This article has been written by  T Girish Akhil currently pursuing my MBA from IIT Delhi

A brief history of Trade

The process of transferring goods and services among individuals or entities, often for the exchange of money is known as trade. In ancient times, the barter system used to prevail where goods and services were exchanged without the use of money. Later on, the barter system was replaced through a common exchange of medium known as money, resulted in promoting trade. Trade routes were established connecting different parts of the world, and the transfer of different goods and services took place. In this process, commerce developed converting wealth into capital, developed banking systems where money was transferred across boundaries. Sooner, markets became part of town life and were regulated by authorities.

Today, International trade has evolved where goods, services, and capital are exchanged across international borders and territories. Organizations such as the World Trade Organization are formed towards the facilitation and growth of trade internationally. The key characteristics of International Trade are exports and Imports as they expose consumers and countries to various markets and new products leading to globalization. 

Indian Trade

The domestic production of a country reflects on its exports and imports. As India was endowed with labor and land, it remained better off in the production of labor-intensive commodities as capital was a scarce factor. Indian foreign trade gained significance during the first half of the 20th century as crops such as oilseeds, cotton, jute, and tea were largely exported with the rise in their production. Prior to independence, India’s exports significantly comprised of raw materials and plantation crops, while imports comprised mainly of consumer goods and other manufactures.

Indian Trade after Independence

After Independence, exports composed mainly of agricultural products and raw manufactures like iron ore. The Second Five Year plan laid a lot of its emphasis on the development of industries, mining, and transportation sectors. Export duties on a lot of products were reduced and special licenses for the importing of raw materials were granted to a number of commodities based on export performances. The conquest for new markets continued and several agreements are designed to increase trade with several East European countries. As Imports outweighed exports, capital goods are listed into restricted category and the OGL (Open General License) categories. Import licenses were made mandatory for restricted capital goods. Imports were permitted only if it is termed mandatory by the concerned departments. Many export incentives were provided and imports were tied to exports. The export growth was in the vicinity of around 1.8 per cent compounded annually. The export growth was in the vicinity of around 1.8 percent compounded annually in the 1950s, 1960s. In the 1970s, India’s exports grew by 18.92 percent per annum; however, it declined sharply in the 1980s where the exports grew by 7.85 percent per annum. The imports also grew at an annual rate of 15.89 percent in the 1970s and declined marginally to 11.54 percent in the 1980s.

Indian Foreign trade reforms

In the early 1990s, the Indian economy had witnessed dramatic policy changes to make it one of the fastest-growing economies in the world. A new economic model, popularly known as LPG (Liberalization, Privatization, and Globalization) was introduced. A lot of structural reforms were made to remove rigidity and enhance International competitiveness for the long term benefits of the Indian economy. Under this policy, India has opened its trade restrictions for the private sector and approached International Banks for the developed of the country. License Raj and a large number of trade barriers were intended to be done away with liberalization. Opening up the core and financial sectors of the economy to private & foreign companies, MNC’s and foreign investors transformed India into a land of opportunities.

Indian Trade (1990s to 2010)

With the initiation of structural reforms in 1991, there has been an opening up of the service sector to private participation. Services such as construction, tourism, health, and computer-related services have been placed on the automatic approval route for Foreign Direct Investment. Telecom services have experienced liberalization during that period as fully-owned foreign firms are allowed in several segments of the telecom sector, government monopoly in long-distance telephone and internet has been eliminated. In several services, the government increased the foreign holding limits to 74 per cent from the earlier ceiling of 49 per cent. On similar lines, financial services there have witnessed some liberalization. The Insurance Regulatory Bill was ratified in 2000, permitting foreign equity participation up to 26 per cent through joint ventures and partnership. With the limit having been raised to 49 per cent, various segments of the financial sector, including mutual funds and capital market, have opened up to foreign participation. Since 2000, hospital segment has been opened to 100 % FDI participation on the automatic trade route. More than 30 foreign firms are present in the healthcare sector through various kinds of subsidiaries, technology, training, and joint ventures. Similarly, in the construction sector, the government has permitted 100 per cent FDI through automatic route in civil works. The annual percentage change in increase of exports was at around 23% from 1980-90s to 1990-2000s. Exports have increased to 7-10% of the GDP in 1990-200s as compared to 3-6% in 1980-90s. Trade balance has also increased after the liberalization period. 

Composition of Exports & Imports (Sector wise)

Before independence and during the initial years of planning, India’s major exports were tea, jute, cotton, textiles. Capital goods & other engineering items, chemical, leather, ready-made garments, handicrafts, etc., entered the export list. Similarly, there has been a shift in India’s import trade from primary products to capital goods and other intermediate manufacturers. Previously, India’s major imports consisted of food grains, cotton, and jute etc., but after that, the trend has changed; now the import of primary fertilizers, iron & steel, nonferrous metals & other industrial inputs has increased. The Indian service sector has grown remarkably & contributed a major share to the GDP of a nation. The share of India in world exports of services increased from 0.6 per cent in 1990 to 1.2 per cent in 2001 and went further up to 2.8 per cent in 2008, while during the same period, its share in global exports rose from 0.5 per cent in 1990 to 0.7 percent in 2001 and to 1.1 per cent in 2008. Services accounted for 20 percent of India’s exports in 1990 and in 2008 it has accelerated to 59.2 percent.

Indian trade deficit over the years

Reasons for India’s Trade Deficit

The factors that are responsible for India’s trade deficit are

1. Foreign reserves

Foreign exchange reserves of a country are the foreign currencies held by its central bank. There are several reasons why banks hold foreign reserves. One of the most important reasons is to manage their currencies’ values. Generally, exporters of a country deposit foreign currency into local banks. Through these local banks, they transfer the currency to their central bank. Then exporters are paid by their trading partners in dollars, euros, or other currencies. The exporters exchange these foreign currencies for the local currency which in turn is used it to pay their workers and local suppliers.

 With rebounding oil prices and India’s unrelenting demand for it increases oil imports and thus widen its current account deficit. This widening deficit results in a weakening rupee, as more imports mean India should buy more foreign currencies to meet its needs. This leads to India’s trade deficit. Foreign reserves are also required to make sure a country meets its external obligations. These obligations include sovereign and commercial debts, and financing imports. India’s foreign reserves stands at $ 412.9 billion for 2018-19.

2. Natural disasters/calamities:

Natural Disasters such as Floods, earthquakes temporarily suspend local exporters’ ability to produce and export goods which cuts off their supply of foreign currency to pay for the imports. International traders can insure themselves to a certain degree against the consequences of natural disasters.

3. Risks involved in businesses due to changes in social, economic, political scenarios:

Social and economic changes such as skilled labor force, productivity create an impact on the overall exports and imports of a country. 

Inflation, if rampant in a country, the cost to produce a unit of a product can be higher than the price with lower inflation. It affects exports, trade balance. Demand for particular products or services are an essential component of international trade. Policies that restrict imports or exports with subsidies change the relative costs of those goods making it more/less attractive to imports/exports. For example, agricultural subsidies reduce the cost of agricultural activities encouraging production for exports.

Political scenarios, too can affect the exports and imports. Nations having restrictive trade policies like high import tariffs, duties may have larger trade deficits when compared to countries with open trade policies, as they may be shut out of export.

4. Loss/damaged goods during transit: 

Goods in transit can be lost or damaged by theft, accidents, or natural disasters. Both export and import goods should have insurance which covers the goods from the manufacturer’s factory gate to the time they reach retailers/buyers. Generally, exporters pass along insurance costs to their buyers. Importers in the countries with regulated insurance industries will be at an advantage as they can negotiate with companies for cheaper insurance rates and can pursue transparent claims processes after any losses.

5. Ease of Doing Business:

The World Bank’s Doing Business reports have become a vital tool and a yardstick for determining business environment reforms by providing quantitative indicators on regulations affecting various areas of a business life. World Bank’s Doing Business indicators were used as the representation of business regulations. India currently stands at 63rd position globally in the latest doing business rankings released by World Bank. Ease of doing business attracts foreign investments, contributes to Make in India program which in turn increases exports. India has a long way to improve its Ease of doing business rankings as it is one of the critical factors to improve upon our exports.

Opportunities to reduce India’s Trade Deficit

1. Trade Negotiations: The government needs to facilitate the negotiations with major economies like the US, EU, China, and Japan, to lift trade restrictions on Indian exports into these countries. A comprehensive approach to trade policy and regulatory practices is critical to the success of an export strategy. If different government departments look after trade-related policies in isolation, it is difficult to implement and develop a coherent policy framework to support their export strategy as it bridges government departments, public and private sectors. The result is will be an overarching set of prioritized objectives prepared holistically through bringing together all relevant stakeholders.

2. Creating Foreign Offices: Encouraging importing countries (primarily USA, EU, Japan) to set up offices in India for the certification of export consignments. Trade Promotion Organizations facilitates local companies to access global markets through programs such as trade shows, buyer-seller meet, exchanging trade missions and offering physical infrastructure for conducting trade events. Trade Promotion Organizations(TPOs) should engage in knowledge-based exercises such as conducting market surveys, sectoral studies, seminars and conferences to generate awareness in foreign countries. In most countries, TPOs provide customized fee-based services such as identifying clients in foreign markets, export counselling, courses on international trade, etc. In the majority of the countries, TPOs function under the Ministry of Commerce of the national government to administer export promotion schemes of their respective government, such as providing export subsidies, quality certification programs, capacity building, etc. There are at least 37 official TPOs in India besides various national and regional industry chambers.

Government of India should open representative offices of India’s Trade Promotion Organization (TPO) in foreign countries because of the following reasons:

1. Bolstering India’s share in world exports
2. To diversify exports
3. Source of Policy Inputs
4. To identify business partners for Indian companies in foreign territories
5. To attract Foreign Direct Investment

3. Issuing Quality Certifications: The Gov. of India established quality certification authority Agricultural and Processed Food Products Export Development Authority (APEDA). APEDA already certifies & supports the cost of quality certification programs such as Eurepgap and HACCP for grapes and peanuts. There is a need for more food items to be included in this scheme.

4. Indigenous Labs: Gov. of India should encourage food testing laboratories in India to obtain accreditation from international agencies. Given the high cost of international accreditation, the Government can incentivize laboratories by partly-funding these costs. The testing protocols by the laboratories and the tolerance levels followed by importing countries and the residue levels in the food products are some of the issues on which convergence of efforts is required.  The Department of Commerce, as part of the Agriculture Export Policy, proposes to have a single portal which provides the facility for single accreditation of labs and stop different organizations from carrying out accreditation activities. National Accreditation Board for Testing & Calibration Laboratories will be the only lead organization for joint assessment, accreditation and penalize the defaulting laboratories in case of unreliable sampling or testing mechanism for exported products.
5. Creating Zoning systems: The government should focus on introducing certification zoning systems, for example, creating pesticide-free zones, organic production zones, and disease-free zones to facilitate high-value exports from India. Special Economic Zones (SEZs) facilitates the production of goods at a comparatively lower price for exporters aiming to be globally competitive.

There are many successful SEZs established by the Govt of India in Public and Private sectors in specific sectors like Textiles, Pharmaceutical, IT, and some being multi-sectorial. There is a need for developing Agriculture Export SEZs aimed at producing value-added agricultural commodities for certain countries, which largely depend on the import of agriculture products. 

Conclusion

Even after Liberalization, the Indian economy has not yet fully opened to international trade and FDI as compared to emerging Asian economies and China. It is characterized by a shallow integration with the world economy. It may be attributed to several factors. The belated opening-up policy and the current Ease of doing business rankings (63^rd) at least explains why India’s foreign trade lags. The barriers to trade have remained relatively high, besides, in the domestic economy, institutional obstacles (reservation policy) and structural factors (high energy costs and lack of infrastructure) have dampened the rise of competitive industries and attractiveness of FDI. 

References

Ancient Indian economy:

https://wits.worldbank.org/CountryProfile/en/IND

https://commerce.gov.in/InnerContent.aspx?Type=TradeStatisticsmenu&Id=254

https://dgft.gov.in/more/data-statistics

https://www.indiantradeportal.in/

https://quatr.us/india/ancient-indian-economy.htm

https://www.ancient.eu/image/9102/ancient-indian-maritime-trade-routes/

https://www.thebalance.com/foreign-exchange-reserves-3306258

https://economictimes.indiatimes.com/markets/stocks/news/forex-reserves-rise-by-1-19-billion-to-422-53-billion/articleshow/63546895.cms?from=mdr

https://www.thebalance.com/trade-deficit-definition-causes-effects-role-in-bop-3305898

https://www.thehindubusinessline.com/opinion/columns/c-p-chandrasekhar/are-global-oil-prices-the-culprit-for-indias-burgeoning-trade-deficit/article25873917.ece

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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This article is written by Meenal Sharma, a student of Vivekananda Institute of Professional Studies. The author, in this article, has discussed the concept of Goods and Services Tax.

Background 

The structure of indirect taxes in India up to 30-6-2017 was based on three lists in the Seventh Schedule of the Constitution of India, which came into effect on 26-1-1950. These provisions were based on the situation prevailing in 1935 and were based on the Government of India Act, 1935. Due to changes in the functioning of society, this structure had become outdated. Most of the countries have moved towards the common tax structure long ago. However, for India, GST is the tax for the twenty-first century. 

The foundation of GST in the country was laid down in the Budget Speech of 28th February 2006 by the then Finance Minister. Since then, there has been a constant endeavor for the introduction of the GST in the country whose culmination has been the introduction of the Constitution (122nd Amendment) Bill in December 2014.

Indirect taxes

The government requires funds for carrying out numerous tasks like maintenance of law and order, defense, healthcare, social services, etc. The main source from which the government obtains these funds is taxation. Justice Holmes of the US Supreme Court has rightly said that ‘tax is the price we pay for a civilised society’.

Taxes are classified into Indirect Taxes and Direct Taxes. Direct Taxes include those assessed upon income, property, business, etc. of those who pay them.  Indirect taxes are levied upon commodities before they reach consumers and are paid by those upon whom they ultimately fall, not as taxes, but as part of market price commodity.

Earlier structure of indirect taxes (up to 30.06.2017)

Article 1(1) of the Constitution of India states that India, that is Bharat, shall be a Union of States. Thus, India has a federal structure of governance, like the USA, Australia, UAE etc. i.e. Union Government and State Governments. In the presence of two authorities, the bifurcation of power is necessary between Union and State to avoid conflicts and ambiguities. Article 246(1) of the Constitution provides that the Parliament has exclusive powers to make laws with respect to any of the matters enumerated in List II (State List). 

In respect of matters enumerated in List III (termed as ’Concurrent List’), both Parliament and State Governments have the power to make laws. Major taxes covered in Union List (up to 30.06.2017) were Central Excise, Customs Duty, Income Tax, Corporation Tax, a tax on the sale of goods from one State to another (Central Sales Tax). Major taxes in the State List (up to 30.06.2017) were tax on the sale of goods within the State (VAT), tax on land and buildings, excise duty on alcoholic liquor, entertainment tax, Entry tax.

Till 30.06.2017, the structure of indirect taxes was as follows: 

• Central Excise duty on manufacture of goods, levied and collected by the Central Government.
• State Vat was levied on the sale of goods within State, levied and collected by individual State Government.
• Central Sales Tax (CST) on inter-State sale of goods i.e. sale from one State to another,  was levied by the Central Government but collected and retained by State Government at a place from where goods were dispatched outside the State.
• Service tax on services levied by Central Government.
• Entry tax on entry of goods within the State levied and collected by State Government.

Besides, there were many cesses. 

Major defects in the previous structure of indirect taxes

The major defects in the structure of indirect taxes, existing up to 30.06.2017 are as follows:

• Central Sales Tax (CST) was payable @ 2% for every movement of goods from one State to another. Even in cases of stock transfers or branch transfers, there was an incidence of tax as input service credit (set off) of input taxes was not fully available.
• In the European Union, the movement of goods from one country to another is exempt from taxation. However, that is not the case in India. Here, the movement of goods from one state to another was not tax-free. 
• There was a cascading effect of taxes, i.e. the same goods getting taxed again and again, which could not be avoided because of CST and Entry Tax. State VAT was payable on central excise element also.
• There was an absence of national market in India due to a lot of visible (CST, State VAT and Entry Tax) and invisible barriers (like various check posts).
• A huge amount of time was lost standing in long queues at check posts. Also, huge corruption is involved.
• Central Government could only impose tax on goods till the manufacturing level. State Government could not impose service tax, it was only done by the Central Government
• Over the years, the distinction between goods and services had become hazy, due to which there is overlapping of State VAT and CST on transactions like work contract, food related services, software, IPR related services, lottery, SIM cards, operating lease/ renting of goods etc.  
• Every State had its State VAT laws with different provisions, VAT rates, forms and procedures. As a result, taxable persons having business in more than one State found it extremely difficult to keep pace with the tax laws of each state. 
• Competing among States to give sales tax reliefs to attract industries, which badly affect tax revenues of State Governments. Most of the State Governments are now in debt trap.

Why was there a need for GST?

The most important question that arises here is that what is the need for GST? To understand that, we first need to observe the previous structure of indirect taxation which has been in existence. There were various taxes levied:  the Central Government levied Central Excise duty on manufacture, Service Tax on provision of services, CST on interstate sale of goods but collected by the appropriate State Government and the State Governments levied VAT on retail sales, Entry Tax on entry of goods in the State, Luxury Tax, Purchase Tax, etc. There were various apparent multiplicity of taxes which were being levied on the same supply chain.

Thus, there was cascading of taxes. Also there were certain taxes levied by the State Governments were not allowed as set off for payment of other taxes being levied by them. Further, due to the presence of numerous VAT laws there was a difference in the tax rates and tax practices, which divided the country into separate economic spheres. Due to creation of tariff and non- tariff barriers, there was a hindrance in the free flow of trade throughout the country. Furthermore, the large number of taxes created high compliance cost for the taxpayers in the form of number of returns, payments etc.

GST Council

Article 279 A in Constitution of India provides for the constitution of a GST Council. GST Council, constituted vide Notification No. SO 2957(E) dated 15.09.2016, is the Apex Constitutional Authority to decide the policies of GST. It shall make recommendations to Union and States relating to GST. The Chairman of the Council is the Union Finance Minister. Following are the members of the Council:

1. The Union Minister of State in charge of Revenue or Finance; and 
2. The minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. 

The Vice Chairperson of GST Council shall be taken with at least 75% of weighted average voting in favour of the decision. The Union Government shall have 33.33% voting power and States shall have 66.67% voting power.

What is GST?

A single tax subsuming all the previously mentioned taxes is called the Goods and Services Tax (GST). It shall be levied on the supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So basically, any tax that is presently being levied by the Central or State Government on the supply of goods or services is going to be converted into GST.

GST is a dual levy where the Central Government shall levy and collect Central GST (CGST) and the State shall levy and collect State GST (SGST) on intra-state supply of goods or services. The Centre shall also levy and collect Integrated GST (IGST) on inter-state supply of goods or services. Therefore, GST is set to integrate various taxes being levied by the Centre and the State at present and provide a platform for forging an economic union of the country.

GST shall lead to the creation of a single national market, common tax base and common tax laws for the Centre and States. Another very important feature of GST will be that input tax credit will be made available at every stage of supply for the tax paid at the earlier stage of supply. This feature would also alleviate cascading or double taxation in a major way. Moreover, it will be supported by the extensive use of Information Technology through Goods and Services Tax Network (GSTN), which will eventually lead to greater transparency in tax burden, accountability of the tax administrations of the Centre and the States and also ameliorate compliance levels at reduced cost of compliance for taxpayers. 

Overall structure of Goods and Services Tax

1. Goods and Services Tax (GST) is applicable on ‘supply’ of goods or services or both, in India w.e.f. 01.07.2017 (including Jammu and Kashmir w.e.f. 08.07.2017). Area up to 200 nautical miles inside sea is ‘India’ for GST. 
2. For supplies within a State or Union Territory-
   1. Central GST (CGST) will be payable to Central Government; and
   2. State GST (SGST) or Union Territory GST (UTGST) will be payable to State Government or Union Territory (as applicable). Area up to 12 nautical miles inside sea is part of State or Union territory which is nearest.
3. For inter-State supplies, Integrated tax (IGST) will be payable to Central Government. IGST is payable if supply is beyond 12 nautical miles but up to 200 nautical miles. 
4. GST Compensation Cess shall be payable on tobacco products, pan masala, coal, aerated waters, motor cars etc. 
5. Basic customs duty, Education Cess of customs and Secondary and Higher Education Cess of Customs, IGST and GST Compensation Cess on goods where Compensation Cess is applicable shall be payable on imports of goods. 
6. Distinction between goods and services will be mostly eliminated, this will eliminate the problem of dual taxation presently faced by various industries.
7. GST is based on VAT concept of allowing input tax credit of tax paid on inputs, input services and capital goods, for payment of output tax.
8. GST is a consumption-based tax i.e. tax will be payable in the State where goods or services are finally consumed.
9. The rates of IGST-Nil, 0.1%, 0.25%, 3%, 5%, 12%, 18% and 28%. In case of supply within State, CGST will be 50% of IGST Rates and SGST/UTGST for supply within the State or Union Territory will be 50% of IGST rates.
10. Though GST is payable to both Central Government and State Government/Union Territory Administration, the control will be exercised either by State Government/Union Territory Authorities or Central Government Authorities to avoid dual control as well as disputes amongst them.
11. Petroleum products, i.e. petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel  are out of GST at present and may be brought under GST later. 
12. Tobacco products will be subject to excise duty plus GST. 
13. Alcoholic liquor will be subject to State duty. This product is out of GST.
14. GST Council is Apex Constitutional body which will determine policies of GST.

Rates of GST 

The IGST and CGST Acts do not indicate GST rate structure. 

According to section 9 of CGST Act, rate of CGST will be as notified by Central/ State Government. The rate shall not exceed 20%. Same provisions will be in SGST Act of each State. The total GST rate for inter-State supplies will not exceed 40% [20% CGST and 20% SGST].

According to section 5 of IGST Act, rate of IGST will be as notified by the Central Government. The rate shall not exceed 40%. 

CGST and IGST rates will be common all over India. SGST rates are also expected to be common all-over India. The State Governments have sovereign powers to levy GST as a result of which different States may have different rates.

Broadly the IGST rates are as follows [for supply within State/Union Territory, 50% of IGST rate is CGST rate and 50% of IGST rate is SGST/UTGST rate] [as amended up to 15.11.2017].

NIL: Fresh meat, fish, chicken, eggs, fresh milk, buttermilk, live animals, live poultry, curd, natural honey, unpacked wheat, unpacked rice, fresh fruits and vegetables, coffee beans, wheat, rye, rice, flour, besan, bread, jaggery, papad, prasad, salt, bindi, sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, pooja equipment, jute, khadi, national flag, raw silk, electrical energy, human blood, human hair, hearing aids, passenger baggage,, duty credit scrip. 

• 0.1%: Supply of goods by Domestic Tariff Area unit to Merchant Exporter who is going to export the goods supplied by DTA unit (w.e.f. 23.10.2017).
• 0.25%: Rough diamonds, rough precious or semi-precious stones falling under 7102, 7103 and 7104.
• 3%: Gold, silver and jewellery, platinum, imitation jewellery, pearl, diamonds, synthetic stone, precious stones.
• 5%: Packaged food (wheat, barley, oats, maize, rice, rye, aata, maida, jawar, corn, honey), fish, fillet, cream, skimmed milk, powder, eggs, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, cashew nuts, edible oils, sabudana, kerosene oil PDS, coal, oreos, specified medicines, stent, lifeboats, handmade safety matches, newsprint, footwear below Rs 500, sugar, cotton yarn, natural fiber, silk yarn, silk woven fabric, cotton fabrics, embroidery, readymade garments up to Rs 1000, readymade locomotives and parts, e-waste, khakra, plain chapatti or roti, unbranded namkeens, bhujia, mixture, chabena and similar edible preparations ready for consumption form, other than those put up in unit container- inserted w.e.f. 13.10.2017.
• 12%: Live horses, condensed milk, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, branded namkeens, bhujia in unit containers, ayurvedic medicines, tooth powder, tableware and kitchenware of wood, colouring books, picture books, corrugated paper, cartons, exercise books, calendars, yarn, carpets, textile fabrics, umbrella, sewing machine, table kitchen articles, knives, LED lamps, cell-phones, readymade garments above Rs 1000, agricultural machinery, permanent transfer of IPR (except software).
• 18%: Flavored refined sugar, pasta, sugar confectionery, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, mineral water, ethyl alcohol, slag, perfumes, fireworks, steel products, printed circuits, camera, speakers and monitors, biscuits, footwear Rs 500 and above, tendu leaves, artificial fibre, synthetic yarn like nylon, polyester, computers, hand tools, machinery for industrial use, machine tools, ball bearings and roller bearings, CCTV, printed circuits, spectacles, clocks, watches, permanent transfer of IPR of software, all other goods not elsewhere specified.
• 28%: Molasses, pan masala, aerated waters, tobacco products, Portland cement, paints, tyres, IC Engines, refrigerators, air conditioning machines, water heaters, washing machines, motor vehicles, motorcycles, aircrafts for personal use, revolvers, video games. [List as pruned on 15.11.2017]

GST Compensation Cess 

There shall be GST cess of 1% applicable  on small cars, 3% on mid-sized cars and 22% on luxury cars. Motorcycles above 350cc will attract 3% GST compensation cess. GST Compensation cess is also payable on aerated waters, cigarettes and pan masala.

Motor vehicles purchased prior to 01.07.2017 and sold or given on financial lease after 01.07.2017 

If motor vehicles purchased before 01.07.2017 and Cenvat credit was not availed, the tax rate is 65% of normal rate. Similarly, if such vehicle was given on financial lease, tax rate will be 65% of normal rate.

Lottery tickets

GST rate will be 12% in the case of State run lotteries and 28% in case of lotteries authorized by State and run by private persons. Tax on lottery will be collected at first stage under reverse charge. Later, there will be no GST on subsequent sale of lottery tickets. The valuation will be 100/112 or 100/128 of face value.

Exemptions 

Goods supplied for petroleum operations have been exempted.

Advantages of GST

Advantages for the government

• It will help to create a unified national market for India, thus, giving a boost to foreign investment and the “Make in India” campaign;
• It will lead to harmonization of laws, procedures and rates of tax between Centre and the States and across States;
• Improved environment for compliance as all returns are to be filed online, input credits to be verified online, encouraging more paper trail of transactions at each level of supply chain;
• Similar uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States and that between intra and inter-state sales;
• There will be increased certainty in the taxation system due to various common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services;
• Use of Information Technology will help to reduce corruption as it will decrease human interface between the taxpayer and the tax administration.
• It will boost exports and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth;
• It will help in creating more financial resources and employment which will ultimately help to eradicate poverty.

Advantages to Trade and Industry

• There will be a simpler tax regime with fewer exemptions;
• Increased ease of doing business;
• There will be simplicity and uniformity in various procedures as a result of reduction in multiplicity of taxes;
• Elimination of double taxation on certain sectors;
• There will be a reduction in compliance costs leading to lesser records and hence less use of manpower and resources for maintaining records;
• There will be a boost in the exports of Indian products in the international market due to neutralization of taxes;
• There will be an increase in consumption leading to an increase in production as a result of a decrease in the average tax burden. This will help in the growth of the industries manufacturing in India.

Advantages to Consumers

• There will be transparency in the price of commodities as a result of seamless flow of input tax credit between the manufacturer, retailer and service supplier;
• The price of commodities will be reduced in the long run due to reduction of cascading effect;
• Small retailers will either be exempted or will suffer with very low tax rates;
• Generating more employment and more financial resources, will help to eradicate poverty.

Advantages to States

• There will be an expansion in the tax base as the entire process from manufacturing till the last retail level will be taxed;
• Since the States will also have the power to tax the services, it will boost revenue and give States the access to the fastest growing sector of the economy;
• Since GST will be a consumption based tax, the consuming States will be favoured;
• The overall investment climate will be improved which is bound to benefit the States in their development;
• Since the SGST and IGST rates will be uniform, the incentive for invasion will be reduced.

Conclusion

GST is set to bring a change in the system of indirect taxation by bringing  transparent and corruption-free tax administration, removing the current shortcomings in indirect tax structure. GST is bound to be business-friendly as well as consumer-friendly. In India, it is set to drastically improve the positions of each of these stakeholders. There has been a need to improve the previous structure of indirect taxation due to various shortcomings in it like the cascading effect of taxation.  This need for change leads us to the need for GST. GST will allow India to better negotiate its terms in international trade forums. It aims at increasing the taxpayer base by bringing the small and medium enterprises and the unorganized sector under its compliance. This will the Indian markets more stable and they will be able to compete in the international market.

References

1. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”
2. Parashuram Pottery Works Co. Ltd v. ITO (1977) 106 ITR 1 (SC)
3. Union of India v. Nit dip Textile Processors P. Ltd (2012) 1 SCC 226
4. Article 1, The Indian Constitution
5. Retrieved from, http://www.gstcouncil.gov.in/about-gst
6. GST Law and Practice with Customs & FTP, Taxmann, V.S.Datey
7. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”
8. GST Law and Practice with Customs & FTP, Taxmann, V.S.Datey
9. Vide Notification No.37/2017-CT (Rate) dated 13.10.2017
10. Vide Notification No. 38/2017-IT (Rate) dated 13.10.2017
11. Vide Notification No 3/2017-CT(Rate) dated 28.06.2017 and No. 3/2017-IT (Rate) dated 28.06.2017
12. Retrieved from, ”http://www.gstcouncil.gov.in/about-gst”

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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This article is written by Karishma Ramchiary, a 4th-year student of B.A. LL.B. in Lloyd Law College, Greater Noida. This article provides the details on the rules and regulations related to road tax in India.

1.Introduction

Transportation as a means of communication is unavoidable; therefore, constructing roads and maintaining them is necessary. This is the reasoning for which road tax is charged from every vehicle which is used or kept for use on roads. Every Country or State charges road tax.

This taxation is also essential because the government in order to ensure the safety and security for all travellers and helps in connecting them to every town or cities conveniently. In india, the road network is the second largest road network, with a total length of around 4,320,000 kilometers which consists of 1000 km -Expressways, 79,243 km National Highways, 1,31,899 km State Highways and other major district and rural roads.

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1.1 Road tax in India

As per the constitutional provisions of the country, Schedule 7th List II  Entry 56 which states, “Taxes on goods and passengers carried by road or on inland waterways”. And Entry 57 which states , “Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III.” 

List III entry 35 states, “Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied.” Thus, It is evident that road tax is regulated by both State Government and Central Government. 

1.1.2 Road tax for vehicles

All vehicles either four wheelers, two wheelers or any other types of vehicles used for private and commercial purposes are levied with road tax. Road taxes are paid at the time of registration of the vehicle. Also, different states have different methods to pay road tax; it is either paid annually or all at once. Road taxes are to be paid at the Regional Transport Office (RTO).

While the initial payment of road tax of a vehicle is done by the dealer of the automobile or the showroom; however after the expiration of the initial payment it is to be done by the individual. The payment of road tax at the RTO requires certain documents such as the  registration papers and insurance paper of the vehicle, address proof, and purchase invoice. It may be done by Cash or Demand Draft.

The need to transfer a vehicle’s registration from one state to another may arise when the owner himself transfers to a new state or when he wants to sell the vehicle in another state. In the first circumstance, the owner has to cancel the original registration of the vehicle and apply for Grant of No Objection Certificate (NOC) to the RTO of the original state.

For the second circumstance, i.e, to sell it in the new state, he shall not only deregister and apply for NOC but also apply for notice of transfer of ownership of the vehicle. The further process is to submit the NOC to the RTO in the new state; pay the road tax applicable to new state and get a new vehicle registration number from the RTO.

1.1.3 State wise road tax in India

§  Road tax in Delhi

Road tax in Delhi is regulated by the Delhi Motor Vehicles Taxation Act, 1962, Amended in the year 2004. 

Levy of taxes:

Section 3 of the Act provides for payment of one time tax at the time of registration on all vehicles used or kept in use in Delhi. Any vehicle that is more than 10 years old from the date of first registration do not attract any tax. (Section 3 (b)(iii) proviso ). The vehicles to be taxed are particularly described in Schedule 1 of the Act. 

Payment of Taxes (Section 4 of the Act): 

The owner of the vehicle shall declare the payment to be paid by him as per required under Schedule 1 of the Act. The tax may be paid – i) for a year or ii) for one or more quarter  for such vehicles specified in part A of Schedule 1 and one time tax for such vehicle described in part B of Schedule 1.

Penalty for non-payment of taxes in time (Section 11 of the Act):

In case of default in making payment of tax,the tax authority will direct penalty of  a sum not exceeding the annual tax payable in respect to the concerned vehicle with the in addition to the amount of arrears. 

The payment of tax for 2 wheels and 4 wheelers (Schedule 1 Part B) are-

The way in which the ‘cost price’ is calculated –

1. In the case of motor vehicles manufactured in India the basic manufacturing cost and excise duty plus sales tax without allowing any cash or trade discount; and 
2. In the case of imported motor vehicles, the price shown in the Bill of Entry and shall be inclusive of customs duty, sales tax or any other levy, as may be applicable. 

For other details of rate of tax refer to 

1. Schedule 1 of the Delhi Motor Vehicles Taxation Act, 1962, Amended in the year 2004. 

Maharashtra Road tax

The Maharashtra Road tax is regulated by Maharashtra Motor Vehicles, 1958. The Act has been amended several times, the latest being on 2017 which was called as ‘Maharashtra Motor Vehicles Tax(Amendment) Act, 2017.’ This Act has 25 sections and 5 schedules.

The objective of the Act is to consolidate and amend the law relating to the taxation of motor vehicles in the State of Bombay (Maharashtra) and to provide for certain other matters.

The important provisions of the Act in relation to road tax in Maharashtra are discussed below:

Levy of Taxes: 

Section 3 of the Act provides for tax to be levied on all vehicles used or kept for use in the state. The rate of tax to be paid is fixed by the state government by notification in the Official Gazette but it shall not exceed the maximum rates specified in the First Schedule of the Act.

One time tax for the lifetime may be levied for the lifetime on all motorcycles and tricycles however, one time tax thrice the rate shall be levied and collected on motorcycle or tri cycle (Section 3 (1C)) used or kept for use in the State by a person not being an individual, a local authority, a public trust, a university or an educational institutions as specified in Part I and Part II of the second schedule of the Act. The maximum limit of this tax shall be rupees 20 lakhs.

Also, motor cars and omni bus shall also be taxed once for a lifetime (Section 3( 1D))and tax twice the rate shall be levied as specified in Part I and Part II of the third schedule provided further the maximum limit being 20 lakhs. One time tax shall also be levied for all goods carriages (Section 3(1E)) and all motor vehicles (including Tricycle) plying for hire or reward fitted with fare meters and used or kept for use in the State of the carriage of not more than six passengers (Section 3 (1F)). 

Section 3A of the Act provides for environmental tax to be levied on all vehicles as specified in 5th Schedule of the Act.

Payment of Taxes: 

Section 4 of the Act provides for payment of tax that is levied in advance by the registered owner or those who are in possession or control of the motor vehicle. The tax may be paid at Annual rate, Quarterly rate or More than one quarter, at multiples of the quarterly rate or For any period less than a quarter expiring on the last day of the quarter,-

(a) at the rate of one-twelfth of the annual rate of tax plus 20 percent, thereof where the period does not exceed one calendar month;

(b) at the rate of two-twelfth of the annual rate of tax plus 15 percent, thereof, where the period exceeds one calendar month but does not exceed two calendar months; and

(c) at the quarterly rate, where the period exceeds two calendar months.

In case of tax payable for one time as specified in Section 3 (1C) (1D) (1E) and (1F), shall be paid at the time of registration-

ii. Within one month from the date of expiry of the period for which the tax is paid 

iii. At the time of Registration mark is assigned to the vehicle in the State of Maharashtra.

Penalty for non-payment of the tax (Section 16):

In case of non-payment of the tax and having its possession and control shall be punished on conviction for incomplete and untrue declaration-

i)  with fine equal to the tax payable for the vehicle for two quarters;

ii) in case of previous offence under this section, penalty of fine not be less than a sum equal to the annual tax payable of the vehicle and it may be extended to a sum equal to twice the annual tax payable in respect of such vehicle, and

iii) fine shall not be less than three hundred rupees which may extended to a sum equal to the one time tax payable in case of motorcycle, tricycle, motor car or omni bus. This fine shall not be less than five hundred rupees and may extended to a sum equal to twice the one time tax payable of the vehicle if previously convicted of an offence under this section.

The 5 Schedule of the Act 

The maximum rates of the vehicles are listed in Schedule 1 of the Act.

The Second Schedule of the Act consist details in regard to the rates of those motor vehicles (specifically motor cycle and tri cycle) which requires one time tax at the time of registration (Part I); payment of one time tax in case the vehicle is already registered (Part II) and details to refund (Part III).

The Third Schedule of the Act also contains details in regard to the rate of those motor vehicles (specifically motor cars and omni buses) which requires one time tax at the time of registration (Part I); payment of one time tax in case the vehicle is already registered (Part II) and and details to refund (Part III).

The Fourth Schedule details out the amount to be paid to the local bodies by the State Government for levying or collecting tolls of motor vehicles and trailers. 

The Fifth Schedule list the rate of environment tax to be levied on Motor Vehicles in rupees.

Road tax in West Bengal

The Road Tax in West Bengal is under Section 39 of the Motor Vehicle Act, 1988 which provides for registration to be done for every vehicle driven in a public place. The road tax for the State of West Bengal is regulated both by the central government and the State Government.

We can find a brief legislative history of the promulgation of the statute relating to tax on Motor Vehicles in West Bengal in Soumitra Banerjee And Ors. vs State Of W.B. & Ors.(2004) which challenged the West Bengal Additional Tax and One-time Tax on Motor Vehicles Tax (Amendment) Act, 2003, the West Bengal Motor Vehicles Tax (Amendment) Act, 2003 and the West Bengal Additional Tax and One-time Tax on Motor Vehicles (Second Amendment) Act, 2003. 

The West Bengal Motor Vehicle Tax Act, 1979 (‘the Act’) provides the rules and regulations relating to imposition and levy of tax on motor vehicles in the State of West Bengal. 

Levy of Taxes: 

Article 3 of the Act states that all types of vehicles shall be levied tax that are used or kept for use on the public roads of the State and the State is entitled for the purpose of safeguarding the revenues of the State and to prevent evasion of tax, to enact a provision raising a presumption the vehicle is used or kept for use in the State without any further proof.

Payment of Taxes:

Taxes shall be paid for the year and in advance by the person liable to pay the tax within such period as may be determined by the Taxing Officer. In case of transport vehicle, taxes may be paid quarterly in advance, but a rebate of five per cent, shall be allowed if the tax is paid for the whole year in advance. Provided  that the Taxing Officer may allow payment of tax in respect of both transport and non-transport vehicle for any period, not exceeding six months at a time to avoid overcrowding of taxpayer during any particular period in a year. (Section 4 of the Act).

Penalty of non-payment of taxes (Section 11 of the Act):

In case of non-payment of taxes, in time, the person liability shall be paid penalty-

1. one-quarter of the tax in case the payment is made within 30 days of the expiration of the time of payment of the tax.
2. One-half of the tax in case the payment is made after 30 days but within 60 days of the expiration of the time of payment of the tax
3. Equal to the amount of tax in case the payment is made after 60 days of the expiration of the time of payment of the tax

The description of Motor Vehicles and Annual Rate of Tax is as below:

For other details with regard to rate of tax refer to 

1. The Schedule of West Bengal Motor Vehicle Tax Act, 1979 
2. Motor Vehicles, Taxes and Fees.

Road tax in Madhya Pradesh

The Road Tax in Madhya Pradesh is regulated under Section 39 of the Motor Vehicle Act, 1988 which provides for registration to be done for every vehicle driven in a public place. The road tax for the State of Madhya Pradesh is regulated both by the central government and the State Government.

The State Government regulates the road tax which is one of the most important sources of revenue by the Madhya Pradesh Karadhan Abdhiniyam, 1991. The latest Amendment done on this act was in 2006. This Act was brought with the objective to rationalize and simplify the motor vehicle tax as it unified ‘motor vehicle tax’ and ‘additional tax’ under MP Motor Vehicle Taxation Act, 1947 and ‘goods tax’ under MP Motor Vehicles (Taxation of Goods) Act.1962.

Levy of taxes:

Article 3 of the Act provides for tax to be levied every vehicle used or kept for use in the State at the rate specified in Schedule 1 and one time tax as specified in Schedule 2.

Payment of Taxes (Section 5):

The tax levied under Article 3 may be paid in advance at the choice of the owner – i) quarterly, ii) half yearly or iv) annually.

Penalty for non-payment of tax (Section 13): 

In case of non-payment of tax or default in payment of tax, a penalty at the rate of 4% of the unpaid amount of tax of each month. However, this shall not exceed twice the unpaid amount of tax.

In case of lifetime tax that is not paid, the owner shall be liable of penalty at the rate of one-tenth of the lifetime tax of each year or part in addition with the payment of tax due. This shall not exceed the lifetime tax specified in Schedule 2.

Description of motor vehicles and Rates 

 In cases of lifetime tax payment

The Cost of the vehicle is determined by the dealer and to calculate the Life Time Tax on the basis of cost of the vehicles, the owner of the vehicle shall be required to produce sale receipt issued by the dealer at the time of registration.

For more details on the rate of tax on vehicles, refer to 

1. The Schedules of the Act.

Road tax in Haryana

Along with the Central Motor Vehicle Act, 1988 (Amended in 2019), the road tax in Haryana is regulated with Haryana Motor Vehicles Act, 2016. Several Other rules that regulate motor vehicles in Haryana are Central Motor Vehicles Rules 1989,Haryana Motor Vehicle Rules 1993, Carriage by Road Act, 2007, Carriage by Road Rules 2011 and Haryana Motor Vehicles Taxation Rules, 2011.

The Haryana Motor Vehicles Act, 2016 provides for-

Levy of Taxes (Section 3)

The State Government shall levy and collect taxes on all vehicles used or kept for use in the State of Haryana, at the rate and penalty that may be specified by the State Government by notification, from time to time however this rate shall not exceed the maximum as specified in Schedule of the Act.

Payment of Taxes (Section 4):

The tax shall be paid to the licensing officer within a period of 30 days from keeping the motor vehicle in the State. In case, the payment is for a particular period , the licensing officer shall grant a licence valid throughout the State as prescribed. Also, In case of a one time tax, the payment would be recorded in the certificate of registration and no license shall be granted. 

Penalty for non-payment of taxes in time (Section 10):

When the payment of tax is unpaid in the specified time, the owner of the vehicle shall pay penalty as may be notified under section 3 of the Act. This penalty shall not exceed twice the amount of tax due in case of one time payment and in other basis, the penalty shall not exceed five times the amount of tax due for a year. 

When the owner of the vehicle fails to pay the tax due or the penalty to be paid, then he would be liable to pay simple interest on the amount of tax due and penalty, at the rate of one and a half per month from the last date of submission of the tax due or from the day when the penalty was imposed by the license officer or in case of no specified period in the order, then from the 15th day from the date of the order.

In cases of non-compliance of the provisions of this Act or any order specified under this Act and if no penalty is provided in the Act for such compliance, then penalty which shall not exceed five thousand rupees will be imposed. 

The maximum rate specified in the Schedule for Non-Transport Vehicle, Transport Vehicle, Private Vehicle and Educational Institute Vehicle is described below. The rate of other classes of motor vehicles are also described in the Schedule of the Act.

1.2  Calculation of road tax

As the road tax in India differs from each state, it is calculated on various factors which include age of the vehicle, seating capacity and weight of the vehicle. Other factors that may be taken into calculation are engine capacity, cost price of the vehicle etc. the factors taken into consideration vary from state to state.

1.2.1 Age of vehicle

Road tax to be paid depends on the age of the vehicle. The  Road Tax would differ for new and old vehicles. For example in the State of Karnataka in case of two wheelers: (Part A1 of Schedule of The Karnataka Motor Vehicles Taxation Act, 1957)

1.2.2 Seating capacity

The Road tax levied can also be determined by the seating capacity of the vehicle. For example: In the state of Bihar, Transport vehicles excluding goods carriages and motor cabs are charged additional motor vehicle tax on the basis of seating capacity (Schedule II of Bihar Motor Vehicles Taxation Act, 1994);

1.2.3  Weight of vehicle

The weight of the vehicle is also one of the basis to calculate road tax. We may again cite the example of Bihar Motor Vehicles Taxation Act, 1994 where trailers are charged tax on the basis of its weight.(Schedule II Part C (6)).

1.3  Rate of road tax

As road tax is a state level tax, the rate of road tax is imposed and determined by each state individually in their own State. Therefore, the rate of road tax vary in all states. Road tax is levied on all vehicles by the State Government, Central Government and Local Authorities.

1.3.1 Pay road tax online

Payment of road tax online can be done on the official website of the Ministry of Road Transport and Highways in case of several states (Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir,Jharkhand, Punjab, Rajasthan, Tripura, Uttar Pradesh & Uttarakhand ). For other states tax may be paid online on the website of the Transport Department of that State. Payment of Road Tax through online websites requires the vehicle registration number and the Chassis number of the vehicle and other general information of the vehicle (Vehicle Permit Type, Seating Capacity (Excluding Driver) etc. ) .The payment is to be done with the available online mode of payment (through internet banking, credit card or debit card etc.).

1.3.2 Refund of road tax paid

The owner of a vehicle may claim for road tax refund in certain circumstances when he decides to – i) transfer and move his vehicle to another state; ii) discard the vehicle which is less than 15 years. To claim refund the registration of the vehicle shall be cancelled at the RTO where the vehicle was registered. In the cancellation process, the owner shall produce the documents related to the vehicle. The refund process is slow and at times it might get stuck at some level. To know about the refund’s progress or reason for its slowdown, one may also file an RTI.

1.3.3 GST on road tax

After the introduction of GST, the State Government has increased the road tax. The report by Economic Times, ‘Higher road tax in 9 states pushes up cost of cars’ (September 17, 2019) states that nine states including Punjab, Kerala, Jammu and Kashmir and Bihar have increased road taxes and this has resulted into rise of road cost of passenger vehicle.

In The report, Maruti Suzuki chairman RC Bhargava says that the simple reduction in the GST will not help on passenger vehicles will help reduce costs and spur demand though GST is a major element that increases the cost of the car. But even if the Central government reduces the GST and the State government adds more to road tax, it would make no difference in the cost of  vehicle.

Conclusion

In the modern world, the use of motor vehicles is on the rise. India became 4 largest auto industry in the world as the sales increased to 9.5 per cent year-on-year to 4.02 million units (excluding two wheelers) in 2017. In 2018, it was the 7th largest manufacturer of commercial taxes. To own a car or a vehicle has become more of a status symbol in urban India. Taking into consideration these new developments, the State Government should consider bringing reforms and progress in the rate of road tax.

Road tax levied should be reasonable for the owner of the vehicle and not tax that is imposed haphazardly by the government.

To brace your knowledge on GST, please Click Here. 

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Rules & Regulations Related to Road Tax in India appeared first on iPleaders.

This article is written by Ramanuj Mukherjee, CEO, LawSikho.

I have been writing about habits for a while. Naturally, I have got many questions about what are the most important habits for lawyers to cultivate. I think this is a very important question. I have been studying successful lawyers for a while, through my interviews on Superlawyer, or when I interview successful lawyers on our Legal Practice Management Course on what led to their success. 

We also have a lot of such events at LawSikho office with top lawyers, clips of which interactions you can watch on the LawSikho YouTube channel here. 

I also had the benefit of guiding and observing many of my students go through various paths to eventual success in their career, as I have been in the legal education business for well over 10 years now. 

There are a few things I have observed to be almost uniform amongst the outliers – lawyers who succeeded against all odds, and succeeded big. 

What are the habits that can lead to lawyers’ growth to be inevitable and inexorable? Let me run you through them.

Learning and development

The top habit of the most successful lawyers is that of continuous learning. The best lawyers I know are like knowledge acquisition machines. They grab every chance to learn something new. 

I have seen even senior lawyers and top counsels who are so eager to learn that they do not hesitate to ask the most basic questions to someone younger than them if that would help them to learn something they do not know yet! 

I know a very senior lawyer who learned Linux and used only Linux on his computer to ensure a higher level of cybersecurity as Linux based computers are harder to hack. Imagine that level of commitment to constant growth and improvement! That is a marked distinction of a lawyer who is destined for greatness.

On the other hand, average lawyers say: but why should I learn that? There is not enough work of that nature in my town. 

Well, if you keep learning, your practice may not remain restricted to a small town? How about that?

If you want to succeed as a lawyer at the highest level, or even at the entry-level, the solution lies in learning practical skills that will help you to deliver results to your clients. 

There is no dearth of legal work, but there is a great dearth of good legal advisors who can get the job done.

If you can build a habit of dedicating at least 1 hour per day to learning about new areas of law that you are not familiar with yet, or even to go deeper in the area in which you already practice, it will start producing some wonderful results within a few months, and over a few years you will be surging ahead of all of your peers.

It is such a no brainer, and yet so few lawyers ever bother to develop this habit that it is painful to even imagine the wasted opportunity.

Learn to put your ears to the ground

I am currently in Jaipur. I was having a conversation with a young lawyer. He told me that there is not enough work in Jaipur. Barely anything to make ends meet. 

I told him I have seen an insane number of cafes, restaurants, and bars in Jaipur, far more than I see anywhere else. Do you agree that there has been a surge in the food and entertainment industry here? What are their legal needs?

Do they need licenses, compliances, tax support, trademarks, contracts with vendors, do their vendors need money recovery services when these food businesses wrap up or fail to pay up on time? 

What about real estate? I can see Jaipur has sprawling real estate all around, some parts of it look like Gurgaon with shiny malls and glass and steel office buildings. What are the needs of those real estate companies? Do they need compliance-related work done? What licenses do they need to start new projects? Why do their projects get delayed or get stuck? What are the builders ready to pay for? What contracts do they need to enter in?

Are you going and figuring out what kind of legal support those builders or the businesses inside those glass buildings require?

The truth is that most lawyers are sitting in their chambers around the High Court and waiting for clients to come in through the door. They are trying to emulate the generation of lawyers that came before them and that does not work anymore.

Enterprising lawyers, on the other hand, are having a field day, raking in the money simply by being in touch with the business world and learning what needs to be done to service to new emerging markets!

This is not the story of just Jaipur. Every city and district has its own opportunities, much of which remains untapped because lawyers have not learned to identify those demands and therefore failed to create any mechanism to satisfy those demands from the market. 

Writing

Writing is a way of thinking. It helps a lawyer to validate ideas, put research and knowledge into context, create a coherent narrative, incrementally improve their arguments and narratives, and trains them to think in a logical way. This is one of the most basic benefits of developing the habit of writing. 

The craziest benefits come at the next level though. 

When you write frequently, you develop formidable knowledge of the subjects on which you write regularly. Also, your written articles are demonstrations of your knowledge and interest in the subject, which means that they help you to reach out to other people and share your knowledge with them, and therefore build your own brand. 

A lot of law firms have banned associates from writing legal articles and publishing. Guess why? Writing is a business development article they want to limit for partners. Associates who write frequently build-up their own clientele. They don’t want associates to do it. 

When people join our Dream Job Bootcamp, our primary way to train them is to make them write one or two articles every day. On one hand, the rigorous schedule of research and writing ensures that students develop the ability to do intellectual work at a stretch. They also develop a high standard of rigour and clarity in their writing. 

When their articles begin to get published and they write dozens of new articles, not only their confidence grows, but their knowledge about a topic also grows drastically. Suddenly they develop the ability to hold an informed conversation about an area of law during an interview.

Also as they begin to publish and their work gets noticed, they share the articles in their social networks and in their peer group, new opportunities open up for them that were otherwise not available.

We have also implemented mandatory article writing for students of our premium courses which has led to great success.

It is a great idea to regularly write around one subject, at least for a while, so that a body of work builds up around a theme. This helps you to go deeper as well as later publish a book or collection of articles, which is very helpful for the image of a lawyer as a serious practitioner. 

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It is important to publish on platforms where your article will be widely read rather than only by a few academics. For this purpose, academic journals usually do not make a good destination for your articles. It is far more fruitful to publish on popular online media where you may get thousands or even millions of readers, and therefore massive exposure!

Many celebrated doyens of the bar regularly write columns for newspapers and online legal media websites. Could that be a mere coincidence?

Developing a habit of regular writing can totally transform your level of success as a lawyer.

Pro bono work

Pro bono work is not for charity alone, it has tremendous benefits on your own practice. I recommend that you develop a habit of doing pro bono work regularly. Maybe once a week, or at least once a month you could take up a pro bono matter. Even as a student, you are free to build this habit.

You don’t do pro bono work for clients who can pay but would rather not. You need to work for people who are truly helpless or NGOs and social organizations that work for such people.  It could be the filing of PILs or fighting in anti-trafficking cases, or helping those who cannot get bail by volunteering his time. You can volunteer to fight against animal cruelty, for example.

Many poor people get terrible government allotted lawyers who screw up their cases.

My friend Amish Aggarwala recently fought and won such a case that he took up pro bono, for a man Sarabjeet Singh who was falsely branded Dilli ka Darinda by media. This is a good example of the type of cases that deserve pro bono attention.

Lawyers have a reputation that they are cutthroat and have no regard for the interests of their clients. Regularly doing pro bono work and being known for the same brings a humane face to your practice, and encourages the common people, other lawyers, and even judges to trust you because they can see that your heart is in the right place.

Also doing pro bono work in volume in the early years gives you a lot of opportunities to appear before the court, figure out the court and government systems, build relationships in critical places. It is a great way to speed up learning.

The beneficiaries of your pro bono work are also likely to talk about you very highly leading to more clients approaching you.

You need to also have a limit on how many pro bono cases you will take in a week or in a month, as otherwise you will get flooded with such requests and have no time to do paid work or other productive things. It is important to draw a line.

The impact of pro bono work is grossly underestimated by most lawyers! They feel that doing pro bono work will encourage freeloaders. 

You must set boundaries on what kind of matters you will do for free and what you will not do. 

Doing pro bono work does not mean not asking for your fees or not taking an advance from other paying clients! You must deal with your clients professionally, and being humane does not mean you ignore your economic interests!

Public commentary

It is important for a lawyer to talk about matters of great public interest in a public manner. Many lawyers think taking a side in a public debate is a bad idea because it will alienate the people who do not agree with you. Sure it will, but anyway, your goal is not to have the whole world as your client, unless you are a big law firm with 100+ lawyers.

When you take a side in such debates, there would be people who agree and identify with you and would therefore want to work with you. They will trust you more than those who stay neutral.

Also when you talk about matters of public importance, maybe on TV or through columns on news media, or even your own YouTube channel or blog if necessary, it helps you to emerge as a thought leader and you get noticed widely by potential clients, other lawyers, media and even judges.

This is why getting involved with politics often help lawyers a great deal.

While some judges and lawyers will get threatened by your early rise and may try to intimidate you or put you down when you are gaining too much attention and fame, especially in a smaller city, but if you stay the course, you have nothing to worry about. Every highly successful lawyer goes through a few episodes like that.

Networking

Networking is a critical habit of lawyers that determine their success to a great extent. However, networking is not exchanging cards or shaking hands with people. Unless you have meaningful interactions that lead to value addition to the person you are connecting with, you will not be remembered and the connection will serve no purpose.

Networking, therefore, is figuring out how to add lots of value to other people at scale. 

And you have to start small. Initially, you should be looking to add value to people in every interaction you have with them, one at a time. 

I found my first client when I kept sending useful information to a CEO I met in a local startup event. It was not a habit back then, but a one-off thing I managed to pull off. I got it right accidentally.

When I started ClikLawyer, therefore, I made sure I call lots of people I knew who had a business and made it a habit to learn what is going on in their business. I spoke to them at length about their worries and challenges and also educated them on what they need to do in order to prevent future legal complications. As a result, many of them began to refer work to me within a few months. Their own, as well as their friends and colleagues!

You can’t do networking unless you are being generous. You have to add value first, without asking for anything back. If you do that enough number of times with enough people, you will start to see returns without having to ask for it.

However, I often asked my friends, and still do, for favours whenever I need one. Just like I never hesitate to extend a favour that is in my power, neither do I stop myself from asking one when I need it.

That is how productive and meaningful professional relationships, based on mutual trust and respect are created, as we exchange value.

Give talks 

As a lawyer, your oratory skills are important. 

When you are seen speaking about legal issues in a lucid, persuasive, powerful way, you attract that right kind of attention. 

It is great if you get to speak on TV or a big stage, but do not wait for it. Seize every opportunity to speak. I really learned to speak by teaching for CLAT and other law entrances. Later, I began to speak in law colleges. 

Back in 2013, I visited almost 50 engineering colleges, delivering lectures to hundreds of engineers about patents, technology law and how engineers and entrepreneurs can benefit from learning the law. That really helped me to kick off my speaking career, which led to an invitation to IITs, NITs, IIM and even ISB Hyderabad to speak or offer workshops to students. 

Maybe nobody is inviting you to speak. Not to worry, make youtube videos! Or produce some podcasts about the legal topics that you are very passionate about. If you make something good, share it with us, we would be happy to promote and support you!

Approach local schools and colleges for an opportunity to speak! Offer free guest lectures, colleges love it. Reach out to event organizers with interesting topics and see if they will give you a spot. 

Volunteer for events, and you will find easier to get a speaking slot in such events. 

When I was very young, and just a year old into the profession, I still got speaking gigs at startup events because I volunteered at Startup Saturday and knew all the other event organizers very well in multiple cities and they owed me favors! Plus everyone wanted to encourage me, so I got speaking slots, and found paid clients from almost every single speaking opportunity!

Team building

I see so many lawyers never reach their true potential because they remain solo players. They fail to scale. They fail to build a team. It is critical to learn how to build a team for every lawyer. Solo practitioners too, need an underlying organization to be truly successful.  

However, how to recruit a team and how to make them productive is a hard lesson to learn. It took me many years. It is not as simple as hiring people with top credentials or having lots of money to hire. 

I am still learning. 

You need to be at it as soon as you can. You do not wait to start a business and to have money to hire people to start team-building. I always considered that I will one day have a company, and wanted to figure out who I will be hiring. I started collaborating with people on various projects, began to mentor them, and built relationships while I was still in law school!

It is not a mere coincidence that my cofounder is also my college mate, and we spent a lot of time in college in collaborating on various things like papers and moots! Even today, my juniors and seniors from NUJS collaborate with me in various ways.

Build a team, become part of a team, you don’t need to start a law firm or a company to do it.

Seeking mentorship, providing mentorship, supporting others in their endeavor and backing others when they need it should be a habit, and you should be doing it at every given opportunity.

Understanding where things are headed

This is a critical habit to develop. Most lawyers emulate their seniors, instead of trying to understand the new trends. Where are things headed? That is important to understand and evaluate continuously. We cannot assume that things that worked 10 years back for our seniors will now work for us. 

For example, if you had to open a tea stall in a place where there are already 10 other tea stalls, you would be worried if that is a good idea because there is already so much competition. You may want to open a coffee shop or a lassi shop there rather than being just another tea shop. It beats me why lawyers forget this basic thing while they are trying to build their legal careers!

What is the situation of the economy? What is your prediction about the next 5 years about which industries will rise and what will fall? What are the gaps in the market given the current situation? What are the lawyers leaving unserved or underserved? Where can you provide more value to clients than what they are already getting?

You need to develop a habit to study what is going on and what is going to happen. This is a key determinant of which lawyers will succeed because the market is always going to shift. Even if you succeed with something once, you cannot really sit on a throne and pass away your life, because someone else is hustling around the corner to steal your lunch. If you are not alert, we are living in a time when you will lose the plot way faster than you found it. 

Please track the market. Please track the economy. Please track how business, regulations, and sentiments are shifting. You need to make a habit of it. 

Want our help in developing some productive lawyer habits?

We are always prepared to help you. We believe and count on the power of habits, and our courses are built around the idea that we need to inculcate these important habits into you. You can experience it for a month by joining any course as there is a refund policy –  if you don’t like it, or if you don’t benefit, you can get your money back, no questions asked. See our amazing LawSikho refund policy here.

Here are some courses in which we are accepting enrollment until the end of this month:

DIPLOMA

Diploma in Intellectual Property, Media and Entertainment Laws

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Prevention of Sexual Harassment at the Workplace

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post 9 Habits you need to develop in order to become a successful lawyer appeared first on iPleaders.

This article is written by Shriya Sehgal, a first year student pursuing BBA.LLB. from Symbiosis Law School, Noida. This article deals with the various aspects of restraint of trade including landmark judgements.

Introduction

Who doesn’t get excited when he/she is hired at a top notch firm? Decent salary, good infrastructure and a lively work environment are the prerequisites for every employee. However, what happens when they get bored with their jobs or want to explore better opportunities? Are they permitted to leave their jobs before the completion of their term of employment? Are there any restrictions on the employees while they are working for a particular organisation/institution?
The above questions would be answered in the following article with respect to Exclusivity and Non-Compete Clauses under Contract of Employment. 

General Rule

Section 27 of Indian Contract Act,1872

Section 27 of ICA,1872 makes the agreements in restraint of trade to be void. This section states that, “Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.” However, there are certain exceptions to this rule.

Exceptions of Restraint of Trade[1]

Statutory Provisions

• Sale of Goodwill- It is the only exception that is mentioned in Section 27. It means that the restrictions imposed on the seller should be reasonable. The seller can only be restrained from carrying on a similar business for such period for which the business sold is actually carried on either by the buyer or by any person deriving title to the goodwill from him.
• Indian Partnership Act, 1932- Under Section 36 of this Act if the outgoing partner makes an agreement with the other partners that he will not carry on a similar business for a specific period of time then such an agreement is valid, provided the restrictions are reasonable. Also, Section 11 of this Act states that the partners should not carry a competing business during the continuance of the partnership.
• Limited Liability Partnership Act, 2008-  Section 24 of this Act talks about ‘Cessation of partnership interest’. The former partners may also be consulted during inspection. 

Judicial Interpretations

• Trade Combinations- It’s a universal practice to carry on a trade in an organised way. Regulations as to the opening and closing of business in the market, licensing of traders, supervision and control of dealers and the mode of dealing are not illegal. [2]
• Service Agreements- These agreements refer to the negative covenants and prevents an employee from working for someone else during the term of employment. This is to prevent leakage of trade secrets etc.
• Sole or Exclusive Dealing Agreements and Franchise- It refers to a practice where manufacturer markets his goods through a single distributor or agent. 

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd., 1894 AC 535

It is this case that established the concept of restraint of trade in 1890s in England. In this case, the appellants sold their business to the respondent company and agreed to enter into a negative covenant not to work for a rival business for a period of 25 years in an unlimited geographical area. Later he worked for a rival business. Consequently, the respondents brought an action against the appellant to enforce the covenant by injunction.

The appellant argued that the clause was in restraint of trade and the clause of unlimited geographical area was unreasonable. Whereas, the respondent argued that the clauses were imposed to protect the interest of their business. 

The House of Lords upheld that the clause was in restraint of trade and was prima facie unlawful. However, the restraint was reasonable in the interest of the parties as Nordenfelt obtained a huge sum of money for his business. Moreover, the restraint was reasonable in the public interest. Therefore, the clause was upheld.

Superintendence Co. of India v. Krishan Murgai, (1981)

The appellant company carries on business as surveyors undertaking inspection of quality, sampling of merchandise, machinery etc. It has established a reputation and goodwill by developing its own techniques and possess trade secrets in the form of those techniques. They have their head office at Calcutta and a branch at New Delhi.

The appellant company employed the respondent as the Branch Manager of its New Delhi Office on the terms and conditions mentioned in the letter of appointment. Clause 10 of the terms and condition placed the respondent under a post service restraint that he shall neither carry on a business on his own nor serve any other rival firm in similar line as that of the appellant company for two years at the place of his last posting.

When the appellant company terminated the respondent’s service, he started his own business in New Delhi on lines identical with the appellant company. Thus a suit was filed by the appellant company and they also sought an interim injunction.

The court granted them an interim injunction which was converted into a permanent injunction after listening to the respondent. The restraint was considered to be reasonable with respect to time and place however the clause contained the expression ‘leave’ which was susceptible.The clause was considered unreasonable as the term of employment was terminated. 

On an appeal by the respondent, a Division Bench of the High Court reversed the order of the learned Single judge holding that the negative covenant operating post service was in restraint of trade and void under Section 27 of the Indian Contract Act, 1872. 

Rationale for Rule Against Restraint of Trade

An employment contract generally includes restraint of trade clause to protect the interest of the employer after an employee leaves their organisation or business. The various restraint of trade clauses are imposed due to the following reasons:

• Non-compete clause prevent the employees from competing with their former employer for a reasonable period of time the employees can compete by opening a similar business or working with a rival business.
• Non-solicitation clause prevents the employee to solicit his former employer’s clients for a reasonable period of time.
• Non-recruitment clause prevents the employee to hire the former employer’s employee for a reasonable period of time.
• Confidentiality clause prevents the employee from disclosing the former employer’s confidential information.

Here, the word ‘reasonable’ is of significant importance. For a contract to be enforceable, the restraint of trade clause must be reasonable. Reasonability can be ascertained on the basis of the following grounds:

1. Time period
2. Geographical location
3. Scope of work 

Conflict of Laws

Conflict of law refers to relations among various legal jurisdictions. Something valid under the jurisdiction of X may be invalid or illegal under the jurisdiction of Y. 

For instance, Conflict of Laws took place in the famous case, Taprogge Gesellschaft Mbh vs Iaec India Ltd.[5]. In this case, the Bombay High Court held that a restraint operating after termination of the contract to secure freedom from competition from a person who no longer worked within the contract was void. The court refused to enforce the negative covenant and held that, even if such a covenant was valid under German law, it could not be enforced in India. [3]

Doctrine of Restraint of Trade not applicable during the subsistence of the Contract

A contract of employment which is operative during the employment doesn’t attract the provisions of Section 27 of the Indian Contract Act, 1872. The main purpose for restraining an employee from joining a competing business or profession is to fulfil the legal terms of the contract that are binding on the employee. This also encourages better performance on the part of the employee.

The clauses of restraint of trade are imposed after the conclusion of term of employment to prevent the employee to benefit from the skills that he/she has acquired during the term from the employer. In other words, the employer prevents his competition to a certain extent. Whereas, when restrictions are imposed during the term of employment, the motive is to ensure performance of employees and the fulfillment of legal terms of the employment contract.

Thus, when the purpose of restraints imposed is transparent and lawful it is considered to be valid by the court. However, when the purpose of restraints imposed is unclear or unlawful it is considered to be void by the court. In other words, only reasonable clauses of restraints of trade can be imposed by the employer.

For instance, an employee of a company during the contract of employment or prior to termination of contract of employment should not join another company carrying on similar business or shouldn’t establish his own business of similar nature.

In case of a franchise, the franchise agreement prohibits the franchisee from dealing with competitors goods during the subsistence of the contract. In this way the franchiser can promote his/her own goods and prevent the competition to a certain extent. It will also lead to ease of distribution of goods.

It was stated in a case that, “There is a growing trend to regulate the distribution of goods and services through franchise agreements providing for the grant of franchise by the franchiser on certain terms and conditions to the franchisee. Such agreements often incorporate a condition that the franchisee shall not deal with competing goods. Such a condition restricting the right of the franchisee to deal with competing goods is for facilitating the distribution of the goods of the franchiser and it cannot be regarded as in restraint of trade.” [4]

Judicial Precedents

Niranjan Shankar Golikari v Century Spg. & Mfg. Co. Ltd., (1967) 

The respondent company is the manufacturer of tyre cord yarn and other things. Their plant is located at Kalyan known as the Century Reyo entered into an agreement with Algemene Kunstzijde Unie of Holland (AKU) and Vereinigte Clanzstoff Fabrikan AG of West Germany (VCF) to transfer their technical know-how to the respondent company for consideration of 1,40,000 Deutsche Marks(currency). It was to be used exclusively for the respondent company’s tyre cord yarn plant at Kalyan.

Clause 4 of that agreement provided that the respondent company should keep secret until the termination of the agreement and during three years when all technical information, know-how, data and documents would be passed on by the AKU and VCF then, the Century Rayon should enter into corresponding secrecy arrangements with its employees.

The respondent company then invited applications for appointments in said plant. The appellant was hired as a Shift supervisor in the tyre cord division and entered into a contract of standard form for a term of 5 years. After obtaining training for 9 months the appellant started absenting himself and then informed the company that he has resigned. The company rejected his resignation and asked him to join back but he had already obtained another employment. The appellant’s services were considered essential for the respondent company as his employment with rival company would cause him damage because they had undertaken to obtain secrecy undertakings from its employees.

Therefore they wanted an injunction restraining the appellant to obtain employment with the rival company. Whereas the appellant said that the agreement was a restraint on trade and against public policy.

Both the trial court and the High Court found that the negative covenant in the present case were reasonable and necessary for the protection of the company’s interest. 

BLB Institute of Financial Markets Ltd. v. Ramakar Jha (2008)

The petitioner company is one of the leading institutes in imparting education and knowledge in the field of financial services. In the course of its business, the petitioner appointed the respondent as a faculty member who was to be responsible for the development of the petitioner’s study material and teaching methodology. Consequently, they entered into an employment agreement including various terms and conditions.

The respondent realised his value to the organisation and asked for a hike in his salary multiple times. One day he sent his resignation via email and stopped coming to work because his demands were not accepted. The petitioner returned the resignation unaccepted and asked him to resume work as his unauthorized absence was in breach of the terms and conditions of the employment agreement.

According to the terms and conditions of the agreement the respondent cannot resign before the compulsory period of 3 years and in case he wants to resign before the completion of 5 years he has to give 6 months notice of the same. Moreover he cannot join a rival business. The same was ordered by the court until the arbitrator independently evaluated the observations made.

Bluedart Aviation Ltd. v Captain Puneet Shankta (2006)

In this case, the defendant, a qualified pilot was trained at the behest of the plaintiff. It was done to enable him to be released as a Senior First Officer for an aircraft and thereafter to serve the plaintiff. But the defendant has abandoned the services of the plaintiff without giving him a written notice of three months or payment for the same. 

Consequently a suit was filed and during it’s pendency an interim injunction was filed for restraining the defendant from taking employment as pilot of any other company. The defendant was made liable to pay a sum of Rs. 10,00,000 with 15% interest from the date of filing the suit for committing a breach of contract. The plaintiff also claimed a permanent injunction restraining the defendant for taking up employment as pilot of any other company or airline or corporation for a period of three years. 

Since injunction is a discretionary relief, the court can grant an injunction for a reasonable period as it is difficult for the airline to make an alternate arrangement. Due to their inability to make the arrangements they will have to minimise their operations which will cause them damages. 

Thus, in the appeal it was held that the learned single judge was was not correct in not granting the injunction at least for a period of notice. In the given circumstances the court desist from directing restoration of status quo ante. However, it is open to the plaintiff to claim any compensation by amending the plaint. Thus, the appeal was disposed of with the aforesaid observations.

Wipro Ltd. v Beckman Coulter International S.A., (2006)

In this case, Wipro worked as a sole and exclusive canvassing representative for Beckman Coulter International, S.A. They worked together for a span of 17 years. Beckman Coulter decided to undertake direct operations in India and issued advertisement seeking employment from people and giving preference to candidates having experience in having handled respondent’s product or similar products. Wipro Limited alleged that such advertisement was in violation of non-solicitation clause and approached the court for prohibiting solicitation and claiming damages.

It was held that the restrictions had not been imposed on the employees but on Wipro and Beckman Coulter and therefore Section 27 would not be attracted and the agreement was held not in restraint of trade.

Conclusion

There is a legal assumption that a restraint of trade is legally unenforceable. However, there are certain exceptions to the same. The various types of clauses mentioned in employment agreement aims to protect the interest of the employer and are not against public policy. The reasonability of these clauses can be determined on the basis of various factors and the clauses beyond the scope reasonability are considered to be void.

References 

1. https://resource.cdn.icai.org/46634bosfnd-p2-seca-cp1-u2.pdf 
2. http://www.legalservicesindia.com/article/1753/Exceptions-of-agreement-in-restraints-of-trade-with-reference-to-Indian-and-English-case-laws.html 
3. https://www.majmudarindia.com/pdf/Validity%20of%20agreements%20in%20restraint%20of%20trade%20in%20India.pdf 
4. Gujarat Bottling Company Ltd and Ors. v. Coca Cola Co. and Ors. 1995 (5) SCC 545
5. https://indiankanoon.org/doc/1495448/ 

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Exclusivity and Non-Compete Clauses under Contract of Employment  appeared first on iPleaders.

This article has been written by Vasu Manchanda, a second-year student at the Faculty of Law, Delhi University.

C S Aggarwal versus State (2019)[1], a judgment on how to tackle the rising frivolous cases in Indian courts, is probably the only judgment in the recent history of the Indian legal system that pertains to how a lawyer should be and what a judge’s duties are. Emphasizing “truth” from the beginning itself, Hon’ble Mr. Justice J.R. Midha talks about its essence in judicial proceedings and also how the budding lawyers and Magistrates can prevent from falling prey to corruption and exploitation. Also, as majorly “observe and learn” culture instead of giving adequate formal training to law students is followed in India, it makes them more vulnerable to fall prey to the existing system, where some lawyers focus more on finding loopholes to win than on the truth of the matter. This is one of the reasons why the courts are flooded with pending cases, most of them being frivolous. In such times and to give the right direction to the law students and fresh law graduates, a judgment like this becomes immensely important. The ratio decidendi of the judgment can be summarised in the words of Loretta Lynch, former Attorney General of the United States – “A license to practice law is not a license to violate it.”

Though this case is of the forgery the ratio applies to other cases as well. In this, the objectors raised a false claim before the court which is punishable under Section 209 Indian Penal Code, 1860. The judge observed that the objectors had no respect for truth and had polluted the fountain of justice with tainted hands and imposed a heavy cost of Rs.1,00,000 on the objector. The reason why mentioning the facts in detail of the case are not important is because the judgment pertains to almost all types of frivolous cases ranging from matrimonial, defamation, bail, cheque bouncing, forgery to property disputes. The intention of the judge through this judgment is to reduce the menace of the piling up of frivolous cases in the courts.

Often in legal disputes, the matter is not as big as the lawyers have made it so. When there is no accountability, some lawyers tend to walk on the road already traveled by many in the pursuit of winning and making a few quick bucks. They perpetuate illegal acts by filing for injunctions or stays dragging on the matter and delaying justice for years, as a result of which there is a huge backlog of cases in India. Over 43.5 lakh cases[2] are pending in the High courts and around 3.11 crore cases in the lower courts with a good number of them being at least a decade old[3]. There is a shortage of fast track courts and judicial officers because of the same reason.

As noble a profession as the law is, spoiling it is no different than dumping waste in Ganga, the holy river and then complaining that it became polluted and spending another fortune in cleansing it. It is the prime responsibility of lawyers and judges to serve justice and keep the truth at a higher pedestal than personal gains or ego. A lawyer is first an officer of the court then a representative of his clients. Law should be all about ethics, truth, and justice and not only about finding loopholes and exploiting and corrupting the whole institution. As law students and lower judiciary services aspirants, not many realize this but the reality becomes grimmer as more and more time they spend in the courts. The only way to stand apart from the crowd in by standing by your principles. Lawyers need not only represent their client’s interests but also realize that they are the officers of the court. Something that they often tend to forget. Their duty is not only towards their client but also majorly towards the court, the judicial system, society and more importantly towards finding the “truth”. There cannot be a more unfortunate event when the well educated, skilled and trained lawyers use their knowledge to delay or deny justice than to impart it. It’s no different than an engineer stealing a tech-savvy luxury car instead of inventing and getting one patented.

The judgment further emphasizes that people would have faith in courts when the truth alone triumphs. A paragraph emphasizing the need to extract truth can be cited from Mohan Singh v State of Madhya Pradesh[4], “A genuine effort should be made to find the truth that is the very object for which the courts are created. The courts have to proceed further and make genuine efforts within the judicial sphere to search out the truth and not stop at the threshold of creation of doubt to confer a benefit of the doubt.” The main and the most important question that arises after having read the need to find the truth is how to discover it. The judgment emphasizes sections 3, 114 and 165 of the Indian Evidence Act, 1872 to determine what the truth is and how it can be discovered by the judge expeditiously. 

Section 3 of the Indian Evidence Act, 1872 talks about when a fact is proved, disproved and not proved after considering the matters before the court. A fact is said to be proved when a court either believes it to exist or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. To ascertain the right and wrong, the judge like a prudent man has to use his judgment and experience and is not bound by any rules except his judicial discretion, human experience, and judicial sense.

Nothing can be said to be “proved”, however much material there may be available until the court believes the fact to exist or considers its existence so probable that a prudent man will act under the supposition that it exists. Emphasising on this point, a beautiful example was given by the Hon’ble Mr. Justice J.R. Midha – ten witnesses may say that they saw the sun rising from the West and all the witnesses may withstand the cross-examination, the court would not believe it to be true being against the law of nature and, therefore, the fact is disproved. 

Further, section 114 of the Indian Evidence Act, 1872, aids the court in its quest for truth by using common sense as a judicial tool. It recognizes the general power of the court to raise inferences as to the existence or non-existence of unknown facts on proof or admission of other facts. 

However, the most important tool to empower the judge is section 165 of the Indian Evidence Act, 1872, that invests him with plenary powers to put any question to any witness or party, in any form, of any time, about any fact relevant or irrelevant. Section 165 is intended to arm the Judge with the most extensive power possible for getting at the truth. The effect of this section is that to get to the bottom of the matter before it the court will be able to look at and inquire into every fact and thus possibly acquire valuable indicative evidence which may lead to other evidence strictly relevant and admissible that might not have been raised by the opposing counsel. Hon’ble Mr. Justice J.R. Midha contemplated that, “Section 165 of the Indian Evidence Act,1872 is not a mere umpire at a wit- combat between the lawyers for the parties whose only duty is to enforce the rules of the game and declare at the end of the combat who has won and who has lost. He is expected, and indeed it is his duty, to explore all avenues open to him to discover the truth and to that end, question witnesses on points which the lawyers for the parties have either overlooked or left obscure or wilfully avoided.” The judgment further emphasized that a judge, who at the trial merely sits and records evidence without caring much to examine the witnesses and parties so that every point is brought out, is not fulfilling his duty. 

Reference was made to Ram Chander v. State of Haryana[5], in which it was observed that under Section 165, the Court has ample power and discretion to control the trial effectively. While conducting a trial, the Court is not required to sit as a silent spectator or umpire but to take an active part within the boundaries of the law by putting questions to witnesses to elicit the truth and to protect the weak and the innocent. A Judge must discover the truth and for that purpose, he may ask any question, in any form, at any time, of any witness or the parties, about any fact, relevant or irrelevant. 

Furthermore, the grave issue of false claims and defenses was also addressed in this judgment as it is one of the major factors of the cases piling up in the courts for years. False claims are serious obstacles with real estate litigation, predominantly because of the ever-escalating prices of the real estate. Litigation about valuable real estate properties is dragged on by unscrupulous litigants in the hope that the other party will tire out and ultimately would settle with them by paying a huge amount. It is a matter of common experience that the court’s otherwise scarce time is consumed or rather wasted in a large number of uncalled for cases. False claims are a huge strain on the judicial system. The courts must see that such wrongdoers are discouraged at every step and even if they succeed in prolonging the litigation, ultimately they must suffer the costs of all these years-long litigation. The judge further suggested that the imposition of actual, realistic and proper costs and/or ordering prosecution in appropriate cases would go a long way in controlling the tendency of filing false cases. Although the Supreme Court has time and again held that heavy costs should be imposed in frivolous cases and if need be, prosecution be ordered to maintain the sanctity of judicial proceedings but it seems like it all has been in vain. 

The courts are often engaged in frivolous litigation by the litigants that are dragged for as long as possible.  In the end, even if these litigants lose, they still become the ultimate winners and have a good laugh. They perpetuate illegal acts by filing for injunctions or stays dragging on the matter and delaying justice for years. Burdening such litigants with exemplary costs and fines would instill the sense of the faith of people and the suffering party in the judiciary. The persons on the right side of the law should not feel like a fool by winning a case after fighting it for decades as it would be the wrongdoer who would be the real gainer as he reaped benefits all those ten-twenty years. Time gained until the matter was decided in the court would be his real gain. Thus, it becomes the duty of the court to ensure that such litigants and wrongdoers are not only discouraged but also made to suffer the costs for all these years-long litigation. 

This judgment should have a huge social-political and educational impact on fresh law graduates, judiciary services aspirants, magistrates, judges, and especially law students as it highlights that the judicial system in India is choked with false claims and some litigants are consuming the court’s time for a wrong cause. The system’s biggest challenge is frivolous litigation which needs to be addressed at the earliest, by all. 

All the sections emphasized upon in this judgment empower the judge or magistrate to discover the truth of the matter rather than to just sit as an umpire and record evidence. It reminds the judge of his duties, responsibilities, and powers.  

The budding lawyers  who get inspired by the likes of Harvey Spectre, a character playing the best attorney in an infamous TV show, Suits, who doesn’t mind bending the law to win, and has an “I play to win” attitude, making “justice delayed is justice denied” common parlance, the judgment highlights how wrong and catastrophic such an approach can be. If after reading it, even a minute percentage of budding lawyers and magistrates can realize the right path and practice, the purpose of this article would be solved.

References

• Judgment dated 29^th March TEST.CAS. 8/1995. Available at : http://lobis.nic.in/ddir/dhc/JRM/judgement/05-04-2019/JRM29032019PR81995.pdf

• https://economictimes.indiatimes.com/news/politics-and-nation/out-of-43-lakh-cases-pending-in-high-courts-over-8-lakh-a-decade-old/articleshow/69974916.cms
• https://doj.gov.in/sites/default/files/ASCI%20Final%20Report%20Page%20641%20to%20822.pdf

Endnotes

[1] Judgment dated 29^th March 2019. TEST.CAS. 8/1995.

 Available at : http://lobis.nic.in/ddir/dhc/JRM/judgement/05-04-2019/JRM29032019PR81995.pdf

[2] Available at : https://economictimes.indiatimes.com/news/politics-and-nation/out-of-43-lakh-cases-pending-in-high-courts-over-8-lakh-a-decade-old/articleshow/69974916.cms

[3] Available at : https://doj.gov.in/sites/default/files/ASCI%20Final%20Report%20Page%20641%20to%20822.pdf

[4] (1999) 2 SCC 428

[5] (1981) 3 SCC 191

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post What is the truth and how can it be discovered? appeared first on iPleaders.

This article has been written by Amit Sharma.

Introduction  

The most glaring, contending and disturbing issues which are affecting the relations between the USA, China, the Philippines are having an inverse impact on the international community as a whole. The conflict in the jurisdictional claim over groups and chains of islands in the south china sea whereby leading the dispute between the nations. Further, the Philippines claims its  jurisdiction on some of the littoral islands sitting on the south china sea, at the same time China is also claiming jurisdiction over all the island on the sea. The overlapping effects of the claim pertaining to jurisdiction lead to the conflict between both nations. Thus creating friction and controversy between the nations thereby affecting their foreign relations.

The aim of this article is mainly focussed on the dispute of South China Sea which is at present creating tensions between the U.S and China.

The Strategic location of south china sea

The international hydrographic bureau defines the disputed South China Sea as a water body which stretches from southwest to northeast direction, further its southern border is 3 degrees south latitude between South Sumatra and Kalimantan. Its northern border is the strait of Taiwan from the northern tip of Taiwan to the Fukien  Coast of  China.¹

To be the most specific geographical location of the islands on the South China Sea lies between 109 degrees and 117 degrees east longitude and 4 degrees and 11 degrees north latitude.²

The disputed sea is composed of approximately 100 to 230 islands wherein small  islands called islets  are usually included in it. Submerged in water, shoals, banks, atolls, reefs and cays, which covers an area of approx. 180,000 sq. km.³

These islands comprised of 4 main archipelagos namely⁴:

1. Pratas
2. Macclesfield bank
3. Parcels
4. The Spratlys

Because of the strategic, political, and economic significance in the Asia pacific region of the South China Sea, most of the claimant states wants to have jurisdiction on it.

Significance of the South China Sea

Economical significance

There are three most arresting reasons which explain why the South China Sea is labelled as economically  significant by the claimant countries.

• The countries which are claiming their jurisdiction on some parcels of islands or islets have credence that the location has revelatory deposits of natural gas, oil, and minerals under the ocean floor.
• near the locations of the islands in the south china sea is plenteously supplied with marine species. Moreover, more than half of the total world’s fishing vessels are found in this zone.
• the south china sea is considered the second busiest international sea route in the world.

Geopolitical significance

South China Sea is a water body which is extremely strategic, on the geographical point of view. Annually about 50% of the merchant fleet all over the world passes through the Sunda Strait, the Strait of Malacca and the Lombok Strait.

Historical overview

Initially, there existed a conflict between China and the Philippines and no other nation of the world was involved in it.

At the time of world war II

The Japanese navy made the optimum use of South China Sea back then. It used the  water body for  various operations and did not allow any other nation to enter into it and utilize that path for military purposes.⁵

Creation of nine-dash line by China

In 1947 Kuomintang government of the Republic of China  popped up with the creation of 11 dashed line which is a very significant turn in the way of this conflict. Later on, 11 dash line evolved as nine-dash line for the reason that there was a flip in the government from the Kuomintang government to the communist government thereby changing the name of the  mainland from the Republic of China to the People’s Republic of China. Further, this drastic change led to the change in the policy and the 11 dash line was converted to 9-dash line in 1949. This line provides for a significant reason that it is the strategic location of the territory of China⁶.

Chinese reaction to the Philippines action

In 2012 when the Philippines navy restricted the fishing practice of the Chineese boats, in the furtherance of the People’s Republic of China retaliated this action of the Philippines through Scarborough shoals.⁷

Declaration of conduct of parties in the south china sea 2011

The parties of this declaration included various nations namely the PRC, Brunei, Malaysia, the Philippines, Taiwan and Vietnam. These nations agreed upon the primary  guidelines of the declaration pertaining to the dispute. Further, this declaration proves to be the milestone to resolve the tensions between China and ASEAN countries.⁸

Relevance of UNCLOS

UNCLOS is the modern law of the ocean which is based on the doctrine of mare liberum which means open sea. With the changing time and rising of marine activities demanded to adapt the UNCLOS. The process of adopting the UNCLOS started in 1958 and it finally came into force in 1994. Further, China and all the other nations involved in the dispute pertaining to the South China Sea  were the signatories to this convention. The USA was the non-party to this  convention, however, has reservations with its seabed convention. The basic highlight of this convention are:

1. It is based on the doctrine of “la terre domine la mer” which means land dominates the sea.
2. Water landwards of the baseline are internal waters on which sovereign rights are exercised.
3. UNCLOS accounted for historic claims during its formulation. However such rights were extinguished with the provisions pertaining to EEZ (Exclusive Economic Zone).
4. There is a difference in the degree of freedom, depending upon the nature of waters for example straits, internal, territorial and high seas.
5. The extent and rights of entitlement from 12 nm territorial rights to 350 nm economic rights for a continental shelf claim.
6. UNCLOS defines and archipelago regime exclusively for states that exist as a group of islands which entitles an archipelagic baseline and internal waters inside them.

Arbitration ruling

Following the dispute, the Philippines filed a case to the Permanent court of arbitration. The tribunal was constituted on 21 June 2013 in pursuant to the  procedure set out in annex VII of the  UNCLOS to decide the dispute presented by the Philippines.

The tribunal considered the lawfulness of Chinese actions in the South China Sea. After finding that certain areas are within the exclusive economic zone of philippines, the tribunal ruled that  China had violated the sovereign rights of the Philippines in its EEZ by:

1. Unduly intervening in Philippine petroleum exploration and fishing.
2. Building artificial islands.
3. Failure in the prevention of Chinese fishermen from fishing in the zone.

The tribunal further considered that China severely harmed the marine environment by large scale land reclamation and construction of large scale artificial islands at seven features in  spratly islands.⁹

The ruling of the tribunal was totally against China and also a major victory for the Philippines. This is also described as a “heavy blow” for China.¹⁰

The principle of territoriality

The disputed South China Sea is protected under 1982 UNCLOS, which provides a pathway from the status of  the islands, the continental shelf, enclosed seas and territorial limits. UNCLOS provides the most relevant provisions for the dispute of South China Sea:

1. Art. 3 of the convention gives the right to every state to establish the territory on the sea upto the limit of 12 nautical miles.¹¹
2. Art. 55 – 75 gives the concept of exclusive economic zone which is an area upto 200 nautical miles beyond and adjacent to the territorial sea.¹²

The EEZ confers on the coastal states “sovereign rights for the purpose of conserving and managing, exploring and exploiting natural resources, whether living or non-living off the water superjacent to…”¹³

The Philippines is claiming the parts of the islands on the basis of the  provisions of UNCLOS on EEZ. Geological studies found that acc.to UNCLOS on EEZ, the Spratly islands in the South China Sea are part of the Philippine territory and jurisdiction.

Therefore by enforcing UNCLOS, the arbitral tribunal gave the ruling in favor of the Philippines.

Award By Arbitration

Award on Nine-Dash Line

The arbitration award stated that the scope of entitlement is elaborated by UNCLOS. Further, China’s claim is excessive pertaining to the nine-dash line. Therefore, the historical aspect of the claim became relevant.

UNCLOS and History

The award stated that though Chinese mariners made used the Islands back then there is a lack of evidence that Chinese mariners exclusively had access to the sea. Thus this contention of China was also rejected.

Reactions to  the ruling

Seven countries from all over the world formally supported the award and called it  to  be respected. The  countries which supported the  ruling are:

Australia, Canada, Japan, New Zealand, the Philippines,  the U.S., and Vietnam.¹⁴

Through this U.S. interfered in the dispute and released a statement of serious concerns over the dispute.¹⁵ Further, U.S. along with japan has pressed the countries in the region to make strong support about the ruling.¹⁶

A Policy of China on the South China Sea

In 2011 the PRC’s global times newspaper editorialised on South China Sea dispute under the heading “Don’t take peaceful approach for granted.”  This article  highlighted the incidents that occurred earlier that year involving South Korea and the Philippines arresting the PRC’s fishing boats in the region.¹⁷

Regarding these incidents the article used the words “prepare for the sounds of canon.” when asked about this by the Chinese foreign ministry, they responded positively and stated that the country’s commitment to resolving the maritime dispute through peaceful means.¹⁸

In 2014 it was reported by prof. Alan Dupont that China is directing its fishing fleets in the disputed waters as a matter of policy.¹⁹

In August 2019 China’s President Xi Jinping told the Philippines that China would not recognise or abide by the arbitration decision.²⁰

Why is south china sea, a matter of concern for the USA?

After the final arbitration ruling from the Hague, issued in July 2016 on the South China Sea dispute between China and the Philippines, the U.S. considered it the impact on the region  of its responses to the ruling and also analyzes the interests  of Washington in the south china sea:

1. To support friends and allies.
2. To preserve rules-based order.
3. To preserve freedom of navigation.

On the outside, these principles look like altruistic and honorable objectives but on the other side, all of these are the basic self-interests of a superpower questing to maintain its domination in this part of the world.

Amicable solutions As a stepping stone to resolving the dispute

An urgent need of the Code of Conduct

There is an urgent need for the 10 ASEAN member nations and China to speed up the negotiations for the code of conduct. So that it can regulate the behaviour of the nations in the busy and resource-rich waterways. Hence, soon bilateral and multilateral treaties must come in force.

Urge for united efforts to maintain peace

The nation must not indulge in the double standard behaviour, rather China along with other Southeast Asian nations like the Philippines, Brunei, Malaysia, etc. can make combined efforts to maintain law, order, peace and security. Hence this issue must be addressed collectively and cooperatively.

Support U.S.A.’s three halts to de-escalate tensions

In order to de-escalate the tension in the region, all the nations involved in the dispute must proactively and fully support the United States of America on ‘three halts’ which includes:

• A halt in reclamation
• A halt in construction
• A halt in aggressive actions.

Avoiding these three halts may raise the chances of heightening the tensions amongst the nations.

Conclusion

Therefore, the pursuit of these interests is not only having an adverse impact on the relations between the U.S. and China but also affecting the ability of these major superpowers to deal with bigger issues like Taiwan and North Korea. Moreover, this dispute is adversely affecting the unity and integrity of Asian nations like China, Philippines, Brunei, etc.and hence South China Sea is regarded as Asia’s most dangerous point of conflict.          

Endnotes

1. Global Security.(n.d.). Spratly Islands. Retrieved athttp://www.globalsecurity.org/military/world/war/spratly.htm. Retrieved online on 11 February 2009
2. Joyner 1999, CIA factbook 2004
3. ibid
4. Energy information admin, 2002
5. Chung, Chris (2016). “Drawing the U-Shaped Line: China’s Claim in the South China Sea, 1946-1974”. Modern China. 42 (1): 38–72. doi:10.1177/0097700415598538.
6. Granados, Ulises (2006). “Chinese Ocean Policies Towards the South China Sea in a Transitional Period, 1946—1952”. China Review. 6 (1): 153–181. JSTOR 23462012
7. Fravel, M. Taylor (2016). “Threading the Needle: The South China Sea Disputes and U.S.-China Relations”. Massachusetts Institute of Technology Political Science Department
8. Martina, Michael (20 July 2011). “RPT-China, ASEAN set ‘guidelines’ on sea row, but no deal expected”. Reuters. Retrieved 20 July 2011
9. Permanent Court of Arbitration (PCA). 2016. The South China Sea arbitration (The Republic of the Philippines V. the People’s Republic of China), Press Release, The Hague. https://pca-cpa.org/wpcontentuploads/sites/175/2016/07/PH-CN-20160712-Press-Release-No-11-English.pdf. Accessed 12 July.
10. Bonnie, Glaser S. 2016. Shaping China’s response to the PCA ruling, The Interpreter. http://www.lowyinterpreter.org/post/2016/07/18/Shaping-Chinas-Response-to-the-Tribunal-Ruling.aspx. Accessed 18 July.
11. UNCLOS Art. 3
12. UNCLOS Art. 55 – 75
13. UNCLOS Art 76 and 77
14. Center for Strategic and International Studies (CSIS). 2016. Who is taking sides after the South China Sea ruling? Asia Maritime Transparency Initiative. https://amti.csis.org/sides-in-south-china-sea/. Accessed 15 August.
15. The Minister for Foreign Affairs of Japan, Kishida, Fumio, the Secretary of State of the United States, Kerry, John, the Minister for Foreign Affairs of Australia, and Bishop, Julie. 2016. Japan-United States-Australia trilateral strategic dialogue, Joint Statement. Vientiane, Accessed 25 July.
16. Japan Bullet. 2016. U.S., Japan prod China to comply with S. China Sea ruling. Japan Bullet, http://www.japanbullet.com/news/u-s-japan-prod-china-to-comply-with-s-china-sea-ruling.
17. “Don’t take peaceful approach for granted”. Global Times. China. 25 October 2011.
18. “China May Resort to Force in Sea Disputes, Global Times Says”. uyghuramerican.org. 25 October 2011. Retrieved 4 September 2019. Foreign Ministry spokeswoman Jiang Yu told reporters today in Beijing that China ‘adheres to the strategy of peaceful development. […] Sowing discord and hostility will only complicate.
19. Pasick, Adam (29 July 2014). “How China’s Enormous Fishing Fleet Is Being Used As a Surrogate Navy”. www.defenseone.com. Quartz.
20. Beijing tells Duterte it won’t honor South China Sea ruling, Associated Press/Navy Times, 2019-09-01

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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This article has been written by kush Kalra.

The National Eligibility Test (NET)  also known as UGC NET or NTA-UGC-NET, is a test to determine eligibility for college and university level lectureship and for the award of Junior Research Fellowship JRF (Hereinafter referred as ‘JRF’) for Indian nationals.

The UGC is a body constituted by virtue of the provisions contained in the University Grants Commission Act for co-ordination and determination of the standards in institutions for Higher Education. In exercise of the powers conferred under the said statute, the UGC issued Regulations on minimum qualifications for appointment of teachers and other academic staff in Universities and Colleges. As per Regulations, only candidates who qualify the National Eligibility Test are eligible for appointment as Assistant Professor in Universities and Colleges.

The University Grants Commission (Hereinafter referred as ‘UGC’) policy of declaring only 6% of those candidates who appear in both the papers of UGC National Eligibility Test (Hereinafter referred as ‘NET’) exam and obtain minimum qualifying marks in aggregate of both the papers is unconstitutional as it is arbitrary, unreasonable and not satisfying the test of reasonableness under Article 14 of the Constitution. Previously UGC allowed total 15 percent of those candidates who appear in National Eligibility Test exam to be NET qualified. The present criteria of only allowing 6% candidates to be declared as passed in NET exams in all streams is defeating the purpose of UGC- National Eligibility Test Exam which aims at checking the “ELIGIBILITY” only to be a Assistant Professor in India and it is not a Competitive Exam.  By merely clearing this exam, does not ensure a post for Assistant Professor as this exam is just an Eligibility Test and does not result in any Sure Job thereafter, unlike clearing IAS, PCS or Judiciary Exams.  

There is minimum required score prescribed by UGC NET Eligibility exam (40% for general candidates and 35 % for unreserved candidates), but UGC makes a merit list and only 6% of those candidates who appear in both the papers and obtain minimum qualifying marks in aggregate of both the papers are considered as NET qualified, unlike Bar Council of India Exam (All India Bar Exam, (AIBE) which is a eligibility test and open book exam for determining the eligibility of Lawyers to practice in courts in India which prescribes minimum 40% score to clear AIBE as the exam is just a qualifying exam/eligibility test exam and not a competitive exam. All those who score the minimum marks are eligible.All the eligibility exams have a minimum required score to be obtained by the candidate after which he is declared successful, unlike the UGC NET which provides for clearing only 6% candidates appearing for both papers out of the total pool of candidates making it more like a competitive exam than it’s true nature which is “Eligibility EXAM”.  This Exam is conducted twice a year and only 6% candidates are clear in one exam (total 12% candidates are cleared in a year as this UGC –NET exam happens twice a year). Candidates for UGC NET exam have to suffer a lot because of 6% criteria of UGC to clear this eligibility exam and even for one exam (in 6 months) lakhs of candidates appear and UGC may be earning in crores (approximately 6 lakh candidates appeared in UGC NET 2018 and the fees for general category was rs 800 ) which means government is earning in crores in 6 months due to this exam.     

In the light of the only total 6% candidates clearing NET exam conducted by UGC and absence of no minimum required score and preparation of merit list of only 6 % candidates out of total number of candidates presently this exam has become a competitive exam and lost it’s relevance of being a Eligibility test to test the knowledge of candidate in a particular subject. The number of candidates appeared for both papers in UGC NET, 2018 exam is 6,81,930 covering 101 subjects. The exam was conducted 598 centres in 91 cities. Out of 6,81,930 candidates of all streams appeared 44,001 candidates cleared NET Exam and 3883 cleared NET exam with JRF.  JRF is a fellowship program offered by government to assist projects and do Phd simultaneously who clear NET exam with High Merit.  Even the 6% result criteria of UGC –NET exam is not making sense as aspirants who can’t clear UGC-NET JRF Exam, even if they qualify UGC-NET exam appear for UGC-NET JRF exam twice thrice or till the age they can appear as per notification, leading to blocking of seats of candidates who can become bonafide teachers by clearing UGC-NET exam and can fill the long list pendency of teachers in Government and Private colleges and Universities across India.   

Due to just 6% selection of candidates in UGC NET exam in all streams presently there is dearth of sufficient number of candidates for appointment to the post of Assistant Professor in  universities and colleges across India.

The analysis of NET result, December 2018 shows that percentage criteria for becoming assistant professor in different streams for exam of NET is :

The analysis of NET result December exam, 2018 clearly shows that there is different cut off percentage for various streams and applying the same formula of clearing only 6 percent candidates in all streams out of those candidates who appear in both the papers and obtain merit as per result of UGC –NET is not justified for all streams, since different subjects have different cut off marks. Previously 15% candidates out of total candidates were declared successful.  Interestingly the UGC bulletin for NET exam 2018 clearly provides for condition of “Both JRF and Assistant Professor” as only 40% aggregate marks in both the papers taken together for general candidates and 35% aggregate marks in both the papers for reserved candidates to be UGC NET qualified. The UGC presently is making the merit out of total number of candidates appearing even if general candidates are securing 40% marks in both papers and 35 % marks are secured by reserved candidates making it a competitive exam and diluting its real purpose which is to check the eligibility. In any situation by securing the minimum marks (40 percent for general candidates and 35 percent for reserved candidates) one does not get qualified in the NET. In order to qualify the NET, the candidates should come within the 6%  (previously it was 15 % ) of the merit lists prepared on the basis of aggregate marks category wise. Thus by having a policy of clearing only 6 % candidates in all streams in UGC –NET exam in 6 months (exam is held twice a year) when different streams have different cut off marks as mentioned above in analysis of NET  result 2018 a situation has been created by UGC where only 6 percent out of total candidates will clear NET exam irrespective of the stream they belong to and their pass percentage. This has resulted in a fewer number of candidates qualifying as assistant professors in some fields and leading to dearth of teachers in Government and Private colleges and universities across india . The policy of clearing only 6% candidates for NET eligibility test is clearly a policy which needs to be quashed on ground of irrational and arbitrary and not satisfying the test of reasonableness as prescribed under article 14 of the constitution. Further this test is conducted twice a year which makes the same candidates to appear twice for a eligibility exam. The UGC can clear 50 percent of those candidates who appear in both the and obtain minimum qualifying in aggregate of both the papers (40%) to be declared NET qualified, without making a merit for a qualifying/eligibility exam which does not ensure job and after which exam a person has to appear in interviews and crack the interviews and written exam by his skill to become a assistant professor in any university or college across India.      

It is to be noted that the different cut off marks for different prominent competitive exams conducted by Union Public Service Commission is as follows:

  Their is no justification for only allowing 6 % (basis of reaching to this figure, previously it was 15% ) of those candidates who appear in both the papers and obtain minimum qualifying marks in aggregate of both the papers. The UGC makes merit list of candidates and clear only 6% candidates out of all streams without  looking at basis of cut-off marks which are different for different stream as mentioned above. Further the Junior Research Fellowship is given from this 6% result. It is a common trend of this exam that people who clear NET exam try for NET Junior Research Fellowship and being a NET qualified spoil one seat of NET aspirant since UGC have no mechanism to separately allow the NET JRF candidates to compete for NET JRF Fellowship and have no mechanism to check if a NET JRF candidate again clears NET exam out of total pool of 6% candidates which in turn results in candidates clearing NET exam twice, thrice or more just to clear NET JRF exam and in turn spoil the seats of candidates out of 6% total candidates allowed to clear UGC-NET exam, thereby resulting in shortage of competent and eligible faulty in universities and colleges across India. Again it is reiterated that UGC-NET exam is conducted for determining the Eligibility for JRF and Eligibility for Assistant Professor and not a competitive exam in which a person should score a high merit to justify to be appointed as a teacher in India. By allowing only 6% candidates in 6 months, (exam is conducted twice a year) in all streams to clear the UGC –NET exams UGC have made this a competitive exam , instead of  eligibility test and further UGC and ministry of HRD are clueless about how this magic figure of 6%  is being ascertained by them as colleges and Universities in India are facing a crunch of faculties.  

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This article is written by Karunashankar K.N. a 2nd-year law student from School of Law Christ University, Bengaluru. This article explains the concept of hawala transaction, the legislations which deals with hawala and the adverse effects of it.

What is Hawala transaction?

The International Criminal Police Organization – INTERPOL’s definition of hawala is ‘money transfer without money movement’.

‘HAWALA’ is an informal, unregulated mode of transferring foreign currencies to and fro in a country. This system works and operates in a similar fashion to the formal banks without any paperwork, questioning and accountability. 

Hawala transactions are those transactions which are not regulated by the Central Bank that is, Reserve Bank of India (RBI). In this, no actual money transfer happens between the persons. These transactions are made through the intermediaries called hawaladars. This transaction works purely on the basis of trust that the person holds on the hawaladar. There is no promissory note present in these kinds of transactions, this is completely based on the trust and journal balances of both the hawaladars. Hawaladar is the person who is not authorised by the financial regulatory bodies (RBI-Reserve Bank of India, FEDAI-Foreign Exchange Dealers’ Association of India) in India, but still deals with the movement or transfer of money from part of the country to another and also from one country to another. 

These transactions are usually made when a person from one country wants to send money to another person in the other country they use this hawala transaction because in hawala transactions there is no limit set for a transaction made by the person, one can send how much money they want, which will not be regulated by any authority.

Most of the businessmen who made huge amount of black money by not paying appropriate taxes to the government wants to hide their money somewhere safe and politicians who made good amount of black money by taking bribes and by doing scams through government projects, use this way to transfer money because they want to convert their kickback black money into white or want to keep their money safe in some other country without paying the required tax in the home country.

Background

Hawala or hewala is an Arabic origin word which means transfer or sometimes as trust. In India, it is also famously known as hundi. The system started in South Asian countries, particularly in the Islamic community during the 8th century, and now it is very popular and used in every part of the world. It was used as one of the modes of transferring money from one person to another who lives in different places. It is one of the traditional banking system, where it is connected with the set of hawaladars. These kinds of traditional banking system induced a major impact on the formation of the present-day banking system.

The hawala system became very important in the society because of mainly two reasons:

1. Lack of efficient banking system.
2. Many people prefer doing cash transaction as it was the traditional mode of transaction.

Is hawala Legal in India?

It is definitely not legal in India as it has been declared as an illegal way of transferring money by The Foreign Exchange Management Act, 1999. Prior to that, it was made illegal under The Foreign Exchange Regulation Act (FERA) Act, 1973. 

The Foreign Exchange Management Act, 1999

“Section 3. Dealing in foreign exchange, etc.

Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall-

• deal in or transfer any foreign exchange or foreign security to any person not being an authorized person;

• make any payment to or for the credit of any person resident outside India in any manner;

• receive otherwise through an authorized person, any payment by order or on behalf of any person resident outside India in any manner;
• enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person.”

This section essentially defines the persons who can deal with the Foreign exchange and with foreign securities, the persons who are not authorised by the central bank are not allowed to involve in any kind of transfer of money outside India or receive the money from outside India. There should be no third party involved in the money transfer other than the parties and the official foreign exchange banks. 

There should be no credit for any person who is transacting with foreign exchange, there should be a two-way transfer of money made during the exchange of currencies between countries. A third person can not be represented on behalf of the persons who want to transfer the money, the parties themselves have to transfer the money which they want to, there should be corresponding money transfer made for the transaction made.

Penalties imposed

Section 13 Penalties

According to FEMA states the penalties awarded for any violation committed under this Act; or any contravention of any rule, regulation, direction or order which are issued under this Act, or contravenes any condition subject to which the authorisation of RBI should be taken. The penalties issued as follows:

• If the amount involved in the violation is quantifiable in nature then, the penalty for that offence would be “THRICE” the sum.
• When the amount involved in the offence is non-quantifiable then the penalty may be imposed up till two lakh rupees.
• And if such contravention is continuing even after imposing the penalty, then such offences will be further penalised with five thousand rupees per day.
• Adjudicating Authorities have the power to confiscate any currency, security or any other money or property which is found during the search.

Section 14: Enforcement of the orders of the Adjudicating Authority

If any person fails to pay the full penalty money which is mentioned in section 13 within ninety days from the issue of notice for payment of the penalty, then he will be liable to civil imprisonment under this section.

The term of civil imprisonment varies from person to person. The term depends upon the amount involved in the transaction, if the amount of transaction is exceeding one crore rupees then the imprisonment term may go up to three years. If the amount is less than one crore then it is six months compulsory and it will increase till the person makes full payment of his penalty.

Hawala transaction in India

India has made hawala transactions as illegal in the country, as it is transacted through the unauthorised persons who are not recognised under the Reserve Bank of India and also due to the lack of bureaucracy in the system. Hawala transactions are made illegal by The Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA).

Demonetisation has had a significant impact on hawala transactions in India. On November 8th 2016, Prime Minister Narendra Modi announced the demonetisation, banning 500 rs and 1000 rs denomination notes which completely paralysed the hawala network in the state of Kerala.

Hawala Transaction Act

Every year around fourteen billion dollars foreign currency comes to India out of which only four billion dollars come through authorised banks and financial institutions and the remaining ten billion will enter India through hawala system. In order to regulate this Government of India as formulated certain rules and regulations.

There is no specific act called Hawala Transaction Act in India. It is governed by various other legislations which are mentioned below. 

Financial Exchange Regulation Act (FERA), 1973

This Act has explicitly prohibited “hawala-type” transaction. The objective of introducing this Act was to regulate the entry of foreign capital into the Indian economy. That was one of the peak time where international trading started. 

FERA provides detailed legal prohibitions on the hawala market. Section 8 it created some restrictions on the individuals who deal with the foreign currency and also states some restrictions on the conversion of Indian currency into foreign currency. It mandates the person to possess the authorised license by the RBI to deal with the foreign currencies that may be selling and borrowing or transferring the foreign exchange. Section 9 covers the domestic hawala transactions, by prohibiting the payments or providing credit to the person outside India. FERA was revised and made several amendments as the process of globalisation, liberalisation, and privation was implemented in India. In the year 1999, this Act was replaced by FEMA.

Foreign Exchange Management Act of 1999

Section 2 prohibits the person from entering into any financial transaction India where the associated consideration of money or an asset outside India. 

Section 6 highlights the importance of the RBI and it states by consulting central government, the central bank may specify the class or classes of capital transactions which is permissible and also sets the limit for the foreign exchange transactions.

Section 10 of FEMA – “The Reserve Bank may, on an application made to it in this behalf, authorise any person to be known as authorised person to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.”

This simply means that when a person wants to deal with the foreign exchanges, he/she should register themselves with the RBI. Where hawaladars are not registered under RBI.

Prevention of Money Laundering Act, 2002

According to Section 2(da) of PMLA – An authorised person is one who deals with the exchange of foreign currency and one who deals with off-shore banking unit with the prior permission from the RBI.

Hawala transaction charges

Generally, in hawala transactions, the commission rates are not fixed. It will vary from one transaction to another, the basis for this commission is the amount which has been transacted and the location to which the money has been sent. Hawala is very attractive to the customers because of their commission rates it ranges from, they charge a very nominal rate of interest as commission. Which is very lesser compared to the bank transfer, as the person has to pay a huge amount of tax to the Government of India. And sometimes to promote hawala transaction, hawaladars exempt expatriates from paying fees to them.

Hawala Transaction as a branch of money laundering

Hawala system comes under one of the branches of the money laundering, ‘money laundering’ means hiding the origins of illegally obtained money which are acquired by not paying appropriate tax, which will be transferred to another country through foreign banks or legitimate businesses.

For example, Mohammad Farooq alias Farooq Shaikh was known as Mumbai’s hawala ‘King’. He was arrested by the Enforcement Directorate (ED) on 24th April 2018, as he was involved in an Rs. 2253 crore money laundering case. In that 2253 crores, 680 crores were transacted by involving his own company Stelkon Infratel Pvt Ltd. and remaining 1572cr was remitted by 12 other dummy companies having fake addresses and directors. He had opened around 160 shell companies to do money laundering.

In the hawala system, there is no such official channel of transferring money through bank transaction or by establishing fake companies. The transfer of money happens through hawaladars which is completely based on trust. Here there is no actual transfer of money. The person who intends to hide their unrecorded money will give that money to the local hawaladar and he sends a message to another hawaladar who is present in the place where money has been sent, and the hawaladar there gives the money to the person to hide it or use it as an investment.

Hawala commission rates

Hawala system charges its customers’ very low amount as commission rates as there is no expense of international bank transfer fee and it is an informal agreement made so there will be less probability of hawaladars to charging more commission is very less. Usually, in the hawala system, they charge 0.2% to 0.5% which is very less compared to the bank transfer rates through international banks ranges from 12% to 15%.

One of the attractive features of the hawala system is that there is no limit set for the transaction amount, this makes customers free to send how much money one wants to transfer. In contrast to this, international banks set up the limit of $250000 which is equal to Rs. 17663694.

In order to encourage this system sometimes hawaladars wave off their commission and hand over the entire money to the receiver, by this they build their trust in the minds of the customer and also goodwill for their future transaction. 

How do Hawala Transactions work?

As mentioned earlier this transaction takes place between two persons through the help of intermediary hawaladars who connect with each other in order to transfer money to the intended person.

For example, Moosa is a businessman in Saudi and his entire family stays in Kerala, India. When he wants to send money to his wife Mary he uses hawala.

• He contacts the local hawaladar Mr A and gives 5205 dirhams which he wants to send it to his wife.
• Mr A gives him the passcode which is highly confidential.
• Moosa sends the passcode to Mary by stating how much money has been handed over.
• On the other side in India Mary will get connected to the local hawaladar Mr B who deals with Saudi transactions.
• Mary gives him the passcode which was given to her by her husband and the amount which has been sent to her.
• Mr B will charge 0.5% as a commission that is equal to Rs. 500 and gives only Rs. 100000 to Mary. 
• Now Mr A owes that amount to Mr B.

Hawala money

Hawala money meaning

Hawala is also known as hundi in many places. Hawala literally means transfer or remittance of money. Hawala money is referred to that money which is being transacted through the hawala system. The money which is sent through the system is black money of certain people who want to transfer it from one country to another without paying any tax. Here there is no actual transfer of money from one country to another. It works on the trust principle.

It is one of the alternative means of transferring funds unlike the conventional method of transferring through banks. Money transfer in hawala is arranged through the network of hawaladars across the places.

Hawala money transfer

Hawala acts as the parallel money transfer system to the formal banking system. Here the businessmen and the politicians who want to evade taxes uses this system. Hawala money is transferred by Hawaladars who acts as an intermediary by collecting the money which is to be sent and connects with the counterpart in the other country and sends information about money transfer and he gives said money to the specific person. And after the transfer money, hawaladars settle each other on a later day. Hawaladars maintains an informal journal where they record all the debt which are to be cleared and the credit which needs to be received. Debt money can be settled between hawaladars in cash, property or providing an equivalent service.

Hawala Cases

1. Jain Hawala Diary Case

Jain hawala diary case is said to be the biggest hawala scam in the history of independent India, nearly 115 top politicians, businessmen, film industry people and bureaucrats of Kashmir were involved in this scandal. This all started with the search for the funding of the terrorist money which was sent to Hizbul Mujahideen organisation of Kashmiri militants. 

The money involved was about 18 million US dollars that is equal to Rs. 650 million. The hawala agents involved were S.K. Jain, N.K. Jain, B.R. Jain, and J.K. Jain and they were famously known as Jain Brothers. Some of the top politicians namely L.K. Advani, V.C. Shukla, P.Shiv Shankar, Sharad Yadav, Balram Jakhar, and Madam Lal Khurana and many others.

This was exposed by Vineet Narain through Kalchakra video, news cassette in August 1993.

2. Hassan Ali Khan-The Biggest Tax-Evasion Scam

Hassan Ali Khan is an Indian businessman, in 2007 his Pune and Mumbai residence was raided by Income Tax (IT) and Enforcement Directorate (ED) officials and found laptop containing all the details of the Swiss bank account where it had 10 banks accounts details with having deposits of Rs. 20000 crore, they also found the 85 lakh hard cash in his residence. He had connections with the international arms market. Ali got introduced about the Swiss bank by Adnan Khashoggi in the year 1982. From there on he started depositing the arms dealing money in a Swiss bank account as money in there is untraceable.

And most importantly IT department officials found 4 crores of unaccounted money and they dig deep into it and found that Ali was one of the biggest hawala operators in India, who used to ship the money of the big politicians and businessmen to the countries like Mauritius and Madagascar where the tax rates are really low and again bring that money back to India as an investment to the companies like Autumn Holding and Payson which are shell companies where there will be no actual company existing in that name.

SC invoked terror charges under Anti-Terror law, Unlawful Activities Prevention Act and also under the provisions of Indian Penal Code against Ali for his relationship with various arms and ammunition dealers and with the people who are involved in terror-related activities, by threatening the national security.

3. IT sleuths dig up Rs. 20000-cr hawala Racket in National Capital 

On 11th Feb 2019, the Income Tax Department cracked down one of the big hawala operators in the National Capital Delhi. The Estimated amount which involved in this scam was around Rs. 20000 crores. There was a series of raids conducted by sleuths of Delhi investigation unit of IT in different areas of old Delhi. It was an operation conducted to dig-in the illegal financial activities done by three groups of operators.

The first raid was conducted in one such group in the Naya Bazar area, they found around 18000 crores worth of fake bills and fake entities through which they used to transfer money from one country to another. But the IT department did not disclose the identities of the accused.

The second case was a highly organised money laundering where unaccounted money was fraudulently shown as the sales of the old shares which is being held for years. They tried to show fake long-term capital gains. And the IT estimates the amount involved here in this scam would be around 1000 crores.

Lastly, sleuths conducted a similar kind of search where they found the persons having undisclosed foreign bank accounts and a well-established racket of claiming bogus duty drawbacks of GST through invoicing of exports. The estimated fake exports are more than Rs. 1500 crores, and during this search, they also seized many signed, unsigned papers, agreements, MoUs, cash settlement of disputed immovable properties around Rs. 100 crores.

4. Rs. 3,300 crore Hawala Racket Involving Infrastructure Firms

On 1st week of November 2019, IT Department raided on the major Infrastructure firms in India, it was one of the biggest tax evasion made by the corporate firms. This raid was conducted in 42 premises that include major cities of the country which are Delhi, Mumbai, Hyderabad, Erode, Pune, Agra and Goa on the group of people who were indulging in hawala transaction by producing fake bills.

Here, the IT department successfully opened up the incriminating evidence and also established the connection of big corporates, hawala operators and identification of the entire chain of the process of money laundering. Officials found that Rs. 3300 crore amount of fund was being transferred illegally by making fake contractual obligations. And also they found unexplained cash of Rs. 4.19 Crore and unaccounted jewellery of worth Rs. 3.2 crore.

This funds which are meant public infrastructure projects was emptied by entry operators, lobbyists and hawala dealers. The companies involved in these kinds of deals are situated in NRC and Mumbai. The companies claimed in billing fake invoices. The projects which were involved in this were major public infrastructure and Economically Weaker Section projects mainly located in Southern India.

The evidence of cash payment of Rs. 150 crores to a prominent person in Andhra Pradesh during the search of this hawala transaction.

5. The target of Enforcement Directorate on Rs. 700 crore Hawala Racket

The interrogation started with the Kashmiri businessman named Zahoor Watali, who was a co-accused in this case. The ED had conducted searches at 11 locations in Delhi and Mumbai which is linked with the international hawala racket which involves around 700 crores. Pankaj Kapur and his associates are the main accused in this case. The ED filed a case of Forex violation against them under the Foreign Management Act (FEMA), 1999. During the search, the ED has seized cash of Rs. 29.19 lakhs and also some of the important documents, electronic gadgets, diaries and the stamps of more than 150 shell companies which are related to the whole hawala transaction of 700 crores.

According to the inquiries conducted by the ED, it is said that hawala transactions is being carried out by one of the Indian Company named M/s Radhika Gems Pvt Ltd, where this company collects the money in cash and transfer that money to abroad as against the payment of diamonds. These overseas companies are also owned and controlled by Pankaj Kapur himself.

Why does the Hawala transaction exist?

1. Hawala gives an easy way for the conversion of Indian currency to Foreign currency.
2. In hawala, there is no set cap for the amount which is being transacted. It allows the whole amount which needs to be sent.
3. Hawala system charges a very minimal amount of money as commission whereas foreign exchange banks will drain money through commission.
4. Hawala gives an opportunity for the black money diggers to convert their black money into white by transferring the black money to a foreign country without any knowledge of the regulators like RBI, Income tax etc.
5. This is the only way through which terror organisations will receive money and transfer money as they don’t have the opportunity to use official banks due to their illegal business transaction.
6. This system maintains a high level of confidentiality where the sender and the receiver will not be disclosed anywhere.
7. The transaction made cannot be traced easily.
8. Hawala system is not regulated by any of the governmental organisation as it is made illegal under the law.

How does Hawala impact India?

1. Increase of informal fund transfer: Informal fund transfer domestically and internationally harms the formal line money transfer, which in turn affects the entire economic system of the country.
2. Increases Corruption: Politicians who make kickback black money by receiving the bribes can easily convert that black money into white through hawala. And most importantly politicians anonymity will be maintained here.
3. Increase of Black Money flow in the economy: As the hawala system is an unregulated transaction. So it is widely used in India and other countries to transfer that money to another country.
4. Conversion of Black money into white money: This system helps the black money holders to convert their black money into white easily by:

(i) Transferring their money to foreign country’s bank where there will be no tax or minimal amount of tax imposed, 

(ii) Transfer black money as a loan to individuals residing in the same country or in foreign.

(iii) Transferring the black money abroad as an investment in a foreign company.

5. Terror Financing: Usually terror organisations receive funds from other countries, those funds cannot be transferred easily through formal banks, so terrorists use hawala transaction for receiving and sending all the funds. 

Measures to curb

Government of India has introduced many measures in order to control the Hawala transaction.

• Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: The main aim of this Act is to curb black money, bring light out of undisclosed foreign assets and income which is being circulated freely in the economy.
• Multi-Agency Group: This was set-up in 2016, as per the order of the Delhi High Court by Finance Ministry after knowing the involvement of Indian Nationals in Panama leaks.
• Special Investigating Team on Black Money: Supreme Court ordered for the setting-up SIT on black money in 2014 to curb and investigate cases of black money that is circulated in the economy.
• The crackdown of Shell Companies: Government of India is trying its best to close all the shell companies which is being run to convert all the black money to white. According to government officials out of 17.79 lakh registered companies in India 5.43 lakhs are shell companies and these companies were closed by the government in the year 2018.
• Demonetisation: On November 8, 2016, Government of India announced a ban on usage of 500 and 1000 rupee currency note and issued new currency notes of 500 and 2000. This helped the economy to cut down the liquidation of cash which leads to the creation of black money, hawala and all the illegal transaction.
• Introduction of a new section in Income Tax Act, 1961: In the year 2017 a new section of 139AA was included in Income Tax Act, which mandates Aadhar no. while applying for the new Permanent Account Number(PAN) card and while filing Income Tax Returns.
• Liberalising Foreign Transaction: RBI has reduced the restrictions and blockages for the foreign transaction and made it faster and customer friendly.
• Notification rules of Prevention of Money Laundering (Amendment) Act, 2005: Government made mandatory to provide Aadhar details while opening a new bank account in any bank and also to provide PAN and Aadhar details while transacting amount is more than 50000.
• Ban on cash transaction: According to section 269ST states that no person shall receive an amount 2 lakh and above in liquid cash in a single day, single transaction and which is related to the same event or occasion.

TransferWise

Transferwise is a British online money transfer service established by Estonians Kristo Kaarmann and Taavet Hinrikus in the year 2011 in London.

This online money transfer service allows the customer of 750 different currencies for transacting across the world. Some of them are GBP, USD, EUR, AUD, and CAD. The net profit of transferwise reached 8 million dollars. And deals with the transfer of more than 4 billion dollars in a month. 

The aim focus of transferwise is to provide a platform for people who want to transfer money from one country to another with the cheaper commission rates unlike traditional banks charging a very high amount of commission. And as of now, this is being in functioning in seven different languages and the profile is created with the help of connecting person’s social media account like Facebook.

TransferWise in India

Transferwise considers the tax regulations of all the countries where it operates. They comply with all Indian laws which are present and operate according to those laws. 

The partner banks to transferwise in India are HDFC bank and Yes bank. Through these banks, it has also registered with the Indian tax authorities. Transferwise also provides all the necessary certificate for the transfer of money from one country to another through these banks.

TransferWise to India

As mentioned earlier all the transactions of transferwise are done with the collaboration of HDFC and Yes bank. There is a minimum amount of 50000 set for receiving foreign currency in India. Compared to all the other competing banks transferwise charges less and transactions takes place in a faster mode.

TransferWise from India

Same as mentioned above there is a minimum amount of 50000 set for transferring money from India to other countries. As many branches all over India, it helps the customers to access it easily and the funds can be transferred faster.

Exchange Rates Involved 

The amount of exchange rates charged by the transferwise is very low compared to all the foreign exchange banks. The commission rate charged by them varies from one country. It takes into consideration the country from where the money is sent and to where that money is being sent.

For example,

The dollar rate as of today is Rs. 71.9, consider you are sending 1000$ to your friend from the US to India, the whole amount without any foreign exchange taxes will be Rs. 71920, transferwise charges 1.92% as commission and your friend in India will be receiving only Rs. 7055 after deducting Rs. 1865 rupees going as commission.

A British Pound rate as of today is Rs. 92, consider you are sending 1000£ to your friend from London to India, the whole amount without any foreign exchange taxes will be Rs. 92000, transferwise charges 0.83% as commission and your friend in India will be receiving only Rs. 91881 after deducting Rs. 119 as commission.

Conclusion

Hawala is one of the economic evils present in our country, which helps the kickback moneymakers to convert their illegal, unaccounted money into white money. This hampers the overall development of a Nation. This is also a parallel illegal exchange market which drives the customers out from the official foreign exchange banks. FEMA Act makes hawala transaction illegal by allowing only RBI authorised persons to transact with the exchange of foreign currencies. It imposes penalties on the persons who are involved in these transactions. And probe agencies like ED, CBI are very active in recent days and it is breaking down all the hawala networks. However, with a lot of effort by the government and enforcement agencies hawala is still existing with a huge amount of transactions taking place on a daily basis.

References

1. Hawala: A Parallel Economy
2. https://www.investopedia.com/terms/h/hawala.asp
3. The Foreign Exchange Management Act (FEMA) Act.1999
4. https://mckinneylaw.iu.edu/iiclr/pdf/vol15p619.pd
5. https://economictimes.indiatimes.com/news/politics-and-nation/i-t-sleuths-unearth-rs-20000-cr-hawala-money-laundering-racket-in-delhi/articleshow/67946158.cms?from=mdr
6. https://www.financialexpress.com/industry/crackdown-on-shell-companies-only-66-registered-firms-active-5-43-lakh-closed/1262062/

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Hawala Transactions : Amazing facts to know about it appeared first on iPleaders.

This article is written by Ramanuj Mukherjee, CEO, LawSikho.

In the last one week, I have been to 3 cities and at least a dozen campuses. And I am clear that there are two kinds of people out there in our law colleges. This includes teachers, students, and administration.

There are some people who have come to believe that there are no opportunities, too many obstacles and that the sweet status quo is comfortable and they can sustain in it. They remind everyone that better things are not possible and recount the number of past failures to justify no progress. They believe that luck and privilege is the key to all success, and there is no other way we can achieve any significant success. 

Let’s call them skeptics.

There is this other kind of people, who refuse to accept that things could not be much better.

They have a distaste for the status quo. They believe that they deserve much better and that they are eventually going to get there. They believe that with their own hard work, creativity, and passion they can change their destiny.

Those are the people who have a spark in their eyes. Let’s call them radicals.

Now, these two groups of people create two very different kinds of environments around them. They are constantly engaged in a battle regarding what kind of environment it is going to be, and they threaten each other to no end.

If there are too many skeptics on campus, especially in important positions, then together they ensure that the culture of the institute is molded accordingly. Same for radicals.

A radical feels very out of place in a skeptical and conservative environment. And the skeptics are very suspicious of radical environments.

However, you can guess from where we get the dreamers, entrepreneurs, and people who cause breakthrough success in various fields. 

A lot of college campuses have a radical environment, due to a concentration of radicals. 

There is a feeling in the air that anything is possible. I saw that when we studied at NUJS. 

Something big was possible, we believed. We believed that we were going to succeed, and those big things in life awaited us. That we have not seen the best yet, that the future ahead is promising and we have to seize the day.

However, we always had professors and students who were super skepticals, and they created their skeptical bubbles.

There are extremely skeptical institutions where radicals create such bubbles for themselves.

Radical people strive to bring in change, to make things better even if by small increments, and hate the status quo with passion. Skepticals are driven by a need for self-preservation, a fear of the unknown and avoiding risk is the major theme. They are ready to trade opportunities for the familiar and the comfortable options.

If you are reading my mails, I assume that you are a radical, because it is super radical. Any skeptical conservative would unsubscribe from it very soon. 

I want you to imagine the impact of a skeptical environment, where you are asked to play small, play safe and not pull punches above your weight.

How does that impact you? 

If you want to dream big, but told that you are overstepping your boundaries, and that you have no business dreaming, and that you are a fool for doing so, I know how it feels because that is exactly how I felt growing up a radical in a family and neighborhood of skeptics!

click above

I could not accept the skeptical approach to life, and stayed a radical against all odds and swung out. I looked for other people like me. I found some refuge in literature, movies, libraries where the skepticism could not reach. 

Only now I know why I used to spend more time with books than any human being as a kid. As I found myself to be part of more radical environments, my need to hide behind books went away, and I was happy to spend more time and engage with the people in my immediate environment.  

If you are a radical stuck in skeptical-conservative environments, and if you are a lawyer or a would-be lawyer, join us. Let’s work together to chase our magnificent dreams, and make the impossible possible. 

We can make the impossible possible because it is impossible only by other people’s definitions, while we know in our hearts that nobody has really delved deep into what is possible. Most people are walking blindly to the tune of the pied piper and avoiding risk all their lives.  

Most of the courts, educational institutions and offices are crowded with skeptics. They do not believe that there are amazing opportunities out there in the market, ripe for the plucking. They follow what the older generations have done like that is the only way to grow but they merely survive. And when they do not succeed, they either blame luck or the privilege of the successful people.

Nonetheless, everywhere I go, I meet young lawyers with dreams, who are battling against all odds and building new paths to success, wealth and contribution to the society.

However, it requires one to get off the well-trodden path. It requires one to take risk and figure out new ways that didn’t exist so far. 

It is not easy. However, it is far easier than most people think it is, and that is what I have learned while walking this path, trying to create India’s most innovative legal education company, LawSikho.com. Your approach and mindset to work itself makes the biggest difference.

We are here to take the different path, we are here to create new paradigms, we are here to celebrate going out on a limb to make something amazing happen.

If you want to be a part of a radical environment, try out one of our courses. Here are the ones in which we are taking admission currently.

DIPLOMA

Diploma in Intellectual Property, Media and Entertainment Laws

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Prevention of Sexual Harassment at the Workplace

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Radical v. Skeptic: Are you a victim of your environment? appeared first on iPleaders.

This article is written by Komal Shah, Content Head, LawSikho, with inputs from Ujjawal Satsangi, Advocate, Allahabad High Court and Deepanshi Sharma, Company Secretary and law student.

When I was in my teens, I used to watch a TV series called “Ally Mcbeal”. The episodes unwrapped the journey of a young lawyer in a law firm. One of the partners in this firm had this peculiar habit of blowing his nose in a certain way during court proceedings, when he found the trend of the arguments against him to be strong. It worked well as a disruption of the proceedings and broke the thought flow of the opposing counsel.

How you manage the scene on the ground while inside a court is what ‘court craft’ is all about. You must always be alert to the surroundings and be able to respond promptly in a manner beneficial to you. This isn’t something you get from textbooks. The more situations you face yourself and the more you watch and listen to the experiences of people, the better you become at this. If you are a pro in this sphere, you will be able to turn the fate of the case in your favour.

Now ‘court craft’ need not necessarily be restricted to “courts’. It can also apply to quasi-courts like the National Company Law Tribunal (NCLT). At the end of the day, the presiding officer will be someone who has been the judge of a High Court. But then, court craft is something which will be very subjective, depending upon the specific location of the bench and even within a city, depending upon the various courts and judges. There’s definitely no ‘one size fits all’ policy here.

Nevertheless, there can be certain things which will help you to have an upper hand (or at least, not to face a showdown from the judge) during a proceeding. 

STAGE 1: PRE-SUBMISSION

You do not get to do the ‘Produnova’ directly at the event. Like Deepa Karmakar, you must have practised it thousands of times before, at least in your head. What groundwork you do before you even submit an application / a petition / an appeal is very, very relevant. Following are some things that we recommend you do not miss out on:     

• Get the facts straight with your client. Clients, by nature, will reveal as less details as they can. It’s your job to extract the maximum information possible from the client by asking enough questions. In addition to the same, collect all the relevant supporting documents from the client. Where you can’t find these, find alternative means to establish the facts. In case of any missing information, send the other side a letter asking for the same. Unless you have all your facts listed and arranged properly, it’s unlikely that you will even understand the case, let alone fight it.

   

• Know what your client wants. Sometimes, it is not just to ‘win the case’. I am reminded of a case shown in one of the TV series where the lawyer had actually agreed with the client that he will get the case settled for less than a specific amount, say USD 10 million. While this lawyer lost the case, the judge ordered payment of little more than USD 1 million as damages to the other party, who celebrated their ‘win’, while the defeated lawyer neatly pocketed a decent percentage of the balance 9 million that he saved. You’re there to get what your client wants, not necessarily to win.

   

• Gather all the precedents. Precedents are also considered a source of law. According to Salmond, ‘Precedent’ is the making of law by the recognition and application of new rules by the Court themselves in the administration of justice. Moreover, precedents also lay down a useful guide as to legal and interpretive issues. Especially, if you are able to get a judgement for a case which was passed by the same bench / judge, you’re in for a lot of brownie points. They will probably not want to overturn the whole of the earlier judgement, though there may be some changes, since in no two cases the facts and circumstances are exactly the same.

• Think through the case. Like I said before, you have got to run it a thousand times in your head – visualise it, ‘live’ it already before it happens. And this is to be done at this initial stage, because your drafting will depend upon how and what you have thought about it.

STAGE 2: DRAFTING OF PETITION/APPEAL/APPLICATION OR ANY OTHER DOCUMENT

The second stage of the institution of a suit is drafting the petition on the basis of the facts, details or any other documents presented by the client, as well as the ‘re-runs’ you have gone through in your head. A legal document must be drafted in such a way so that you can guide the thought flow of the reader and establish absolute clarity about what has already transpired and what is required. It must categorically specify the facts clearly, the legal issues involved on the basis of the facts and statements of the client and the remedies sought / prayers.

The guidelines, which should be followed are:

• READ  the applicable provisions, rules and guidelines, because the drafting has to adhere to this – there’s no escape, no short cut here. You must read it thoroughly. Part III of The National Company Law Tribunal Rules, 2016 (NCLT Rules), specifically provides for the provision in regard to the institution of proceedings, petitions, appeals, etc. In addition to this, the customary practices shall also be looked upon. We have whole chapters in this course dedicated to what the registry in the NCLT is going to look at, when you submit your documents. 

• Language and grammar are very important. As a millennial, you may have thought of this advice from your parents or teachers as unnecessary or inconsequential to adhere to. But remember that one day you will land before a judge who is ‘old school’ and believes that language and grammar are important – most judges are above 50 years of age. Now you may not have listened to your parents or teachers, but you will have to listen to the judge. On the other hand, if you have presented your documents in impeccable language, this may create an impression, since it will look different than submissions from other counsels. 

• Never ever copy and paste/use a pre-filled template. I recall one of the leading NCLT practitioners mentioning that she had seen an oppression and management (Section 241-244) petition containing clauses requesting a waiver of the eligibility requirements, while the petitioner fully met all eligibility requirements. The counsel involved had probably ‘lifted’ the draft from another case where a waiver was needed. At the most, you can refer to a template for structure, but always draft the text from scratch.

• Avoid silly mistakes and omissions. For example, the Form NCLT.4 provides for the heading which must be used in all documents to be used in the proceedings before the NCLT. If you have missed this out in any of the documents, it will be difficult to track it to the specific case. A judge who looks at a document without this heading will form an opinion about you in his / her head, and it might not be something you would like them to think.

• The whole set of documents required often includes far more than is clearly indicated. Index is considered as an integral part of the necessary documents for submission of any petition/appeal/application. A concise index containing brief details of the document attached in the file should be prepared. In addition to this, make enough copies of everything for the opposite side and the bench. 

• You must have ran through a million times, digested and dreamt of the case file. Keep all the documents organized so that everything can be found at the time of urgency. I have literally seen ‘buzzer rounds’ happen during the proceedings where the judge asked for the page number in the documents where he can find certain things and the lawyer was able to answer within seconds.

• You need to know exactly how the documents have to be printed off and submitted. And this may differ in different benches. For example, green-colored paper is used for the submissions in Mumbai, Kolkata and Hyderabad benches of NCLT, while in the remaining places, white legal paper is used 

Further for the NCLT Principal Bench, Delhi and the Delhi Bench, the submissions can be e-filed (see here). While, in the case of NCLT – Mumbai as of November 2019, non – electronic documentation process is followed and application is filed through CD and physical copy of application.

• Where you are drafting a reply to a petition the following points should be kept in mind:

• While most lawyers try and attack each ground/fact stated in the petition, see if you can attack the maintainability of the petition itself. If there are any grounds or reasons why the petition should not be maintainable, those are the first you should use. 
• There may be facts or documents which have conveniently not been referred to by the petitioner. You need to bring those out in your reply. Then challenge each of the grounds taken by the petitioner in view of the new documents/facts.

STAGE 3: HEARING

It takes effort for a proceeding to reach a hearing stage – you must know what to do in case your matter simply isn’t listed for a long period of time (Learn about what a ‘praecipe’ is, in [this-insert link] course). In the course of litigation, hearings are conducted as oral arguments in support of motions filed. Arguments are an important weapon in a professional’s arsenal while appearing before judicial or quasi-judicial bodies.

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• Ensure that you are properly authorised to appear. In the case of an Advocate, a Vakalatnama shall be submitted. However, in the case of other professionals such as chartered accountants or company secretaries, a Memorandum of Appearance shall be submitted. Both the documents, as the case may be, shall be supported by a board resolution. The board resolution must provide adequate authority to you to appear on behalf of the company.

• It’s sometimes said that it’s more important for you to ‘know your judge’ than it is to know the law. Prior to the date of hearing, you must find out about the judge from other practising professionals or from the prior judgements delivered. This will help you in pre-empting what the judge is likely to ask / query and prepare your arguments accordingly. Based on this, you can even draft your written arguments to lead the direction of the hearing rather than let the opposing counsel or the judge move it away from the direction you want it to proceed in.

• Be there on time! It can happen that you have no clue exactly what time your matter will come up for hearing, even though it is listed for a particular day. You need to ensure that you are present on the ground, when it does come up. I have witnessed a lawyer leaving his junior associate in a courtroom and moving out after asking him to let him know when the matter came up. The associate probably did message, but the senior guy took time to arrive and so the associate started arguing by himself. The senior returned in a few minutes, only to be upbraided by the judge for leaving the associate alone to argue.

• There may be a situation where a judge is torpedoing any chance of success for you and the client by asking difficult or tricky questions. In such circumstances, the best way is to be calm and let the judge finish all of his statements. You should then, calmly and without losing composure attempt at responding. 

• Sometimes, prompt action is required to respond to the demands of the changed circumstances. If there is a likelihood of irreparable harm or injury that can occur immediately, during the pendency of the proceedings, you must be ready to request for an ad-interim order. This is an order to stop or continue certain actions, without which, the substratum of the case may be lost. For example, if you already have a pending proceeding in relation to property against some authorities requesting for interim reliefs and the municipal corporation issues an order to bulldoze your property in the next two days, you would need an ad-interim order to get a stay on such bulldozing. Otherwise, the property in question will simply not remain.

• Respect your opposing counsel. A professional is not supposed to use such language as is un-parliamentary or would show discourtesy to the opposing counsel. For instance,  if the opposing counsel makes some untrue statements, you can gently counter by stating that “My learned friend is not properly instructed”. Do not interrupt the opposing counsel. At the same time, if you face interruption, request the judge to restrain the opposing counsel from interrupting you and to let you have your say.

• Though the Rajasthan High Court recently opined that there is no necessity to use the customary “My Lordship” or “Your Lordship” and that even “Sir” is sufficient, you may not want to be the only one referring to the bench as ‘Sir’ while your opposing counsel continues with ‘My Lordship’. It may or may not augur well – depending upon how the judge takes it. 

STAGE 4: RECEIPT OF ORDER

Once the arguments are completed, the judge can either issue an order, or give another date for the hearing, particularly if you have asked for further time to present something. Either way, the custom is for the lawyers to state ‘Obliged, my lord’. You need to ensure that you do not react and show disagreement, if the order is not in your favour. Receipt of order is the concluding stage of a suit unless an appeal is filed to the appellate tribunal. 

Post the receipt of the order, you need to ensure that if the order is subject to the implementation of certain conditions, those conditions are implemented. Further, if the order is required to be filed to the registrar of companies or any other appropriate authority the same should be done within the prescribed deadline.

Like I mentioned before, these things cannot be found in textbooks. But if you want to hear it directly from the professionals who represent clients frequently before the NCLT, join into the Executive Certificate Course in National Company Law Tribunal Litigation and we will ensure you continue to get such insights.

We have extended the admission till the 18th November 2019. 

Here are some courses in which we are accepting enrollment until the end of this month:

DIPLOMA

Diploma in Intellectual Property, Media and Entertainment Laws

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Prevention of Sexual Harassment at the Workplace

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post How relevant is court craft in appearing before the National Company Law Tribunal? appeared first on iPleaders.

This article is written by Kanchan Verma, Certificate Course in Prevention of Sexual Harassment at the Workplace from LawSikho.com. Here she discusses “Impact of “METOO” Movement on Implementation of POSH Law”.

Background

Sexual Harassment of Women at workplace has been in existence for many years, right from the time women were emancipated and stepped out of the security of their homes and tried to work alongside men. This was not easily accepted by the males who thought these women were available and free with their favors and that they actually belonged within the four walls of their homes and in the kitchen. The role of women was essentially considered to be that of a procreator and homemaker. There was a change in the attitude of women but no such change in the men. At the workplace, there were no rules or guidelines specified as to what constituted Sexual Harassment and what the women could do about it. If a woman was harassed at workplace, her course of redressal was  to lodge a complaint under Section 354of the Indian Penal Code 1860, that dealt with criminal assault of women to outrage a woman’s modesty, and section 509 that punishes an individual for using words, gestures or act intended to insult the modesty of any woman. However, the women were hesitant to take such a drastic step as it could backfire on them and they could lose their jobs and reputation, ours being a male dominated society.

Vishaka v/s. State of Rajasthan

During 1990’s Rajasthan State Government employee, a  Dalit woman Bhanwari Devi who tried to prevent child marriage, which was a duty as part of her job working on Women’s Development Program, was gang raped by the landlords of the Gujjar Community. These landlords were enraged and to teach her a lesson they had raped her. As according to them she came from a low community and they were the feudal patriarchs and she had no right to do anything or speak up against them. The victim Bhanwari  Devi did not get justice and the landlords went scot free. A woman’s rights group called Vishaka was enraged by the decision of the court and they filed a PIL in the Supreme Court of India. This incident revealed and brought the hazards and evils faced by women at workplace on a day to day basis to the Supreme Courts notice.

In 1997 , the Supreme Court passed the landmark judgment in the above case and laid down guidelines to be implemented in cases of Sexual Harassment at Workplace , which were known as the “Vishaka Guidelines”. The Court felt that this was necessary to uphold the rights and dignity of women and for gender equality and the right to work with dignity under Articles 14, 15, 19 (1)(G) and 21 of the Constitution and safeguard interests of women at workplace. 

These Guidelines for the first time defined the precise meaning of Sexual Harassment and what acts constituted harassment. It specified the procedure for the victim and the respondents, the punishment or penalty and the employers obligations towards the cause, prevention and redressal.

POSH Act

However, there were many lacunas in the guidelines. Many employees were not included in the employee list and workplace was not clearly defined. There was ambiguity and many organizations did not follow the Vishaka guidelines.Considering the importance of Women at workplace and the effects of Sexual Harassment, India’s first legislation “Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 was enacted. (POSH). It was enacted under the Ministry of Women and Child Development. Sexual Harassment created not only an insecure and hostile environment but also affected the woman’s performance at work. It also affected their social and economic growth and put them through a lot of physical, emotional and psychological stress. This Act was more specific than the Vishaka Guidelines and stated the exact meaning of Sexual Harassment, employee, workplace, the role and responsibility of the Employer, The internal Complaints Committee, complaint processes and procedures, penalties and redressal, actions for preventing such cases by holding training and workshops. It was mandatory for all organizations with 10 or more employees to set up an Internal Complaints Committee. Action could be taken in case of noncompliance.

Despite the Act being passed, there were still many cases of Sexual harassment and unfortunately a large percentage of those went   unreported. Despite the advances in society, many women were not reporting such cases-

Firstly-they were not clear of what constituted sexual harassment as the employer was not taking this seriously and there were no training and updates on exact meanings. 

Secondly, even in this day and age, women were not confident enough to complain about these issues especially in case where the harasser was the Boss himself or very often a senior, out of fear of losing their job and reputation.

Thirdly, the employers had not formed the Internal Complaints Committee or the employees were not updated and not aware of whom to complain to or of the complaint and redressal procedures.

Most companies ensured compliance but overlooked the spirit of the law. The processes were in place, ICC was set up and training was imparted. However, there was no shift in the attitude of the stake holders. This brought about the #Me Too movement, which had a greater impact than the Act itself. It made the organizations sit up and act to avoid reputational risks and loss in branding.

#METOO Movement

In 2006, Civil rights activist Tarana Burke used the phrase ‘” ME TOO” to raise awareness on the existence of sexual harassment. She wanted to spread the message to the woman survivors that “You’ve been heard and understood”. However, in 2017 actress Alyssa Milano helped start the current phase of the movement to emphasize on the “magnitude of the problem”. It became a grassroot campaign for women of color who experienced sexual abuse.

In India the movement was started in 2018. This on social media became a shout, a semaphore, as all women shared their experiences of being harassed by male coworkers, supervisors or people they met in the course of their work. The biggest advantage of it has been to bring the issue to the fore. It is no longer an issue to be discussed in hushed tones. As it is said, “what was not heard was not seen”. It is most important to voice something, be heard and only then can it get redressed. Now thanks to the Me Too era, organizations have no choice but to sit up and listen and take quick action. Because if they don’t, there is a public platform for women to ensure they are heard.

Question is – What actually changed after this Me Too movement. What has been its impact on the POSH Act which was already in existence since 2013?

This movement was basically to raise awareness of the prevalence and effect of sexual harassment despite all the laws being in place. It was a movement to create a change and end sexual harassment. It provided courage and support to survivors. Many powerful men lost their jobs THOUGH It was not really about getting men fired.

#Me Too got the organizations waking up to dust the sexual harassment policies out of their bottom drawers and refocusing on training.

Silence was shattered. The movement marked the beginning of a cry against sexual harassment. All those who finally spoke outdid to get justice or be heard or in solidarity with other women. It saw women coming out of the closet and emboldened. Many women have taken the brunt of the patriarchal male behavior for too long where they were considered as playthings and often senior males at that. It made women wary of complaining despite the complaint processes being in place.

Other changes that have taken place as a result of #Me Too-

MeToo increased awareness about the prevalence of sexual harassment at work and redress measures available.

Me Too movement stirred companies into action. There was alertness across corporate India. It jolted them out of their passiveness.

All companies took note to comply with the POSH Act which makes it mandatory for companies with more than 10 employees to set up an Internal Complaint Committee which had not been taken seriously earlier or totally ignored.

There was renewed focus on doing sessions with women, getting their feedback on the office situation. Giving training on aspects of harassment and getting feedbacks of any complaints and reassuring them of support.

Many Companies now feared negative publicity and undertook due diligence of all senior persons profile and encouraged self-reporting.

This saw an increase in complaints by almost 14-15% in 2018 -2019, thanks to the movement and increase in support by organizations fearing reputational risks. The NCW saw a rise in complaints from 570 in 2017 to 965 in 2018.

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Organizations realized that if the women did not get a chance or choice to complain, they may speak out in public, on social media or go to the police. 

Women were feeling empowered. Companies started doing more and more and women employees became more confident.

Many companies have gone beyond the legal requirements and put gender neutral policies in place.

The new employees also who were normally the targets are emboldened by this movement and upfront asked about the ICC and complaint procedures.

Earlier various service oriented industries like advertising, travel, hospitality, even cinema where they were very complacent about the liberal attitude and some actions and gestures were considered normal saw an attitudinal change.

It has caused fear in the minds of perpetrators, who will think twice before doing something.

It motivated organizations to solve harassment issues.

Many skeletons are coming out of the cupboard, all this is being taken seriously by ICC and victims are getting justice. Even the lower level employees are feeling empowered.

Several states have passed laws prohibiting nondisclosure agreements.

In many counties, many more workers have come in the ambit of “employees”. Many domestic and farmworkers have been included. Some states have expanded their law to cover independent contractors.

For many, it is expensive to bring about a suit, the employers are providing all assistance to the victims to complete the complaint procedures and if need be to file FIR. Some organizations have set up legal funds to assist such victims.

YES, the #ME TOO movement has definitely impacted the implementation of the POSH ACT. But why should we wait for such movements to accelerate the following of laws which are our rights in the first place. We need to find ways to end such abuse and uphold the dignity of the women.

An excellent way to ensure fairness to women and gender equality is to have more women in the organization at various levels. More the women, more will their voice gather strength which will lead to strong social action. The movement of crowd always prevails. It is up to us how we stand tall and move forward.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Impact of “METOO” Movement on Implementation of POSH Law appeared first on iPleaders.

This article is written by Ramanuj Mukherjee, CEO, LawSikho.

I was talking to a friend today. She is a specialist in work like SEO and social media. She is hard-pressed for some work, and I suggested trying out online marketplaces. After all, these services are in really high demand these days, and there is a lot of freelance work out there one can do.

She told me that she is not able to get any work from Upwork or Fiverr. Those platforms don’t work for me, she said.

Why is that? Well, I have posted some amazing services but nobody buys them!

Crazy. How is the service amazing if nobody wants it? Why are you creating novel and unique services? Why not provide the services people already want and posting about? 

If you want to create a new category of innovative services that people are not already asking for but you want to offer, it is way harder to do so even if it actually makes economic sense. It will take more time, patience, and marketing firepower to pull that off. Why not start with what people already want, and something that does not require immediate marketing?

There are too many people out there who are so much in love with their idea of what they want to do, or what they already know, that they would not take the trouble to find out what people really want. 

Van Gogh, a great artist, well ahead of his time, died poor and unknown. I don’t want to be like him. I like success!

We cannot succeed unless we give people what they really want.

At LawSikho, we know that we can build the greatest courses in the world, but unless it is connected with what people already want, we will never succeed.

So we always try to identify the courses that people already want. We sometimes fail, but we often get it right, because we prioritize feedback from the market over all else. 

For example, I may think that there would be a great demand for a certain kind of law course amongst journalists. I mean, isn’t that a no brainer? They are getting trolled and abused on social media all the time. They are getting notices for defamation. They are getting threats for reporting on politicians and bureaucrats. They are reporting on issues that involve the law – often the constitution, or some other laws and judgments. What if we had a course that explained all these concepts to them in a simple enough language?

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Wouldn’t that be great? Would journalists not line up to buy such a course?

Well, on paper, that does not sound bad. It may just work. I have even been approached by journalists who wanted to know if there was such a course. However, is there a large enough market to justify developing a full-fledged course for the same?

I am not sure. I cannot be sure. The only way to find it out will be to test the market. Maybe I should interview at least 20 journalists to see if they are interested. Maybe I should offer an online workshop and see how many journalists show up. That would be a cheap way to test the water. 

I need to take into account that a large number of journalists are seriously underpaid and work in vernacular media, and not the English media where payment is way better. 

If I speak to 20 journalists, I may discover some pain points that journalists will be very happy to pay to resolve. Or there may be no such pain points. 

Perhaps, instead of a course to teach law to journalists, I should create a service to connect lawyers with journalists who will explain the law to a journalist happily in lieu of getting quoted or featured in a story!

Or maybe even that is a dud idea. I have to admit that I do not know if that’s worth doing unless the market validates it. I have to see if either lawyers or journalists would pay for any of it.

I have to keep testing and pivoting until I find an idea that the market approves of.

I can’t be in love with an idea because I came up with it. I have to go to the market and understand what it will actually pay for.

But that’s not how most lawyers approach their career

I want to be a criminal lawyer. I want to do arbitration. I want to do corporate law. I want to be an environmental lawyer. I want to be a senior counsel. I want to argue in court. I want to help women who are in distress. I want to do sports law.

People are in love with some images, some ideas, some stories that they heard about other people and got hooked.

Well, sure. But what will you do? Who will pay you to do it? What way is the market headed? Where are the new opportunities arising? What are the gaps in the market?

If you are not thinking in those terms, if you are not training yourself with the skills needed to succeed in the next generation of law practice, if you are aligning yourself with the market, you may get a rude shock after spending much money, time and effort, that people do not want what you are offering.

Many lawyers think that if they had a nice office in some specific area of town, racks of books to decorate the same, some juniors to go with the furniture, and had a nice big luxury car, then clients will come to them and give the big cheques. That such trappings of success or lack of access to power and privilege is what is preventing them from being successful.

Or worse, they are stuck in a low-paying, stunted market that does not have good economics. They are able to make ends meet, although barely, and then blame the entire legal profession for their troubles. 

That is the fate a majority of lawyers meet.

Or you could spend some time trying to understand the worst pain points of your potential clients and therefore, flourish by addressing those. 

There is not much profit to be made from emulating seniors who did not have to face the market realities of today.

Or maybe you hope to just get lucky by stumbling onto the right practice area by chance! Some lawyers indeed just get lucky. 

How are you thinking about your career? Are you consciously aligning yourself with the market?

All our courses at LawSikho are carefully market aligned, and we only offer such courses and teach those lessons that would help you to go out and serve clients based on the skills you learn from us, and therefore earn significant sums of money. And we have a refund policy to take away all risks from you. Here is the refund policy, please read it.

We know that being aligned with the market is critical for success. Do you know that too?

Here are some courses in which you can enroll today:

DIPLOMA

Diploma in Intellectual Property, Media and Entertainment Laws

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Prevention of Sexual Harassment at the Workplace

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Why being aligned to the market is so critical for professional success appeared first on iPleaders.

So today is the day! We are finally announcing the winner of our Blog Writing Competition of 2nd week of November 2019 (From 11th November 2019 To 17th November 2019) 

We’d like to say a big thanks to everyone for participating! It has been a great pleasure receiving your articles on a different legal topic, they were all amazing! 

And now we’d like to congratulate our top 5 contestants who become the undoubted winners. They will receive Prize money of Rs 2000, LawSikho store credits worth Rs. 1000 and a Certificate of Merit from team LawSikho.

They will also get an opportunity to intern at LawSikho under the direct mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain and Komal Shah. Their articles got published on iPleaders blog (India’s largest legal blog). Click here to see other perks available to them.

Their entries (see below) received maximum marks based on the average marks given by the panel of editors, and has been crowned the winners!

Meet our next 5 contestants who made it to top 10 here. They will receive a Certificate of Excellence from team LawSikho.

They will also get an opportunity to intern at LawSikho under the direct mentorship of Ramanuj Mukherjee, Abhyuday Agarwal, Harsh Jain and Komal Shah. Their articles got published on iPleaders blog (India’s largest legal blog). Click here to see other perks available to them.

Click here to see all of the contest entries. Click here to see our previous week’s winners.

Our panel of judges, which included editors of iPleaders blog and LawSikho team, choose the winning entry based on how well it exemplified the entry requirements.

The contestants have to claim their prize money by sending their account details at uzair@ipleaders.in within 1 month (30 days) of the date of declaration of results and not afterwards. Certificates will be sent on the email address given by the contestant while submitting the article. For any other queries feel free to contact Uzair at 8439572315 LawSikho credits can be claimed within three months from the date of declaration of the results (after which credits will expire).

Congratulations all the participants!

Regards,

Team LawSikho

The post Blog Competition Winner Announcement appeared first on iPleaders.

This article is written by Avni Sharma, a 2nd year student of National Law University Odisha. This article covers all relevant portions of the Equal Remuneration Act, 1976.

Introduction

For instance, consider that you are a woman working really hard to earn well, but you find that there is some other person who worked half as hard as you but earned double the amount just because that person was a male. The basic concept underlying, the very controversial subject, Feminism, is “equity”. Equity refers to a treatment of equal with equals and Unequal with unequals. The Equal Remuneration Act, 1976 (the Act) does just that. It provides for Equal remuneration both men and women, but also understanding the fact that it will not override any special treatment provided to women in the country. There was a time in India when women used to face heavy discrimination in pay. But, after the advent of this Act, women have been able to sue malpractices prevailing in their workplace.

Act to have overriding effect

The Central Industrial Machinery (also, Chief Labour Commissioner) has given effect to this Act and it states that it will not affect the terms and conditions of any law which provides special treatment to women. The statement in Section 3 itself suggests that it will have effect under all circumstances.

However, it also provides that any special treatment accorded to women in connection with the birth or expected birth of a child, or the terms and conditions relating to retirement, marriage or death or any of them will not be affected by the present Act.

Payment of Remuneration at Equal Rates to Men and Women Workers and Other Matters

Chapter 2 of the Act, provides for payment of remuneration at Equal Rates to Men and Women workers and other matters. 

Duty of employer to pay equal remuneration to men and women workers for the same work or work of similar nature

The employer must not discriminate on grounds of sex, when it comes to remuneration provided for the same amount and nature of work. This Act was placed because there were numerous cases of women getting paid at a lower rate than their male counterparts.

In the case of People’s Union of Democratic Republic v. Union of India 1982, women were only paid 7 per day as opposed to 9.25 per day for male workers. After hearing both sides, Justice P.N. Bhagwati held that the authorities need to make sure that the men and women both are paid at par to each other for similar amount of work.

No discrimination to be made while recruiting men and women workers

The Act suggests that there must not be discrimination in recruitment of personnel on the basis of ground of sex. The section states that there must be no discrimination in remuneration from the commencement of the Act and provides an exception regarding employment of women is prohibited. There are certain places which are hazardous for employment of women and children, the section provides immunity from employment at those places.

Advisory Committee

Section 6(1) of the Act states that an Advisory committee must be created which will aid the purposes increasing employment opportunities. The government is taking all possible steps in making a change in the remuneration policies of the employers in India.

Section 6(2) states, the definition of appropriate government is given in 2(a)(1) here means, the part of the Central Government which is responsible for the administration of that area of work. The areas of work, which are administered by a Central authority or a Central Act, for example, Banking companies, oil fields etc. will be addressed to the Central Government. The rest of the areas which come under the state government’s authority, will be governed by the State government.

The advisory committee must consist of at least 10 people, which will be nominated by the appropriate government. Women must consist of one-half of this committee because that will help in formulation of policies with the help of people who are the real stakeholders.

Section 6(3) states, the factors which make a difference in the decision are:

1. Number of women at work
2. Nature of work
3. Hours of work
4. Suitability of women
5. Need to provide opportunities

After consideration of all these factors, the committee must decide in bringing the appropriate norms in effect. The advisory committee will work towards bringing reforms by understanding the requirements of the employees. The committee is free to regulate its own procedures. The appropriate government will implement the policy as suggested by the committee.

Power of appropriate Government to appoint authorities for hearing and deciding claims and complaints

Section 7 of the Act states, the complaints and claims regarding the infringement of this Act shall be addressed to the appointed officer. The applicants have to make sure that they have accurate proof of the commitment of the offence. The offenders will certainly be sued for any inequality in payment. In cases where the discrimination is made in two or more works, the consequences will be decided by the appointed officer.

Section 7(4) of the Act, suggests that due inquiry must be made by the appointed officer, wherein both the parties in the matter, must be given an opportunity to be heard. The appointed officer shall have all the powers of a Civil Court, as mentioned under Section 195, Code of Civil Procedure 1908 and Chapter XXVI of the Code of Criminal Procedure.

Section 7(6) mentions the situation where any of the parties is dissatisfied with the decision given by the authority. The aggrieved party must prefer an appeal before such an authority which is specified by the appropriate government, within thirty days from the date of the order.

Miscellaneous

There are several miscellaneous duties and powers provided in Chapter III of the Act.

Duty of employers to maintain registers

Section 8 of the Act specifies a duty of Employers to maintain a record of the employees, which must contain detailed information regarding the remuneration. This is done in order to gauge, if there is an discrimination in pay on the basis of sex. The ascertainment of offence is important in order to impose the correct amount of liability.

Inspectors

In order to ascertain the offence, the appropriate government is given a task to appoint an Inspector, who will be responsible for carrying out the investigations. 

Section 8(2) states that the inspector must be a public servant. Section 21 of the IPC, provides 12 broad categories of a public servant, where the post of the Inspector must lie, otherwise his or her appointment will be considered unauthorised.

The Inspector is bestowed with certain powers which help him in carrying the investigations, smoothly.

The inspectors have the following powers while investigation, which are provided in Section 8 of the Act:

1. Enter the premises at reasonable hours.
2. May call for any official or official documents for examination.
3. May call for evidence at any given point.
4. Examine the employer.
5. Make copies of required documents.

These powers help the Inspectors to carry out the work in a fair and just manner.

Penalties

Penalties are charged in case, any employer fails to comply with the norms provided in the Act. Section 10 of the Act specifies that if an employer fails to:

1. Fails to maintain a register;
2. Fails to produce the register when required;
3. Refuses or omits to give evidence as per requisitions;
4. Refuses to give any information;
5. Makes any recruitment in contravention of the provisions of this Act;
6. Makes payments at unequal rates;
7. Makes any discrimination on the basis of sex;
8. Fails to carry out any direction as mentioned in the Act;

shall be punishable with at least a fine of 10,000, which may extend till 20,000 or imprisonment, not less than 3 months, which may extend to one year. In case of more than one offence, the punishment will increase, accordingly. 

Offences by companies

Section 11 of the Act specifies that if the offence is committed by any body corporate and includes a firm or other association of individuals, shall be deemed to be guilty of the offence. Unless, the person can prove that such an act was done without his or her knowledge or he is she exercised all due diligence in order to prevent the act from happening.

Cognizance and trial of offences

Section 12 of the Act was amended in 1987, with the Equal Remuneration (Amendment) Act, 1987. It suggests that Metropolitan Magistrate or a Judicial Magistrate of the first class will be the authority at the lowest position for reviewing such a case under the Act. The courts are allowed to take cognizance only on its own knowledge or any complaint made by the appropriate government. An authorised officer can also complain to such an authority. The aggrieved person is also authorised to take his or her own complaint to the court. Apart from these, the court shall not entertain any complaints under the Act.

The courts involved in these matters must take immediate actions in order to protect the employees from such discrimination. 

Power to make rules

The Central Government has the power to make regulations in order to protect the interest of the employees. Section 13 of the act mentions the powers of the government to form policies and regulate changes in the Act.

The Houses of Parliament can implement changes by following due procedure. The employers will have to comply with the norms, so provided. 

Power of Central Government to give directions

Section 14 of the Act states that the Central Government has the power to direct the state government as to the execution of the Act. The state government will have to comply with the directions, so provided.

Exclusion of certain cases

Section 15 of the Act was amended by Equal Remuneration (Amendment) Act, 1987 which states,

“Nothing in this Act shall apply-

(a) to cases affecting the terms and conditions of a woman’s employment in complying with the requirements of any law giving special treatment to women, or

(b) to any special treatment accorded to women in connection with-

(i) the birth or expected birth of a child, or

(ii) the terms and conditions relating to retirement, marriage or death or to any provision made in connection with the retirement, marriage or death.”

The Act provided for all possible exclusions, which helps with the protection of interests of women who require special treatment. This emanates the idea of equity and the spirit of protection of all kinds of rights.

Power to make declaration

Section 16 of the Act states exemption from liability of employer in certain circumstances.

The Act also provides for a situation where the employer has to discriminate on the basis of any ground, but sex, will be exempted from any prosecution, if after complete consideration of the case, the government deems it fit.

Power to remove difficulties

The Central Government has the power to make any order, which might be inconsistent with the provisions of the Act, but are necessary for the circumstances of that case. Such act must be necessary for the removal of such difficulty. The implementation of the provisions must be carried out smoothly, without any difficulties.

Repeal and saving

The Equal Remuneration Ordinance, 1975 (12 of 1975), which was the Act governing, before the implementation of the present Act, stands repealed by the effect of Section 18 of the current Act. The actions taken under the ordinance which was repealed, will be deemed to be under the provisions of the present Act. 

Conclusion

The Equal Remuneration Act, 1976, helps in bridging the gap between unequal remuneration faced by the women of our country. By the successful implementation of the Act, India is moving closer to being a country, which treats its men and women equally.

References

• For more information, please visit,

https://archive.india.gov.in/business/legal_aspects/equal_remuneration.php

• Equal Remuneration Act, 1976 – Bare act:

http://nclcil.in/infobank/act/The%20Equal%20Remuneration%20Act,%201976.pdf

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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This article is written by Avni Sharma, a 2nd year student of National Law University Odisha. This article talks about the Competition Act, 1998 and the procedures contained in it. 

Introduction

“And when the law of competition is sometimes for the individual, it is best for the race because it ensures the survival of the fittest in every department” 

-Andrew Carnegie

If a person were to enter a market where the practice of Cartel prevails, it will have to face losses at not less than 25-30 per cent. The Competition Act, 1998 successfully secures the market from becoming anti-competitive by imposing heavy punishments such as a fine of 10% on the worldwide turnover of the business organisation and even to the extent of disqualifying its directors for up to 15 years. 

The offences have both civil and criminal counterparts. The civil regime may include prohibition by the courts on abuse of a dominant position or when a third party has been aggrieved due to the actions of the defaulting party. The criminal regime includes convicting individuals involved in offences.

However, the offences are ascertained only after a formal procedure provided by the guidelines in the Competition Act, 1998 (CA98). The procedure begins with the opening of a formal investigation, following which, it is ensured that there is sufficient evidence for the constitution of the offence. The decision is then provided after the parties have duly represented themselves.

Inquiries and Investigations

When the complaint gets registered and it reaches a stage of formal investigations, it is assigned with: 

1. A designated case team
2. A Senior Responsibility Officer (SRO)

The team will help with day to day running of the case and the SRO will make all the necessary authorisations. The Competitions and Marketing Authority (CMA) will send the businesses, a Case Initiation Letter, containing all relevant details. In some cases, it will not be appropriate to issue a case initiation letter at the start of a case, as it may prejudice the investigation. In these cases, the CMA will issue the letter as soon as possible.

 Opening a formal investigation

Formal investigations provide a thorough process which helps with ensuring that an offence has been committed in a fair and just manner. In order to establish that infringements have been committed, the CMA is bestowed with certain powers. The major powers include:

1. Power to gather information

 1.1 Ask for written inquiries

 1.2 Power to ask Questions

2. Power to enter premises with a warrant 
3. Power to enter premises without a warrant
4. Powers of surveillance

Power to require documents and information

The CMA has powers to enquire and gather information about the documents, specified information. In order to gather information, the CMA can even enter the premises with or without a warrant.

Written inquiries

The CMA may send out formal information requests in order to access the information that would seem necessary for the investigation. The information letter will clearly tell the recipient about the nature of the enquiry. The information and examples of the type of documents that CMA may ask for includes internal business reports, copies of emails and other internal data.

These powers also entitle the CMA to ask for documents which have not been written down up till now. The requirement of the documents, is solely based on the discretion of the CMA.

In case the company has any queries regarding the scope of the requirement, it must raise them with the Case Team as soon as the query arises. 

The written information request will also contain a deadline within which, the parties have to respond without fail. The CMA holds the authority to impose a fine on the parties who do not comply with the given deadline.

CMA can conduct inquiries about the people having ‘connections with’ the businesses because any of this might amount to substantial information required for carrying out the information.

Power to ask questions

In the process, the CMA is authorised to be provided with information through any media. He is also allowed to ask questions, the extent of which is up to his discretion. If the parties have queries regarding the scope of the questions asked, the Case Team is to be approached immediately.

These powers are bestowed in order to make the investigation process a lot more transparent and makes the proof of the infringement very authentic because all the information has been drawn from first hand sources. 

Power to enter premises

Domestic premises as defined under section 28A(9) of the CA98 means (and includes) premises (or any part of premises) used as a dwelling, or also used in connection with the affairs of an undertaking or association of undertakings, or where documents relating to the affairs of an undertaking or association of undertakings are kept.

The CMA has full power to enter these premises, in case it is required by the process of the investigation. 

The occupier of the premises holds no power to restrict the CMA from entering the premises where the documents are kept. 

 Power to enter premises without a warrant

A CMA officer who is authorised by the CMA in writing to enter premises but does not have a warrant may enter business premises in connection with an investigation if they have given the premises’ occupier at least two working days’ written notice. 

Power of surveillance

The powers of surveillance are included in the powers to enter a premise. These powers are not only exclusive for the investigation stage but they are extended till the final decision. 

Access to lawyers

The fact that the parties are engaged in a legal matter, the trial will only be fair if both sides have access to lawyers. Lawyers will guide the process and also provide due diligence on the legal matters.

Limitation on the use of the powers of investigation

The CMA has powers, but those are subject to certain limitations, which are listen down below:

Legal Professional Privilege

CA98 does not authorise any CMA to disclose privileged information. The CMA cannot require for the production of any privileged information. Privileged information may include a conversation between an attorney and a client.

If a dispute arises during an investigation with regard to whether the communications, or parts of communications, are privileged, a CMA officer may request to keep such communications in a sealed envelope or package. The officer will then discuss the arrangements for the safe-keeping of these items by the CMA pending resolution of the dispute.

Self-Incrimination

The requests or information inquiries made by the CMA cannot force any business to prove against themselves. The businesses need not provide an infringement of law by their side. However, CMA has the power to ask questions that lead to the proof of the case of infringement.

Confidentiality 

In the course of investigation, there are several documents which have high confidentiality. The CMA has to strictly abide by the guidelines as to non-publishing of confidential information (CI). A deadline will be set for provision of confidentiality representations reflecting the extent of the material provided.

The disclosure of which information may have serious harm on the business, shall be preserved with utmost care. The CMA will have serious implications if there is disclosure of such information.

Human Rights Act, 1998 and Police and Criminal Evidence Act, 1984 (PACE)

Section 7(1) of the Human Rights Act, 1998, states that if a person claims that a public authority has acted or proposed to act against Section 6(1), he may (a) initiate proceedings in the appropriate tribunal or court, or (b) rely on the rights concerned in any legal proceedings or convention right provided he is (or would be) a victim of such unlawful act.

The CMA will be prosecuted if any act is unlawful and not up to the mark of predefined standards. 

In Police and Criminal Evidence Act, 1984, the standards have been set in order of which, the conduct of the CMA, must lie. Otherwise, action will be initiated against the person.

Sanctions

Sanctions against the businesses for non-compliance along with the powers of investigations, have both civil and criminal repercussions. The sanctions are:

1. Requirements of a formal notice are not complied with. 
2. Intentional obstruction in the investigation of an office.
3. Destroying, disposing, falsifying or concealment of any necessary documents.
4. Intentionally, providing false information in order to mislead the investigations.

Penalties 

The penalties are generally financial in nature, but in case of any of the offences above listed, the person may also have to face imprisonment upto 2 years.

EU Investigations

The European Commission investigates evidence or allegations of anti-competitive behaviour contrary to Articles 101 or 102 TFEU by companies that has an impact in more than one EU country.

The proceedings under the Competition Act, 1998 are derived from the laws of competition of Europe.

Complaints and Super-Complaints

Competition law provides for serving the interests of the consumer in various ways because the act was made for consumer welfare. The ways in which consumer interests can be addressed can be:

1. Complaints
2. Super complaints

Complaints

Consumers may lodge a formal complaint to the relevant national competition authority or to the European Commission alleging that an infringement of the competition laws has taken place. Consumers have the liberty to present their views to the competition authorities or to the European Courts where the alleged organisations can be questioned and consumer grievance can be addressed. The complaint may also help in suing the organisation for the offences committed by them. 

Super- Complaints

The UK Enterprise Act, 2002, brought in the concept of Super Complaints. Under Section 11 of the Act, certain designated bodies may complain to the OFT that any feature, or combination of features, of a market in the United Kingdom for goods or services is, or appears to be, significantly harming the interests of consumers.

The Officer of Fair Trading (OFT) has to publish the response in a matter of 90 days and the response. The responses may include, enforcement actions, market studies or even a market investigation to the Competition Authorities, dismissal of the complaint. The commentators have praised the process of Super Complaint highly, as it not only brings administrative changes but also engages people into a dialogue regarding the procedures. 

Opinions and Informal Advice

In 2010, the OFT introduced the short for opinion, in order to guide the competitors in a market against not only indulging in anti-competitive activity but also helping them in their business. The advice and opinions include providing application of competition law, prompt guidance, resolving novel questions among the competitors. It constitutes an important tool in order to establish fair practices in the trade.

Enforcement

Procedure

The procedure contains several important parts including Statement of objections, involving third parties, responding to statements of objections, considerations, letters of facts, supplementary of objections, draft penalty statement and the infringement decision is then rendered. Let us have a look at each step one by one. 

Statement of objection

Statement of objection includes a provisional view and proposed steps in the process. The party who has been accused will be provided with a fair chance to go through the exact challenges that have alleged against them. It will include facts and legal economic assessment. It will also issue the directions to stop the infringements if any. 

The publication of statements of objection will be subject to the CA98 guidelines. Along with issue of Statement, the addressee will also be mentioned who will have the opportunity to access the file. The addressee will also have to inspect the file and may provide any third parties who may be able to assist materially the assessment of a case with an opportunity to submit written representations. 

Response to the statement of objection

The recipient will have a chance to represent his side in front of the Competition Decisions Committee by making written and oral submissions. The Procedural Officer will chair all the Oral Hearings. The transcript of this oral hearing is preserved and the facts are then verified. 

Following the oral hearing, the Procedural Officer will report to the Competition Decisions Committee, indicating any procedural issues that have been brought to the attention of the Procedural Officer. 

Procedural Officer

The procedural officer is the authority to which the complaints for procedure can be addressed. He can review the decisions of the PSR, upto the extent of:

1. Deadlines for the response from the parties in order to receive the information requests, to provide written representations on the Statement of Objection or Supplementary Statement of Objections or to provide non-confidential versions of documents,
2. Requests for treatment of CI in documents on the PSR’s case file, in a Statement of Objections or in the decision given at the end of the procedure,
3. The disclosure and non-disclosure of certain documents is requested,
4. Oral hearings and issues related to them, 
5. Other significant procedural issues that may arise during the investigation.

The review by Procedural officer will be restricted to the above-listed situations. Besides, the procedural officer will chair any oral hearing along with preparing the report of fairness.

Subsequent procedure

The steps following the above representations are:

1. Consideration
2. Letter of facts
3. Supplementary statement of objections
4. Draft penalty statement
5. Infringement decision

Consideration 

The Competition Decisions Committee considers all the documents, oral hearing Transcripts provided. It may also take advice from economists, lawyers etc.

Letter of Facts

If the committee finds any new evidence, appropriate time is provided to the recipient in order to respond to such evidence. Further, the time allowed for responding depend on the volume and complexity of the new evidence. 

Supplementary Statement of Objections

The Competition Decision Committee will give the addressee another opportunity to respond in writing and orally, and to inspect new documents on the file. 

Draft Penalty Statement

This will set out the key aspects relevant to the calculation of the penalty that we propose to impose on that party, based on the information available to us at the time. This also duly includes the reasoning given by the committee that compelled them to take the decision. 

Finally, the relevant authority, after seeking representations on confidentiality from the addressee(s) and third parties, if required, will publish a summary and a non-confidential version of the infringement decision. 

Commitments 

Commitments are statements made by the parties in order to promise their conduct in the future. The Section 31A of the CA98 mentions, that the committee may consider the commitments made by the parties and may reduce the penalty and punishments.

Interim Measures

Under section 35 CA98, CMA has the power to direct a party to comply with temporary directions (referred to as ‘interim measures’) till the investigation is not completed. In summary, PRS may require a party to comply with temporary directions where:

• the investigations have commenced but not concluded, and 
• it considers it necessary to act urgently to protect the public interest or to prevent significant damage to a person or category of persons.

Directions and provisions in practice

In terms of the procedure:

• Any application made to the case team should be in writing and must provide all the possible details as to why the grounds set out in section 35 CA98 are met. The Case Sponsor may provisionally decide to give interim measures direction (a provisional decision which may follow a complaint or be on our own initiative). PRS will write to the party to which the directions are addressed setting out the terms of the proposed directions and the reasons for giving them. 
• PRS allows parties to have a reasonable opportunity to make representations. 
• Except the parts that are confidential, parties are allowed by PRS to inspect the documents in the file.
• After taking into account all the representations and circumstances of the case, and having satisfied ourselves as to the adequacy of the evidence that is being relied upon, PRS will make the final decision and inform the applicant and/or any Formal Complainants and the party against which the order is being sought. The responsibility is on the Case Sponsor to decide whether to give an interim measures direction or not, which is subject to the approval of PSR senior management.
• PRS will publish any interim measures direction it issues.

Persons who may be subject to directions

All the parties involved in the matter will be subject to the directions of the PRS. The compliance of the provisions must be taken due care of.

Enforcement of compliance with directions

The penalty guidelines and CMA’s leniency policy will be applied under CA98 for enforcement of the penalties and orders. Leniency applications need to be made directly to the CMA (in particular, since PRS does not have concurrent powers under EA02 in relation to the prosecution of the cartel offence, and cannot grant immunity from prosecution in relation to this offence).

Penalties

Maximum amount of liability

The liability needs to be admitted first. After the admission, in order to ascertain the amount of settlement, the amount of maximum liability is ascertained on the basis of nature of the offence.

The Guidance as to the appropriate amount of a penalty

The guidance as to the appropriate amount needs to be sought from the CMA.

The CMA has prescribed a six-step approach which is procedurally established and has also been reformed to adjust the requirements of the process.

• Step 1 – The starting point needs to be determined.
• Step 2 – The duration needs to be adjusted.
• Step 3 – Aggravating and mitigating factors need to be adjusted.
• Step 4 – Specific deterrence and proportionality needs to be adjusted.
• Step 5 – Efforts to prevent the maximum penalty is to be exceeded and double jeopardy needs to be avoided.
• Step 6 – Reductions under the CMA’s leniency programme and for settlement agreements need to be avoided.

This six step approach helps the CMA in carrying out a smooth investigation.

 Immunity for small agreements and conduct of minor significance.

Small agreements and conduct of minor significance is granted immunity because they are are not considered at the level optimum to create binding decisions by the companies. This immunity not only provides help to the companies, it also helps the CMA in not looking at the insignificant aspects of the investigation.

Leniency

Terminology 

Leniency refers to the relaxation and immunity from fines and penalties. It also includes relief from criminal prosecution. The system also protects from director disqualification. The step taken by the OFT in the direction of Leniency will help in the enhancement of the enforcement procedure in the Cartel offence.

Key features of the leniency system

• The hypothetical cases on requests will be available on a no-name basis.
• The legal advisors are given the ability to determine whether immunity should be available to their client prior to the client’s identity is revealed.
• ‘Markers’ are important for the formal agreement of leniency protection. The availability of the same is a key feature in the present situation.
• Criminal immunity is guaranteed for all cooperating current and former employees and directors in cases where the applicant informs the OFT of cartel activity that it was not previously investigating.
• There are immunities available or reduced penalty for cases where applicant is the first one to approach the OFT. provided there is a pre-existing investigation going on.
• The reduction of any penalty that might be imposed on applicants who are not the first to apply and there is a possibility of granting individual immunity to some cooperating current or former employees and directors in such circumstances.
• There is a commitment that the OFT will not apply for a Competition Disqualification Order against any current or former director of a company which benefits from leniency in respect of the activities to which the grant of leniency relates.
• Oral applications are also possible under appropriate circumstances.
• Applications by undertakings or by an individual is also possible.
• The corporate and criminal immunity will not be granted smoothly, because of the high threshold of standard of proof being a corecer in form of an individual or an undertaking. 

Eligibility of different types of leniency

There are three types of immunity under the leniency system:

Type A immunity includes cases where there is no pre-existing CMA investigation. This immunity will not eligible for those who have coreced others to enter into a cartel.

Type B immunity is the one where the CMA is already conducting an investigation into cartel activity, the first applicant to provide additional evidence of the cartel prior to the CMA issuing a statement of objections is eligible for this immunity. 

In addition it must:

Accept that it engaged in cartel activity.

Cease its participation in the cartel.

Agree to provide continuous co-operation throughout the CMA’s investigation (and any subsequent appeals).

Have not been coerced by the take part in the Cartell.

Type C immunity is applied in circumstances where another undertaking has already reported the cartel activity (or where the applicant has coerced another undertaking to participate in the cartel), only this type of leniency is available.

Checking the availability of leniency and initial application

Seeking Confidential Guidance 

OFT is supposed to provide its views, which is considered to be binding in nature,in case the discussion is followed-up by an application within a reasonable time. Further provided that the information was given when the advice was sought was not false or misleading and there has been no material change of circumstance.

Conducting Internal Investigation

An internal investigation will be conducted by the OFT in order to ascertain the authenticity of the application.

Application of legal privilege

The OFT will not as a condition of leniency require waivers of legal professional privilege (LPP) over any relevant information in either civil or criminal investigations.

Maintaining confidentiality and securing evidence

Utmost confidentiality will be maintained and the evidence will also be secured in order to make the application move further.

Checking the availability of leniency and initial application.

Ascertaining Type A immunity

A confirmation from the legal advisor is required. It is ascertained that there is ‘concrete basis’ for cartel activity. A genuine intention to confess must be present.

When Type A is not available

The applicants are free to apply in any other option. 

Cooperation throughout investigation

It is expected that the parties maintain cooperation with the authorities examining and investigating the process. Immunity is provided only after a due procedure and the parties must cooperate with the authority in order to attain the same.

Leniency and No Action Agreements 

A proper determination of whether a person should receive a no-action or comfort letter cannot generally be made until at or near the conclusion of the OFT’s criminal investigation. It may not be necessary for all lines of enquiry to have been completed.

Disclosure and information

The information which might have an impact on the overall business, will not be disclosed. Rest information which is non-confidential will be disclosed. 

Issues relating Criminal Proceedings

The major issue relating to the Criminal Proceedings are the interactions between the cartel offence in the UK and the Commission Leniency Notice.

The OFT is aware that some practitioners might have a concern that undertakings approaching the Commission under the Commission Leniency Notice might inadvertently increase exposure for the undertaker’s current and former employees and directors to the risk of prosecution in the UK for the cartel offence, in those cases where the infringement had some effect on the UK. 

Other procedural issues: leniency plus/penalties

The major issues relating to procedures are mainly related to Leniency are Leniency Plus and Penalties. An undertaking co-operating with an investigation by the OFT under CA98 in relation to cartel activity in one market (the first market) may also be involved in completely separate cartel activity in another market.

Penalty calculations 

There are issues regarding the calculations of penalties due to the availability of unliquidated damages. These might come up as issues because the calculations might end up being complicated.

‘But For’ Test 

Where a Type B or Type C applicant that is granted a reduction in financial penalties, has provided evidence of previously unknown facts relevant to the gravity or duration of the infringement, the OFT will not take account of such information to the detriment of the applicant when assessing the appropriate amount of penalties.

Bad faith / withdrawal of leniency / revocation of no-action letters

Bad faith

The act of destruction of materials which were necessary for the investigations to be carried out. These also include unauthorised disclosure of information. 

Withdrawal of Leniency

Where the applicant has failed to cooperate or otherwise failed to meet the conditions, the withdrawal of leniency is applied.

Revocation of no-action letters

A no-action letter may be revoked, if 

• The recipient of a letter ceases to satisfy in whole or in part any of the relevant conditions, or
• The recipient of a letter has knowingly or recklessly provided information that is false or misleading in a material particular.

Settlements

In the process, ‘Settlement’ is a stage where the businesses admit on committing the offence and the administrative process is charged on them. 

Discretionary nature of settlement

In determining whether a case is suitable for settlement the CMA will have regard to a number of factors. The primary factor is whether the CMA considers that the evidential standard for giving notice of its proposed infringement decision is met. The factors make it discretionary on the part of the CMA.

Requirements of a settlements

The admission of liability is the foremost requirement of a settlement. The infringing behaviour will be ceased in order to make the liability and penalty. The CMA will then make sure that the penalties will be paid in due time. 

After the approval of the settlement is done, the penalty statements are drafted and the further process of enactment is carried out. 

Statistical analysis

The statistical analysis shows that the Authorities have been fair in their proceedings and have displayed the penalty calculations have undergone transparent procedures. 

Appeals against the decision imposing penalties

The appeals for decisions go to the Competition Appeal Tribunal. The CAT is a specialist independent judicial body which was created by Section 12 of the Enterprise Act, 2002. Further details are provided in Schedule 2 to the Enterprise Act, 2002. 

Aggravating Factors

A basic amount, called the ‘base fine’, which is calculated first according to the volume of commerce affected. This base fine is then adjusted for a number of aggravating and mitigating circumstances. Aggravating factors include coercive measures, role of the officers, continuation of offence etc. 

CAT can increase penalties

The Competition Appeal Tribunal is authorised to increase penalties in case the offences have been proved twice against the appellants. The appellants have no right to claim against the increase of the penalties.

The Cartel Offence and Company Director Disqualification

Cartel offence

Definition of Cartel Offence

Cartel offence was a new type of statutory fraud which was brought about with the Enterprises Act, 2002.

Cartels can take many forms but essentially consist of agreement or collusion among two or more competing commercial enterprises designed to increase their profits by either:

1. Fixing prices,
2. Sharing markets,
3. Restricting output of supply or production, or
4. Collusive tendering/bid rigging (who should win a contract).

Prosecution Guidance

Prosecution guidance is done in two steps by the full code test:

1. Evidential Stage 
2. Public Interest Stage 

Evidential Stage 

At this stage the CMA must be satisfied that there is a presence of a solid case of Cartel against the parties in order to provide a realistic view. At this stage, the CMA must also consider the case of the defence and how it is likely to affect the prospects of conviction. 

Public Interest Stage

This stage basically includes the prosecution stage. It is not necessary that this has to be done only after the evidential stage, it can even happen simultaneously. The CMA ensures that there is public interest involved and the decisions will be taken accordingly. The intensity of the offence is measured according to the harm caused to the public. The culpability of the parties is also ascertained. The impact on the community is also taken into consideration and it is checked whether prosecution is a proportionate response to all the answers to the above question.

Circumstances in which the cartel offence is not committed

There are circumstances in which Cartel offence is not committed. After the parties are able to prove this case, they are exempted from the liabilities so charged and are set free to continue their market operations.

Defences

There are mainly three types of defences, only one of which needs to be proved in every given case. First, the party is able to prove that there was no intention of creating such an agreement which would be detrimental to the customers.

Second, the proof of not knowing that there was no intent of hiding this from the customers.

Third, the party took reasonable steps to disclose this to the customers.

Apart from this, there is no scope of any other.

Company Director Disqualification

Grounds of Disqualification

The directors in case of proof of misconduct may be disqualified from the Board immediately in cases where:

1. Wrongful trading
2. Misconduct 
3. Failure to comply with competition laws

Procedure 

Section 9C of the Act includes a procedure:

1. The grounds of the proposal of a Competition Disqualification orders are ascertained.
2. The summary of evidence is produced.
3. The copy of written submissions is acquired.
4. The other necessities are fulfilled.
5. An assurance that, if a Competition Disqualification Undertaking offered by that person is accepted by the CMA before proceedings are issued, the CMA will not seek to recover any costs from that person; 
6. A statement that once a CDO application has been made to the court, the award of costs will be at the discretion of the court and that the general principle is that costs will be awarded against the unsuccessful party.

Conspiracy to defraud under Common Law

Conspiracy to defraud is an agreement where two or more persons enter into an agreement to deprive another person of his or her natural rights. 

The House of Lords in their decision in the case of Norris v Government of the United States of America and others, said that price-fixing is constituted as criminal conspiracy to defraud. It will be considered as final by the House of Lords. The Cartel offence is officially a conspiracy to defraud under Common Law.

Concurrency

The term ‘concurrency refers to the position under which, the sectoral officers share the power of implementing competition policy with the designated competition authority. The regulations for concurrency are provided below.

Concurrency Regulations and Concurrency Guidelines

The Competition Act, 1998 includes the regulations to be followed in concurrency:

1. Information regarding potential Cases must be preserved.
2. If a competent person wants to exercise its prescribed functions, it must submit in writing about doing so.
3. The persons must agree with the rules laid under Part 1.
4. Avoidance of double jeopardy is necessary.
5. The competent persons must transfer the case to the transferee.
6. Each competent person must share crucial information relating to the case with other competent persons.

UK Competition Network

The purpose of the UK competition Network was to give effect to the Enterprise Regulatory and Reform Act, 2013. The UKCN is going to promote Strategic Dialogue, helps in enforcement cooperation under competition law, enhances capabilities and helps in sharing best Practices under the Act. It also helps with Advocacy and Annual Concurrency Reports within the Competition Network.

Concurrency arrangements in Practice

Concurrency regulations as mentioned above will be applied in practice. They are not meant to be exhaustive in providing guidance but are there to be provide consistency in decision making on a regular basis. They also facilitate the appeals procedure which helps in UKCN Practice and Procedure. The competition regulations are also facilitated by the concurrency practice.

Report on the operation of concurrency arrangements 

In 2014, the government of UK introduced a concurrency regime which later turned into an annual report system. The report of 2019 understands the operation of concurrency arrangements. However, as the CMA has indicated in previous reports, concurrency should not solely be evaluated on the basis of numbers of enforcement cases. Markets work also forms an important part of the concurrency arrangements and both the CMA and regulators have carried out significant markets work during this reporting period. 

Appeals 

Appealable Decision

The decisions which have reasonable grounds of appeal to the Competition Appeal Tribunal (CAT) shall move for an appeal. It will also include decisions where parties are unsatisfied with the final decisions. The parties must know that the appellate authority is authorised to increase the penalty amount if found guilty.

Successful appeals against explicit non-infringement decisions

The appeals can prove successful if there is an explicit non-infringement. It must be proved beyond all reasonable doubt.

Successful appeals against implicit non-infringement decisions

In certain cases, the appeals with implicit non-infringement decisions are also successful by means of evidence.

Unsuccessful appeals by third party complainants

If a third party complaints are unsuccessful, then they lose the chance to appeal. 

Competition Appellate Tribunal Rules 2013

The rules include regulations regarding all the possible requirements under an appeal.

It includes:

1. Commencement of appeal proceedings.
2. Response to appeal proceedings. 
3. Intervention and consolidation forum.
4. Claim for damages.

Procedure 

The procedure contains:

1. Notice of appeal (this must be filed within 2 months of the decision by the CMA).
2. Registrar of CAT will send the notice to the respondent. 
3. Filing of a defence by the respondent.
4. Convening of a case management conference.
5. A timetable of the case is fixed.
6. The procedure is tried to be completed in six months but it might take longer than expected.

Powers of the CAT

1. Confirm or set aside on all parts of the case.
2. Remit the matter to the CMA.
3. impose, revoke or vary the penalty.
4. Make any decision which CMA has already made.
5. Give directions to the CMA.
6. Dismiss the appeal or quash the whole or part of the appeal.

Cost appeals

Cost appeal has been amended to reflect the entry into force of the competition provisions of the Enterprise and Regulatory Reform Act, 2013 (ERRA). On 1 April 2014, the CMA took over all the competition functions of the Office of Fair Trading (OFT) and the Competition Commission, which ceased to exist. However, this note continues to refer to the decisions and actions of these former authorities, taken up to 31 March 2014.

Reform

The appellate procedure has been reformed from time to time in order to fit the standards and needs of the appellants.

Can an Article 267 reference be made where a court or tribunal is applying the Competition Act, 1998?

Yes, an Article 267 reference be made where a court or tribunal is applying the Competition Act, 1998.

Which courts or tribunals in the UK can make Article 267 reference in a case under the Competition Act, 1998?

Article 267 of TFEU allows National Courts to request preliminary rulings from the Court of Justice of the European Union. According to the view of the United Kingdom, the reference is also open to the Courts and Management Authority.

Conclusion 

The Competition Act, 1998 covers all the relevant requirements for an offence of Cartel. Cartel as an offence kills the vibe of a fair competitive market where merits are counted as baselines of winning in a market. The offence is detrimental for the customers as well, as they do not get competitive prices and the markets are unfluctuating at all times. The customers suffer the most by the effect of this offence, which is why they have been granted the appropriate rights. These offences have seen a significant fall after the implementation of Competition Act, 1998.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post Competition Act, 1998 and the cartel offence: Public enforcement and Procedure appeared first on iPleaders.

This article has been written by Anurag Mawai. In his article, the author discusses “How Did Apple Convince Book Publishers to make books available despite offering lower shares than Amazon?”

In July of 2013, The Southern District Court of New York ruled in an antitrust suit filed by Department of Justice and 33 States of U.S.A, that Apple along with five major publishing houses indulged in anti-competitive practices and conspired to increase the price of EBooks. Apple denied all charges of wrongdoing and announced that it will appeal against the decision, while the major publishing houses settled separately with the Department of Justice. A major question which comes to mind after this incident is how can one company which until three years back had not even entered the EBook market, change the entire market’s pricing models and to such extent that an antitrust suit is filed by the federal government of the United States.

The Background

 To delve into this story, we have to look at the EBook market as it existed in 2009 where the only vendor ruling the market was Amazon, controlling more than 90 percent of the distribution network. Its success was because of Kindle and its loss leader formula of prices i.e. making available e-books at a price of $9.99, but paying the book publishers the cover price of $15 and even as high as $20, just to capture market share and drive rest of eBook vendors out of business. The Publishers even though were happy for the increased sales volume, they feared that customers will begin to form a perception that the justified price of an eBook is $9.99 and any more than that is gratuitous overpricing. To add more to the woes of Publishers, eBook sales were cutting into the hardcover sales, and decimating the brick and mortar stores which served as profit centers to the publishers besides Amazon. This made the Publishing houses tied to Amazon in the near future for any distribution strategy. The publishers saw the reaper in Amazon but then came a digital knight in the form of Steve Jobs, Apple desired to launch in January 2010 its IPad and on it, an eBook store connected to iTunes as there were predictions of the eBook market to grow from $42 billion in 2009 to around 10 times in the next four to five years. With the IPad launch and thousands of credit cards available in iTunes, Apple was not willing to fight Amazon on the loss leader turf it had created, so it instead changed the whole market model.

 The Problematic Wholesale Pricing Model

Traditionally books both hardcover and eBooks were sold through a “Wholesale” Model which meant the publisher used to set the cover price for a book and bookstores paid a negotiated wholesale price, usually around 50 percent of the cover price. The bookstore after that will set the retail price, like a book with a cover price of $40 will have a wholesale price of around $20 and the bookstore may sell it for $35 and show $5 as discount. (Most of the authors have royalty agreements on the basis of cover price like a 10% royalty agreement will be paid on $40 not $35). Amazon under this model played fast and loose with the retail price to its strategy of being the loss leader and driving the competitors out of business. It was giving deep discounts on every article like a book with cover price of $15 or even $20 was sold for $9.99  suffering a loss of up to even $10. This price was not viable and made other vendors close shop it was a classic sales technique of Amazon by which it penetrated markets and gathered market share and reduce costs by logistics and volume growth. But this had the book publishers worried as even though they were getting paid the cover price, the general public preferred to buy the cheaper e-book of $9.99 than the hardcover of $27, publishing houses began to delay eBook releases to Amazon to shore up any hardcover sales they could get but this led to increased risk of piracy and violation of copyrights leading to further losses. This eBook price warfare had even built a perception in the general public that eBooks are inherently made with less cost so the $9.99 is the real valid price which should be charged. This perception led to fear among publishers that if this is to continue they will be trapped in this whirlpool of loss as major book publishing costs are incurred in proofreading, editing, advertisement, marketing and the manpower costs rather than printing costs making eBooks just as expensive to make as hardcover, eBooks may have advantages regarding storage costs and transport but still these could not bring the price difference to the Amazon figure of $9.99. The Publishers knew if this model was continued for long Amazon would hold the sole control of book selling business and hardcover business would be rendered waste in light of this sentiment.

The Ingeniously Collusive Solution

When Apple approached Harper Collins and other publishers it was not willing to fight Amazon on price as it knew it would be like bidding against itself for a competition to the Red Line Balance Sheet. So it convinced the publishers to change from wholesale model, to an “Agency” model, the publishers readily agreed as they themselves wanted out of the price perception game hence they renegotiated the terms of distribution along these new lines with other distributors including Amazon as well. Amazon first protested to this renegotiation but later gave in as all major Publishing Houses put up this condition for renewal. But what exactly was this “Agency” model, and how could it alleviate the publishers pain.

What is Agency Model 

In “Agency” Model publishers would set the retail prices directly and vendors will sell books only at that price reducing the space for price maneuver, vendors will not pay the whole cover price to the publishers but only a certain portion of the new given retail price keeping some portion as their own profit (publishers will get 70% of the price instead of the whole cover price), in this manner Publishing Houses cut out the vendors from  the price negotiation process. Apple uses this model in its App Store and Mac App store where they paid the developers 70 percent of the price of the app and the rest 30 percent is taken by Apple. This actually gave the publishers lower returns than the wholesale model under Amazon, where the whole cover price was paid but the publishers agreed as not only they get to decide the cover price according to the margins and revive the pulp sections of their inventory but now they get to write the perception story of eBooks.

There is nothing inherently wrong with the “Agency” model per se, as we have seen Apple uses this model to pay for App Store which has never been accused of antitrust violation. The actual problem arose when two key clauses which Apple inserted with book publishers that led to price collusion between the Publishing Houses as manufacturers and Apple as their leading vendor- Price tier with caps and MFN (Most Favored Nation) clause.

• Price Tiers with Caps- Apple’s executives knew in order to capture a fair market and not be ridiculed they had to be in range of Amazon’s price range so they introduced two price caps on of $12.99 and another of $15.99. The $12.99 was for eBooks whose hardcovers were priced from $24 to $27 and $15 for the hardcovers priced around $27 to $30. There was also a range of $16.99 and $19.99 for eBooks whose hardcovers were priced more than $30 with a $5 increment for new releases. The price tiers prevented publishers from setting unreasonably high prices, as Apple knew it had to be within some dollar range of Amazon products to effectively compete with it.
• MFN Clause- Most Favored Nation clause means that if Publishing Houses gave a discount to any vendor then they have to give the same to Apple as well. If any vendor had lower prices than Apple, Apple could match it and pay Publishing Houses on that price only guaranteeing profit to Apple even at a lower price for example- if in the future Amazon had a sale where it was selling Times Bestsellers at a discounted rate of $10, even if the retail price fixed by Publishing Houses was $15, then Apple could also match that price without violating the agreement, and pay 70% of $10 to the Publishing Houses removing any additional burden of higher prices.  MFN Clause ensured that Apple was always ahead of the price curve compared to other platforms and stores and retained its customers as they knew if the eBook was available somewhere else at a cheaper price, soon it will be available at that same price in ITunes too. This strategy also gave Apple a steady customer base with practically zero price competition.

The New Mechanism of “Agency” model coupled with the clauses of Price Tiers and MFN enabled the publishers and Apple to decide the price of eBooks and neither Amazon nor any other retailer like Barnes and Noble could change the price significantly, the only wiggle room they had was some discount on the listed price given at the expense of taking huge losses whose competitive advantage was taken care by MFN Clause in these vendor agreements.  Apple wanted to launch IPad in the market on its own terms and with the publishers having negotiated Agency model and other clauses with the rest of distributor chains in eBook industry it was ready to make the machines dance to the tune of its ballad.

The Work in motion

Due to these changes in EBook market when in 2010, the IPad launched it started a chain reaction in eBook price wars, soon many publishers began increasing their prices and even started to remove their titles from Amazon, if it did not agree to the new pricing models. Times Bestsellers were not available for over two months on Kindle as Publishers could not come to an agreement regarding price structure with Amazon. Amazon as a result lost its market leader status , and began to dig its heels after this phenomenon, it tried to portray itself as a messiah of the common folk trying to bring books to people at an affordable price, but really was concerned about its falling game plans of eating into the profits of other vendors. After a lengthy battle with almost all publishing houses and suffering losses running into millions Amazon finally relented and let the $9.99 model fall, and with it lost the pole position in eBook race. EBook sales dipped in total, but in revenue due to higher prices the turnover increased. Apple constantly increased its market share, no matter the title, the MFN Clause ensured that it was available on iTunes at the most competitive price of the market. Even after a total decline in sale volumes, publishers did not flinch as they now had at least an option to do some price management to increase profits and avail other platforms for their sale promotion. Hardcovers also began to see some traction, as the gap between the pulp and the digital files began to shrink. But most importantly Apple’s greed led to some opening of market which had been till now the playground of a sole ruler. This vice of Mr. Jobs gave him profits and might have been incorrigible but was he the sole culprit?

Is Apple the only one to blame?

Many trade analysts do not solely blame Apple for the fiasco as Amazon’s predatory pricing was also not beneficial for the sector and for industrial competitiveness. But as the United States Trial Court in its judgement observed, if Amazon was indulging in predatory pricing then the justified remedy for the Publishing Houses was to bring it to proper authorities rather than engaging in anti-competitive practices themselves. But Mr. Jobs was never known to be a subtle spectator of his industry he went ahead with the move and orchestrated a plan with so many moving pieces which changed an entire sector worldwide and had effect on multiple industries from electronic sales, publishing, ecommerce, gadgets and even disturbed the piracy markets all over the world. From being a leviathan in eBook markets sitting atop the throne as the sole ruler in times to come for eBook distribution Amazon was thrusted into the jungles of open competition, thanks to shrewd planning and careful orchestration by Steve Jobs. The actions may be unscrupulous if seen in black and white but besides his wardrobe Mr. Jobs never dabble in these colors, he was an artist in grey master in finding loopholes and solutions to make an enterprise work, and his creativity maybe saved an entire sector from being captured by one enterprise, as we read about his strategy in his biography available on Amazon at a price of $16 not $9.99.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post How Did Apple Convince Book Publishers to make books available despite offering lower shares than Amazon? appeared first on iPleaders.

This article has been written by N. Pradhan, Indian Revenue Service Officer. In this artice the author discusses about “Are Findings Recorded by The Constitutional Bench of The Supreme Court In Civil Case Binding On Pending Criminal Case?”

The final judgement in the Ram Janmabhoomi-Babri Masjid dispute, popularly called the Ayodhya case, was declared by the Supreme Court of India on 9 November 2019. The dispute emanated from the fundamental belief and assertion that Lord Ram was born 9,00,000 years ago in the Treta Yuga, in a room located under what was the central dome of the Babri Masjid. The Masjid was built on the orders of Mughal emperor Babur in the 16th century and occupied 1,482.5 square yards before its demolition by kar sevaks on December 6, 1992.

The Supreme Court ordered the land to be handed over to a trust to build the Hindu temple. It also ordered the government to give an alternate 5 acres of land to the Sunni Waqf Board for the purpose of building a mosque. The bench delivering the verdict also mentioned about the demolition of the Babri masjid on December 6, 1992. “Justice would not prevail if the court were to overlook the entitlement of the Muslims, who have been deprived of the structure of the mosque through means which should not have been employed in a secular nation committed to the rule of law,” the bench observed. “…The entire structure of the mosque was brought down in a calculated act of destroying a place of public worship,” it said. “The Muslims have been wrongly deprived of a mosque which had been constructed well over 450 years ago.”

The said demolition of the Babri Masjid on December 6, 1992, and the criminal conspiracy that led to the demolition is being heard by a Lucknow court. This is the other Ayodhya case. It is important to understand the significance and impact of the Apex Court’s words in one Ayodhya case on the other Ayodhya case?

The two Ayodhya cases are distinctive by their very nature. One is a title dispute related to ownership of the land, and the second a criminal trial arising out of FIRs filed by the CBI in relation to the demolition of the Babri Masjid at Ayodhya, which goes beyond ownership. One pertains to civil matter and the other criminal.

Now talking of civil and criminal matters, certain offences are more serious in nature and due to their negative reflection of the character of the offender in question and the societal implications of the offence being committed; the State took the responsibility of arguing such cases of criminal nature. An implication of the serious nature of criminal proceedings is the higher degree of proof that is required to convict a human being of a crime. It is established that civil proceedings use the system of ‘preponderance of probabilities’ to determine the rights and liabilities of individuals whereas criminal proceedings require the accused person’s offence to be proved ‘beyond reasonable doubt’.

The question arises-can the findings or judgement of civil case be used as evidence in criminal proceedings? To speak legally, one is referring to inter-admissibility of civil judgments in criminal proceedings and vice-versa. X is convicted of rape case. Y, a magazine editor, publishes a report stating that X is a rapist. When X sues Y for libel, can Y adduce evidence of X’s conviction in support of his plea? Now if X is acquitted of rape charge, can he use his acquittal in subsequent proceedings to support denial of rape?.

 In M/s Karamchand Ganga Pershad & Anr. Vs. Union of India & Ors., AIR 1971 SC 1244, Supreme Court, while dealing with the same issue, held as under :-

“It is well established principle of law that the decisions of the civil courts are binding on the criminal courts. The converse is not true.”

The said Judgment was delivered by a three-Judge Bench of without taking note of the Constitution Bench Judgment in M.S. Sherrif Vs. The State of Madras & Ors., AIR 1954 SC 397 on the same issue, wherein it was held as under :-

“As between the civil and the criminal proceedings we are of the opinion that the criminal matters should be given precedence. There is some difference of opinion in the High Courts of India on this point. No hard and fast rule can be laid down but we do not consider that the possibility of conflicting decisions in the civil and criminal courts is a relevant consideration. The law envisages such an eventuality when it expressly refrains from making the decision of one court binding on the other, or even relevant, except for certain limited purposes, such as sentence or damages. The only relevant consideration here is the likelihood of embarrassment.”

In K.G. Premshankar Vs. Inspector of Police & Anr., AIR 2002 SC 3372, the Supreme Court placed reliance upon the Judgment of the Privy Council in Emperor Vs. Khwaja Nazair Ahmad, AIR 1945 PC 18 wherein it has been held as under :-

“It is conceded that the findings in a civil proceeding are not binding in a subsequent prosecution founded upon the same or similar allegations. Moreover, the police investigation was stopped and it cannot be said with certainty that no more information could be obtained. But even if it were not, it is the duty of a criminal court when a prosecution for a crime takes place before it to form its own view and not to reach its conclusion by reference to any previous decision which is not binding upon it.”

In Iqbal Singh Marwah & Anr. Vs. Meenakshi Marwah & Anr., (2005) 4 SCC 370, the Supreme Court held as under :-

“Coming to the last contention that an effort should be made to avoid conflict of findings between the civil and criminal courts, it is necessary to point out that the standard of proof required in the two proceedings are entirely different. Civil cases are decided on the basis of preponderance of evidence while in a criminal case the entire burden lies on the prosecution and proof beyond reasonable doubt has to be given. There is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the basis of the evidence adduced therein.”

There are no apparent provisions in civil law in India regarding admissibility of criminal judgments in civil proceedings.  Findings of fact recorded by the Civil Court do not have any bearing so far as the criminal case is concerned and vice-versa as standard of proof is different in civil and criminal cases. There is neither any statutory nor any legal principle that findings recorded by the court either in civil or criminal proceedings shall be binding between the same parties while dealing with the same subject matter and both the cases have to be decided on the basis of the evidence adduced therein. However, there may be cases where the provisions of Sections 41 to 43 of the Indian Evidence Act, 1872, dealing with the relevance of previous Judgments in subsequent cases may be taken into consideration.

The Indian Evidence Act, mentions the relevancy of ‘other’ judgments and when they are admissible in Sections 40, 41, 42 and 43. The scheme of the Act is such that admissibility of judgments in other proceedings to criminal proceedings is an exception to the rule, and such exceptional features are laid out in the aforesaid provisions.

Section 40 -Previous Judgements relevant to bar a second suit or trail –
The existence of any judgment, order or decree which by law prevents any Courts from taking cognizance of a suit or holding a trial, is a relevant fact when the question is whether such Court ought to take cognizance of such suit, or to hold such trial. The object of the provision is to avoid multiplicity of the suits and to save the precious time of the Court. In Civil Procedure Code Section 11 provides rule  of Res Judicata and in Cr.P.C and constitution it is provided that no one shall be punished for the same offense twice i.e. rule of double jeopardy.

Section 41- Relevancy of certain judgements in probate, etc., jurisdiction-  

 A final judgment, order or decree of a Competent Court, in exercise of probate, matrimonial, admiralty or insolvency jurisdiction, which confers upon or to take away from any person any legal character, or which declares any person to be entitled to any such character, or to be entitled to any specific thing not as against any specified person but absolutely, is relevant when the existence of any legal character, or the title of any such person to any such thing, is relevant.

Such judgment, order or decree is conclusive proof –

i) That any legal character which it confer accrued at the time when such judgment, order or decree come into operation;

ii) That any legal character to which it declares and such person to be entitled, accrued to that person at the time when such judgment, order or decree declares it to have accrued to that person;

iii) That any legal character to which it takes away from any such person ceased at the time from which such judgment, order or decree declared that it had cased or should cease.

iv) And that anything to which it declares any person to be so entitled was the property of that person at the time from which such judgment, order or decree declares that it had been or should be his property.

Section 41 deals with what is known as judgement in rem, which not only bind the parties at the representatives to it, but also are binding as against the whole world.

For a judgement to be binding and conclusive proof under section 41 the following conditions have to be satisfied –

1) The judgement must be a final judgement.

2) The court delivering the judgement must be competent.

3) The judgement must have been delivered by the court in the exercise of Probate, size of Matrimonial, Admiralty or Insolvency jurisdiction.

4) The judgement must confer on or take away from any person any legal character or declare that any person is entitled to such legal character or declared that any person is entitled to any specific thing absolutely.

Section 42-Relevancy and effect of judgements, orders or decrees, other than those mentioned in Section 41 –

According to Section 42, Judgments, orders or decrees other than those mentioned in Section 41, are relevant if they relate to matters of a public nature relevant to the inquiry; such judgments, orders or decrees are not conclusive proof of that which they state.

Illustrations

X sues Y for trespass on his land, Y alleges the existence of a public right of way over the land, which X denies. The existence of a decree in favor of the defendant, in a suit by X against Z or a trespass on the same land, in which Z alleged the existence of the same right of way, is relevant, but it is not conclusive proof that the right of ways exists.

Section 43-Judgements etc other than those mentioned in Sections 40 to 42, when relevant-

Section 43 states that Judgments, orders or decrees other than those mentioned in Sections 40, 41 and 42, are irrelevant, unless the existence of such judgment, order or decree is a fact in issue, or is relevant, under some other provision of this Act.

Illustrations

• A prosecutes B for adultery with C, A’s wife. B denies that C is A’s wife, but the court convicts B of adultery. Afterwards, C is prosecuted for bigamy in marrying B during A’s lifetime. C says that she never was A’s wife. The judgment against B is irrelevant as against C.
• A prosecuted B for stealing a cow from him, B is convicted. A, afterwards, sues C for cow, which B had sold to him before his conviction. As between A and C, the judgment against B is irrelevant.
• A has obtained a decree for the possession of land against B. C,B’s son murders A in consequence. The existence of the judgment is relevant, as showing motive for a crime.
• A is charged with theft and with having been previously convicted of theft. The previous conviction is relevant as a fact in issue.
• A is tried for the murder of B. The fact that B prosecuted A for libel and that A was convicted and sentenced is relevant under Section 8 as showing the motive for the fact in issue.

Thus, under Section 40 of the Act, previous judgments are admissible in support of a plea of res judicata in civil cases or of autre fois acquit or autre fois convict in criminal cases. Section 41 of the Act which only makes a final judgment of a competent Court, in the exercise of probate, matrimonial, admiralty or insolvency jurisdiction, conferring upon, taking away from or declaring any person to be entitled to any legal character or to be entitled to any specific thing absolutely, relevant when the existence of any such legal character or the title to any such thing is relevant. Section 42 of the Act relate to matters of a public nature. Section 43 of the Act positively declares judgments other than those mentioned in sections 40, 41 and 42 to be irrelevant unless their existence is a fact in issue or is relevant under some other provision of the Act.

The findings of K.G.Premshankar case (supra) are very relevant here-

(1) the previous judgment which is final can be relied upon as provided under Sections 40 to 43 of the Evidence Act;

(2) in civil suits between the same parties, principle of res-judicata may apply;

(3) in a criminal case, Section 300 Cr.P.C. makes provision that once a person is convicted or acquitted, he may not be tried again for the same offence if the conditions mentioned therein are satisfied;

(4) if the criminal case and the civil proceedings are for the same cause, judgment of the civil Court would be relevant if conditions of any of the Sections 40 to 43 are satisfied, but it cannot be said that the same would be conclusive except as provided in Section 41. Section 41 provides which judgment would be conclusive proof of what is stated therein.

(5) Further, the judgment, order or decree passed in a previous civil proceeding, if relevant, as provided under Sections 40 and 42 or other provisions of the Evidence Act then in each case, Court has to decide to what extent it is binding or conclusive with regard to the matter(s) decided therein. Hence, in each and every case, first question which would require consideration is whether judgment, order or decree is relevant?, if relevant its effect. It may be relevant for a limited purpose, such as, motive or as a fact in issue. This would depend upon facts of each case.

To conclude, with respect to the applicability and admissibility of civil judgments in criminal proceedings, the Indian Evidence Act of 1872 sets parameters to be followed concerning the admissibility of other judgments, keeping in mind the standards of proof used in civil and criminal proceedings. With respect to the admissibility of civil judgments in criminal proceedings, there exists no ambiguity due to the presence of statutory provisions in the Indian Evidence Act of 1872 that regulate the admissibility of other judgments but nevertheless make them admissible when they are clearly relevant.

References

1. Civil Appeal Nos 10866-10867 of 2010 & other Suits (Supreme Court of India)
2. The Supreme Court of India in the case of Kishan Singh (D) Thru Lrs vs Gurpal Singh & Ors on 12 August, 2010
3. The Supreme court of India in the case of G. Premshankar Vs. Inspector of Police & Anr., AIR 2002 SC 3372
4. Indian Evidence Act , 1872

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post The Other Ayodhya Case- Are Findings Recorded by The Constitutional Bench of The Supreme Court In Civil Case Binding On Pending Criminal Case? appeared first on iPleaders.

This article is written by Ramanuj Mukherjee, CEO, LawSikho.

It’s not my fault that the work is not done!

I always watch out for people who would not take responsibility for the end result and want to keep such people at bay. So does everyone who has the experience of handling a team, a business, or any responsible position.

There are two kinds of people out there – some of them have learned how to get things to work, and there are those who can give you impeccable reasons for why things did not work. 

I try to find how can I make things work when it is not supposed to work, and I have made a career out of it.

I was not born that way, and indeed in my first job, I did not know how to take responsibility for the final outcome and thought it is my boss’ job to get me to do the work, to get me to be productive. Terrible. I am ashamed of myself until today for thinking like that back then.

Doing a startup completely changed me, because I had to take responsibility for everything. Even if the office was not cleaned properly, it was ultimately my responsibility. If a client did not get what was promised because an employee was lax, or did not follow protocol, or even just simply absconded, all the fault was mine and I had to do something to fix the situation. 

Taking responsibility is what creates value and avoiding it means you are soon going to get replaced.

Then there are those who tell us why things are not working and why they are not to be blamed for the work not getting done. 

Click Above

There was not enough time. There was no enough money. There was not enough guidance. There is not enough work in the market. The judge was tough. The case was bad. How can I learn if nobody teaches me? It is not my fault alone, there were others who also failed.

Well.  

All successful lawyers are also masters of the craft of making things work. They make things work that do not otherwise work. 

They win cases most other lawyers cannot win. They identify problems and innovate and come up with solutions. Sometimes they fight tooth and nail for clients and snatch victory away from jaws of defeat. 

If all cases were easy and simple, a handful of lawyers won’t be rich or famous. If the legal profession was very simple and easy to succeed in, then it would be more like that of a clerk. There won’t be so many millionaire lawyers if not for a bunch of very difficult cases.

If you cannot learn to take responsibility for an outcome and direct blame at others, then you are in great trouble. Even if you survive, you will at best survive in mediocrity, and never taste true success.

And yet, most people would spend more time doing everything they can to avoid blame rather than taking responsibility to get things to work and produce the necessary outcome.

Most lawyers do not take responsibility of the outcome they produce for their clients. Surely, not everything is in the hands of a lawyer. There are so many other factors, but have you really done everything that could be done? Most lawyers do not. Those who really push themselves for their clients, usually stand out of the crowd over time and succeed big time. They are the ones clients do not want to lose, especially sophisticated clients who know the value added by that lawyer.

And if your clients do not recognize the value you add to them, why even work with such clients?

The truth is that most lawyers do not take responsibility for their own training, and that is the weakest link in their practice.

There is plenty of work in the market, especially a lot of work that most lawyers are not ready to do, or do not do justice to, due to a skill gap.

For example, drafting a patent application! There is a lot of money to be made from it, but there are hardly any lawyers around who know how to do it.

There is plenty of work that one can find with respect to IP agreements, specialized technology-related agreements, economic fraud investigation, corporate governance disputes – but how many lawyers actually know how to do that work?

I come across so many lawyers who say they want to do arbitrations and are looking for such work. Yet, they are very unclear about basic procedural issues that an arbitration lawyer needs to know.

Most lawyers do not even know how they can get a vehicle that was seized by police to be released from custody, or how to draft a watertight police complaint to start with.

A huge number of lawyers are unable to do anything other than copy-paste work based on templates they procure. And even those templates are often of no good quality.  

How do they expect to do well, except for by cheating some hapless and clueless clients?

When law firms desperately look to hire lawyers with good skills, I have seen how they sometimes have to interview dozens of candidates and still find not a single satisfactory candidate for months!

I see so many clients looking for help, commenting on our blogs, and still not finding a lawyer in their budget, who is providing a reasonable service.

And that is why I do not believe that there is not enough legal work in the market. Yes, there are way too many lawyers, but most have very little skill. Most lawyers do not stand a chance to start with.

If you can increase your knowledge incrementally day by day, if you invest in self-development and learning advanced skills, you will be in a very special league of lawyers, and there are not too many such lawyers to go around.

It is not hard to succeed in the legal profession, but only if you take responsibility for your ultimate success.

Please start by taking responsibility for learning more and more about the work you will be doing every day. 

We at LawSikho, also have upped the game by taking more responsibility than anyone in the industry does. We give a money back guarantee. If you attend our classes, do the exercises, and get no value, you can get a full refund. No questions asked, as long as you follow the policy. That is how we take responsibility.

Here are some courses which can help you to get a headstart:

DIPLOMA

Diploma in Intellectual Property, Media and Entertainment Laws

Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution

Diploma in Cyber Law, Fintech Regulations and Technology Contracts

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Labour, Employment and Industrial Laws for HR Managers

Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Prevention of Sexual Harassment at the Workplace

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

The post How to be a member of a very special league of lawyers appeared first on iPleaders.

This article is written by Shambhavi Tripathi, a 3rd-year student of LL.B. in Panjab University, Chandigarh. The article discusses copyright, trademark and other IPR issues in Cyber Space and International Regimes related to the same.

Introduction

With the advancement and popularity of e-commerce and e-business, it has become important for companies and organizations to protect their intellectual property rights online. These days cyber crimes are not only limited to committing fraud and identity thefts but extend to copyrights and trademarks infringement as well. There are various kinds of IPR related cyber crimes that are committed in order to make money or to draw traffic to their sites. IPR related cyber space issues can be of various kinds:

Copyright issues in cyber space

1. Linking: “Linking” allows a website user to visit another website on the Internet without leaving that particular website. By clicking on a word or image in one web page, the user can view another Web page somewhere else in the world, or on the same server as the original page. Linking may damage the rights or interests of the owner of the page that is linked to in two ways:

• linked-to sites can lose income as their revenues are often tied to the number of viewers who visit their home page, and;
• it may create the impression in the minds of users that the two linked sites endorse each other or are somehow linked to each other.

For example, A makes a homepage for his website, and on the homepage he places some advertisements, from which he can make some money and it contains links to various subordinate pages. Then, B creates his website, which contains links to A’s subordinate pages. This is called deep linking. Because of this, the website visitors to B’s site will be able to gain access to A’s material, without even visiting or seeing A’s advertisements.  

Copyright infringement occurs when one site contains links to copyrighted materials contained in another site against the wishes and knowledge of the copyright owner. Though the person who provides the link may not be making copies themselves, some courts have found the link provider to be partially responsible for copyright infringement.

In Shetland Times, Ltd. v. Jonathan Wills and Another, the Shetland News’s “deep link” to embedded pages of the Shetland Times’s web site, through the use of Times’ web site’s news headlines, was held to be an act of copyright infringement under British law and an injunction was issued for the same.

1. Inlining: “Inlining” is the process of displaying a graphic file on one website that originates at another. In inlining, a web site user at a certain site can, without leaving that site, view a particular video featured on some other site. 
2. Framing: “Framing” is the process of allowing a user to view the contents of one website while it is framed by information from another site. Framing may trigger a dispute under copyright and trademark law, because a framed site alters the appearance of the content and creates the impression that its owner endorses or is associated with the framer.

Trademark issues in cyber space 

A domain name dispute is a conflict that arises when more than one individual believe they have the right to register a specific domain name. A “domain name dispute” arises when a domain name similar to a registered trademark is registered by another individual or organization who is not the owner of registered trademark. All domain name registrars must follow the ICANN‘s Uniform Domain-Name Dispute-Resolution Policy (UDRP).

• Cyber squatting: Cyber squatting is a kind of Domain name dispute. It includes registering, selling or using a domain name with the intent of profiting from the goodwill of someone else’s trademark. 

Yahoo! Inc v. Akash Arora & Anr (1999 IIAD Delhi 229) the defendants were using “yahooindia.com” for providing internet services. The petitioner here was the owner of the trademark “Yahoo!” and had registered its domain name with different countries like “yahoo.in” for India. Hence, the domain name “yahooindia.com” could be mistaken as an extension of “Yahoo!”. The Court treated the matter as passing off and granted an injunction restraining the defendant from using the domain name “yahooindia.com”.

• Mate-tags: Meta tagging is a technique in which a word is inserted in the keywords field of the site in order to increase the chances of a search engine returning the site, even though the site may have nothing to do with the word which was inserted. Trademark infringement occurs when companies include in their own websites meta tags containing the names or descriptions of other companies.  For example, Coca Cola used the keyword “Pepsi” in its meta tags, now the web surfers who used search engines in order to obtain information about Pepsi would be directed to Coca Cola’s web site due to these meta tags.

As happened in the case Oppedahl & Larson v. Advanced Concepts (D. Colo. Feb. 6, 1998), the law firm of Oppedahl & Larson, owner of the domain name <patents.com>, filed a trademark infringement action against three companies and the corresponding ISPs after discovering that the companies inserted the words “Oppedahl” and “Larson” in the keywords field of their web pages in order to draw traffic to their sites.

International legal regimes relating to IPRs

1. Berne Convention: The Berne Convention, 1886, deals with the protection of works and the rights of their authors. It provides creators (authors, musicians, poets, painters etc.) with the ways to control how their works are used, by whom the works are used, and terms of such usage. It contains a number of provisions determining the minimum protection that is to be granted and certain special provisions available to developing countries that want to use them. It is based on three basic principles and the three basic principles are the following:

1. Principle of National Treatment- Works originating in one of the Contracting States must be given the same protection in each of the Contracting States as the protection latter grants to the works of its own nationals. “Work originating” means works of the author who is a national of that particular State or works first published in that State.
2. Principle of Automatic Protection- Protection must not be conditional upon compliance with the formalities. 
3. Principle of Independence of Protection- Protection is independent of the existence of protection in the country of origin of the work. 

1. Rome Convention: The Rome Convention, 1961 secures protection in performances for performers (actors, singers, musicians, dancers and those who perform literary or artistic works), in phonograms for producers of phonograms and broadcasts for broadcasting organizations.
2. WIPO Copyright Treaty: The WIPO Copyright Treaty reemphasizes that copyright protection extends only to expressions and not to underlying ideas, procedures or related methods of operation or mathematical concept. It provides that the relevant provisions of the Berne Convention related to reproduction and the exceptions apply in the digital environment and the use of works in digital form. Article 4 of the treaty guarantees the protection of computer programs as literary works in all modes and forms of expression. Article 5 of the treaty recognizes that all forms of compilations of data or other material, by reason of the selection or arrangement of their contents constitute intellectual creations and thereby are protected. WIPO Copyright Treaty addresses three specific rights namely:

• Right of distribution: The right of distribution confers on the authors an exclusive right of authorizing the making available to the public of the original and copies of their works. 
• Right of rental: The treaty specifically recognizes the exclusive right of authors of certain types of works in authorizing the commercial rental of their works to the public. 
• Right of communication to the public: The treaty provides the authors with an exclusive right of authorizing any communication to the public subject to relevant provisions of the Berne Convention. 

Article 10 provides the signatory countries the freedom to impose other limitations or exceptions to the authors’ rights granted under the treaty. Further, the treaty requires signatory countries to provide legal remedies against circumventing of technological measures imposed by authors in order to exercise their rights and to restrict unauthorized use or acts not permitted by law.

• WIPO Performance and Phonograms Treaty: WIPO Performances and Phonograms Treaty, 1996 (WIPO PPT) is a relatively comprehensive regime in comparison with the WIPO Copyright Treaty. The WIPO PPT imposes a ‘National Treatment’ obligation on the signatory countries to guarantee exclusive rights specifically recognized under the treaty, including the right to equitable remuneration. 

The treaty deals with a range of rights of performers including moral and economic rights and the related rights of reproduction, distribution, rental etc. The treaty also addresses a range of rights related to producers of phonograms. This treaty also deals with the right to remuneration for broadcasting and communication to the public, obligations related to technological measures and rights management. 

• UDRP: The Uniform Domain Name Dispute Resolution Policy (the UDRP Policy) sets out the legal framework for the resolution of disputes between a domain name registrant and a third party over the abusive registration and use of an Internet domain name in the generic top- level domains (gTLDs) (e.g.,. biz,. com,. info,. net,. org), and country code top- level domains (ccTLDs) that have adopted the UDRP Policy voluntarily. 

According to Paragraph 4(a) of the UDRP Policy, the UDRP Administrative Procedure is only available for disputes related to abusive registration of a domain name. For a domain name registration to be abusive, certain conditions are needed to be fulfilled. The conditions are:

• The domain name registered by the domain name registrant is identical or confusingly similar to a trademark or service mark in which the complainant (the person or entity bringing the complaint) has rights; and
• the domain name registrant has no rights or legitimate interests in respect of the domain name in question; and
• the registered domain name is being used in bad faith.

OECD Convention on Data Protection: In 1980, in an effort to create a comprehensive data protection system throughout Europe, the Organisation for Economic Co-operation and Development (OECD) issued its “Recommendations of the Council Concerning Guidelines Governing the Protection of Privacy and Trans-Border Flows of Personal Data”. This laid down seven principles governing the OECD’s recommendations for the protection of personal data. However, the OECD Guidelines were non-binding and data privacy laws still vary across Europe. The seven principles were:

1. Notice: Notice to be given to the data subject when their data is being collected;
2. Purpose: Collected data should not be used for any other purposes other than already mentioned and informed;
3. Consent: Collected data should not be disclosed without the consent of data subjects;
4. Security: Collected data should be protected from any kind of abuses;
5. Disclosure: Data subjects should be informed as to who is collecting their data;
6. Access: Data subjects should be allowed to have access to their data and make corrections to it; and
7. Accountability: Data collectors should be held accountable for not following these principles. 

Conclusion

Cyber space is becoming a hub for intellectual property rights infringement of various e-businesses. Certain practices by web site operators have resulted in violation of intellectual property rights or other entitlements of other websites operators. Hence, it has become important that people are aware of the illegal usage of their websites and pages. With the advancement of Cyber space, copyright and trademarks are not limited to the conventional intellectual property but has extended to intellectual property over the internet. There are various guidelines provided by international conventions and treaties to protect IPRs online which are helping e-commerce and e-businesses to expand without any harm to them.

References

• WIPO Guide to the Uniform Domain Name Dispute Resolution Policy (UDRP); WIPO; Date of Access: 24.10.2019 <https://www.wipo.int/amc/en/domains/guide/>
• Summary of the Berne Convention for the Protection of Literary and Artistic Works (1886); WIPO; Date of Access: 24.10.2019< https://www.wipo.int/treaties/en/ip/berne/summary_berne.html>

• Summary of the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (1961); WIPO; Date of Access: 24.10.2019 <https://www.wipo.int/treaties/en/ip/rome/summary_rome.html>
• Aurélie Pols, Ewa Bałazińska, Karolina Lubowicka: OECD Guidelines: 8 Privacy Principles to Live By; PiwikPro Dated: 21.09.2018; Date of Access: 24.10.2019 < https://piwik.pro/blog/oecd-guidelines-8-privacy-principles-to-live-by/>
• Linking, Framing, Meta Tags, and Caching; Date of Access: 24.10.2019 < https://cyber.harvard.edu/property00/metatags/main.html>
• Linking, Framing, and Inlining by Richard Stim; Nolo; Date of Access: 24.10.2019 < https://www.nolo.com/legal-encyclopedia/linking-framing-inlining-30090.html>
• India: Legality Of Metag-ing, Linking & Framing by Himanshu Sharma and Martand Nemana; Singh & Associates; Dated: 08.09.2016; Date of Access: 24.10.2019 < http://www.mondaq.com/india/x/525188/Trademark/Legality+Of+Metaging+Linking+Framing>
• Cybersquatting: What It Is and What Can Be Done About It by Stephen Elias and Richard Stim; Nolo; Date of Access: 25.10.2019 < https://www.nolo.com/legal-encyclopedia/cybersquatting-what-what-can-be-29778.html>
• Himani Makkad: Trademark Law in Cyberspace: Protection to Internet Address <jlsr.thelawbrigade.com>
• R. Muruga Perumal: Copy Right Infringements in Cyberspace: The Need to Nurture International Legal Principles; Faculty of Law; University of Macau
• Sally M. Abel: Trademark Issues in Cyberspace: The Brave New Frontier; 5 Mich. Telecomm. & Tech. L. Rev. 91 (1999)

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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