the theory and gain some real world insights from lawyers practising in this field.

I spoke at length to understand what kind of work these lawyers do. My plan was to change the angle of the article itself. If I know the functions they perform on a regular basis, then maybe some aspects of company laws would be highlighted.

I asked questions like what do law firm lawyers do with respect to companies act? How important is the knowledge of companies act? What provisions of companies laws are more frequently used than the others? Are there any particular segregation when it comes to handling company laws by lawyers? Where can one learn the practical aspects of the company law course?

The lawyers were extremely patient and answered all these questions. They also maintained unequivocally that the companies laws are underlying aspect of corporate law and the knowledge of its is quintessential as it comes forth every now and then. It comes while advising clients, formulating transactions, doing due diligence, prior and subsequent to drafting contracts, while structuring the contracts, etc.

Here is what I learnt:

# Advisory

One of the most important function of a lawyer is advising the client. When it comes to company laws, there’s a requirement for these lawyers to have a thorough knowledge of the laws. It is not like media laws or cyber laws, where you have a focused set of laws governing the field. Company laws are the underlying aspect of the job that you must know in order to perform in your role as a corporate lawyer.

There are memos prepared for advising the clients on different aspects like duties of the directors, their liabilities, oppression and mismanagement, etc. The advise on company laws is a part of the whole work. So for instance, a new director is being added on the board, he must be made aware of the duties and obligations of the role under the Companies Act. In case there are new developments in the laws, the lawyers have to advise the clients accordingly.

# Transactional

Generally the transactions takes place between companies and not individuals. The entire transaction has to be compliant with company laws. For instance if a loan is to be advanced to a director, Section 185 of the Companies Act is attracted. Similarly, when a company is advancing loan or investing in another company, Section 186 is applicable, whereby, a company when making investment, cannot make it through more than two layers of investment, companies, barring some exceptions.

Similarly in cases of related-party transactions, Section 188, requires that such transactions be disclosed in the Board Report for prior approval, along with a justification. If the transactions are beyond the threshold limits, then they need to be disclosed in the General Meeting for approval by special resolution.

From transfer of shares or securities of a company to structuring of deals, everything has to be in compliance of company laws. Recently, Section 90 was amended. According to this  article by Khaitan & Co., “Section 90 of the Act requires every individual who, either by himself or with others (including a trust and persons resident outside India), qualifies as a significant beneficial owner (SBO) of a company to make a declaration to that company specifying the nature of his beneficial interest”. This affects the rights of SBOs and therefore require legal expertise in order to provide necessary legal support.

# Due Diligence

Another major aspect of functions in law firms, is conducting due diligence. The lawyers are required to conduct a thorough due diligence of all the necessary books, reports, documents, etc. in case of acquisitions or investments. Moreover, they also help the companies to comply with the provisions and necessary compliances of the Companies Act.

For instance, Section 88 of the Companies Act, requires any company to maintain the registers of its shareholders, debenture holders, security holders. If a company fails to comply with the same, then the company and its officers face penalty under the section.

# Contract Drafting

While drafting contracts, the lawyers need to comply with companies laws as well. There are necessary preconditions and postconditions while drafting contracts. There are plenty questions like whether the necessary regulatory compliances have been met with? Whether the consents have been duly obtained? Whether there are any pending legal requirements or ongoing litigations? Whether the compliances of the pre/post covenants done suitably? Are there any additional agreements to be entered into? Whether the key personnels are retained or not?

The necessary approvals has to be obtained by the board of directors or the shareholders, in a meeting before undertaking certain decisions. For instance, while drafting a shareholders agreement, lawyers have to inform the clients what would be the significance of giving certain rights to the shareholders or curtailing them, etc. In order to do so, the lawyers must possess a thorough understanding of the companies laws, apart from the other aspects.

In my short quest, one thing was amply clear to me, lawyers need to possess a clear understanding and command of companies laws in order to impart advice, conduct due diligence or draft contracts.

You could read the act back to front and memorise it even, but unless you have the practical knowledge, the learning falls short. Therefore, for all those who want to learn a thorough practical knowledge of company laws, you can check this company law course.

Good luck!

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“I’m beautiful in my way, cuz God makes no mistakes. I’m on the right track, baby cuz I was born this way.”

It is totally correct when we say that films are a reflection of our society. This is truly depicted when we see movies like ‘I am Sam’, ‘Bill on his Own’, ‘Bonds of Love’, ‘I Never Promised You A Rose Garden’, ‘The Kid from Nowhere’, ‘Tare Zameen Par’, ‘Margarita with a Straw’.

Many believe that persons with intellectual and developmental challenges cannot function in society and are unable to meet the physical or emotional demands of normal life. People believe that they cannot handle the challenges of daily life and are not able to contribute as ‘normal’ people do. These misconceptions have built a stereotype which has taken a strong hold on minds. However modern day cinema, otherwise used as a tool for entertainment, has tried to change these misconceptions, showing the true reality of the lives of people with challenges. By destroying the false impressions that so many have, they have shone a light on the possibilities that those with challenges can actualize. With only small efforts from us, they show that persons with challenges can be not at all different from us, in fact, they are just the same.

THE KID FROM NOWHERE is a TV movie, which came out in 1982. It portrays a story of a single mother who is overprotective of her intellectually challenged son, denying him a normal social life, which makes him angry and difficult. The movie illustrates the struggles that a family must go through every day. However, things start to change when the boy began to train for Special Olympics, gaining self-esteem in the process and his mother learning finally, to let go. The story travelled beautifully from the mother fearing what the society says, to becoming proud of her son. The film received a hugely positive reaction from the audience.

BILL ON HIS OWN, “Why do you want to learn?” when the teacher asked Bill (60 years old) he simply said “Because if I learn, then I’ll be a regular good man.” The classic Hollywood comedy ‘Bill on his Own’ (1983) is a story about Bill, who is an intellectually challenged man who wishes to live freely in the society just like everyone. After many years living in an institution, Bill is mesmerized by how beautiful the outside world is. With the desire to learn and live independently, Bill starts his journey of many challenges and new friends. And along this journey, he meets people who really care and love him. The movie met positive reviews as its simple story-line was capable to grab the attention of many viewers, helping to change the perceptions they had earlier held.

I AM SAM is an American film released in 2001. It showcases the story of Sam, a single father with intellectual disability, who wants to raise his daughter alone after the mother of the child abandoned them. With emotions as the prime tool taken by the director, the movie goes through the different phases of the lives of Sam (father) and Lucy (daughter). When Lucy is sent to a foster home, Sam fights for her custody in court. Despite the serious intellectual challenges Sam faces, he proves that he can take care of Lucy independently, and can be a caring father. At the end of several twists and turns, Sam wins custody of his daughter. The movie shows that how, despite the considerable challenges that he had, Sam won the hearts of all and proved that he can also be a part of the society as normally as others. The movie went to win many awards and opened the eyes of many people.

TAARE ZAMEEN PAR is a 2007 Indian drama, revolves around Ishaan, an 8 year old child with dyslexia. Although excellent in arts, young Ishaan is unable to get good grades in academics. With the school making repeated complaints about Ishaan’s distraction, the frustrated father sends him off to a boarding school. Ishaan’s arts teacher at the new school, the role played by Aamir Khan, suspects that Ishaan has dyslexia and he helps him to deal with his challenges. The story generates a slew of emotions as it travels through Ishaan’s life, from when he is misunderstood by his parents, to being accepting of his true self. The movie got universal praise from the critics and went on being one of the top movies of 2007. The movie made a huge impact on people’s assumptions on dyslexia and changed their thinking about it.

MARGARITA WITH A STRAW is a 2014 Bollywood movie which centres on the life of Laila who has Cerebral Palsy. Each step, each turn brings difficulties in her life, and the movie shows how she overcomes them through her positive attitude. It depicts the struggle as well as the power that individuals have to meet each challenge. It describes how every person’s desires and needs are the same as everybody else, despite being ‘normal’ or challenged. The movie received critical appraisal all over the globe and won many awards. The colourful story of Laila decodes the struggles faced by people with Cerebral Palsy but also shows how people can be happy despite all the difficulties.

With these movies, we are only seeing the tip of the iceberg. Ina time in which people are joining hands to come together for equality, movies like these take giant steps towards equity for people with challenges. Each movie mentioned above shows the different struggles and difficulties that persons with challenges go through, every day of their lives. It shows how we, as members of society, create their nightmares for them. These movies represent the fight that these warriors must fight every day to get adjusted and accepted within their own communities. Playing to the emotions as a primary strategy to win the hearts of people and open the window of their mind, cinema has been an amazing medium of change. What non-governmental organizations, the medical profession and support groups could not do, Hollywood and Bollywood have done. Film is a medium so strong, it leaves an impression on humdrum lives forever. With the right direction, it hits its target and moves onwards, ending misconception and making the lives of PwC just a little easier.

So let us take a pledge and move to end the typecast preconceptions about persons with challenges which has inhabited the minds of members of society – us – for a lifetime. Let us extend a hand of support to persons with challenges and walk with them towards equality, so that they can also have a chance to live life fully and freely. Remember even though persons with challenges are not same as others, they are not different from others.

“Don’t hide yourself in regret, just love yourself and you’re set on the right on the right way, cuz you were born to be brave and you are born this way.”

About the author: Karan Yadav is a trainee journalist from India Today Media Institute, currently pursuing Post Graduate Diploma and was working as an intern at Amrit Foundation of India.

(This article was originally published by the Amrit Foundation of India. To know more about the organization please click here!)

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Seeking a Second Chance

For some who struggle to keep up with medical bills, declaring bankruptcy can provide relief — and the process is fairly simple.

By Rilind Elezaj

Did you ever need a do-over?

If you’re experiencing a financial collapse and need to start over — as is the case for many who are grappling with cancer — declaring bankruptcy could be the answer.

Bankruptcy is a court proceeding in which the judge and other trustees study your assets and liabilities to assess whether you are able to pay your bills. The goal is to determine whether you should be allowed to let go of your debt. Bankruptcy laws were created to give people a second chance when they are experiencing hard financial times due to bad luck. The good news is that most people who file for bankruptcy end up getting it.

Who Can Declare Bankruptcy?

In general, people eligible to declare bankruptcy carry debts that can never be cleared with the money they possess now or expect to earn in the near future. This can include individuals having trouble settling their medical bills, such as patients with cancer who require immediate treatment that ends up continuing for a prolonged period — possibly a lifetime. These patients are typically paying for medical treatment while also trying to fulfill the financial obligations they had before they got sick: mortgages, student or auto loans and credit card debt.

A 2013 study found that people with cancer are 2 ½ times more likely than those without cancer to declare bankruptcy.

Types of Bankruptcy

Patients and owners can consider declaring either one of two types of bankruptcy: Chapter 7 or chapter 13.

In chapter 7 bankruptcy, patients sell certain property such as any equity they have in their homes and vehicle, as well as clothing, household appliances, and wedding jewellery and use it to pay all or part of their debt, which is then considered satisfied.

However, a lot of property is exempt and can be kept by those who are filing. A business owned by a debtor may not be touched by creditors, even if it was used as collateral because bankruptcy law is about helping debtors with their debt and putting them back on their feet. Bankruptcy law recognizes that not everything should be taken from them because it doesn’t benefit any side. Non-exempt property generally covers items outside of the necessities for living and working. So it’s reasonable for the creditor to let you keep the business in order to pay off your debts using the income you earn. In a chapter 13 bankruptcy, you propose a repayment plan where you repay part or all of the debt over three to five years. In addition, necessities including a patient’s car, home, clothing, furniture, work equipment, appliances, wages and retirement savings tend to be exempt.

The Pros and Cons

Bankruptcy can provide patients with peace of mind. Their bills will be considered settled, and lenders will no longer contact them to request payment. In fact, creditors are required to stop contacting debtors the minute they petition the court for bankruptcy relief.

Other benefits are that there is no minimum amount of debt needed in order to file; one spouse can file alone if the other doesn’t want or need to; and the process is fairly anonymous — odds are, no one will realize that you’ve filed unless you tell them.

In addition to the fact that filing for bankruptcy takes some work — hiring and meeting with an attorney, filling out paperwork and going to court — another drawback is that some assets may be lost. Too, the spending and borrowing power of people who have filed for bankruptcy may be restricted, with evidence of their bankruptcy showing up on their credit reports for 10 years. Still, these folks will retain the ability to secure and use new credit cards.

Important to note is that people with ongoing medical problems may accumulate new debt after successfully filing for bankruptcy. Another filing will not be allowed for years, but patients who are protected under chapter 13 bankruptcy may petition the court to add some of their new debt to their existing plans, protecting them against having to pay. A legal remedy of a bankruptcy for medical bills is debt discharge. Most people who file for Chapter 7 will have the right to discharge most or all of their debts. The amount of medical debt which can be discharged in Chapter 7 bankruptcy is not specified.

This issue is not only stressful for the bankrupt’s but also for hospitals and physicians who are dealing with these cases and they might cause a medical malpractice stress.

How to File for Bankruptcy

Those who want to file for bankruptcy will first need to come up with a complete financial record that includes their expenses, income, debts, and assets. They will also need to consult with a credit counseling agent who has been approved to guide them. The court requires people considering bankruptcy to do this within 180 days of filing to help determine whether they have exhausted all their financial resources.

To find a credit counseling agency approved by the U.S Trustee’s office in your area, visit justice.gov/ust, click “Consumer Information” and then click “Credit Counseling & Debtor Education.”

It’s possible, though, that you can avoid that step and achieve one-stop shopping by selecting your bankruptcy attorney before you do anything else. Your attorney can most likely give you financial record forms that will spell out what you need to include, and may also be able to recommend a credit counseling agency.

The good news is that, wherever you are, you should always be able to find a qualified lawyer in this niche who can simplify the filing process for you.

For patients with cancer, there may be opportunities to get this legal help at a discount or for free.

One resource for finding that help is the National Cancer Legal Services Network, at nclsn.org. In addition, Know Cancer, an online community that provides social and professional support to people affected by the disease, offers information about free or discounted legal help online at knowcancer.com/cancer-lawyers. Your local bar association may offer you a short, discounted discussion with a lawyer, and many communities or countries have legal aid societies that can offer help to those without a lot of financial resources. Lawhelp.org also may direct you to free or discounted legal advice.

In many cases, private local law firms will also be willing to offer you their services at a discounted rate — or even for free.

Legal Aid Legal aid provides people who can’t afford a legal representation and give them permission to access the court system. Private companies of lawyers also provide legal aid for individuals. Patients can approach a Law Centre if one exists in their area or contact their local Citizens Advice Centre. There are also a lot of organizations and firms that provide them with necessary information about Legal Aid.

Having a solid policy and process in place for regular debt collection will keep bankruptcy filings from having a major impact on your practice. However, when bankruptcy does occur and you receive notice of filing, all collection attempts on bills prior to the filing date must stop. Informing your collection agency of the notice is the next step for patients already in collections.

It’s important for you to rebuild your credit score after bankruptcy, of course, it’s never a good idea to make a hasty decision to file for business bankruptcy—it will stay on your credit history for 7-10 years. Be sure to explore all your options before settling on what to do with your business in the near future. Best thing to do after dealing with bankruptcy is to rebuild your credit score. One of the best ways to do this is with a secured credit card. This is where you go to a local bank or credit union and give it some amount of money to hold.

About the Author

Rilind Elezaj is an experienced a Digital Marketing Specialist with a demonstrated history of working in the marketing and advertising industry. Rilind possesses a strong entrepreneurial mindset and has devoted his career to enhancing the sphere of digital marketing. In his methodological approach, Rilind integrates web development and other digital marketing solutions to create hybrid strategies that bring the best results.

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In this article, Shreya Mohanty pursuing BBA LLB discusses how to Manage risks in outsourcing of financial services by banks.

Introduction

Recently a new trend has emerged in the operation of banks all over the world. Banks are using the outsourcing method to third parties who may be unrelated or member of the group. The main reasons for outsourcing are:

• Reduces cost
• Access to specialist expertise
• Achieve strategic objectives of the banks

Outsourcing along with these advantages also brings many risks such as:

1. Strategic Risk: The outsourcing providers or the third parties may not know the overall strategic goals of the entity for which it is working.
2. Reputation Risk: If the third party commits any mistakes or perform poorly then the reputation of the regulated entity will be at risk.
3. Compliance Risk: If the service provider do not comply with the privacy law or consumer and prudential laws.
4. Operational Risk: This means there may be technology failure on the part of the service provider or they may create any fraud or error which may cause loss to the customers and bank both.
5. Strategy Risk: If the bank is relying upon only one company or there is a loss of relevant and important skills within the firms and companies, then this may lead to strategic risk.

Some other risks are counterparty risks, access risks, contractual risks, etc.

What are Outsourcing Activities?

Outsourcing may be defined as a bank’s use of third party (either an affiliated entity within a corporate group or an entity that is external to the corporate group or an entity that is external to the corporate group) to perform activities on a continuing basis that would normally be undertaken by the bank itself, now or in the future.

In simple language, outsourcing is a process in which a company or any bank delegates its powers to a third company or party which manages entire business process of the parent company like finance, accounts, customer support, etc.

Examples of Outsourcing Activities

Tata Business Support Service (TBSS) is a service provider or a third party to the Tata Telecommunications i.e. TATA DOCOMO. Tata Docomo has outsourced its customer support service to TBSS.

P&G has outsourced some Research and Development (R&D) activities which helped the parent company P&G in boosting its innovation productivity by 60% and generated its revenue more than $10 billion. Today more than ½ of the P&G products comes from outsourcing and external collaboration with other companies and firms.

Hindustan Unilever Ltd. In 2005 when planning to merge all his company’s unit into one unit, asked an external/ third party to develop a ERP system as Unilever was not expert in IT solutions.

ACER Company outsourced everything it had like manufacturing.

Recently State Bank of India has published a notification asking for companies for outsourcing its Audit and Accounts. This explains that banking companies have also entered the outsourcing business.

Legal Framework for Outsourcing Activities by Banks

Since many banks have entered into outsourcing, the Reserve Bank of India have released a notification dated November 3, 2006 (https://rbi.org.in/scripts/NotificationUser.aspx?Id=3148&Mode=0)  which states various guidelines that has to be followed by banks:  

1. 1. The core management functions like corporate planning, management and control and decision making functions like sanction of loans, compliance with KYC forms, etc. cannot be outsourced by banks.
   2. RBI will review and check the implementation of these guidelines by the banks and insurance companies.
   3. Bank Obligations: RBI has made a point that bank shall be liable for any outsourced activities and its Board and Senior Management will be responsible for the outsourced activity. Banks will also be liable for the actions of the external party to whom the bank has outsourced (i.e. the service provider). Banks has the ultimate control on the outsourced activities.
   4. It is essential for the bank to work for the bank to work within all relevant laws, guidelines, regulations and conditions of approval, licensing or registration.
   5. Customer Rights: The rights of the customer should not be affected by outsourcing arrangements. Banks have the duty to reveal the third party agreements to the customers and they should also reveal the role of the third party service providers and what are their obligations towards the customers.
   6. The third parties, whether located in India or outside India, should not interfere in the bank’s management of its activities and RBI’s duty to check over the bank’s functions.
   7. RBI has also asked the banks, in these guidelines, to create and start a robust grievance redressal mechanism and it should not be compromised in any manner.
   8. After compliance of these guidelines, banks have to notify the RBI if there is any outsourcing activities or if they are planning to start outsourcing activities.
   9. If the outsourcing is outside India, then prior permission has to be taken from the RBI.
   10. Any bank which is planning to outsource its activities should first make an outsourcing policy and then it should be approved by the bank’s Board and Senior Management.

Role of the Board and Senior Management

1. They should check whether there is any risk in the outsourcing and they can add any obligations which they think fit for the benefit of the bank.They should review the outsourcing strategies.
2. They have right and duty to select the area of function of the bank which has to be outsourced.
3. The banks have to create a Redressal of Grievance Machinery where the customers can directly contact the bank if they have any grievances or complaints. The bank, after the creation of the Redressal, has to make publicity of the same through social platforms.

Difference between Outsourcing by Banks and Outsourcing by NBFCs

What is an NBFC?

A Non-Banking Financial Company (NBFC) is a company registered with the Companies Act, 1965/2013 of India, engaged in the business of loans and advances, acquisition of shares, stock, bond sire-purchase, insurance business, or chit business. It does not include any institution whose principal business is that includes agricultural or industrial activity; or the sale, purchase or construction of immovable property.

Difference between a Bank and an NBFC

There are in total 3 differences between a bank and a NBFC. They are: –

1. An NBFC does not have the right to accept a demand deposit but a bank can accept the same.
2. An NBFC cannot issue cheques to the customers, its main duty is to provide loans to the customers, but a bank can issue cheques.
3. Customers of NBFCs do not get the deposit insurance facility of DICGC, but this not the situation in case of banks.

Outsourcing by NBFCs: How is it different from that of the banks?

RBI on November 9, 2017 (https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11160) had issued few Directions for control of Outsourcing of financial services by NBFCs.

The object of RBI issuing such notification is:

• protection of interests of the customers of NBFC
• The RBI is trying to ensure that the service provider provides such quality of work as a NBFC would give.

The directions and guidelines by RBI are:

1. As bank is not allowed to outsource core management, similar is in the case of NBFC but the difference is that NBFC is not allowed to outsource the Internal Audits.
2. Outsourcing by NBFCs should be of financial services and not of technology related issues and issues not related to financial services.
3. RBI has issued some guidelines regarding the duty of the service provider. They are: –
   • The service provider should not interfere in the management of the NBFC.
   • The service provider shall carry due diligence of its employees.
   • The service provider should not mix the documents of different NBFCs and should not disclose it to any other person.
   • If the service provider makes any breach of the contract or agreement they have to inform about the same to the NBFC.
   • When the outsourcing agreement comes to an end it is the responsibility of the service provider to inform the public that it is no more a service provider to the NBFC.
4. NBFC has the duty to give training to the service provider.
5. The outsourcing agreement between the NBFC and the third party must be flexible at the option of the NBFC so that NBFC can control on the outsourced activities and it can intervene with appropriate measures for legal and regulatory work.
6. The service provider must take prior consent from the NBFC if it wishes to subcontract the outsourced activities.
7. The service provider cannot be a party who is related to the parent company. For example a company who is owned by any one of the director or employee of the NBFC.

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Conclusion

The Outsourcing of activities of financial service by the banks and the NBFCs is almost similar. RBI has given similar guidelines for both but there are few changes for the NBFCs. While outsourcing, banks and NBFCs must follow these guidelines and directions. RBI has also decided to keep a check on these outsourcing activities so that the customers don’t get affected and their confidentiality is properly maintained.

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This article is written by Anirudh Singh.

Section 10 of “Insolvency and Bankruptcy Code, 2016” (Hereinafter referred as “IBC”) gives power to a corporate applicant to file a suo moto application for commencing corporate insolvency resolution process with the Adjudicating Authority. Prior to 6^th June 2018, no provisions under the IBC or Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 made it compulsory for the Corporate Debtor to have the validation of shareholders before initiating the application process for Insolvency.

However, Form-6, which is the requisite form for application by Corporate Applicant for commencing insolvency, contains instructions of the attachments to be made along with the form and Annexure-VII. These instructions mandate the attachment of a document which records the authority of the Corporate Applicant to make such application. As per Annexure VII,

“A copy of:

(a) relevant  extract  of  any  constitutional  document  or shareholders’  agreement  that  records  the authority of the corporate applicant to make this application, where the corporate applicant is a member or partner of the corporate debtor; or

(b) relevant extract of an employment agreement, constitutional document or fillings made to the Registrar  of  Companies  confirming  the  authority  of the  corporate  applicant  to  make  this application,  where  the  corporate  applicant  is  an  individual  in  charge  of  managing  the operations  and  resources  of  the  corporate  debtor  or  has  control  and  supervision  over  the financial affairs of the corporate debtor.”

Although the instructions given in Form-6 stipulates the attachment of document which records the Authority of the Corporate Debtor to make such application, there was no manifest requirement of taking the authorization of the shareholders before initiating the process of Insolvency, and therefore, in some cases it seemed that such applications were filed on behalf of Corporate Debtor without shareholder’s authorization.

Relevant Provisions under Companies Act, 2013

Under Companies Act, 2013, the approval of shareholders was obtained through special resolution passed for major decisions of company, before the commencement of IBC. For example-

1. The provision of winding up of the Company as per Section 271(1)(a) of Companies Act, 2013.
2. The amalgamation procedure of a sick company with any other company, under Section 262(2).
3. The approval of arrangement by liquidator, as per Section 319.

Owing to the enactment of the IBC such rights of the shareholders have taken a back seat. Though it is evident that the beginning of CIRP process may lead to amalgamation, merger or liquidation of the Company, the shareholders who were given rights of validating or invalidating major decisions of the Company before the introduction of IBC, have been dispossessed of their powers after the enactment of IBC, which is a contentious issue.

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The “Report of the Insolvency Law Committee”

The Insolvency Law Committee, which was set up on 16^th November 2016, observed that a need for approval by shareholders of the Corporate Debtor may be important as CIRP is a momentous event for a Corporate Debtor which may also lead to its liquidation.

The Committee noted that “in order to prevent misuse of section 10 of the Code, which permits initiation of CIRP by Corporate Applicant, it has been recommended to provide for the requirement of special resolution passed by the shareholders of the Corporate debtor or resolution passed by at least three-fourth of the total number of partners of the corporate debtor as the case may be….”

The Committee further recommended that “The Committee felt that the shareholders or partners, as the case may be, must be given the power to approve initiation of CIRP by a corporate applicant and a provision mandating approval by them may be inserted. Since commencement of CIRP is a major decision for the corporate debtor and may have a huge impact on its functioning or even lead to its liquidation, a special resolution or a resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, may be provided in this regard. Thus, the Committee recommended that section 10 of the Code may be suitably amended to provide for the requirement to obtain an approval of shareholders by special resolution or an approval of at least three-fourth of the total number of partners, as the case may be, as a precondition for filing for CIRP.”

The Ordinance of 6 June 2018

On the advice of “Insolvency Law Committee”, an amendment was bought in Section 10 of the Code. Now Corporate Debtor would compulsorily necessitate a special resolution from the shareholders of the company to initiate insolvency resolution under the Code.

The amended Section 10(3) is as follows:

(3) “The corporate applicant shall, along with the application, furnish—

(a) the information relating to its books of account and such other documents for such period as may be specified;

(b) the information relating to the resolution professional proposed to be appointed as an interim resolution professional; and

(c) the special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of the corporate debtor, as the case may be, approving filing of the application.”

Approval of Resolution plans under Section 30 & 31 of the IBC: Clarification by the Ministry of Corporate Affairs (MCA)

The Ministry of Corporate Affairs (MCA), via the General Circular Number IBC/01/2017 on 25^th October had clarified that once the resolution plan is sanctioned by the Adjudicating Authority, no further approval of the resolution plan is needed from the members of Corporate Debtor.

There was a clarification needed as to what the resolution plan may consist of which necessitates the approval of shareholders under the Companies Act, 2013 (For example, in case of the reduction of share capital or further issue of shares- The consent of shareholders needs to be taken). Even if the consent of members is required, it is pertinent to mention that on which the stage such consent needs to be taken. It was clarified by the MCA that approval of members is not needed either before authorization of the resolution plan by COC/NCLT or thereafter, i.e, while its implementation.

Before the commencement of IBC, 2016, Companies Act needed the consent of shareholders in major decisions of the company. However, the enactment of the Code tinkered away the legal requirements under the previous Act and no power was given to the shareholders to protect their interests or consent in the instance of initiation of insolvency proceedings of the company. In the case of listed companies which comprises of thousands of shareholders, significant investments have been made by the said shareholders, implying the substantial role they play in the decision making of the company. All of a sudden, the inherent rights of these members are taken away and they cannot stage their opinion in such a major decision of the company. Rights of large number of people are affected and no provision was made for fulfilling the interest of such large group.

Final Position

Owing to the recommendation made by the Insolvency Law Committee, an amendment is made in IBC which means that the approval of shareholders is mandatory for initiating CIRP process by corporate debtor. After the ordinance dated 6 June 2018, the shareholders of the companies will have the power to decide that whether the company should go for insolvency or not. However, such power cannot be availed by the shareholders of the company which initiated insolvency process before the date of ordinance.

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This article is written by Team LegalWiz.

A trademark helps in distinguishing different goods and services, by creating an identity that makes the brand stand out in the market. If it is not secured, it would lose its distinct feature and it won’t be able to create a reputation in the market. Trademark opposition is a stage where a third party can stop an individual or a company from obtaining registration of a trademark that is not distinct or is already being used in the market. This is to avoid any confusion among the consumers or users regarding the brand or the company, they are availing services or good form. It prevents dilution of the brand value of already existing trademarks or well-known marks and also secures their exclusivity. Trademark opposition and trademark objection are two different stages and there is always confusion among masses about them. This article would bring some clarity between the two and would explain the concept of trademark opposition in brief.

Objection vs. Opposition

TM Objection

A trademark before getting registered goes through many stages that check its registrability. One of the initial stages of refusal is trademark objection, which is instituted by the Trademark Examiner from the Registry. An objection in the most cases can be overcome by proper representation before the registrar.

Some common grounds for objection are:

1. Lack of distinctiveness (Section 9),
2. Similarity with pending or registered marks (Section 11),
3. Usage of geographical names,
4. International proprietary names,
5. Offensive or obscene words as a part of or as a trademark

TM Opposition

Trademark Opposition is instituted by a third party after the application is accepted by the Trademark Registry. This is a very important and critical stage in the trademark registration procedure. After the trademark fulfils all the initial requirements i.e. the distinctiveness factor and has got an approval from the registry regarding its registrability, it is finally advertised in the Trademarks journal for inviting any third-party opposition. The main reason behind this is to give an opportunity to the common public to raise an opposition against the registration if they believe the trademark to be deceptively or phonetically similar to their owner other existing marks.

Who can file an opposition?

Any person may give a Notice of Opposition irrespective of the fact of his commercial or personal interest. The person need not be an owner of a prior registered trademark. He can be a customer, a purchaser or member of the public likely to use the goods. The question of bona fides of the opponent does not arise in case of filing an opposition. People are permitted to oppose the TM within a period of three months from the date of its publication in Trademark journal, which can then be extended to a maximum one more month.

What are the Grounds of Opposition?

A pending trademark application may be opposed on the following grounds:

• The mark is a generic term for the associated wares or services (in any language);
• The mark is primarily merely a surname;
• The mark is confusing with another trademark, official mark, an Olympic mark or a geographical indication registered in India;
• The trademark is prohibited under the Emblem and Names Act, 1950;
• The mark is scandalous, obscene or immoral;
• The mark is customary in the current language or in the established practices of business;
• The mark is contrary to the law or is prevented by law;
• The mark contains matters that are likely to hurt the religious feelings of any class or section of people;
• Another party had prior use of the mark or a confusingly similar mark in India;
• The applicant used the mark only as a licensee of another party;
• The mark is devoid of distinctive character;
• The mark is descriptive in nature;
• Application for the trademark is made with bad faith;
• The trademark is likely to deceive the public or cause confusion.

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Essentials for filing an Opposition

The trademark opposition is filed through form TM-O. The concerned party that files the

opposition needs to submit required documents along with information of the application being opposed.

The required details and documents differ based on the ground of opposition. Let’s have a look over the ground of opposition and associated details.

Prior Registration

If the opposition is based on the previously registered trademark, the opponent needs to mention the details of such TM with its status, application number and priority date.

Well-Known Marks

If the opposition is based on already existing well-known marks or a mark having a reputation in the market, any document that can act as an evidence of such a mark and an indication of the country or countries in which the earlier mark is recognized to be well known should be mentioned. Alternatively, the proof that the mark is registered or applied for can be presented.

Licensee

In situations where the opposition is filed by a licensee not being a registered user, the name of the licensee and his address and an indication that he has been authorized to enter the opposition may be given.

Foreigner

In situations where the opposing party is a foreigner, having no place of business in India, the name of the opponents and his address for service in India is required.

Conclusion

Creating and maintaining a brand is a big responsibility and huge funds may be invested. Hence, an application must pass through multiple checks and scrutiny before registration to prove their distinctiveness and validity.

Hence, Trademark opposition is the essential and critical stage in the registration process. It is one of the most effective remedies to protect your trademark and secure your brand. As the limitation period play a significant role in awarding the remedy. The registered proprietors/ prior users are required to be vigilant in securing their marks by initiating an appropriate proceeding at the right time.

About LegalWiz.in

LegalWiz.in is leading online legal service provider committed for offering simplified and hassle-free solutions to businesses and corporates at across India. From company registration to trademark protection, we make managing and protecting the business simpler. LegalWiz.in is one step solution for all businesses.

LegalWiz.in can help you with filing Trademark Opposition in India online at an affordable cost. If you are seeking assistance from experts to register your mark or have any other concerns regarding intellectual property protection feel free to get in touch with our expert at support@legalwiz.in.

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In this article, Shivam Gupta and Mayank Ratnaparkhe, both pursuing B.A.LL.B (4th Year) from Rajiv Gandhi National University of Law discusses the Compliance Requirement under Companies (Significant Beneficial Owners) Rules, 2018.

Section 90 of the Companies Act, 2013 (hereinafter “Act”) which relates to significant beneficial ownership has gained much relevance since the notification of Companies (Significant Beneficial Ownership) Rules, 2018 (hereinafter “SBO Rules”) on 13th June 2018. According to Rule 3(1) of the SBO Rules the last date for filing a declaration by every Significant Beneficial Owner (hereinafter “SBO”) is 90 days from commencement of SBO Rules which makes the due date as 13th September 2018. This article focuses on a brief introduction to the concept of SBO, the intricacies involved while identifying the SBO in different structures of ownership and the legal compliances that an SBO and the company are required to abide.

INTRODUCTION

According to Section 90(1) of the Act

Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five percent or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2, over the company…….

Reading the abovementioned provision of the Act along with Rule 2(1)(e) of the SBO Rules clarifies that an SBO is an individual who is holding ultimate beneficial interest of not less than 10 percent in a company but whose name is not entered in the register of the members of the company as holder of such shares.

Hence, the concept of SBO revolves around five broad heads which are discussed under.

Every SBO is an individual

Section 89(1) of the Act explains that every person (including non-natural persons) who holds shares in a company but does not hold a beneficial interest in such shares, shall make a declaration to the company specifying the particulars of that person who holds such beneficial interest. Whereas Section 90(1) of the Act states that it is the obligation of every individual who holds beneficial interest in the company to make a declaration regarding such interest to the company. Therefore the basic line of difference between these two provisions is that Section 89 provides that registered owner of shares shall declare to the company regarding the beneficial interest of such other person whereas Section 90 stresses upon an individual’s intimation to the company regarding its beneficial interest. Hence, the central point of every SBO will always be an individual.

A member of a company cannot be an SBO

An SBO is an individual who enjoys beneficial interest in the shares of the company but his name is not entered in the register of the members of the company as holder of such shares.

Beneficial Interest

SBO means an individual holding ultimate beneficial interest of not less than 10 percent but whose name is not entered in the register of members of company as the holder of such shares.

Significant Influence

An individual would be considered to have a significant influence over the affairs of the company when it holds not less than 20 percent of total voting power or has a participation in business decisions under an agreement.

Control

An individual would be considered to have control over the affairs of the company when it has power to appoint majority of directors or controls the management or the policy decisions.

APPLICABILITY AND NON-APPLICABILITY OF SBO RULES

The SBO Rules are applicable to companies which have shareholders other than individuals and natural persons and such shareholders hold beneficial interest as per the prescribed limits.

The SBO Rules are not applicable to the holding of shares of companies/body corporates, in case investment funds such as Mutual Funds, Alterative Investment Funds (AlFs), Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) regulated under SEBI Act.

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COMPLEXITIES INVOLVED IN IDENTIFICATION OF AN SBO

The real issue involved while identifying the SBO is whether the chain of ownership needs to be seen right up to the top or only one level above in the ownership chain. The main reason giving birth to this issue is ambiguously drafted sections of the Act and SBO Rules. So as to understand the ambit and the real intention behind the Act and the Rules it is important to refer to the recommendations of the Company Law Committee which suggested these provisions.

“Complex structures and chain of corporate vehicles are used to hide the real owner behind the transactions made using these structures. Realising this, jurisdictions world over have been putting in place mechanisms to identify the natural persons controlling the corporate entity.”

It can be concluded from the recommendations of the Company Law Committee that to determine the real owner we need to go right up to the top and not just one level up.

ILLUSTRATION – HOW TO DETERMINE AN SBO

In the above mentioned arrangement A is a company in which X Co. and Y Co. hold 25% and 75% shares respectively.

In X Co. two individuals M and N hold 50% shares each and in Y Co. three individuals P, Q and R hold 8%, 46% and 46% shares respectively. P is also the promoter of Y Co. and as per the company’s internal arrangement has the power to appoint 8 out of 10 directors.

In this arrangement tracing right up to the top we can identify that M and N are SBO’s as they have 50% stake each in X Co. The ownership structure of Y Co. is a bit more complex than that of X Co. In Y Co. Q and R are SBO’s by virtue of their respective stake holdings of 46% each while P is also an SBO as he is a promoter who by virtue of the internal arrangement has power to appoint 8 out of 10 directors and hence exercises control over the affairs of the company.

LEGAL COMPLIANCES TO BE FOLLOWED BY SBOs

There are 4 forms which are prescribed by the SBO Rules.

BEN-1

It is mandatory for every SBO to file a declaration in form BEN-1 to the company in which he holds significant beneficial ownership. As per the rules the last date for filing declaration under this form is 13th September 2018. If there is any change in significant beneficial ownership then the SBO should inform the company regarding the same within 30 days of such change. Further every individual who acquires SBO under any company after the commencement of these rules is also required to file a declaration under this form to the company under 30 days of acquiring such significant beneficial ownership.

BEN-2

It is the liability of the company to file a declaration under form BEN-2 with the registrar in respect of the declaration the company received by the SBO under form BEN-1 within 30 days from the date of receipt of such declaration.

BEN-3

It is the obligation of the company to maintain the register of SBO’s under form BEN-3. This register shall be open for public inspection during business hour on every working day on payment of such fee as may be specified by the company but not exceeding Rs. 50 for each inspection.

BEN-4

The company can give notice to the individuals which they apprehend to be the SBO’s to provide the company with required information under form BEN-4.

CONCLUSION

The main intention behind the enactment of SBO Rules is the prevention of money laundering and terrorist activities. This provision will lead to the identification of the individuals whose beneficial interest is involved in the company. While the final rules and forms seem simple and easy to understand, there are some issues with the vague language used in the Act and the SBO Rules which creates divergent views. The real test will be for the companies to ensure the fulfilment of legal compliances. It will be interesting to witness how the companies implement the provisions of the final rules. Further, with the lowered threshold limit for determining the ownership, the compliance burden of the companies will increase drastically.

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