This article is written by Shriya Sehgal, a first-year student pursuing BBA.LLB. from Symbiosis Law School, Noida. This is an exhaustive article dealing with the nuances of borrowing, lending and investment made by the company under the light of the Companies Act, 2013 and related Acts.

Borrowing

Borrowing is an external source of raising money. A company cannot borrow money until it is so authorised by its memorandum.

Under Section 179 of the Companies Act, 2013, the directors have the power to pass a resolution to borrow money and the power to borrow money can be delegated only by passing a resolution.

Under Section 180 of the Act, the directors are restricted from borrowing temporary loans that are obtained from the company’s banker. This section also defines temporary loans as the loans which are repayable on demand within 6 months from the date.

Unauthorised Borrowings

It refers to those borrowings which are made without the authority or beyond the amount prescribed in the article. Thus, borrowings beyond the prescribed authority are ultra vires (here, the authority can be either expressed or implied).

Consequences of unauthorised borrowings are:

1. No Loan: An ultra vires lender has no legal debt against the company. Such borrowings are forbidden on the grounds of public policy.
2. Injunction: If the money advanced by the lender to the company has not been spent then the lender can obtain an injunction to restrain the company from spending it.
3. Subrogation: The total indebtedness of a company remains unaffected when a lawful debt has been paid off with an ultra vires loan. In this way, the ultra vires lender is protected against the loss and the burden of the company is not increased.
4. Identification and Tracing: If the money of the ultra vires lender is with the company in its original form and is still capable of identification, then he can claim the money from the company.

Types of Borrowings

1. Long term Borrowing: The funds are borrowed for a period of five years or more.
2. Short term Borrowing: The funds are borrowed for a short period of up to one year. Meeting the working capital needs is the main purpose of these funds.
3. Medium-term Borrowing: The funds are borrowed from a period of two to five years.
4. Secured Borrowing: Under this, if a creditor has the re-course of assets of the company then a debt obligation is considered as a security.
5. Unsecured Borrowing: Under this, the debt consists of financial obligation.
6. Syndicated Borrowing: Under this, a group of leaders provides a large fund to the borrowers.
7. Bilateral Borrowing: Under this, the borrowing is made from a particular financial institution, by a particular company. It is the opposite of syndicate borrowing.
8. Private borrowing: Under this, the company takes a loan from the bank of a financial institution. It consists of bank loan obligations.
9. Public Borrowing: Under this, all financial institutions are freely tradable on a public exchange.

Registration of mortgages and charges

The power to mortgage the company’s assets or to create a charge on them is included in their power to borrow. This is done to give some security to the lenders as they always insist on some type of security against the loan granted by them.[1] “Charges” have been defined under Section 2(16) of the Companies Act, 2013 as an interest that is created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. Chapter VI (Section 77 to Section 87) of the Act deals with the ‘Registration of Charges’.

Registration of Charges

Section 77(1), Section 78 and Section 79 of the Companies Act, 2013 deals with the registration of charges. The application for registration of charges should be submitted to the Registrar of Companies (ROC) in a manner prescribed in the Companies (Registration of Charges) Rules, 2014.

Under this, a company creating a charge should register the particulars of the said charge together with a copy of the instrument, if any, creating or modifying the charge within thirty days of its creation or modification. The fee, Form No.CHG-1, in case of other than Debentures, or Form No.CHG-9, in case of debentures including rectification, signed by the company as well as the charge holder. This charge can be on the company’s property, assets or any of its undertakings. This charge can either be tangible or intangible situated in or outside India. 

Charges Requiring Registration

1. A charge created for the purpose of securing any issue of the debenture.
2. A charge on the uncalled share capital of the company.
3. A charge on any immovable property. Such property can be situated anywhere or have an interest therein..
4. A charge on any book debt of the company.
5. A charge on any movable property of the company which is not a pledge.
6. A floating charge on the undertaking or any property of the company including stock-in-trade.
7. A charge on calls made but not paid.
8. A charge on a ship or any share in a ship.
9. A charge on intangible assets including goodwill, patent or trademark. [2] 

Extension of Time for Registration

Section 77(1) of the Act deals with the extension of time for filing particulars for registration of charge. The ROC may allow the registration within 300 days on the application of the company along with the payment of additional fees. Rule 4 provides that the application shall be made in Form No.CHG-1 and together with a declaration from the company signed by its secretary or director. 

In case the registration is not made within 300 days of such creation, the company can seek an extension of time for filing of the particulars for the registration of the charge from the Central Government under Section 87 of the Act and Rule 12. The Central Government can provide for an extension of time if the omission to register such charge, was accidental or due to some other sufficient cause. It is considered to be just and equitable to grant relief in this case.

Effects of Non-Registration of Charge

Section 77(3) of the Act deals with the effect of non-registration of charges. In case a charge is not registered with the Registrar of Companies then the charge shall not be taken into account by any creditor. However, nothing in this Section shall affect any obligation for the repayment of the money secured by a charge.

Therefore, it is advisable to make an application for registration of charges to avoid the unforeseeable hurdles.

Debentures

A debenture is an important tool for raising loan capital for a company. Although the money raised by a debenture becomes a part of the capital structure of the company but it doesn’t become a part of the share capital. It is in the form of a loan certificate which serves as evidence that the company is liable to pay a specified amount with interest. 

Debentures have been defined under Section 2(30) of the Act. It states that a debenture is inclusive of debenture stock, bonds or any other instrument of a company which cannot be used as evidence against a debt, whether constituting a charge on the assets of the company or not. Section 179 (3) of the Companies Act, 2013, gives the power to the board of directors to issue debentures on behalf of the company. Section 71 of the Companies Act, 2013, deals with the issuance of debentures along with the penalties for non-compliance of the same. 

Kinds of debenture

Basis of Convertibility

Non-convertible debentures

Non-convertible debentures refer to those debentures in which the debentures cannot be exchanged for equity shares in the company.

Partly convertible debentures

Partly convertible debentures can be divided into two portions, that is, convertible and non-convertible. The convertible portion can be converted into equity shares of the company at the expiry of the specified period whereas the non-convertible portion can be redeemed at the expiry of the specified period in terms of the issue.

Fully convertible debenture

Convertible debentures refer to those debentures in which the debenture-holders are given an option to exchange their debentures for equity shares in the company. Certain conditions and limitations are imposed on the period during which this option may be exercised.

Optionally convertible debentures

Optionally convertible debentures refer to those debentures which can be converted into shares at the option of the debenture-holder. The issuer decides the price for such conversion which is consented upon by both parties at the time of issue of the debenture.

Basis of Security

Secured debentures

Secured debentures refer to those debentures which are secured as there is a charge on the fixed assets of the company. The purpose of this instrument is to secure the debenture-holder in case of default made by the issuer for the payment of either the principal or interest amount. He can sell the assets of the issuer to recover the amount.

Section 71(3) of the Act provides that a company has the right to issue such an instrument subjected to the conditions of the government of India.

Unsecured debentures

Unsecured or naked debentures refer to those debentures which are unsecured in case there is a default in the payment of the principal or interest amount. The debenture-holder can not sell any assets for repayment.

Basis of Redeemability

Redeemable debentures

Redeemable debentures refer to those debentures which are issued with an option of redemption on demand or by a system of periodical drawing or by serving notice at a fixed date. Generally, debentures are redeemable in nature and after redemption, they can either be cancelled or can be reissued. The rights of the person who reissued the debentures shall remain the same as before.

Perpetual debentures

Perpetual or irredeemable debenture refers to those debentures in which there is no fixed time for the issuer to repay the amount. The debenture-holder cannot demand the payment of principal amount provided the company does not default in making payment of the interest regularly. 

Basis of Registration

Registered debentures

Registered debentures refer to those debentures which are made in the name of an individual who is registered in the register of debenture-holder and his/her name appears on the debenture certificate. Section 56 of the Act provides that these debentures can be transferred in a similar way as shares are transferred with necessary formalities.

Bearer debentures

Bearer debentures refer to those debentures which are negotiable and are made out to bearer. They are transferable by delivery like share warrants and the person to whom it is transferred becomes a ‘holder in due course’. Such a person has a right to recover and receive the principal and interest amount.

Register of debenture-holders

Section 88 of the Companies Act, 2013 provides for registration of members, etc.

Every company shall maintain a register of debenture-holders as well as a register of any other security holders. Rule 4 of the Companies (Management and Administration) Rules 2014 elaborates on the particulars in the register of debenture-holders and register of any other security holders.[3]

Every company which issues debentures or any other security should maintain a separate register of debenture-holders or security holders and for each type of debentures or other securities. It should be done in Form MGT – 2.

Index of Names

Rule 6 provides that every register maintained under Section 88(1) shall include an index of the names entered in the respective registers. The index should contain sufficient indication to enable the entries relating to a particular folio to be readily found. The company shall make the necessary entries in the index simultaneously with the entry for transfer or allotment of any security in such Register.

In case the number of members is less than fifty then the maintenance of the index is not necessary.

Authentication

The entries in the registers and the index included therein must be authenticated either by the company secretary of the company or by any other person who is authorised by the Board for the purpose. The date of the board resolution authorising the same shall be mentioned. 

Shareholder compared with debenture-holder

Chapter IV (Section 43 to Section 72) of the Act provides for share capital and debentures. The difference between a shareholder and a debenture-holder can be understood with the help of the following comparative table:

Floating charge

A floating charge can be understood as a security undertaken on the entire business’s assets, in respect of a particular debt by a creditor. This type of charge allows a business to borrow even in cases when it does not own a particular asset such as premises, which can act as a security. But a business can borrow against its assets such as plant and machinery, stock in trade, vehicles, etc. A company may also dispose of these assets without the permission of the creditor. So floating charges are not constant and the creditor is left with only the remaining assets of the business after all the sales/transactions.

The existence of floating charges is necessary to allow businesses to buy and sell business inputs and stocks without affecting their day-to-day operations. In this way, their business operations remain uninterrupted while they obtain funding by keeping a charge on their inventories as collateral. 

Chief characteristic

• The value of the assets changes with the change in the value of the charge. Thus, it is a cover against all the assets of the business. 
• The consent of the lender is not required to be obtained by the borrower. 
• The floating charge allows unrestricted use of the asset held as security. The company can buy or sell the charged asset freely in the normal course of business. [4]

Floating Charge v Fixed Charge

The difference between floating charge and fixed charge can be understood with the help of following comparative table:

Crystallisation of floating charge

The process of conversion of floating charge security into fixed charge security is called the crystallisation of floating charge. The floating charge becomes a fixed charge under the following circumstances:

1. The company is about to wind up.
2. Non-payment of debts, that is, the debtor is unable to pay the debts.
3. The business cannot be carried on if the creditor takes an action against the debtor for non-payment of debts and other circumstances mentioned under the provisions of the Companies Act, 2013.

Once the property is crystallised, the creditor (lender) obtains the right to possession of the crystallised security. The debtor (borrower) cannot dispose of crystallised security.

Debenture trust deed

Debenture trust deed refers to the document created by the company, where trustees are appointed to protect the interest of debenture-holders before they can be offered for public subscription. Section 71 of the Companies Act, 2013, provides for the debentures. 

When the debenture-holders don’t have the time to look after their interest in the properties mortgaged to them, they may appoint someone among themselves as the trustee for the supervision of their common interest. A trust deed is made under which some of them are appointed as trustees. The deed contains various details including rights and duties of the debenture-holders as well as the company. It is beneficial as it is the function of the trustees to watch the interest of the debenture-holders. The trustees are expected to act honestly and with due care and diligence.

The company offering debentures should abide by the following conditions

(i) No public issue of debt instruments should be prepared. But in the case of credit rating, the credit rating group is acquired and revealed in the tender deed.
(ii) The offer deed should consist of credit ratings for the last three years.
(iii) Requisite powers should be granted to debenture trustees. In this way, they can protect the interest of debenture-holders.
(iv) The creation of Debenture Redemption Reserve should be ensured by debenture trustees. [5] 

Form of a trust deed

The trust deed has to be in such form and executed within such time as may be prescribed. The Central Government may prescribe and regulate the above-mentioned things.

Supply of copies and inspection

Section 71(13) of the Companies Act, 2013 provides that the Central Government may prescribe for a procedure for debenture-holders to inspect the trust deeds and obtain copies of the same.

In other words, a copy of the trust deed should be available for inspection to the debenture-holders as well as other members. They can also get copies of the same on payment of prescribed fees.

Penalty

In case of unavailability of a copy of trust deed for inspection to a debenture-holder or any member, every officer in default shall be punishable for a certain amount of fine. The fine is imposed on an everyday basis.

Appointment of debenture trustees and their duties

Section 71(5) of the Companies Act provides for the appointment of debenture trustees. The appointment of debenture trustees should be made before making the debenture issue. The fact of the appointment and their consent to act as a trustee should be mentioned in the letter of offer or prospectus.

Person not qualified

(i) A person who favorably has possession of company shares.
(ii) If the person is beneficially entitled to the money, which is to be compensated by the company to the debenture trustees.
(iii) If the person has entered into any agreement of guarantee in respect of principal debts protected by the interest or debentures thereon.

Functions

Generally, the functions of debenture trustees are to protect the interest of the debenture-holders as well as redress their grievances. Other functions are as follows:

(i) They call for the periodic reports from the company.
(ii) They take possession of the trust property as per the conditions of the trust title deed.
(iii) They implement the safety measures in the interest of debenture-holders.
(iv) They create a charge in opposition to the assets as under debenture Trust Deed must be accomplished inside a month of the issue of allotment note and posting of debenture certificate.

NOTE: A debenture trustee may disqualify himself to act as a trustee by not abiding by the provisions of the set rules and regulations.

Duties

The duties of debenture trustees are as follows:

(i) To ensure that the assets of the company issuing debentures and of the guarantors are sufficient to discharge the principal amount at all times.

(ii) To ensure that the company doesn’t commit any breach of the debenture trust deed or covenants. 

(iii) To take reasonable and necessary steps in case of breach of covenants. 

(iv) To satisfy himself that the letter of offer or the prospectus doesn’t contain anything ‘inconsistent’ with the terms of the debenture.

(iv) To take care to call meetings of debenture-holders as and when it is required to be held.

Responsibility of company to create security and debenture redemption reserve 

The company issuing debentures has to create a Debenture Redemption Reserve. Till the time debentures are redeemed, adequate amounts have to be transferred to the fund from the profits every year. The amount so credited cannot be used for any other purpose. [6]

In the Companies (Share Capital and Debentures) Rules 2014, the requirement of creating Debenture Redemption Reserves has been changed as opposed to what was mentioned in the final rules issued by it initially. [7]

The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the following conditions:

1. The company shall create Debenture Redemption Reserve out of the profits of the company, available for the payment of the dividend.
2. The company shall create Debenture Redemption Reserve equivalent to at least fifty percent of the amount raised through the debenture. The same should be issued before debenture redemption commences.

Remedies of debenture-holders

In case of a default by the company in repayment of the principal amount or interest amount, the remedies of a debenture-holder vary according to whether he is secured or unsecured. [8]

In case of a default, the position of an unsecured debenture-holder is the same as that of a creditor. The following remedies are available to him:

1. He can file a suit against the company for the principal as well as for the interest.
2. He can file a petition for the purpose of winding-up of the company and prove his debt as an unsecured creditor.
3. If the company is under the process of winding up, they can claim their principal.

A secured debenture-holder, in addition to the above remedies has the following remedies as well:

(I) Where a trust deed must be executed

Sale of assets: The debenture trust deed or debenture provides for express powers to trustees for sale of assets. In case of the absence of such power, an order to sell can be obtained by making an application to the Court.

Foreclosure: The trustees can make an application to the Court for an order of foreclosure. It affects the borrower’s interest as the charge of the assets is completely extinguished and the lender becomes the owner of them. For an action of foreclosure, it is necessary for all debenture-holders of the class to be united.

Appointment of a receiver: the trustees may appoint a receiver as the trust deed provides so. In case of the absence of such power, an application to appoint one may be made to the Court. On the appointment of a Receiver, the assets become specifically charged in favour of the debenture-holders.

(II) Where no deed has been executed

Debenture-holders’ action: In such case, a debenture-holder can bring an action on behalf of himself and other debenture-holders of the same class, on default in payment of the principal or interest amount. They can ask for the following things in a debenture-holder’s action:
(i) a declaration that the debentures have a charge on the assets.
(ii) an account of what is owed to the debenture-holders including the number of assets, prior claims, etc.
(iii) an order of foreclosure or sale.
(iv) the appointment of a Receiver.

NOTE: If a debenture-holder owes a debt to the company which is insolvent, he cannot set off his debt against the liability he owes to the company.

Investment in other companies 

Section 186 of the Companies Act, 2013 talks about the loans and investments made by the company. Investing in other companies is one of the best ways to expand the company internationally and especially in a country like India. Buying or acquiring a company helps people to start their operations instantly as well as enables one to gain foreign expertise.

Companies invest in other companies for the following reasons:

1. Hedging: Companies can invest in other companies to eliminate or reduce the risk of their businesses. For instance, a company of steel production can invest in iron extraction to eliminate the raw material price soaring.
2. Liquidity management: A company generates money and wants to hold it for tax payment or until a chance is available to introduce a new product. So they can either hold it in banks or decide to buy shares for better returns and less inflation impact.
3. Partnership on the Long-term: A company can be looking for mergers and acquisitions with other successful companies. In this way, they can gain control in the long run to form a new successful union.
4. Eliminate Competition: A company may want to eliminate its competition by getting control of other companies. For instance, Maruti Suzuki bought shares of Hyundai in order to eliminate competition in the same sector.
5. Speculation: A company has professional advisers and experts who think the other company’s price is undervalued so it decides to invest in that company to generate extra returns.[9]

Inter-corporate Loans and Investments

Section 186 of the Companies Act, 2013 provides for ‘Loans and Investments by a Company’ which corresponds with Section 372-A of the Companies Act, 1956. A company is entitled to provide another company with loans, investment, securities, and guarantees. The same can be done either with the consent of the board or that of the shareholders.

Register of investments-loans

Section 186(9) of the Act provides that the company has to keep and maintain a register including particulars about investments, loans, securities and guarantees as per the prescribed manner. The register should be maintained in the manner prescribed. The particulars are as follows:

1. The name of the company.
2. The date on which the loan or investment is made.
3. The date on which security or guarantee has been provided against the loan or investment.
4. The amount, purpose and terms of the loans, investment, securities, and guarantees.

The particulars should be entered in the register in chronological order within seven days of the making of the loans or investments.

Section 186 (10) of the Act provides that the register should be kept at the registered office of the company. The same should be open to inspection to members of such offices. They can also take extracts and demand copies of the same on the payment of a prescribed fee.

Rule-making power

The Central Government has the power to regulate the provisions of the mentioned Section in a prescribed manner. It is provided under sub-section 12 of the Act.

Exceptions

Section 186 doesn’t apply to certain transactions. Thus, this Section would not be applicable to any loans or guarantees given by:

1. A banking company, an insurance company or a housing finance company for transactions made in the ordinary course of business.
2. A company framed with the sole purpose of financing industrial enterprises or for providing infrastructure facilities.
3. An organization that purchases the rights of shares.
4. A company whose primary business is the acquisition of shares.
5. A registered non-banking finance company that primarily focuses on the acquisition of securities.
6. Unlisted companies are legally authorized by the Ministry or Department of the State or Central Government.
7. A government company that operates defence production. [10]

Penalty provisions

There are majorly two types of default and are treated differently. One is the violation of the main provision and the second is default in maintaining the register. A very light penalty is provided in the matter of the register.

If a company contravenes or violates the provisions of the given Section, the company shall be punished with a fine of a minimum of twenty-five thousand rupees, which can be extended to five lakh rupees. The officers of the company who are in default will also be punished with imprisonment for a term of maximum two years along with a minimum fine of twenty thousand rupees, which can be extended to one lakh rupees.

Loans

For the purpose of the given Section ‘loan’ includes debentures or any other deposits of money made by one company with another company. Here, the depositee company should not be a banking company.

In case of default in payment of interest, the company is prohibited from making any inter-corporate loan, guarantee or security. Such prohibition remains effective until it is addressed by the company. 

Free reserves

Free reserves refer to those reserves which are free for distribution as a dividend, as per the latest audited balance sheet of the company. It also includes the amount of the premium received on the issue of securities but doesn’t include the share application money.

Investment in one’s own name

Section 187 of the Companies Act, 2013 deals with ‘Investment of company to be held in its own name.’ which corresponds with Section 49 of the Companies Act, 1956.

This Section requires all the investments made by a company on its own behalf to be held by the company in its own name. Where a company advances money by way of a loan to another company in order to enable the borrowing company to make investments in its shares, that doesn’t amount to investment in its shares by the lending company in another company’s name. If the company’s director or nominee becomes a director in another company and is required to hold qualification shares then they may be held jointly in the name of the company and such director. 

There are certain exceptions to this provision. These are stated as follows:

1. The section does not apply to the investments that are made by such a company whose primary business is to buy and sell securities or shares.
2. A company can hold shares in the name of one or more nominees in its subsidiary company if the number of members is going below the statutory minimum.
3. A company can deposit its shares or securities with bankers for the collection of dividends or facilitate their transfer. In case the transfer is not effected within the period of six months, they should be held by the company in its own name. 
4. A company can transfer its shares or securities for the performance of an obligation or as security for a loan to another person.
5. A company can hold investments in the name of a depository. This can be done when the investments are in the form of securities held by the company as a beneficial owner. 

In order to enable their identification, such exceptional transactions have to be entered in a register.

If a company contravenes or violates a provision of this section:

1. The company should be punished with a minimum fine of twenty – five thousand rupees, which can be extended to twenty-five lakh rupees.
2. The defaulting officers of the company can be punished with imprisonment for a term of a maximum of six months or a minimum fine of twenty-five thousand rupees, which can be extended to one lakh rupees; or both.

Execution of deeds

Formal deeds can be executed only through the power of attorney. A company can appoint any person as its attorney, by writing under a common seal. The power of attorney has the power to execute deeds on behalf of the company and such deed binds the company in the same way as it were under the company’s seal. The seal is a physical impression upon the documents of the company which can be used by the authority of the directors or a committee authorised by the directors.

A company transacting business in foreign countries may have in accordance with its articles its official seal in a foreign country. Such seal is an exact copy of the common seal of the company which includes the name of the pace where it is to be used.

NOTE: Execution of deed and use of seal was mentioned under Section 48 of the Companies Act, 1956 which was repealed by the 2013 Act.

Authentication of documents and proceedings

Section 21 of the Companies Act, 2013 deals with ‘Authentication of documents, proceedings, and contracts’ which corresponds with Section 54 of the Companies Act, 1956. Also, Companies (Registration Offices and Fees) Rules, 2014, provides that the document needs to be authenticated by some professional or Individual.

Certain documents or proceedings are required to be authenticated by the company. Such documents need to be signed by any director, or secretary, or manager, or any other person who is authorised by the officer. In such cases, a common seal is not necessary. When a document is signed by an authorised officer who is acting in the course of his duties in the business of the company then his signature constitutes a representation made by the company and signed by it.

For instance, a suit for recovery of insurance money was filed by the managing partner of the complainant company. He could not produce any authentic document showing his authority to proceed on behalf of the company. Thus, the suit was not allowed. [11]

Bill of exchange and promissory note

Section 22 of the Companies Act, 2013 deals with ‘Execution of bills of exchange, etc.’ which corresponds with Section 47 of the Companies Act, 1956. The section includes the bill of exchange, hundi, and a promissory note.

The mode of authentication is considered to be necessary in the case of legal persons. Legal persons are those persons who cannot act by themselves or act only through representatives. In order to bind the company explicitly, the signature must be of an authorised person and the name of the company should be mentioned. Even implied authority is given to a person so executing the bill of exchange etc. shall also bind the company. Whether the person signing is actually authorised or not depends upon the arrangements of the company with its officers.

Liability for the dishonour of cheques

Section 6 of the Indian Negotiable Instruments Act, 1882 defines the term ‘cheque’ as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It also includes the cheque in an electronic form.

The following individual or bodies can be prosecuted under Section 138 of the Negotiable Instruments Act, 1881 for the dishonour of the company’s cheque:

1. The company
2. Every person who was in charge of the company’s affairs at the time of the issue of cheque
3. Every other officer whose negligence brought about the debacle

According to the law, not all the directors of a company are liable in case of dishonour of cheques. The burden of proof is on the complainant. He has to prove that a director is responsible for the conduct of the affairs of the company in order to hold him liable. In case of absence of a specific declaration in the complaint, no director is liable under Section 138 of the Negotiable Instruments Act, 1881 unless and until he is a Managing Director or Joint Managing Director or a signatory to the Cheque. However, the directors can either undergo a trial before the Magistrate Court or approach the High Court at the earliest before the commencement of the trial in order to quash the proceedings against him and establish the fact that they are not guilty.

The following ingredients need to be fulfilled to constitute an offence under Section 138 of the Act: 

1. Cheque should be issued for the discharge of any debt or other liability, wholly or partly. 
2. The cheque should be presented either within the period of six months or within the period of its validity; whichever is earlier.
3. The payee in due course should issue a notice to the drawer within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The notice must be in writing.
4. The drawer should have failed to pay the cheque amount within fifteen days of the receipt of the notice after the receipt of the said notice by the payee in due course.
5. In case of non-payment of the amount due on the dishonoured cheque, the complaint should have been filed before a Metropolitan Magistrate or a Judicial Magistrate within one month from the date of expiry of the grace time of fifteen days. [12]

NOTE: Offences under the Act are compoundable

Conclusion

In order to survive as well as progress, a company needs to borrow, lend and invest; and to do this the company needs to follow certain rules and procedures which are governed by the Companies Act, 2013 and related Acts. These acts also prescribe the remedies in case of violation of the rules or deviation from the prescribed manner. 

References

1. Company Law, Avtar Singh (Fifteenth Edition) 
2. https://www.slideshare.net/Mbinani/chapter-vi-registration-of-charges-the-companies-act-2013 
3. https://aishmghrana.me/2014/06/13/register-of-debenture-holders-etc/ 
4. https://efinancemanagement.com/sources-of-finance/floating-charge 
5. https://hairstylingtools.knoji.com/debenture-trust-deed/ 
6. http://www.companiesact.in/Companies-Act-2013/News-Details/472/Provisions%20relating%20to%20creation%20of%20%20Debenture%20Redemption%20Reserve%20stand%20changed 
7. http://www.companiesact.in/Companies-Act-2013/News-Details/472/Provisions%20relating%20to%20creation%20of%20%20Debenture%20Redemption%20Reserve%20stand%20changed 
8. http://companylaw0.blogspot.com/2014/04/121010-remedies-of-debentureholders.html 
9. https://www.quora.com/Why-do-companies-invest-in-other-companies
10. https://www.indiafilings.com/learn/inter-corporate-loan-and-investment/
11. Company Law, Avtar Singh (Fifteenth Edition), Pg. 488
12. https://www.toppr.com/guides/business-laws-cs/negotiable-instruments-act/hundi/

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 Borrowing, Lending, Investments, and Contracts: an overview appeared first on iPleaders.

This article has been written by Namrata Kandankovi, pursuing B.A LL.B (Hons), Symbiosis Law School, Pune.

Understanding Competition Law

Considering the Indian scenario, it can be stated that the decade of the 80s and 90s were the ones of significance as it was at this time when there came to be new developments like that of the introduction of new economic policy, and also the opening up of the Indian market to the world at large. As a consequence of this there were numerous other developments like that of The New Economic Policy of 1991 was brought into effect, this policy further widened the scope for privatisation, liberalisation and globalisation of the Indian economy. This eventually broadened the scope for market forces in India and also brought down the role of government in various economic and business sectors.

It was in the year 1969 when India adopted its first Competition Law which was in the form of Monopolies and Restrictive Trade Practices Act (MRTP). The enforcement of this act was based on the socio-economic conditions of India which were in line with the socio-economic philosophy laid down in the Directive Principles of State Policy which has been contained in the constitution of India.  With the passage of time, the MRTP act went through a number of changes and various amendments were brought into being.

The inception of Competition Law in India

The government of India constituted a committee in the year 1999 known as the Raghavan Committee, which functioned under the chairmanship of Mr SVS Raghavan. This committee in its report came up with certain important implications like that of-  To bring effective competition, the rivals should be given opportunities in terms of competition in the markets and this should be provided to them on the basis of the quality of their outputs. Taking all these recommendations into consideration a draft was proposed in the parliament in November 2000. After taking into account the recommendations of the committee, the parliament passed the bill in the year 2002 by the way of which the Competition Act 2002 was brought into effect. Hence, the Competition Act 2002 replaced the MRTP act from the date of 1 September 2009and the MRTP act was stood repealed.     

Following this, it was the Competition Act 2002 which laid down the rules and regulation for competition laws in India, it also established the Competition Commission of India which acts as a quasi-judicial body and enshrines the principles of rule of law and also possesses all the powers of a civic body in terms of gathering evidence.

The advent of food delivery apps in India

The concept of food delivery has occupied the most commonplace in the modern world. The very idea of food delivery comes up with the combination of both quality food and convenient service in delivering the same. The current phase at which the popularity of food delivery is growing in India is the highest when compared to any other day in the past.  The current rate at which online delivery of food is growing has resulted in an increase in the number of orders per day reaching to around 40,000 in a metropolitan city like that of Bangalore. This, in turn, means that the food deliveries went up to 56% of the total number of orders delivered by the food tech sector in India.

The saga of Swiggy and Zomato

The major players like that of Swiggy, Zomato and Foodpanda would be on advantage with the investment in in-sourcing delivery. Swiggy which is seen as a significant player in terms of competition in the food delivery world has in-sourced from the time of its inception and has continued to do the same and has been able to process 100% deliveries. Zomato on the other hand, which started as a restaurant discovery medium, eventually turned into a food delivery app. It further went on to acquire leading companies like that of Runner, a hyper logistics firm which again boosted its in-house delivery sector.

Looking at the current facts and figures, it could be predicted that even in the recent future, the two leading giants, that is Swiggy and Zomato would continue to earn profits and exercise their control over the market. But at the same time, one’s attention should be drawn towards the development where Ola, one of India’s largest taxi-handling sectors has planned on buying Foodpanda. This kind of development could affect the business established by Swiggy and Zomato and prove to be a tough competition for both these giants. Having a look at this model of development various experts have expressed their opinion stating that there can be a risk to this market as various other sectors with deep pockets try to buy the market shares and express the undue influence on the market. 

Dependence of consumers on food delivery apps in India

E-commerce in India was expected to grow on a wider scale from the period of 2013 to 2020, which actually came true in terms of numbers and figures. Amongst all other developments in the field of E-commerce, the sector of online food delivery is growing rampantly, this current demand for online delivery also leaves an impact on the small scale restaurants. Some of the significant reasons behind the unprecedented growth of these food delivery applications in India have been discussed under:

• Ideal Indian Demography– It is to be noted here that, India caters to a population of 1.2 billion and in addition to it, India is one of the biggest consumer markets in the world. Adding to the point, more than 50% of the Indian population falls under the age group of 25 years, which is again the youngest population in the entire world. The widely accepted notion which is also true is that most of the demands for food come from the population aged between 18-2 and as India caters to almost all the ideal conditions, it becomes a hub for online food delivery market.
• Rapidly changing lifestyles– As the trend these days demands the working of both the parents, there arrives a rapid change in the lifestyle in the family including their food habits, consumption and their routine, and all these elements make the family bank on the delivery apps in order to fulfil their requirements. Along with the existence of demand for food delivery apps, there also exists a wholesome ability to satisfy these needs as they are available at affordable prices.
• Increase in the number of working women– Considering the changing aspect of the society, the number of women being employed in numerous sectors of business is also on the increase. As a result of this, women start investing most of their time in their work being produced in the same and as a result, there is less time left for them to focus on the household courses and this factor again adds as a major one in terms of increasing the dependency on food delivery apps.
• Improved standards of living and increased consumption– When the young population of India gets employment opportunities, their standard of living tends to improve with the amount of salary being granted to them in various sectors like that of IT, Corporate etc. These developments make a large chunk of the young population in India opt for online delivery of food, as they become affordable to whatever costs are to be incurred for ordering in.

Zomato, Swiggy, Foodpanda and others eating into the business of small scale restaurants?

In the recent past, there have been allegations made by small scale and midsized  restaurants that the food delivery apps like that of Zomato, Swiggy, Foodpands etc. have been making undue use of their positions and in addition to this, dominance has been showcased by these delivery apps in order to earn greater profits and this, in turn, is acting as a huge burden on the small scale restaurants.  

As a response to the ongoing miscreation, the restaurants have filed an online petition, which has been addressed to the Competition Commission of India (CCI) and the Prime Minister’s Office(PMO). Now looking from the perspective of the delivery apps, it is to be noted that some of the apps like Swiggy and Zomato have negated the allegations, while some others like that of Foodpanda and Ubereats have declined to respond to the query expressed by these small scale restaurants. However, the Competition Commission of India stated that it would look into the matter and would further try and put an end to the unsustainable pricing by these food delivery applications. Some of the significant issues which the Competition Commission of India had to address in this matter were- issues related to deep-discounting, cloud kitchen and in-house kitchens. These issues will be further discussed in detail in the forthcoming section of the article:

• In-house Kitchens– The petition filed by the small scale restaurants mentioned the in-house kitchen started by Swiggy, which is – The Bowl Company, the prime concern expressed by the restaurants was that a company like Swiggy by starting an in-house kitchen is trying to divert all the consumer base towards itself. In addition to this, there are certain measures taken up by Swiggy, For example- The first advertisement which pops up when the user logs into Swiggy are the advertisements of The bowl Company, which is their in-house kitchen. The petition has stated that this amounts to the misuse of consumer database. Swiggy has denied these allegations and has stated that they do not intend to divert the consumer base towards their in-house kitchen but they try to meet the needs of the consumers whose needs haven’t been met and have gone ahead to state that they try to bridge the gap which exists in the market.

Zomato, on the other hand, also has an in-house kitchen named HyperPure, which delivers vegetables, meat and chicken etc. The tactic used by Zomato here is that it has made it mandatory for other restaurants to purchase these items from HyperPure, which goes against the Competition Act. But, in its defence, Zomato had stated that its prime idea was just to provide fresh ingredients to the restaurants and has also said that forcing restaurants to buy products from HyperPure would actually go against their ethics and there is no compulsion issued by Zomato on any restaurants.

• Deep-Discounting– The very idea of deep-discounting used by the online platforms is actually diverting consumers from the restaurants to these platforms, and as a consequence of this, the footfall on consumers in getting reduced in the small-scale restaurants. For the small-scale restaurants, the cost of doing business is also escalating day by day as the commissions are directly getting impacted and also, this is hurting the small-scale restaurants in the long-run. Again, in their defence, the delivery apps stated that providing discounts is a voluntary act and its main objective is to increase the participation of the consumers in terms of buying the food products. They also stated that the restaurants can also participate in the discounting campaign. But, in reality, this idea of deep-discounting is acting as a burden on the part of the small-scale restaurants.

Showcase of Dominance

In the market of competition, expression of dominance is never considered to be a bad aspect per se, but when it comes to abuse of power by the way of dominance, then it falls under the ambit of arbitrary dominance and calls for the attention of the competition act of India to resolve the matter. The various aspects of dominance have been discussed as under in line with the provisions of the Competition Commission of India:

• Practices which are Exclusionary in nature– The main objective behind imposing dominance by various firms by adopting strategies like that of contracts and different pricing strategies are in order to stop the new competitors from entering the marketplace. This, in turn, would lead to the market being restricted only to certain competitive firms who can continue to earn profits. This strategy is executed by the firm, by pricing the commodities below the production rate in the initial stages in order to exit the competitors and eventually raising the prices in the medium and the long run in order to make up for the losses incurred previously. Now the concept of predatory pricing comes into picture where in order to bring in the practice of predatory prices, the following conditions should be fulfilled:
• Pricing the commodity at a lower cost in the first place.
• The reduction in prices being made in order to reduce competition and eliminate competitors from the market.
• Rebates– The term rebate refers to the reduction in the amount to be paid. Section 2(4) of the Competition Act 2002, gives out a wider ambit to the concept of rebate. In the current market in terms of food delivery in India, rebating has been used by different sectors in order to create a foreclosure of the market to the new enterprises to ensure that they do not enter the market. Generally speaking, there are three different provisions by way of which rebating can be brought into effect which are:
• The threshold rebates– If the total value of a customer purchase crosses a certain threshold during a given period, then the dominant firm offers a discount of X per cent to its customers.
• Selective price cuts– In this model, price cuts will be offered only to certain selective customers. This has been widely in practice in various dominant firms in the market.
• Fidelity rebates– This particular aspect comes into play more as an arbitrary measure adopted by a dominant firm, whereby, discounts are offered only to those consumers who purchase products only from these dominant undertakings.

All these measures have been used by the food delivery apps in India in some or the other way, and taking the legal clauses of competition law into consideration, it can be said that these fall under arbitrary use of dominance by the way of power and it is termed as a differential condition of sale of goods which also attracts liability under Section 4 (2) a (1) of the Competition Act, 2002.

• Market Access being denied– Section 4(2)(c) of Competition Act, 2002 provides that any entry barriers imposed by the dominant enterprises through their conduct results in the abuse of power which is wrong under Competition Act. Further, such acts of creating an entry barrier affect the way the market functions and as a result, there might even be an impact on the upstream and downstream of the market. Hence, such acts purported by the dominant firms call for legal action against them. Hence, these firms can be subject to liability for their acts under The Competition Act, 2002.

The Food Fight- Tackling the ongoing problems

In recent times, which is in August 2018, the National Restaurant Authority of India (NRAI) had issued letters to all the prime delivery applications in India, that is Swiggy, Zomato, Foodpanda and Ubereats. There were serious concerns raised by the NRAI where it brought the attention of these delivery apps towards the raising concerns towards the ongoing issue of a food fight between the food delivery apps and the small scale restaurants operating in the country. In the four different letters addressed to the food delivery apps, the NRAI raised concerns about the issues of Lack of transparency, deep-discounting offered by the delivery apps and the abuse of their dominant position in the marketplace and how it is affecting the small scale restaurants.     

The concept of deep discounting and data masking which have been unfolded by the delivery apps has caused trouble to the midsized restaurants on a larger scale. Some of the important activities rolled out after the issuance of letters by the NRAI which have been discussed in the following segment of the article:

• The #logout campaign– There was unwinding of the #logout campaign earlier in the month of July during which some 2000 small sized hotels and restaurants delisted themselves from the delivery apps and this was done as a response to the heavy discounting offered by the various dining programs like that of Zomato, Swiggy, EasyDiner, Dineout etc. Taking this matter to book, the Mumbai head of NRAI- Anurag Katriar that the association has urged the delivery apps and the small-sized hotels to resolve the matter mutually and come to a conclusion. He further stated that as an industry body NRAI would like to actively involve with the food aggregators to find a solution to the existing problem.
• Reviewing Discounting Schemes by food aggregators– The deep discounting schemes offered by the various delivery outlets act as a major problem in terms of creating problem to the business of small scale restaurants. Hence, if the food delivery apps come to a consensus with the hotels and work on their deep discounting scheme, there can be some resolve given to the small-sized restaurants. There has also been a warning issued by The Federation of Hotels and Restaurants Association of India that there would be nationwide protests if the food aggregators do not consider working on their discounting schemes in order to make it advantageous towards the working of the small scale restaurants in India.
• Zomato calls for a truce and says it’s willing to rectify the mistakes of the past- Following the recent developments where it saw a face-off between the small-sized restaurants and food aggregators, Zomato founder Deepinder Goyal in series of tweets called for a truce and sanity. After the unfolding of the #logout campaign, Zomato lost around 65 restaurants which almost amounted to 1% of its entire program. Zomato in its tweet came out with the statement that whatever is good for the restaurants is good for Zomato and whatever is good for the consumers will be in the interest of Zomato. Goyal further stated that Zomato is committed to working by serving the interests of the consumers and also the interests of the small-sized restaurants. Hence, if the food aggregators themselves start analysing the existing problem and work in terms of resolving it, then there can be a smooth functioning between the food aggregators and small scale hotels.

Conclusion

After analysing and understanding the aspect of the problem faced by the small-scale restaurants, it can be stated that there exists a gap between the working of food aggregators and small scale restaurants and in order to curb the differences between them, there is a dire need to come up with an immediate solution to the existing problem. Considering the economic scenario of the market and the provisions of the Competition Act 2002, it can be said that there are necessary provisions under the said law, which would come in handy in order of imposing liability on the sector which takes undue advantage of its position and abuses its power. This will also create a deterrence to the happening of such instances in the future and ensure the safety and independence to the functioning of the small-scale restaurants in India. In order to make this happen, there should be strict compliance with the provisions of the Competition Act 2002 and also the implementation of the same in the numerous arenas whenever it is required.

References

• Restaurants shrink as food delivery apps get more popular, Livemint, https://www.livemint.com/Companies/IJpQEIcTkZk4UhgDNSQLFK/Restaurants-shrink-as-food-delivery-apps-get-more-popular.html
• Zomato, Swiggy & others eating into our business: Restaurants, Economic Times, https://tech.economictimes.indiatimes.com/news/internet/zomato-swiggy-others-eating-into-our-business-restaurants/67358478
• How Delivery Apps May Put Your Favorite Restaurant Out of Business, The New Yorker, https://www.newyorker.com/culture/annals-of-gastronomy/are-delivery-apps-killing-restaurants
• The changing market for food delivery, Mc Kinsey, https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-changing-market-for-food-delivery
• Consumers Love Food Delivery. Restaurants and Grocers Hate It, The Wall Street Journal, https://www.wsj.com/articles/consumers-love-food-delivery-restaurants-and-grocers-hate-it-11552107610
• Online Food Service in India: An Analysis, AIIMS Institute, https://theaims.ac.in/resources/online-food-service-in-india-an-analysis.html
• Deep Dive: Third-Party Delivery Apps Face Growth Challenges, Pynmts, https://www.pymnts.com/restaurant-innovation/2019/third-party-delivery-apps-growth-challenges/
• What is the importance of food ordering mobile apps for business? Quora, https://www.quora.com/What-is-the-importance-of-food-ordering-mobile-apps-for-business

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 food delivery apps on small scale restaurants in India appeared first on iPleaders.

This article has been written by Aayush Akar and Hitesh Gangwani.

Introduction

India has been a multilingual country for thousands of years with every region and every state has a different language and every language having a heavy impact in that particular region. The vastness and the magnanimity of India are known to everybody all across the world. India is a country with over 1.3 billion people having regional, religious, cultural, caste, creed and linguistic diversity at all fronts.[1]

The linguistic diversity of the country can be gauged from the fact, that as on date there are 22 scheduled languages, 100 non-scheduled languages and over 1700 dialects and other vernacular languages spoken all across the country. If we go by the philological studies, then in India language changes every eight kilometers. It may not be out of context to mention that each scheduled languages in India are spoken by over a million people, every non-scheduled language is spoken by at least 10,000 people and other dialects by other groups, sects, regions, etc.

One of the most controversial and political issues in Indian politics is related to language problems. After attaining independence, the Indian government decided to enact Hindi as the only official language of independent India. Hindi belonged to the lineage of Aryan languages. People who spoke other languages, especially Dravidians, saw in this decision an attempt to erase their language cultures. But the Indian constitution had declared that English can also be used for official purposes.[2]

After India’s independence when Hindi was chosen as an official language of India, different speakers of ‘Hindi’ language began demanding official recognition of their languages. Maithali and Punjabi speakers also demanded to recognize their languages as separate languages from Hindi. Of the different ‘Hindi’ languages, only Punjabi got this recognition. Other ‘Hindi’ languages are considered dialects of Hindi and their status in the different states of India isn’t clear and is interpreted differently by different parties. After so many struggles of different political parties, the Government of India had permitted various state governments to have their own official language and created the three-language formula in the states.

Cooperative federalism in India

Federalism is the division of power between the centre and its various constituents, like provinces, states, cantons and so on. Cooperative federation means that both the sets of government are deriving power from the same constitution and are working cooperatively to ensure smooth governance.[3]

The Indian model of federalism is recognized by legal scholars as quasi-federal as it contains features from both a union and a federation. When the government is divided between constituent political units and a central authority then that system is recognized as federalism. The Constitution of India is established and recognized by the Indian government as a federal structure hence declaring it to be a ‘Union of States’.[4]

Why India Followed Cooperative Federalism

In India Federalism is “an indestructible union of destructible states“. It was perceived at the floor of the constituent assembly that states must be an integral part of India denying any right to secede. Therefore, a need for a strong union was anticipated and the constitution gave dominant power to the central government.[5]

However adequate powers were also relegated to the states in order to administer and govern the local government with much efficacy. Such arrangements have been exhibited in the union, concurrent and state list of the seventh schedule. In order to streamline the development process and enhance the progress of all the regions, cooperation between centre and state is the utmost necessity. Such a form of cooperative federalism is required more so in the case of India, due to its vastness, enormity, and extreme diversity.[6]

How Cooperative Federalism Works in India

Co-operative federalism in India is observed by the following:

• Distribution of powers;
• The supremacy of the constitution;
• A written constitution;
• Rigidity; and
• Authority of Courts

Under this arrangement in the constitution, the centre has got dominant power as evident from the following:

• The executive power of the state must be exercised by the state with adherence to the laws made by the government at the centre and must not delay the executive power of the union within the [7]
• The centre can even usurp the legislative discretion of the state with the permission of the Rajya Sabha. The governors are to be appointed at the discretion of or by the central government to supervise states within their official
• The centre can even take over the executive of the states on the issues of national security or breakdown of the structure of the constitutional machinery of the [8]

Cooperative Federalism in India is Practiced Under Following Norms

• Article 263 of the constitution has set up provisions for the implementation of an Inter-State Council for investigation, discussion, and recommendation for better coordination of relations between the centre and the
• The Zonal Councils which were set up by the State Reorganization Act 1956 provide another constitutional mechanism for union-state and inter-state co-operation to mend or repair the conflicts and strengthen the framework and working of their co-operation. The National Development Council and the National Integration Council are the two other important forums that provide opportunities for discussion to resolve differences of [9]

Development of Hindi

An argument took place at the time of constitution-making, development of Hindi language took a long transitory period for change over from English to the Hindi language. It was said that the Hindi language is underdeveloped language and that it needs to be developed before it could take place of the English language.

Article 351 places the central government under a responsibility to take steps to promote the spread and development of Hindi. It also states the future form of which Hindi should be developed so that it may serve as a medium of expression for all the people of different culture of India and secure its enrichment by assimilating without interfering with its genius, the forms which different people follow, style and expression used by Hindustani and in the other languages mentioned in the 8^th schedule of the constitution.[10]

This provision contains too many compromises and it seems to have a balance between the purist and the liberalist as regards for development and enrichment of Hindi. Purist wants to draw upon Sanskrit whereas liberalist wants to use all regional languages and Hindustani for the purpose.

There is no doubt that Hindi developed on the lines laid down in Article 351 would be very different from its present form. The idea which they have of assimilating terms from regional languages into Hindi is convenient or helpful but possibly not completely moral as it would allay the feeling of doubt or apprehension about the outcome or consequences of those linguistic groups whose languages do not have Sanskrit base.[11]

Regional Languages in India

The people who were framing the constitution were faced with an important question regarding the future role of regional languages. They took their view that these regional languages should be upgraded and developed so that these languages can play a meaningful role in the future setup in the country. Article 350(a) and 350(b) was inserted by the Constitution Amendment Act 1956 to ensure the protection of language minorities.

To achieve these objectives, the constitution provides 22 regional languages in the 8^th schedule of the constitution which includes Assamese, Bengali, Bodo, Dogri, Gujarati, Hindi, Kannada, Kashmiri, Konkani, Maithili, Malayalam, Manipuri, Marathi, Nepali, Odia, Punjabi, Sanskrit, Santhali, Sindhi, Tamil, Telugu and Urdu. These languages are going to be represented on an official language commission to be appointed under Article 344(1).[12]

Intergovernmental Communication

Another problem peculiarly faced by the constitution-makers was to devise a formula concerning the language to be used in inter-governmental communication. This becomes necessary in view of the possibility of the different states adopting the different official languages.

Article 345 therefore, lays down that for the purpose of communication between 2 states, or between the centre and a state, an official language of the centre should be used, although two more states may agree to use Hindi for the purpose. Article 345 and 347 though provide procedures for declaration of an official language, the procedure is completely different as Article 345 deals with the power of state legislators and Article 347 deals with the power of the president of India. The requirements of both Articles are different and not interchangeable.[13]

Constitutional Provisions of Language in India

The Constitution contains a detailed provision relating to the problems of language. These provisions consist of conflicting views held by the Hindi supporter. The Constitutional formula contains a variety of inter-related components-

• English would be an additional official language for the next 15 years;
• Hindi would also serve along with English as an official language;
• Meanwhile, various steps would be taken to promote the expansion of Hindi;
• The state could adopt any other language as its official

According to Article 343(1), the Hindi which is written in Devanagari script is to be recognized as an official language. The reason behind designating the Hindi as an official language, not as the national language is that not only Hindi is regarded as a national language but all the regional languages are considered to be national and not a foreign language. It lays down the final goal to be reached within the course of time for declaring Hindi as an official language and fixed a period of fifteen years for this purpose in order to pacify the south Indians. Therefore, it was envisaged that from Jan 26, 1965, Hindi would be put in as an official language at the centre meanwhile, the English language would be used for all official purposes.[14]

Article 343(2) among other things, provides for the continuing use of English for various purposes of the union for a period of 15 years from the beginning of the constitution. The Constitution regards 15 years as an absolute deadline and some flexibility has been introduced within the arrangement. Thus, Article 343(3)(a) authorizes parliament to produce a law even after that time period i.e. the Parliament could thus allow the utilization of the English language on the far side of fifteen years period for some or all an official purpose of the union.[15]

Official Language Commission

Article 344(1) states about the appointment of the President of Official Language Commission after 5 years from the commencement of the constitution and thereafter at the end 10 years from such commencement. The commission compromises of chairman and such different members representing the various kind of regional language which is mentioned in the 8^th schedule of the constitution.[16]

 According to Article 344(2), the Commission’s duty is to make or give a recommendation

• More use of Hindi language for an official purpose of union
• Restriction on the utilization of English Language for all or any of an official purpose of union
• The Language to be used for proceedings within the Supreme Court and High Courts and also the state legislation and delegated legislation made under it [17]

The constitution provision provides that the main function of the commission is to facilitate the use of Hindi language over the English Language during the transition period so that when changeover will take place its smooth for all to change from English to Hindi. A good deal was given to non- Hindi people as they are in the majority to change from the use of English to the Hindi language. The principle of the commission is to keep in view the industrialist and cultural advancement of the country and to recognize the problem of non-Hindi people so that they can quickly change from English to Hindi.

The recommendation made by the commission is to be screened by the parliamentary committee consist of 10 members of Lok Sabha and 20 members of Rajya Sabha elected by propositional representation system it means that by one transferable vote as mentioned in the Article 344(1). The President can give direction to the whole or any part of the committee report, nevertheless anything in Article 343 i.e. to restrict the use of the English language and promote the Hindi language.[18] There so many safeguards taken in favor of non-Hindi people that no rash action taking during the interim period and the English language could also be used.

Linguistic Division of States in India

Language is the group of symbols which is accepted as the mode of communication in the group. It plays a key role in the life of any individual. There was only integration of states on the ad hoc basis so during independence need aroused for the creation of permanent states on the account of accommodation of multilingual groups and their culture.

Movement for the Linguistic States

The demand for the creation of the states on the basis of a linguistic basis was started from the pre-independence era i.e. from the British time. The first such movement was started for the formation of Orissa state. It was the result of the movement started in a century ago. The main issue was that the British government had made Hindi as an official language but the Sambhalpur was then included in Madhya Pradesh so the Oriya people started feeling the imposition of   Hindi. In 1902, there was a proposal made to Lord Curzon then Viceroy of India for the creation of Orissa state. In 1927 as a member of Central Assembly Nilakantha Das passed the resolution for the formation of Orissa state. Finally in 1935 Orissa state was formed under Indian Administrative Act.[19]

Political Integration After Independence and The Constitution of 1950

As we all know the British granted independence to India on 15^th August 1947 and divided the Indian subcontinent into India and Pakistan. After independence Britishers dissolved their treaty with more than 500 princely states, there was choice created for these princely states either to be a part of India or with Pakistan while there was no compulsion for them. Form these princely states Kashmir, Bhutan and Hyderabad opted to be independent. Later on, Hyderabad became part of India.[20]

On 26 January 1950, the new constitution of India was created which made India a sovereign, democratic republic. The states were divided into 3 parts i.e. part A deals with those states where Governor will be appointed by the President and there will be elected state legislature. It includes states of Madras, Punjab, Odisha, etc. Part B includes states where the ruler will be Rajpramukh, the ruler of the state. It includes princely states of Madhya Bharat, Cochin, etc. Part C includes states which will be administered by Chief Commissioners appointed by the head of the country. It includes states of Coorg, Delhi, Himachal Pradesh, etc.[21]

In 1948 the JVP committee was formed headed by the retired justice SK Dhar, justice of Allahabad High Court to examine whether there would be the possibility of the restructuring of the states on the basis of language.[22] The committee did not agree with the idea of the states of the country to be redesigned on the basis of language and referred to the division of states on the basis of administrative convenience.

State Reorganisation Commission

In the year of 1953, Prime Minister of India appointed the following commission to reorganize the on the formula of a linguistic basis. The commission was headed by Fazal Ali, Supreme Court’s retired judge and the committee consisted of the following members namely H. N. Kunzru and K.M. Panikkar. As there was a widespread protest in the southern state of Madras for the division of Andhra Pradesh as the Telugu people thought that Tamil would be imposed on them. So the PM Nehru forced to create the first separate state on the basis of language named Andhra Pradesh. Similarly, a demand arose for the other states on a similar basis. While Nehru did not accept the full recommendation of the commission, he divided India into 14 states and 6 union territories under the State Reorganization Act, 1956.[23]

Unitary Power of Central Government

The concept of the linguistic division of states has weakened the cooperative federation in India. In the case of Babulal Parate v. State of Bombay and Another[24], 1960 the question arose whether the consent of the state legislature is required for the formation of a new state and regarding the validity of the 5^th Constitutional Amendment Act, 1955.

The 5^th amendment states that the President of India has the lawful right to set the time limit for the state legislature for their consent regarding the formation of a new state. The Supreme Court held that there will not be any violation of Article 3 which states that the Parliament of India has the absolute right for the creation of a new state with the views of respective state legislature within the specific time period for reference. So the honorable Supreme Court, in this case, held that there was nothing mentioned in Article 3 for the Central Government to act upon the views of the state legislature. This affects the centre-state relations as in the formation of new states the consent of the state government is not obligatory on the part of the central government. So there will be no cooperative federation.

In the formation of the separate state of Telangana which was carved out from Andhra Pradesh in 2014 under Andhra Pradesh Reorganisation Act, 2014, the respective state government opposed the centre’s move for the formation of Telangana which would comprise of 10 districts.[25] But as per the Fifth Amendment, the views of the Andhra legislature were not binding on the centre. Finally, the Parliament of India divided the Andhra state and the new state of Telangana was born out which is now recognized as the 29^th state of the Indian union.[26]

National Language Controversy in India

After meeting Tamil Nadu Governor, Banwarilal Purohit, President of Dravida Munnetra Kazhagam (DMK) MK Stalin said that the protest scheduled in Tamil Nadu on the imposition of Hindi language will not take place in 2019. Amit Shah made a controversial statement of unifying the Hindi language for the whole country during Hindi Diwas.[27]

In 2017, Union Minister Venkaih Naidu made a controversial statement regarding the Hindi language. He said that the state governments should promote the Hindi language. Every citizen should feel proud to speak such a beautiful language and Hindi is our national language and it could be the link language of the nation.[28] He said we Indians are following the colonial language ‘English’ as link language for the whole nation. But the census of 2001 just answered to the opposite of the Union Minister. It revealed that in the whole nation just 40% speak Hindi and 25% have the Hindi as their mother dialect.

As per history, India is the multi-lingual country where the Constitution itself respects language under Article 29 respects the language of each community of India. In ancient times Sanskrit and Urdu were used as the channel of communication for the whole nation. With the arrival of Britishers, the English became soon popular in the country. Initially, the Britishers used vernacular language as the language of communication in court but for their convenience, they preferred as an official language in courts.

After independence, the debate started regarding the national language in India. The debate was first mainly between Hindi and Urdu language. The state of other regional languages like Tamil, Bengali also wanted these languages to be the national language of India but as we know it was not possible to make Tamil as the national language due to geographic problems and the majority of Hindi population in the country.[29]

Debate for Single Language

As when the process of the Constitution started the question arose in the mind of makers was what language should be used as link language of the nation. As the landmass of the country was huge so the debate started regarding the national language. Hindi could be the link language in the Hindi heartland but what could be the language in the states of non-Hindi speaking background.[30]

Most of the distinguished members of the Constituent Assembly wanted to accomplish the dream of the father of nation Mahatma Gandhi for having a single language as the national language of India in order to attain the cultural identity. Dr. N.G.Ayyangar says in one of his speeches at the Assembly, “There was one thing about which we reached a fairly unanimous conclusion that we should select one of the languages in India as the common language of the whole of India, the language that should be used for official purposes of the union”.[31]

BR Ambedkar argued for the adoption of the written constitution in English which would be more clear and articulated.  But many north Indian members demanded the adoption in Hindi in Constitution as English was the colonial language. Seth Govind Das in one of his speech said that Hindi would be the national lingua franca of India. Only some members wanted English as the national language and for South India English could be the lingua franca for a limited period of time then Hindi would be the national language of India.[32]

The Hindi-Hindustani language controversy came to an end as Article 99 of the Indian Constitution states that in Parliament English or Hindi would be used for official transactions. Lokamanya Tilak, Gandhiji, C Rajagopalachari, Subhash Bose and Sardar Patel wanted Hindi to be the national lingua franca of India as it would lead to national integration.[33]

As the unity of assembly was going to split regarding this sensitive issue, the whole assembly decided to adopt the Munshi-Ayyangar formula. As per this formula, all official proceedings in the court of law and in public service would be done in English. This formula would be applicable in India until 1965 than in the whole India Hindi would be adopted without any conflict. When the term of 15 years was about to end then PM Lal Bahadur Shastri under intense pressure from Tamil Nadu as the particular southern state was about to leave India by creating Dravida Nadu and the state till now never approve Hindi as the national language of India, he passed ‘Official Languages Act, 1963’ where Hindi along with English would be allowed by non-Hindi speakers for official purpose in all India service. In 1967 Indira Gandhi passed an official Language (Amendment) Act in order to resolve this sensitive issue where Hindi along with English would be an official language of India.[34]

Hindi Agitation in Madras

The Hindi agitation in Madras was a serious issue regarding a single language in India. It reprinted its image in the history of Indian during both pre and post-independent India. The agitation involved many students, women, professionals, etc for making Hindi as an official language in the state.

In 1937, the Congress government came to power with the majority under the leadership of C Rajagopalachari and we know that he was Hindi chauvinist made Hindi mandatory in the province. This was tremendously protested by Justice Party leader EV Ramaswamy.[35] The agitation involved many protests in the form of conferences, fasts, etc. When the Congress government resigned in 1939 the order was later withdrawn due to widespread protest by then-governor Lord Erskine.

After debating for the creation of the Constitution for India, the Constituent Assembly took the decision for making an associate official language along with Hindi and that language was English for the period of Hindi. The efforts of the Indian government were turned into extravagant when despite making efforts till 1965 for making Hindi the sole official language of India non-Hindi states were not ready to accept it especially in the southern state of Tamil Nadu.[36]

On 26 January 1965, there was a widespread protest in Madurai as this was the last day of the 15-year tenure of English as the additional language of India and from the next day, Hindi would be the sole official language of India. So in order to pacify the situation, PM Shastri passed an Official Language Act 1963 where English would continue as an additional official language along with Hindi. The Dravida Munnetra Kazhagam (DMK) was formed in 1949 which was totally against Hindi imposition in the state. In 1953, M Karunanidhi protested along with thousands of protestors for altering the naming of Dalmiapuram railway station’s name and erased the Hindi name of it. In the pre-independence era, it started demanding Dravida Nadu meant for a separate country for Tamilians. But due to the Sino Indo war and the implementation of the 16^th Constituent Amendment Act 1963, it dropped its demand for Dravida Nadu. As a result, DMK came to power in Tamil Nadu in 1967 and till then only Dravidian parties are having power in the state.[37]

In 1965, the Congress government passed the three language formula for non-Hindi speaking states where Hindi, English and regional language would be taught in Schools. This was also scrapped in Tamil Nadu as people were totally against the use of Hindi in schools and there was a widespread protest against the Hindi language. Till now only Tamil and English are used in state schools of Tamil Nadu.[38]

Hindi Agitation in Karnataka

The people in Karnataka voiced its concern over the use of Hindi in the Namma Metro. Even the CM Siddharmaiah expressed his discontentment to the center regarding the use of Hindi language in the mass transit transportation. Most social activists protested against the arbitrary action of center over the use of Hindi signboards in the metro. Even they were imploring the Bengaluru Metro Corporation to take stringent action against those who were using the propaganda in the metro.[39]

English v. Hindi Controversy In India

India has till now resolved this sensitive issue of the national language of India in spite of having a rich collection of languages. Many scholars demanded the use of English as the sole official language of India as it was used in India by Britishers for the century and Indians are now accustomed and feel comfortable with the colonial inherited language. This English language has contributed immensely to the formation of institutions that cherish the idea of equality, liberty, justice, and fairness. Thus there are so many advantages to the adoption of English as one of the sole official languages of India. They are as follows-

• As the language has acclaimed the status of all over the world and is adopted as one of the official languages of the United Nations so it will help Indians to communicate with people of the rest of the
• The language has a rich source of international
• Indian languages are not widely popular as compared to English which is the colonial language in so many international

Hindi is one of the most spoken languages of the Indian subcontinent. As per the 1951 census, 42% of the population of the country speaks Hindi. But because of the following reasons, Hindi can’t be alone an official language of India.

• Because of anti-Hindi protest, DMK came to power in Tamil Nadu
• Hindi was initially imposed on non-Hindi speaking states people so it becomes very difficult for non-Hindi speaking state people to adopt Hindi as the sole official
• The creation of states on the basis of lingua franca created an obstacle for the central government for the promotion of Hindi as the national language of

Hence Hindi and English both are used as an official language of India as English has a very powerful impact on the administration of India. For the promotion of Hindi in non-Hindi speaking states, separate departments of Hindi have been created.[40]

Further Development of Language Controversy

The language problem which arose the constitutional provision failed to solve it, and the controversies have arisen from time to time in this regard.

An official language commission, as envisaged by Article 344(1) of the constitution, was duly appointed on 7^th June 1995 and is reported in 1957. The commission reported that the English language could not remain as an official language for very long for a union as it would be against national self-respect and that only through an Indian language could there be an increase in popularity of the national life.[41]

The main force of its recommendations was that effective steps should be taken immediately to ensure a change over the Hindi language on appointed day i.e. 26 January 1965. The commission was with the opinion that the arrangements the Indian government is making for the training of employees On voluntary basis in Hindi, if their experience showed no proper results coming under there arrangements, the necessary steps should be taken by the government making it compulsory on go to servants to qualify themselves in Hindi language within the given particular circumstances and regulations in given period, to the extent given period for the discharge of their duties.[42]

The recommendations of the commission were placed before a parliamentary committee as possible by Article 344(4). The committee came up with the opinion that the government should give legal requirements to the government servants to qualify themselves in the Hindi language.

After considering the report of the committee, the President issued an order on 27 April 1960.

The report which was issued by the commission raised a controversy in the non-Hindi speaking area. To remove the unpleasant or intense feeling of these people, Prime Minister Nehru Ji gave an assurance that the English language would continue to be the “Associate” official or link language for as long as they wanted.

An Official Language (Amendment), 1963

The advice given by the committee is being examined by the parliamentary committee and Parliament passed an Official Language Act, 1963 as parliament can exercise their power under Article 343(3). The act passed by the parliament was that the English language may continue to be used but in addition to Hindi. Even after the completion of the deadline which was of 15 years, English will be used for all an official purposes of a union for which it was earlier been used.

Two important points need to be noted as per Section 3 of the Act-

• The word ‘may’ has been used;
• The English language is to be used in addition to

The act therefore clearly states that before 1965 Hindi is to be used in addition to English but after 1965 English is to be used in addition to Hindi.[43]

To rethink the problem of language in the future date, the act grants for the designation of a parliamentary committee on official language to resolve the past sanction of the president which are been passed by both the houses. Basically, the committee consists of 20 members of Lok Sabha and 10 members of Rajya Sabha are elected on the basis of propositional representation.

The act includes the provisions for the law-making or converting of Hindi version of a law to English and English version of a law to the regional language. The bill in the parliament is to be introduced in both English and Hindi.  The important texts of the central legislation must be in English.

The act states that those states which use a different language other than Hindi for the legislative purpose, there will be a conversion of the act into the Hindi language as well as into the English language as per Article 348(3) and it will be published in the state gazette.

The regional languages should be used in the lower courts but in the High and Supreme Courts, the English language will be used. Article 348(1) and Article 348(2) states that the language used in the High court should be in English. The language of High court proceeding can only be changed by the governor under the permission of the President, the judgment of the high court can be given or delivered in a different language other than English. The act provides that the state government after getting permission from the president can give permission to use Hindi or regional languages in addition to the English language for judgment purposes. The provision raises the problem of inequality of languages which of the translation to be accepted by the Supreme Court the only the English language would be adopted.[44]

An Official Language (Amendment), 1967

As on 26 Jan 1965, there was an argument suddenly appear whether the 1965 act was absolute enough regarding continuing use of the English language for an indefinite period as Nehru assured. The use of the word may be as weak as mentioned in Section 3 and was not specified as for how long it would be continued to be used at the centre. A demand, therefore, made for the constitutional guarantee of the English language to be used as an associate language in the centre. To fulfill the demand, the parliament had passed an official Amendment Act 1967.[45]

Key provisions of the amendment act are as follows-

• Use of the English language after completion of the deadline which was of 15 years (1950-1965) but English will use in addition to Hindi for an official purpose of the union;
• Use of English language between Centre & the non-Hindi state;
• If Hindi is been used between non-Hindi and Hindi people then an English version is to be used with

The last provision is of the greatest importance, as it gives the statutory assurance that the English language will continue at the central level as an associate language. The decision to continue English is now left on the non-Hindi speaking state as they did not adopt Hindi as the sole official language. The act also made sure that the use of English is to make compulsory to be used in addition to Hindi at the central level and to defend the interest of non-English people.

Inter-governmental communication is very important to the centre, so it adopted the 2 official languages, English and Hindi according to Article 346. Any of them could be used for intergovernmental communication as the non-Hindi state do not use Hindi for communication.[46]

National Language status in India

The Gujarat High Court had given a verdict stating that Hindi is considered a foreign language for Gujaratis and ruled that the state government-run primary schools will teach only in Gujarati as it is their mother tongue. The decision came after hearing the case filed by the Junagadh farmers who objected to the notification sent to them in the Hindi language by the National Highways Authority of India. It all started when the NHAI planned to widen the already existing two-lane national highway 8d to four lanes in 2006, but the plan was changed last year on various grounds.[47]

The farmers of Junagadh and Rajkot were deeply hurt by the notification and had moved to the High Court as their land would have been acquired to widen the Highway. And now, as the plan has been changed last year, these farmers are assuming that it must have been changed for the benefit of the influential people. The High Court said that according to section 3(a)(3) of the National Highways Act, the notification regarding the change in the plan must have been published in Gujarati as it is the regional language.

The High Court Justice V M Sahai, who heard the case, came to the conclusion that NHAI has made a mistake by not publishing the notification in Gujarati. He also canceled that notification as it was published only in Hindi and English and declared it as unacceptable and invalid, but has refused to cancel the project.

The Gujarat High Court declared that Hindi is not a national language of India in the case of Suresh Kachhadiya v. Union of India[48]. The petitioner Suresh Kachhadiya asked the court to issue the mandamus to the centre for making Hindi compulsory in the packets of the products including date of manufacturing, price, etc. So the Court asked the petitioner to mention whether Hindi is the national language of the country as the constitution mentions it as an official language of the country along with English. The Court said that it’s the manufacture’s right whether to use Hindi or English in the products.[49]

Language Controversy in High Courts of State and Supreme Court of India

As per Article 348(1), all the proceedings in the Supreme Court of India and High Courts of every state shall be conducted in English until the law of Parliament. Under Article 348(2), the governor with the consent of the President may allow the use of Hindi or any other regional language in the court of law of that state. This similar provision is made in Section 7 of an Official Languages Act, 1963.

The optional use of Hindi is allowed in the High Courts of Bihar, Uttar Pradesh, Madhya Pradesh, and Rajasthan. But the similar requests were not allowed in southern states.

Tamil Nadu

The central government issued the notice to the legislature of Tamil Nadu that its demand for making Tamil an official language of Madras High Court stands rejected referring to the Supreme Court order in 2012. In 2006 the Legislature of Tamil Nadu passed the resolution in the Assembly recommending the centre to make an official language in High Court of Madras as Tamil. When this resolution as an unstarred question was presented in Rajya Sabha it was replied by the Minister of State for Law, Justice and Corporate Affairs, expressing that the proposition was alluded to the Chief Justice of India for consultation and was rejected in 2012 after considerations with the Supreme Court.

The Central Government got a proposal from the lawmakers of Tamil Nadu to make Tamil as an official language of the highest court of Madras. In the years 1997 and 1999, the Supreme Court had earlier rejected this similar resolution of making an official language of Madras High Court as Tamil.[50]

Karnataka

The Karnataka High Court had dismissed the Public Interest Litigation (PIL) for making the Kannada as an official language of the highest constitutional court of the state. The court held that though the use of other languages is permitted along with English there is no other option is available. Yet oath is allowed in both English and Kannada but making Kannada as an official language of the highest court would violate Article 348 of the Indian constitution. The court also held that in the Hindi region similar petition has been filed and rejected in the court because there should be a link language between all the courts of India son that the profession can be easily carried out. The bench noted that the order of High Court in March 2003 to conduct proceedings in all the lower courts including family courts to be conducted in Kannada.[51]

Supreme Court

The centre had notified the Government of states of Tamil Nadu, Karnataka, and Chhattisgarh that the Supreme Court had not allowed any other languages other than English in the respective High Court of Judicature of these following states. The Apex Court rejected the petition for making Hindi an official language of the High Court and Supreme Court. It held that though English was only allowed for the first 15 years of the court of law and the same can be extended by law.[52]

Conclusion

We can say that the following sensitive issue of language controversy in India is more entangled than what our Constitution drafters thought to be. The division of Andhra Pradesh is also the result of the lingua franca conflict as Urdu people thought they are being humiliated by Telugu people. So it is now proved that language holds primacy in the cultural and structural division of India.

In view of giving emphasis for the creation of national language for this vast multi-lingual country, this must not be side-lined that India has the world’s most vast collection of regional languages and steps are necessary for their protection. Gandhi Ji also voiced his thoughts in this regard and said: “Unless we give Hindi its natural status and Provincial languages their due place in the life of the people, all talk of Swaraj is useless.”

On September 14 we every year celebrated Hindi Diwas as on this day after the long and substantive debate of this issue Hindi is adopted as an official language of India in Devanagari script. But after a long protest by Madras regarding the Hindi language as the sole official language of India the Indian government in order to keep unity in such a huge diverse landmass makes English as an alternative official language for just 15 years. Even after 70 years of independence from Britain, we till now have not resolved this issue and now following English and Hindi language as an official language of India.

Gandhi Ji knew that India could gain Swaraj only with language. He wanted to promote Hindi in south India so he sends Hindi missionaries over there. He also established Dakshin Bharat Hindi Mahasabha in 1923.

The truth is that English is till now not so much popular in north India as Hindi is widely spoken there. There is an inherent element of anti-Hindi aggression in south India as once Hindi is made compulsory over there, they will start protesting in spite of knowing Hindi. The major problem lies in Tamil Nadu which is famous for its dirty politics of language issues. In order to keep cooperative federation in India, the Constitution drafters did not make Hindi national language of India. The question always arises in the mind of readers as to when other Dravidian states have no problem regarding Hindi then why Tamil Nadu has such a problem. Even Hindi is widely popular in Odisha and West Bengal being the non-Hindi speaking states. The country needs to compromise with inherited colonial language English because of one state as per Constitution no language can’t be imposed in any state, so that element of unity can be maintained in India.

Endnotes

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[2] ‘Abd2941’ <https://www.accu.or.jp/appreb/report/abd/abd2941.html> accessed 22 November 2019.

[3] ‘Cooperative and Competitive Federalism in India’ (Drishti IAS) <https://www.drishtiias.com/to-the-points/Paper2/cooperative-and-competitive-federalism-in-india> accessed 22 November 2019.

[4] ‘States Uts – Know India: National Portal of India’ <https://knowindia.gov.in/states-uts/> accessed 22 November 2019.

[5] ‘Indestructible Union of Indestructible States Meaning – Brainly.In’ <https://brainly.in/question/8824867> accessed 22 November 2019.

[6] ‘Cooperative Federalism Principle in India and Other Countries’ <https://www.jagranjosh.com/articles/upsc-ias-exam-cooperative-federalism-in-india-1462540049-1> accessed 22 November 2019.

[7] Dr Anil Kumar Dubey, ‘PRESIDENTIAL TAKEOVER OF STATE GOVERNMENT’ 41.

[8] ‘Article: EXECUTIVE DISCRETION AND ARTICLE 356 OF THE CONSTITUTION OF INDIA: A Comparative Critique, Vol. 8.1’ <https://www.ejcl.org/81/art81-4.html> accessed 22 November 2019.

[9] PK Sharma, ‘Zonal Councils in the Indian Federation’ (1969) 4 Economic and Political Weekly 263.

[10] ‘Language Provisions in the Constitution of the Indian Union | Compendium of Language Management in Canada (CLMC) | University of Ottawa’ <https://www.uottawa.ca/clmc/language-provisions-constitution-indian-union> accessed 22 November 2019.

[11] ‘Hindi as Sole National Language Is an Idea Which Militates against India’s Pluralist Unity in Diversity – The Hindu BusinessLine’ <https://www.thehindubusinessline.com/opinion/quick-take/hindi-as-sole-national-language-is-an-idea-which-militates-against-indias-pluralist-unity-in-diversity/article29439339.ece> accessed 22 November 2019.

[12] ‘EighthSchedule_19052017.Pdf’ <https://mha.gov.in/sites/default/files/EighthSchedule_19052017.pdf> accessed 22 November 2019.

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[22] ‘Why Was Formation of Linguistic States Inevitable after Independence’ <https://www.toppr.com/ask/question/why-was-formation-of-linguistic-states-inevitable-after-independence/> accessed 22 November 2019.

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[24] Babulal Parate v. State of Bombay and Another, 1960 SCR (1) 605.

[25] Jairam Ramesh, ‘Jairam Ramesh: Lessons from Reorganising India’s States – and Why Uttar Pradesh Needs to Be Divided’ (Scroll.in) <https://scroll.in/article/909436/jairam-ramesh-a-potted-history-of-reorganising-indias-states-and-why-uttar-pradesh-should-be-next> accessed 22 November 2019.

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[36] David Crystal, ‘English as a Global Language, Second Edition’ 229.

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[39] ‘Karnataka Government under Pressure on Usage of Hindi in Metro | Bengaluru News – Times of India’ <https://timesofindia.indiatimes.com/city/bengaluru/govt-under-pressure-from-activists-to-spell-out-stand-on-language-issue/articleshow/59745027.cms> accessed 22 November 2019.

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[44] ‘High Commission of India, Port Louis, Mauritius’ <https://hcimauritius.gov.in/pages?id=9avme&subid=ejRRe&nextid=7e5Ba> accessed 22 November 2019.

[45] ‘THE CONSTITUTION (TWENTY-FIRST AMENDMENT) ACT, 1967|Legislative Department | Ministry of Law and Justice | GoI’ <http://legislative.gov.in/constitution-twenty-first-amendment-act-1967> accessed 22 November 2019.

[46] ‘Official Language Act : Ministry of Social Justice and Empowerment, Government Of India’ <http://socialjustice.nic.in/UserView/PrintUserView?mid=64581> accessed 22 November 2019.

[47] ‘Hindi Is a Foreign Language for Gujaratis, Says Gujarat High Court | Ahmedabad News – Times of India’ <https://timesofindia.indiatimes.com/city/ahmedabad/Hindi-is-a-foreign-language-for-Gujaratis-says-Gujarat-high-court/articleshow/11321862.cms> accessed 22 November 2019.

[48] Suresh Kachhadiya v. Union of India, SCA/2896/2009.

[49] ‘Hindi, Not a National Language: Court’ The Hindu (Ahmedabad, 25 January 2010) <https://www.thehindu.com/news/national/Hindi-not-a-national-language-Court/article16839525.ece> accessed 22 November 2019.

[50] ‘Tamil Cannot Be Madras HC’s Official Language: Centre Rejects TN Request Again | The News Minute’ <https://www.thenewsminute.com/article/tamil-cannot-be-madras-hcs-official-language-centre-rejects-tn-request-again-75808> accessed 22 November 2019.

[51] ‘Kannada as ’ High Court Language ’ Runs Contrary to Constitution, Says Karnataka HC | Bengaluru News – Times of India’ <https://timesofindia.indiatimes.com/city/bengaluru/Kannada-as-high-court-language-runs-contrary-to-constitution-says-Karnataka-HC/articleshow/16300694.cms> accessed 22 November 2019.

[52] ‘Govt against Hindi as Official Language in Higher Judiciary | India Others News, The Indian Express’ <https://indianexpress.com/article/india/india-others/govt-against-hindi-as-official-language-in-higher-judiciary/> accessed 22 November 2019.

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  Aastha Khanna.

“A witness is the eye and ear of Justice”

~ Bentham

Introduction

In the words of Whittaker Chambers, a witness is “a man whose life and faith are so completely one that when the challenge comes to step out and testify for his faith, he does so, disregarding all risks, accepting all consequences.”Witness in a trial is a person who has some relevant knowledge of the dispute and gives evidence thereof.

According to Manu, a person becomes a witness either because he has seen something or heard something. Witness is the one, who deposes to fill in the lacuna in the story of prosecution and defence. Thus, witnesses are the backbone of the case.

Under the Indian Evidence Law, every person is competent to testify as a witness as long as he understands the questions put by the court and gives rational answers thereof. Religion caste, sex, age play no role at all in deciding he competency of a witness. Once a court is satisfied that the person has the mentally capability to answer the questions rationally, he is allowed to give his testimony and help in completing the story involved in the case.

Section 118, Indian Evidence Act, 1872 states the qualification of the persons who can testify. The section is reiterated as below:

S.118 Who may testify: All persons shall be competent to testify unless the Court considers that they are prevented from understanding the questions put to them, or from giving rational answers to those questions, by tender years, extreme old age, disease, whether of body or mind, or any other cause of the same kind. 

Therefore, the disqualifications as provided in the act are:

1. Tender age
2. Extreme old age
3. Disease of mind or body which renders the person incompetent to understand the questions and answer rationally.
4. Any other cause for instance unconsciousness, drunkenness, extreme bodily pain etc.

In other words, witness is that dramatis personae whose attendance in re is indispensable to establish the happening. Jeremy Bentham defines a witness as;

 “…..those who are accustomed to reflect on ideas, know well how much idea depend on words. According to him, the word witness is employed to mark two different individuals or the same individual in two different situations; the one that of perceiving witness, that is of one who has seen or heard or learned by his senses the fact concurring which he can give information when examined and the other that of a deposing witness, who states in a court of justice the information which he has acquired. The term witness then may be applied to the parties themselves who have an interest in the case as well as to all those whom it is commonly employed to designate….”

History & Importance

According to Yajnavalkya Smriti, Part IIch.II. v. 22, in ancient India, proof was considered to be of two kinds:

1. Human
2. Divine

Human proof is furnished by

1. Document- Lekhya
2. Witnesses- Sakshi
3. Enjoyment or possession- Bhukti

     Divine proof is usually of 5 kinds:

1. Ordeal by Balance – Ghata,
2. by fire – Agni,
3. by water –Udaka,
4. by poison – Visha,
5. by drinking water – Kosa.

The Human proof was always considered primary proof and divine proof subordinate to human proof. The Shastras laid down that truth shall always be established by means of a Sakshi i.e. a witness-in conflicts and disputes.

As stated in B. Guru Rajah Rao, The Ancient Judicature, 98 (Ganesh & co. Madras 1920), The ancient Hindu law insisted on high moral qualifications in a witness in all matters and did not permit any one being picked up from streets or from the court premises and made to depose.The term Sakshi itself connotes that witnesses could only speak to what they had themselves seen or had heard.

In the case of (Mahender Chawla v Union of India, 2016)[i], A.K Sikri J. stated:

The importance of the witness, particularly in a criminal trial is highlighted in a book in the following manner:

“In search of truth, he plays that sacred role of the sun, which eliminates the darkness of ignorance and illuminates the face of justice, encircled by devils of humanity and compassion.The value of witnesses can’t be denied, keeping in view the dependency of the criminal proceedings on the testimonies and cooperation of witnesses in all the stages of the proceedings, especially in those cases where the prosecution has to establish the guilt with absolute certainty via oral cross-examination of witnesses in hearings open to the world at large. In such cases, the testimony of a witness, even if not as an eye witness, may prove to be crucial in determining the circumstances in which the crime might have been committed…”

Notwithstanding the same, the conditions of witnesses in Indian Legal System can be termed as ‘pathetic’. There are many threats faced by the witnesses at various stages of an investigation and then during the trial of a case.[ii]

To ensure fair trial, both the sides must be allowed to produce witnesses to prove their case. Witnesses, whether corroborated or uncorroborated, are administered the oath and required to present before the court whatever they had seen or heard on their own. Hearsay evidence is generally rejected by the court since it is unreliable. The information provided by the witness, along with other evidence on record, helps the judge in deciding the case.

Types of witness

Witnesses can be of three types; namely:

Factual Witness

Any person who has seen or heard the crime on his own i.e. a person who was present at the time of occurrence of the offence. The factual, ordinary or a regular witness knows the circumstances under which the crime was committed and can be totally relied upon provided the court is satisfied with the veracity of his statements.For instance, in case of a murder, if the factual witness on being administered the oath, testifies that the murder by the accused was committed as a result of grave and sudden provocation, the case will take a major turn and accused be convicted for the offence of culpable homicide not amounting to murder.

Expert Witness

Any person who has a special expertise about any element of the crime or offence and which is usually beyond the understanding of an ordinary man is called an expert witness. Whenever a judge suffers with the understanding of a particular element, an expert witness may be called by any of the parties to the case. Such witnesses analyse the facts of the case and give their opinions to the court.  Doctor, psychologist, accountant, handwriting expert, forensic expert, etc are all expert witnesses whose testimonies are helpful in deciding the case. However, expert evidence is not a substantial piece of evidence and may be required to be corroborated.

Character Witness

Such witnesses are required to describe the character and standing of the accused in the society. The objective of character evidence is to establish that the accused is less likely to have committed the offence because they possess good character. Such evidence is usually given when the accused has already been convicted and the judge has to decide the sentence to be imposed upon him. For instance, in a defamation case, character witness is usually called to testify and then the such witness is cross examined by the other side.

Chance Witness

If by coincidence or chance a person happens to be at the place of occurrence at the time it is taking place, he is said to be a chance witness.The term has been borrowed from foreign country where every person values the privacy of his house and the presence of other shall have a reasonable explanation. The testimony of the chance witness in favour of the accused must be scrutinised carefully and cautiously more so if he happens to be the relative or friend of the victim, his subsequent conduct can also be taken into consideration for testing the credibility and reliability of his deposition. Evidence given by the chance witness whose presence cannot be explained or is doubtful must be discarded by the courts.

Hearsay Witness

Hearsay witnesses are those who have given the statements on the basis of what they have heard from the third person. The testimony of such witnesses is generally excluded. Such witness is unreliable as he has not observed the event on his own and is not qualified to depose on oath. The testimony of only those witnesses who have heard seen or perceived the occurrence with their own senses is admissible unless the statement is covered by Sec. 32 of Indian Evidence Act, 1872.

Test of Reliability

The judges are considered to be the gatekeepers i.e. they are, using their judicial mind, required to exclude all the testimonies of different witnesses which are unreliable.

The test of reliability is important to avoid wrongful convictions. According to Blackstone’s ratio, the idea is that “It is better that ten guilty persons escape than that one innocent suffer.” This idea has now become a staple of legal thinking under criminal jurisprudence. A witness, if reliable, helps to reach the doors of justice. There is no straitjacket solution for testing the veracity of witnesses, however, it must not depend on the caprice of the judge and jury, rather there should be some scientific reason to accept or reject the testimony of the witnesses.

• WITNESS CREDIBILITY & RELIABILITY ASSESSMENT

When the witness’s statements are recorded, it is the job of the investigator/prosecution to see the level of confidence which can be attributed to each part of the statement. Sometimes, the witness is also one of the offenders and there comes the witness-suspect dilemma i.e. such a witness cannot be relied upon as he is to give self serving statements both for himself and his accomplice. A proper witness interview must be conducted and variety of leading questions must be asked. An in-depth cross examination must be done. In a recent judgement, SC observed that cross examination is not a child’s play and must be done only by an experienced lawyer.

• VOIRE DIRE TEST

Voire Dire means to speak the truth. It is generally conducted before the examination-in-chief by the lawyer wherein the lawyer asks several preliminary questions from the witness to check his veracity & credibility. If the answers received are not satisfactory, the witness is out rightly rejected however if the answers received are satisfactory, the lawyer can contradict the witness using other evidence on record and prove that the witness is unreliable and hence incompetent.

Position of witness child

As stated above, there is no rule to reject the testimony of a child witness based on his age. The earlier criterion to rely on the testimony of a child was based on his age. It was considered that children were more prone to tutoring and lived in the world of their own and hence could imagine stories and state things which they did not really witness themselves. As per the Section 4 of the Oaths Act, 1969, all witnesses must be administered oath, however; this section does not apply to a child witness below 12 years of age, As it is believed that a child below 12 years of age does not have a sufficient level of maturity and understanding. But now the present trend states that a child can be a reliable and competent witness, if in the opinion of the court, they appear to possess a degree of understanding. Scientific research shows that a child can be a reliable witness, as once they have witnessed something; they have the tendency to remember that for a long period of time. The admissibility of the testimony of a child witness depends upon the good sense and discretion of the judge.

In the case of State of Maharashtra v. Dama Shinde[iii], it was observed that it was not possible for a child to remember each and every detail of the offence they witnessed and therefore, it was not reliable.

In Nivruti v. State of Maharashtra[iv], the court stated that Children were pliable and liable to the influence easily and therefore proper scrutiny of their testimony was required.

If on scrutiny, it’s found that there was no tutoring and the testimony was straightforward, trustworthy and inspired confidence, then there was no need of corroboration. The same view was taken in State of U.P. v. Krishna Master& Ors.[v]. However, as a rule of prudence, there must be some additional evidence if the child witness is involved in anycase. The independent evidence must be able to connect the accused with the commission of the crime. Testimony of one child is not sufficient to corroborate the testimony of the other. If there is no direct evidence involved then the court may look into the circumstantial evidence which proves sufficient connection between the accused and the crime. However, a child witness is not required to give affidavit in the court. In Ghewar Ram v. State of Rajasthan[vi], it was held that once the child witness was found competent, his inability to give affidavit or take or understand oath or affirmation or omission in administering the oath had, neither invalidated the proceedings nor made his testimony inadmissible.

Position of Witnesses Unable to Communicate Verbally

‘Language is much more than words’

In Criminal Law (Amendment) Act, 2013 section 119 of the Indian Evidence Act, 1872 was amended and its scope was widened. Prior to the said amendment, Section 119 talked about the competency of dumb witnesses.However, post amendment; it now talks about the witnesses who are unable to communicate verbally owing to physical deformity or vow of silence.

S.119 Witness unable to communicate verbally:  A witness who is unable to speak may give his evidence in any other manner in which he can make it intelligible, as by writing or by signs; but such writing must be written and the signs made in open Court, evidence so given shall be deemed to be oral evidence:

Provided that if the witness is unable to communicate verbally, the Court shall take the assistance of an interpreter or a special educator in recording the statement and such statement shall be video graphed.”

Earlier, it was considered that deaf and dumb people were idiots and incompetent to understand and give rational answers. But now, due to the scientific advancement, it has been proved that these people are far more intelligent than others and may understand the nature of the oath. The oath can be administered to them and their evidence can be taken with the help of an interpreter by means of deaf and dumb alphabets/sign language or face expressions, hand gestures etc. or if the person is literate, he can be given the list of questions and he can write the answers thereto. However, these evidence would be admissible only when both the witness and the interpreter are administered the oath and sign language used by the person unable to communicate verbally and the interpretation thereof by the interpreter are video graphed.

In the era of silent movies and Charlie Chaplin, silence was considered golden as the facial and body languagecommunicated the ideas though novel signs and gestures and had enabled the audience to comprehend the intended message. A person’s face and body language form 55% of the communication and convey more reliable information and thus, the use of body language to give evidence can never be discarded.

In the case of MeesalaRamakrishan v. State of Andhra Pradesh[vii], the apex court stated:

“…we would state that the “sign language” developed so much by now that it speaks quite well. We may refer in this connection to what has been mentioned about this language at pp. 120 to 123 of Encyclopaedia Britannica, Vol. 7, 1968 Edn., wherein the history of the education of the deaf has been dealt with. A perusal of the same shows that the educators of the deaf are divided into those who favour the manual (sic language) system supplemented by articulation and those who favour the speech and lip reading, vetoing the manual language. At p. 796 of Vol. IO of the aforesaid Encyclopaedia, something more has been said about “sign language”. Reference has even been made to what a certain Mehar Baba, an Indian religious figure, had done in this regard. As to this Baba it has been noted that he abstained from speech in the last decades of his life, but “dictated” voluminous writings to his disciples, at first by pointing to letters on an English language alphabet board; but, after evolving a suitable sign language of gestures, he relied on that alone. If volumes can be dictated by this method, a short message of the type at hand can definitely be conveyed by gestures.”

In case of State of Rajasthan v. Darshan Singh[viii], the Hon’ble Supreme Court observed that:

“a deaf and dumb person is a competent witness. If in the opinion of the Court, oath can be administered to him/her, it should be so done. Such a witness, if able to read and write, it is desirable to record his statement giving him questions in writing and seeking answers in writing. In case the witness is not able to read and write, his statement can be recorded in sign language with the aid of interpreter, if found necessary. In case the interpreter is provided, he should be a person of the same surrounding but should not have any interest in the case and he should be administered oath.”

The Hostility of a Witness

A witness turns hostile when he ruins the case of the party by whom he was called to testify. In other words, the witness who becomes adverse to his own party is called a hostile witness. Witnesses are the foundation stone on whom the entire wall of prosecution’s case is built and if the witnesses turn hostile, the case of prosecution would fall and is no longer a fair trial as most likely the witnesses have been threatened, coerced, induced or bought by the other side. This renders the case paralyzed.

In Panchanan Gogoi v. Emperor[ix], it was observed that a hostile witness is one who from the manner in which he gives evidence shows that he is not desirous of telling the truth to the court, Within which is included the fact that he is willing to go back upon previous statements made by him.

However, only because a person gives evidence which is favourable to the other party does not necessarily mean that he has turned hostile. It is only when, in the opinion of the judge that the witness has been gained over by the other party, that the judge will reject his testimony and label him hostile.

In R.K. Dey v. State of Orissa[x], it was observed that the duty of the witness was to furnish the true details of the crime as were seen/heard by him and not to favour the party which called him. Hence, an unfavourable testimony did not turn the witness hostile.

The hostility may not always be expressed, it can as well be inferred from the demeanour, temper, attitude, sympathy of witness towards the accused or disinclination to attend the court proceedings or answer the questions.

Once the prosecution feels that the witness is giving unfavourable answers, it can request the court to allow cross examination of the witness i.e. the prosecution itself can put such questions to the witness as may be asked from him by the other party. If during cross examination by the party to his own witness, it is found that the witness has been gained over by the other party, the court can reject the testimony of the witness. However, India does not follow ‘Falsus in unofalsus in omnibus’ which translates to False in one thing, false in everything. In other words, u/s 154(2) of the Indian Evidence Act, 1872, the part of the statement of the hostile witness which supports the party shall be admissible and the other part shall be discarded by the court.

A party cannot onits own declare the witness hostile, it is only the judge, in whose opinion the witness has – 1. Suppressed the truth; 2. Caused harm to the party’s disadvantage, can declare the witness hostile. There should be some material to show that the witness has retracted from his earlier statement and is no more desirous of telling the truth to the court or has exhibited the element of hostility or has changed sides.

When a party is confronted with a hostile witness, it has three courses of action:

1. With the permission of the court, the party calling the witness may- put leading questions (Sec. 143); cross-examine the witness (Sec. 145) or put questions which tend to test his veracity or shake his credit (Sec. 146).
2. Impeach the credit of a witness (Sec. 155) i.e. expose the real character of the witness so that the court may not trust him. This can be proved by introducing an independent evidence to show that the witness in question is unworthy of credit or has been corrupted by inducement or threat or by proving that the witness has been giving inconsistent statements.
3. If the hostile witness was required to prove a fact in issue or a relevant fact then the party may call any other witness to depose to the fact and destroy the adverse effect of hostile witness’ evidence.

Witness Protection: The Lifeline Of A Criminal Trial

Jessica Lal, Priyadarshini Mattoo, Nitish Katara cases, deaths of material witness of Vyapam scam and Asaram case throw light on the failure of investigation and miscarriage of justice in India. All these cases point towards the hostility of witnesses and travesty of justice. There are several reasons for the hostility of a witness. The other party in order to win acquittal, might induce, threaten, coerce or lure the prosecution witnesses. The witnesses are often given threats of retaliation or physical violence to depose against the prosecution. A person who is poor or disadvantaged by caste or gender may turn hostile due to the grave threats and intimidations. Sometimes, political pressure or fear of police or annoyance caused by frequent adjournment of proceedings can also turn the witness hostile.

In order to ensure fair trial and delivery of justice, Witness Protection Scheme(WPS) should be implemented. Such programme will help the party to protect its witness from unnecessary inducement and threats from the opposite party.

WPS will inspire the confidence of the witness and, knowing that he is under the protective shield of the State, he will be able to bring the truth of the occurrence of crime in the knowledge of the court. In ZahiraHabibulla H. Shiekhand Anr. v. State of Gujarat[xi]  it was said, “If the witnesses get threatened or are forced to give false evidence that also would not result in a fair trial.” And therefore it becomes of utmost importance that witnesses, the bulwark of investigation and prosecution, have faith and trust in the criminal justice system and come forward to assist the justice delivery authorities.

In case of Neelam Katara v. Union of India & Ors.[xii](14.10.2003), The Delhi High Court stated that the competent authority (Member Secretary, Delhi Legal Services Authority) on receiving a request from the witness shall determine whether the witness requires police protection and to what extent and for what duration. The factors to be taken into consideration while extending the police protection to the witness by the competent authority are as follows:

1. The nature of the risk to the security of the witness which may emanate from the accused or his associates.
2. The nature of the investigation or the criminal case.
3. The importance of the witness in the matter and the value of the information or evidence given or agreed to be given by the witness.
4. The cost of providing police protection to the witness.

The Court also issued direction viz-a-viz the obligations of the police such as:

1. While recording statement of the witness Under Section 161 Cr.P.C., it will be the duty of the Investigating Officer to make the witness aware of the “Witness Protection Guidelines” and also the fact that in case of any threat he can approach the Competent Authority. This the Investigation Officer will inform in writing duly acknowledged by the witness
2. It shall be the duty of the Commissioner of Police to provide security to a witness in respect of whom an order has been passed by the Competent Authority directing police protection.

The above-mentioned directions and guidelines are applicable only within the NCT of Delhi.

Recently, The Punjab and Haryana Court (The Bench of Justices Rajiv Sharma and Harinder Singh Sidhu) also issued 10 commandments for protection of witnesses. The Bench directed all the Trial Courts in Punjab to grant adjournment for next day only on under special circumstances and the examination of witnesses must be done on continuous basis. It was held that witness is an integral part of the system therefore they should be provided with some necessary facilities such as short or long term insurance, installation of security devices at their homes including security doors, CCTV cameras and alarms, providing boarding and lodging facility in case the recording of statements spill over the next date, providing travel allowance, audio-video recording of their statements, relocating the witnesses, giving them new identity and the police were directed to have emergency contact number of the witnesses, ensure regular patrolling around their houses and escort them to and from the courts on government vehicles.

As per the proposed Witness Protection Scheme, 2018 by National Legal Services Authority, following are the rights of witnesses:

1. Right to give evidence anonymously.
2. Right to protection from intimidation and harm.
3. Right to be treated with dignity and compassion and respect of privacy.
4. Right to information of the status of the investigation and prosecution of the crime.
5. Right to secure waiting place while at Court proceedings.
6. Right to transportation and lodging arrangements.

The proposed scheme also talks about the various measures in proportion to the threat and for a specific duration; the protection of identity; change of identity; relocation of witnesses; confidentially and preservation of records; recovery of expenses, etc.

It is important to prevent the witch-hunting of witnesses by the accused and provide them with the formal rights so that they are not afraid to testify even against the accused that is politically or financially powerful and influential.

Suggestions & Conclusion

Witnesses, who are considered the cornerstone of the criminal justice administration, are the primary oral evidence of the commission of crime. Based on their testimony, along with other evidence on record, the judge has to decide the case which ultimately affects the rights of parties to the case. Witnesses of the case are like a foundation stone on whom the strength of the case is dependent. A witness sometimes may be competent but not compellable owing to the privileges provided under the Act. Such witnesses cannot be compelled to depose and therefore their testimony is inadmissible. We have seen a colossal change in the opinion of the courts regarding the competency of a child witness and a witness who is incapable of communicating verbally. An applaudable Witness protection Scheme has been proposed by National Legal Services Authority in 2018 however, India still has a long way to go before it can ensure the safety of the witnesses. Owing to the majority of political figures facing criminal charges against them, the witnesses in their cases are always under the grave threat of death or harm to person and property. India’s criminal justice system suffers from some major loopholes and hence fails to ensure the confidentiality and safety of witnesses. Whether the Witness protection Scheme as proposed will be a success or not depends upon thelevel of penalties and punishment for the witness tampering or intimidation. Nonetheless, it has been able to ignite the confidence within the witnesses to support the truth and bring the criminal trial to the door of justice.

Endnotes

[i] Mahender Chwala v. Union of India (2016) W.P. (Crl.) NO. 156 OF 2016 (India)

[ii] Mahender Chalwa v. Union of India: WRIT PETITION (CRIMINAL) NO. 156 OF 2016

[iii] State of Maharashtra v. Dama Shinde  (1999) Appeal (crl.) 992-993  of  1999 (India)

[iv] Nivruti v. State of Maharashtra, (2017)  Crl. Appeal 486/02 (India)

[v] State of U.P v. Krishna Master & ors. (2010), Crl. APPEAL NO. 1180 OF 2004 (India)

[vi]Ghewar Ram v. State of Rajasthan, ( 2001)  CriLJ 4460, 2000 (1) WLC 193 (India)

[vii]MeesalaRamakrishan v. State of Andhra Pradesh, (1994) Crl. Appeal no 171 of 1987 (India)

[viii] State of Rajasthan v. Darshan Singh , (2012) Crl. Appeal no. 870 of 2007 (India)

[ix]Panchanan Gogoi v. Emperor  AIR 1930 Cal 276 (India)

[x]R.K. Dey v. State of Orissa, (1977) AIR 170,  1977 SCR (1) 439 (India)

[xi] Zahira Habibulla H. Shiekhand Anr. v. State of Gujarat 2004 (4) SCC 158 SC, (India)

[xii]Neelam Katara v. Union of India & Ors (2003) Crl. W. No. 247/2002 (India)

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 Witness Hunting: Competency, Reliability& Protection of Witnesses appeared first on iPleaders.

This article is written by Mariya Paliwala, Student of VII semester Mohan Lal Sukhadiya University College of law.

Introduction

Euthanasia is a practice or an act by which a person suffering from painful and incurable disease is put to death in order to end the suffering of that person. This can be done in the following ways:

1. By incapacitating physical disorder.
2. By withdrawing treatment is a passive means to cause death.
3. By introducing something is an active means to cause death.
4. By withdrawing artificial life-support system.
5. When Physician some medicine and patient or third person administer it to cause death. This is called as Physician-assisted death.

Euthanasia is also called ‘Mercy Killing’.

Historical Overview

In 1935, when C. Killick Millard found a society called Voluntary Euthanasia Legislation Society, which later on came to be known as Euthanasia society. This society organized a movement to legalize Euthanasia in 1935. However, the Bill failed in the House of Lords in 1936. The morally accuracy of Euthanasia is traceable from the time of Plato, Aristotle and Stoics.

Some countries of the word took forth a step to legalize Euthanasia, which was Netherlands in 2001, Belgium in 2002, and Oregon in 1997.

Classification of Euthanasia

Classification Based on Consent

1. Voluntary

When the practice of Euthanasia is conducted with the consent of the patient. This act is legal in Luxembourg, Belgium, The Netherlands, Switzerland, Washington in the U.S.A and the states of Oregon.

2. Non-Voluntary

When the practice of Euthanasia is conducted without the consent of the patient in the case when patient is unable to give consent due to his deteriorating health conditions. In these kinds of circumstances, another appropriate person, on behalf of the patient, gives the consent. The quality of life and suffering needs to be taken into consideration.

Classification Based on Procedure

1. Passive Euthanasia

Passive euthanasia is called when life-sustaining treatments are withdrawn. For instance, if a doctor may prescribe high dose of pain killing medicines like opioids, which perhaps may be toxic to the patient, or by removing a life support system.

2. Active Euthanasia

Active euthanasia is comparatively more controversial as it seems to derogate moral, ethical, religious and compassionate values. When somebody to end patient’s life uses a lethal substance or force.

Position of India on Euthanasia

India is a country where there are no laws pertaining to Euthanasia. In fact, in India attempt to suicide and abetment to suicide are both punishable under Section 309 and 306 of Indian Penal Code, 1980 respectively.

In the case of P. Rathiram vs. Union of India, 1994 constitutional validity of Section 309 was challenged in the Supreme Court, wherein it held that Section 309 of I.P.C was unconstitutional and was in derogation with Article 21, which pertains to ‘Right to Life and Personal Liberty’.

However, in the case of Gian Kaur vs. State of Punjab, 1996 there was the abetment of commission of Suicide punishable under Section 306 of I.P.C. came before the Supreme Court. The trial court convicted the accused, which upheld by the High Court.

Later on in an appeal to Supreme Court the accused contended that ‘Right to Die’ is included within ‘Right to Life’ under Article 21 of the Constitution of India. Further, any person abetting the commission of suicide by anyone is a mere helping that person in enforcing his fundamental right under Article 21. Hence, punishing the accused under Section 306 is the violation of fundamental right.

The constitutional bench of the Apex Court in this case held that ‘Right to Life’ under Article 21 of the Constitution does not include within itself ‘Right to Die’.

Therefore, after this the Supreme Court reconsidered its earlier decision and affirmed that abetment of suicide and attempt to suicide are two distinct offences punishable under I.P.C.

Arguments against Euthanasia

People who oppose the practice of Euthanasia put forth the following arguments:

1. Disposing of diseased person

People suffering from incurable disease will be disposed off from the civilized society.

2. Violative of basic rights

Euthanasia is violative of the basic fundamental rights and most importantly the Human Rights. For instance, euthanasia is unnatural termination or extinction of life, which is violative of ‘Right to Life’ under Article 21 of the Constitution of India.

3. Mental instability leads to incapability of decision

Suicide in most of the cases is a cause of mental illness, which is difficult to analyze.

4. Immoral misuse of euthanasia

There is the possibility of misusing Euthanasia by the family members of the patient for the purpose of inheriting the property or for any other greed.

5. Commercialization of health care

Commercialization of health care leads to the relatives of a poor patient withdraws the treatment because it involves a huge cost to keep them alive.

Arguments By Euthanasia Supporters

People who favored the practice of Euthanasia put forth the following arguments:

1. Eliminates Burden

It eliminates the burden from the shoulders of the caregivers of the patient suffering from incurable, disabling, degenerative or debilitating conditions.

2. Denying Medical Treatment

Refusal to take medical treatment is well recognized in law. For instance, a patient suffering from blood cancer can refuse treatment or deny feeds through nasogastric tube.

3. Right to die with dignity

Patients in the vegetative state or in chronic illness, who do not want to burden their family, can choose the option of Euthanasia as a way to uphold ‘Right to life’ by embracing ‘Right to die’ with dignity

4. Encourages organ transplant

Euthanasia not only gives ‘Right to Die’ to a person suffering from acute pain but also give ‘Right to Life’ to the organ needy patients, which ultimately encourages donation of organs.

Transformation of Hippocratic oath

All the doctors that they will responsibly dealing with the health of their patients generally take Hippocratic oath. However, the words of the oath has changed over the years. 

The former is the earlier oath and the later is the modern oath. The former depicts an argument against Euthanasia while the later favors Euthanasia. Further, with the changing time and circumstance, some people feel that the original oath is outdated. In some countries the doctors while in other countries take a transformed and upgraded oath like Pakistan doctors still stick to the original oath. The change in the Hippocratic oath has take place in various nations.

Different nations of the world on Euthanasia

Australia

The practice of Euthanasia is illegal in Australia. Although in June 2019 Victoria i.e. one of the Australian state passed a law pertaining to assisted suicide only in certain limited prescribed conditions. Back in 1997, the Northern territories of Australia had laws pertaining to Euthanasia, which was known as Euthanasia Law Act, 1997. The Act was legal only for a short duration in Northern territories of Australia. However, organizations such as Exit International want the Australian government to bring back the legislation pertaining to Euthanasia.

Argentina

On 24^th May 2012 Argentine Senate enacted a legislation wherein Euthanasia was legalized and has enabled to discard the treatments, which enable to artificially prolong the life of the patient with chronic disease. The consent for Euthanasia can be given by the patient himself or his relative in the case where he is unable to express his consent.

Belgium

On 28^th May 2002 Belgian Parliament legalized the practice of Euthanasia.  According to the survey report published in 2010 stated that compared to other form of death people died from euthanasia were more of youngsters, male cancer patient and mostly died in their homes. Further, almost in all the cases unbearable physical suffering was noted in the report. About 1,400 cases were recorded in 2010 since the law was introduced and 1.807 cases in 2013.

Canada

In Canada ‘Physician Assisted Suicide’ is legal in Canada. Physician Assisted Suicide is a kind of Euthanasia wherein voluntary active euthanasia is given to the patient who is above the age of 18 years and is suffering from such a chronic illness where death is foreseeable. In order to prevent the increase in suicide tourism, euthanasia in Canada is pre conditioned that mercy killing can be done to only those patient who can claim Canadian Health Insurance.

Chile

Active euthanasia is not legalized in Chile while passive Euthanasia is legal. The laws of Chile leaves on the patient’s will when he suffering from terminal disease can refuse the treatment.

Finland

Like Chile, active euthanasia is not legal in Finland, however passive is permissible.

Germany

Passive euthanasia is permissible in Germany only on the request of the patient. However, active euthanasia wherein lethal compound is administered to the patient is still illegal in Germany.

India

On March 2018, the Supreme Court of India legalize Passive Euthanasia by the way of removal of life-support system from the patient who is in the vegetative state. However, active euthanasia wherein lethal compound is administered to the patient is still illegal in India.

Ireland

Both the active or passive euthanasia are illegal in the country of Ireland.

Latvia

Both the active or passive euthanasia are illegal in the country of Latvia.

United Kingdom

Passive euthanasia is considered to be legal in U.K. in case a patient is in Permanent vegetative state. For example withdrawal of life support system or feed tube, etc. from the patient. However active form of Euthanasia is still not legalized in United Kingdom.

United States of America

Active Euthanasia is illegal throughout the United States of America except in the state of Oregon, California, Colorado, Vermont and Washington with the help of the backing of the enactment called ‘Death with Dignity Act 1997’. However, patient has a complete right to refuse medical treatment, which is intern a right to passive euthanasia.

Situation where Euthanasia turned into Murder

1. An elderly woman who was suffering from Dementia in the Netherlands was administered a lethal injection resulted to her death. The days before euthanasia as undergone she repeatedly said that she do not want to die. This action resulted in the wrongdoing called murder.
2. When an elderly woman was suffering from dementia and she had a will to live. However, her son in the greed of the property instructed the doctor to administer her lethal injection so that her life is ended. On the instructions of the son the doctor acted accordingly. This action was immoral and both the doctor as well as the son was liable for the wrong doing. 

The lack of following points led euthanasia to become murder:

1. Consent of the patient
2. Against the morality and justice
3. When the disease is not permanent or severe.
4. When it is against the law of the land.
5. When a person had a desire to live
6. When the family members in the greed of property leave a person to die without even considering the chances of his survival.

Conclusion

Wherefore, the main intent behind the practice of Euthanasia is not to take a life of a person but to relive him from all forms of pains and suffering, which can also be named as ‘good death’. ‘Right to life’ is given in all the nations of the world while ‘Right to Die’ is recognized only in few nations of the world, this is because the nations which have refused their citizen the ‘Right to Die’ believes that because this era is changing minds are becoming more practical there will be more of murders in the name of Euthanasia which will ultimately led to the violation of human rights. While other nations who approves the culture of euthanasia are of the opinion that a patient must not suffer and ‘Right to life’ includes within itself ‘right to die with dignity’. Both the point of views is correct at their place, but some middle way needs to construct so as to achieve collective good. Further, approval of a passive euthanasia like removal of feed tube or removal of life support system in the case when the death is foreseen or when a person is in the vegetative stage. Active euthanasia wherein lethal drugs or injections are administered to the patient is something which must not be approved of.

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 Euthanasia: Does Right To Life Include Right To Die? appeared first on iPleaders.

This article has been written by Sahajveer Baweja.

“True freedom requires the Rule of Law and justice, ad a judicial system in which the rights of some are not secured by the denial of right to others.”

–Jonathan Sacks

It is interesting and exhilarating to witness changes in laws which have proved to be catalysts for path-breaking changes in the existing justice system. There has been a paradigm shift from the era of customs to the codified legislature; and the world has enthused towards more empirical and objective approach. Earlier, the society was governed sovereignly by the driving force of customary laws, that later culminated into pervasive social practices.

Even in present day, customs are recognized as a valid source of law. Certainly, past trends show us that customs at one point of time dominated the prevailing law; but with evolving modern jurisprudence, they have boiled down to serve a mere subordinate source to the legal system. This can be attributed to the development of the concept of Rule of law and constitutionalism in the nation[1]; that have eventually led to the streamlining of the system, eliminating arbitrary norms and greater emphasis on the ‘black letter law’. Thus, the incorporation of customary law into our common law is; however, like our other sources of law, subject to the supreme law of the land.

What are Customs and Customary Law?

The present proposition calls for a deeper understanding conflict between customs and the constitutional letter. Customary law can be termed as a few good words of the old retired judges. “The word custom” as defined by Sapir, “is used to apply to the totality of behaviour patterns which are carried by tradition and lodged in the group, as contrasted with mere random personal activities of the individual.” Moreover, in case of Chettiar v. Kumarappa, custom was defined as the particular rule that has existed from the time immemorial and has obtained the force of law in a particular locality.[2] Custom in Chamber’s 20th Century Dictionary connotes, ‘What one is wont to do: what is usually done by others: any of the distinctive practices and conventions of a people or locality, esp., those, of a primitive tribe.[3] Citing Hur Prasad v. Sheo Dayal, Sir Hari Singh Gour states, ‘Custom is an established practice at variance with the general law.’[4]

These definitions give us an insight, that a custom is certainly a dynamic, abstract form of law which that derives itself from the general practices of a community. It derives its legitimacy from the people in that era. It is founded on the convenience of the common folk, in their attempt to regulate their daily activities. What is essential to note is that, they pertain to certain timeline and may not necessarily fit into evolving societies. There’s where the entire debate arises, when the common folk refuse to dispense with such customs due to cultural or sentimental factors, allowing them impinge on the changing and growing needs of certain sects in the society.

Customary Law: An Impediment to The Road To Justice?

One of the features of the customary law, that can be deduced out from its functioning, is that  they have undergone the culture of domination. For instance, the person who held the regime could have acted arbitrarily in forming those rules. Owing to their formulation centuries ago, customs that continue to prevail have a vision of patriarchal ideology underlying within. Women have always been considered inferior to their counterparts, and the same is reflected through such customs. The customs were created by the dominating-class and were imposed on the dominated-class. Even now, in some societies, women need aid from a male relative to bring a case to court. In the 21^st century, the word justice cannot be interpreted in this sense, when most of the countries have guaranteed fundamental right to equality. Any distress to the feminist jurisprudence can shake the whole justice system as the philosophy of equality shall be distorted.[5].Customary rules, like the concept of criminalizing same-sex marriage on the grounds of Victorian Morality has led to the violation of minority opinion. Harmony has to be established and the spirit of natural justice has to be a prudential factor in determining the validity of law.

After the enlightenment period, Auguste Comte focused on the positivist approach. It states that the focus should be given on objectivism and empiricism. Our state in the 21st century has everything in a written and objective form so that no issue can result out. In fact, the orders of the lowest court are written and recorded. At this place, unfortunately, the legal backing of custom falls in a disadvantaged position. Customs are not in a written form and, hence, it can lead to arbitrariness. Ideally, the customs are informal and which affects the principle of natural hearing. The flexibility of the customary law is also a negative factor in providing justice because it may get harder to ensure that the application of the law is similar with every people who have committed wrongs. The rules and its interpretation may differ from society to society and in extreme case, even in the same ethnic group.

An unwritten form of law ensures that there might be a case of monopolization of its knowledge and further, it gives an esoteric and non-transparent aura that runs contrary to basic rule of law tenets such as open, transparent and knowable law. There will be a violation of the principle of natural justice when reliance would have been paid on the law which does not have any codified or written form. Just because of fulfilling the essentials of the custom, the empiricism couldn’t be traced out. In some instances, customary laws and processes for adjudicating or resolving disputes are influenced by beliefs in supernatural forces. If such beliefs are taken into consideration, it would be against the principles of Lady Justitia who treated law as pious and the highest state of justice. Law has to be based on reason and not on beliefs. Aristotle through his teleological approach states that every law has its purpose which it tends to achieve. This form of Custom will hamper the judicial proceedings and will devastate the jurisprudence.

Customary law was by no means a perfect one even in historical times. There were elements of it that were crude, barbaric and unconscionable and they were enforced with the same vigor as the good aspects. The play of Antigone by Sophocles has portrayed us the clash between natural justice and the customary laws. The definition of a just law changes with time but the harmony with the nature of law is an inevitable clause. Lon Fuller has also given the eight points describing the grounds on what laws[6] fails and out of them one talk about the evil nature and the non-acceptance of the law. There is a requirement of more practical approaches to its smooth implementation. Law has to adhere to its sincerity and a rational reason has to be given for every law made unless it is not causing hindrance to the justice system.[7]

Sabarimala Verdict: A Leap towards Constitutionalism

India is considered to be the land of colours, the land of diversity. With a landscape bridled with such diversity, it had become almost impossible for law to percolate into the practices of the local folks everywhere. Consequently, men and women have always conformed to their prevailing customs and practices to regulate their lifestyles. The Judiciary at certain instances has intervened to check the arbitrary imposition of such customs. In pursuance of the same, they have exhibited prowess in evaluating impact of the cultural background and practices of the parties, in order to reach the best decision on the matter.  In doing this, however, the courts always have to consider that the black letter law first as the superior law in our country and then examine customary law and cultural practices so that they can be taken into account as long as they do not unreasonably contradict the law.

An excellent example of the same was the recourse adopted by the Apex Court in the case of Indian Young Lawyers’ Association v. State of Kerala[8] or the Sabarimala Temple case. The Judiciary has showcased how customs and traditions, when left unchecked can lead to severe injustice to a particular class of society, and why the rule of law holds  higher authority than such practices.

As proponents of Rule of Law and libertarian rule, we strongly appreciate and admire the majority opinion of the Court in the instant matter. The Court lifted the ban on the entry of women aged 10-50 years in the historical temple of Sabarimala in Kerala. The Lord Ayyappa Temple at Sabarimala in Kerala thus opened its gates to women of all ages following the verdict on September 28, 2018.[9]

Background

The ban found its origins in a custom that deprived almost half of the population’s right to equality and freedom of practicing religion as mentioned in Part III of our Constitution[10]. For centuries, women were prohibited to enter the Sabarimala shrine based on the biological ground of menstruation. The Rule 3(b) of the Kerala Hindu Places of Public Worship (Authorization of Entry Rules, 1965 (Rules 1965) which states that “Women at such time during which they are not by custom and usage allowed to enter a place of worship” was the basis of the practice of excluding women of the age group of 10 through to 50 years to enter the temple. These Rules were framed under Section 4 of the Kerala Hindu Places of Public Worship (Authorization of Entry) Act,1965 (1965 Act). Age-old religious practices are not expected to conform to a modern constitution, but laws have to be in concordance with its stipulations. The Kerala government’s move to turn the Sabarimala custom into a statutory rule was a thoughtless action that left the court no choice but to judge it on the touchstone of the Constitution

Further, Proviso to Section 4(1) created an exception to the effect that the regulations/rules made under Section 4(1) shall not discriminate, in any manner whatsoever, against any Hindu on the ground that he/she belongs to a particular section or class. [11]The learned Court adopted a liberal approach and held that the language of both these provisions indicate that custom and usage must make room to the rights of all sections and classes of Hindus to offer prayers at places of public worship.[12]

It was also opined that that a custom that considered a biological process like menstruation as an impure phenomenon cannot be in conformance with the society we breathe in today. Dipak Mishra J. in another judgment remarked that:

‘Constitution is a tool to transform our society and Constitutional morality supersedes any custom or tradition. It is unnecessary that a custom which was moral or just a century ago must be in concordance with the moral standards of the society today, and if it is not, then such custom must be either altered or invalidated in order to meet the dynamism of the society.’

 The role of the Court is to break the shackles of narrow-mindedness that stigmatize and erode the fabric of evolving society. We believe that such strong viewpoints shall go a long way in diluting the prevalent social taboos[13] and ensure greater equality to women, and a better realization of Article 14.

The reasoning offered by Chandrachud J. is the highlight of the judgement, as an ardent guardian of constitutional values. In his words:

“A claim for the exclusion of women from religious worship, even if it be founded in religious text, is subordinate to the constitutional values of liberty, dignity and equality. Exclusionary practices are contrary to constitutional morality.”

The fledgling Indian State, through its Constitution, visualized a nation built on the trine pillars of equality, liberty and justice, not only for men, but for ―We, the People of India. The Constitution which we ―gave to ourselves on 26th November, 1949 was built on the premise of a Sovereign, Democratic, Republic, guaranteeing Justice- social, economic and political; Liberty of thought, expression, belief, faith and worship; and Equality of status and opportunity. We at the first place, sought to break the oppressive shackles of inequities, injustice, and social hierarchies and entrenched structures that perpetuate discrimination and prejudice.

Thus, such an abominable ‘tradition’ had no place in our prevailing constitutional order. We must keep in mind that the simple act of prohibiting a woman’s entry into a temple, has a far-fetching psychological impact on the greater part of the society. This antique practice had become so ordinary, that for years nobody sought to notice that it impinges upon guaranteed rights of a chunk of population.

The mere prohibition was a violation of the charter of Equality, Article 17 that prohibits untouchability of any nature, Article 19 and Article 25 of the Constitution. Art 15. This has been regarded by the Courts as one of the most significant provisions of the Constitution and it has been held that, ―The full development of personality and fundamental freedoms and equal participation by women in political, social, economic and cultural life are concomitants for national development, social and family stability and growth, culturally, socially and economically. All forms of discrimination on grounds of gender is violative of fundamental freedoms and human rights.[14] A custom that conflicted with some odd 4-5 fundamental rights was liable to be struck down.

The Court in their verdict also overruled S. Mahendran v. Secretary, Travancore Devaswom Board wherein a similar patriarchal approach had coloured the judicial decisions in relation to women‘s entry into temples too. A PIL filed in Kerala High Court against allowing women to trek Sabri Hills and offer prayers at the Sabrimala Shrine as it was contrary to the custom and usage followed in the temple. Here, exclusion of menstruating women between the age of 10 to 50 years from the Sabrimala Temple was in question, and the argument put forward was that this was a matter of religion and right of religious denominations to exclude such women are protected under Article 26(b) of the Constitution which guarantees the right of religious denomination to manages its own affairs in such matters.

It is also pertinent to note that the Hindu Code defines custom and usage as “Any rule which, having been continuously and uniformly observed for a long time, has obtained the force of law…in any local area, tribe, community, group or family, if it is certain and not unreasonable or opposed to public policy.”[15] The final words of this provision substantiates for the fact that the precedence given to law over custom was reasonable and necessary. [16]It is concordance with the glaring feature of ‘open architecture’ in Hinduism, that makes it one of the most accommodating and diverse religion. Striking down a non-essential practice could in no way belittle the sanctity of the Lord, who treats his devotees one and the same. However, such is the power of entrenched patriarchy that women are being intimidated on their way to the shrine.

This progressive outlook of the Judiciary has been observed in a series of pronouncement in the last decade. The Supreme Court adopted a similar approach and imposed a ban on Jallikattu: They expanded the scope of justice not only to humans but also to animals when it banned the use of bulls in Jallikattu.[17] . The famous bull-taming festival required men to tame an agitated bull, injuring themselves, and the animal as well. In fact, custom allowed only upper caste men to participate, discriminating the lower caste section of the society. Many lives, of animals, of people participating in the sport and even the spectators, were lost in this celebration of cruelty in the name of sport and entertainment. The court ruled that this custom resulted in severe violations of the “constitutional rights” of the animals mentioned in Article 51-A (g)(vii) and (h)(viii), which form a part of the Fundamental Duties to be fulfilled by the citizens. They held the view the view that such customs promoted cruelty and other unjust practices in the name of sports.

In another celebrated judgement, the Court upheld the constitutional letter by banning the arbitrary and whimsical practice of triple talaq[18]. Thousands of helpless women had been deserted by their husbands on social networking sites like Facebook or through posts and denied the right to maintenance. Amidst uproar by the Muslim community, the Court adopted the bold path and laid the path of redemption for these women, ensuring their right to a dignified life, disregarding pervasive customs.

The noble attempt of the Court in limiting itself to the constitutional mandate has both been appreciated and criticized. We must understand that customs are not always necessarily evil, and have often facilitated the smooth functioning of the intrinsic matters pertaining to the society. [19]One controversial decision of the Rajasthan High Court was when they struck down the antique practice of Santhara followed by the Jain community[20]. The court called the practice of voluntary fast-unto-death as punishable under section 309 of the IPC as an attempt to commit suicide. The court also ordered support to Santhara by any person punishable as abetment under section 306 of the IPC.[21]

Need for Progressive Legislation to Supersede Customs

To Savigny, “law like language stands in organic connection with nature or character of the people and evolves with the people.” Therefore, according to his, the true basis of positive law is its existence, its reality, in the common consciousness of the people. Custom therefore is the badge and not the ground of origin of positive law.

The recent debate on various customs and practices prevailing in the society looks upon the Law as an instrument of social change. In the above cases, it can be clearly observed that the judiciary has given precedence to laws and not customs that are unjust or not fit for the society today. Customs which are in accordance with the law has always found a place in legislation but the customs which serve as a barrier in the deliverance of justice have been carefully dealt with. Hence, even in the above cases, the courts have not adopted an extreme approach by blatantly imposing a ban on the entire practice but have adopted a carefully crafted mean path to take down only that part of the custom which acted as a hindrance in imparting justice.

Ideally, it seems that the above approach is enough to strike a balance between diverse interests. However the Indian legal still has to go a long way to achieve justice in its true sense. This struggle was initiated when gruesome practice of Sati was struck down centuries ago, amid public grievance and protests. [22]Law became the means to destigmatize the society out of such evils, and it shall continue to serve such purpose. The objective and the philosophy of the Constitution is implicit in the concept of Constitutional morality can only be achieved by transforming the society and eliminating the obsolete concepts that obstruct the path towards social development and evolution of the way individuals participate in the society through social practices[23].

Conclusion

With the progress of culture and advancement of civilization, humanitarian feelings developed individually and collectively, and many social welfare legislations have been also enacted. The time has been changing rapidly and this growth of civilization and culture, aesthetic sense, ethical values and humanitarian feelings cannot be promoted by depending on customary laws and violating the sanctity of rule of law.[24] Dependency on The spoken law had sometimes been all things to all men but now the written law is the one that puts everyone on a same platform irrespective of any classification or categorization. Customary laws were those law emerged from the aura of vagueness, mystery, uncertainty, and liability to change which had enveloped them for so long, and stood forth stark and bare to public scrutiny and with the plethora of transformation in our society, their arbitrary functionality contrasts the aroma of justice which shall be tasted by every citizen.[25]  Law performs certain functions essential to the maintenance of societies and it is a vital part of social organism. Law grows with the growth, and strengthens with the strength of the people, and finally dies away as the nation loses its nationality. [26]So, any unfair law like customs shall stand on the defective part and will drive the nation to the state of losing its individuality and will suffocate itself unless it dies in the hands of confiscated judiciary. Hence, this takes me to the conclusive statement that customary law should have only persuasive value and shall not prevail as a law of land.

Endnotes

[1] Fitzgerald, P.J., M.A., “Salmond on Jurisprudence”, (1997), N. M. Tripathi Pvt. Ltd., Bombay, at p 190

[2] Chettiar v. Kumarappa, AIR 955 Mad 144

[3] “Customary Law in india: jurisprudential and legal aspects”, Chapter 3, http://shodhganga.inflibnet.ac.in/bitstream/10603/74298/9/09_chapter%203.pdf

[4] Gour, Sir Hari Singh, the hindu code, (1973), Law Publishers, Allahabad, Vol. I, at p 156.

[5] Kane Minnie, Onyango, J. Oloka, Tejan-Cole Abdul, Reassessing Customary Law Systems as a vehicle for providing equitable access to Justice for the poor, NEW FRONTIERS OF SOCIAL POLICY, December 12-15, 2005.

[6] Customary Law, MY DEMOCRACY NAMIBIA, Law in Namibia Factsheet Series No. 5 of 6, Hanns Siedel Foundation, http://www.lac.org.na/projects/grap/Pdf/Law_5-Customary_Law.pdf

[7] Mahajan, Dr. V.D., “Jurisprudence and Legal Theory”, (2007), Eastern Book Company, Lucknow, at p 254

[8] Indian Young Lawyers Association v. The State of Kerala, 2018 S.C.C. OnLine S.C. 1690.

[9] Constitutional and Legal Bases of Sabarimala Verdict, Financial Express, October 17, 2018 https://www.financialexpress.com/india-news/the-constitutional-and-legal-bases-of-the-sabarimala-verdict-october-17-2018/1352605/( last accessed on 12^th February 2018).

[10] INDIA CONST. a. 25

[11] Nair, TKA. The Sabarimala Verdict Establishes the Supremacy of Constitutional Morality.  Hindustan Times, 8 Nov. 2018,  

[12] Sabarimala Temple Issue – Customs Vs Constitution, IAS Express, (Jan. 24 2019 10:05 AM), iasexpress.net/sabarimala-temple-issue-upsc-ias-gk.

[13] John Austin, 1885. Lectures on Jurisprudence or the Philosophy of Positive Law, Vol. I, ed. R. Campbell. London: John Murray (5th Edition). P. 316-7

[14]C. Masilamani Mudaliar & Ors vs The Idol of Swaminathaswamiswaminathaswami Thirukoil, SC 1996 AIR 1697, JT 1996 (3) 98, judgment by K. Ramaswamy, J., retrieved from http://indiankanoon.org/doc/1999938/ accessed on 5th July, 2014.

[15]The Hindu Marriage Act, 1955, Sec 3(a).

[16] Mahmood, Tahir. Custom v. Law. , The Indian Express, 25 Oct. 2018, indianexpress.com/article/opinion/custom-vs-law-5418862/.

[17] Animal Welfare Board of India v. A. Nagaraja, (2014) 7 S.C.C. 547.

[18] Shayara Bano v. Union of India, 2017 S.C.C. OnLine S.C. 963.

[19] Allen, Sir Carleton Kemp, Law in the Making, (1964), Oxford University Press, Ely House, London W.I., at p. 111.

[20] Nikhil Soni v. Union of India & Ors, 2015 SCC OnLine Raj 2042 .

[21] Joychen, PJ. Jain Practice of Santhara Illegal: Rajasthan HC – Times of India. TOI, Business, 10 Aug. 2015, https://timesofindia.indiatimes.com/india/Jain-practice-of-Santhara-illegal-Rajasthan-HC/articleshow/48430004.cms.

[22] Bodenheimer, Edgar, Jurisprudence: The Philosophy and the Method of Law, First Indian Reprint (1996), Harvard University Press, U.S.A., at p. 300.

[23] T. W. Bennett and T. Vermeulen, 1980. Codification of Customary Law, Journal of African Law, Vo1.24, No.2, p.213.

[24] dias, r m w, Jurisprudence, First Indian Reprint (1994), Aditya Books Private Limited, New Delhi, at pp. 192.

[25] William A. Robson ,Civilization and the growth of law, the McMillan Co., 1935, pp. 10–11

[26] Lloyd’s introduction to jurisprudence, 5th Ed., pp. 868–69.

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 Remembering the Sabarimala Verdict: A Conflict of Customs and Law appeared first on iPleaders.

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

My most productive time in the day is the morning. And morning is the time I end up wasting very often, because I have the whole day to work, right?

When I was younger, I mostly worked late at night. I found that time to be serene and less distracting. Also, as I didn’t get the work done the entire day, sometimes I was just forced to work hard late at night.

I even got convinced that I am not a morning person, but someone who needs to stay up late and work. I called myself a night owl.

However, entertaining such fantasies while I was in college was easier. As I began building a business, working late at night has not remained a valid option at all. 

Through a journey of self-improvement, I had to learn how important sleep is. I learned that I function the best when I have great sleep. 

I began measuring my sleep. You can use a band or a sonar app on your smartphone to track the quality of your sleep. Sleepscore is a great app for this. If you have any smartphone, you also have this.

Anything that you measure improves. When I began to measure the quality of my sleep, I began to realize how important it is to sleep earlier and not skip sleep. Within a few months, it was clear that a major key factor of my productivity was sleeping on time.

This was followed by the discovery that if I do not swamp myself with emails, WhatsApp messages and Twitter in the morning, I get tons of work done in those early hours of the morning. 

Click Above

I have been since training myself to do my most important and difficult work first thing in the morning. I know about this concept since I was in college, but I am really beginning to get success in implementing it only now.

Just knowing something barely ever helps us to benefit from that knowledge. Practicing what you know, when it goes against your existing habits and patterns, is quite hard. 

Anyway, understanding that mornings are a great time for me to do the most cerebral tasks has led me to do most of my writing work in the morning. I also do the planning, strategizing and reading in the morning. I meditate the first thing when I wake up. I also work out in the morning. 

On the best days, even before its time for me to get to the office, I have already got some serious work done! Tim Ferriss wrote in this bestseller the 4 Hour Work Week the importance of doing a very important task every day before 11 am in the morning.

If you could do only one thing in a day, what would that be?

Well, do it before 11 am in the morning. That is his topmost productivity advice. 

If there is one person who had the single biggest impact on the world of finance or Wall Street, it was Mike Milken. He was called the junk bond king, a formidable power in corporate America who rewrote the rules of engagement and caused many upheavals. There are several Hollywood movies that have been made about his exploits, or around characters that loosely resembled Mike Milken. Laws had to be written to rein in the destructive power he unleashed on USA Inc. He went to jail at a point for some securities fraud, but irrespective of that, nobody denies his impact and the titanic dimensions of what he built.

What were his work habits? Quite peculiar. Mike Milken, the topmost executive of an investment bank that he built from a non-descript unknown organization to the biggest one on wall street of the time, went to work at 4 am in the morning. By the time his colleagues will begin to stream into the office, he was done with half the day’s work!

Steve Jobs woke up like clockwork every morning at 6 am, and began his work by 630 am, no matter where he worked – Apple, Pixar or NeXT. He arrived at the office usually by 8 or 9 in the morning, but by that time he already had one or two hours of work done!

However, most of us have a lot that we can improve about our mornings. 

One thing that is very important is to start the day strong, ideally with meditation or a brief work out. I also love to read or write in the morning and set my brain on fire with the most exciting ideas. 

The biggest setback I face is sleeping late. The days on which I do not sleep within a reasonable time are the ones that lead to unproductive mornings. I recognize that it is worth spending some late nights socializing with my closest friends whose company I love, but I also need to keep on check how often I do it.

I know exactly what impact late nights have on my productivity on the following day. I simply can’t afford it.

Way too many people complain that they cannot do the most important work of their life, things that would lead to real progress because they do not have enough time. If you are one of those people, do look at how you spend your mornings. You may discover something interesting there.

Want a course that you can spend 1 hour every morning on, and tremendously grow yourself as a powerful lawyer? Check out these courses in which we are taking enrollments:

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 What is your most productive time in the day and how do you use it? appeared first on iPleaders.

So today is the day! We are finally announcing the winner of our Blog Writing Competition of 3rd week of November 2019 (From 18th November 2019 To 24th 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 Ramanuj Mukherjee, CEO, LawSikho.

Suneeth Katarki started IndusLaw with 3 other batchmates from the National Law School of India, Gomatham Sridhar, Srinivas Katta, and Srinivasa Raghavan in the year 2000.  At that point, they just had 4 years of experience each. Suneeth and one more partner were into corporate law, while two others were into litigation. 

In 2019, almost two decades later, IndusLaw is a behemoth. They are present in all 3 major legal markets of Delhi, Bangalore, and Mumbai in full strength and even have a Hyderabad office which was rated the best law firm in Hyderabad for several years. 

While it is not considered a Tier 1 law firm so to speak, it is certainly knocking on the door. According to Legal 500, it is right up there in Tier 1 as far as Corporate and M&A is concerned, while for practice areas like Banking and Finance and Projects they have been put into Tier 2. My sense is that given its growth and upward trend it may be visible as a Tier 1 full-service law firm soon.  

It is also definitely the undisputed leader in some niche areas of law practice across the country. Most well known for its work in venture capital and M&A, IndusLaw has been now raiding the biggest law firms in town for a market share in practice areas like Capital Markets, considered reserved only for heavyweights.  

It is the classic story of the underdog emerging the champion. It is very inspiring for all of us involved in the legal industry and entrepreneurship.

So when I got a chance to interview Suneeth Katarki, it was very, very exciting! IndusLaw is proof that you can start a law firm early in your career, and if you play your cards right, you can pull off what most lawyers would consider impossible.

What was the beginning like? What were they thinking? 

It is interesting that Indus was not merely looking to start a full-service law firm, as most ambitious law firm founders did back in the day. They had a clear hypothesis, and it turned out to be scarily accurate! 

Back in 2000, when even the green shoots of startup economy and venture capital were yet to become visible to most of us, Suneeth and others realized that Bangalore was becoming the IT capital, and may become the epicenter of startup investments. Having done some startup focused work at internships in Mumbai and seeing the interest and activity in the same at Dua Associates as an associate, he could see that there was a gap in the market with respect to startups and venture capital investments. They also wanted to build a professional law firm in Bangalore, a concept that was mostly alien in the city at the time.

Most lawyers did not know much about startups and venture capital work and did not do justice to the work. It was not much different in 2008 when I discovered the startup scene in Kolkata. Even as a 4th year law student, I could pursue startups to let me do their investment deals. 

Indus decided to fill that gap, super early, starting in 2000. I would think that it was too early, but starting early helped. When the wave came and became a Tsunami, they had positioned themselves very well. 

The gap was not merely with respect to startups and venture capital though, they discovered that there is a great demand for a professional corporate law firm in many other sectors too.

Most lawyers see a trend too late, and jump into the bandwagon when its already way too crowded. It is better to be the leaders in a small niche market that is yet to pick up, but being the 10th best in a well-established market is not so rewarding.

Indus sensed these trends very early, and that is what they went after. 

How did they find the conviction? Was it not too early for focussing only on such a small niche? Back in 2000, startups barely existed. It was just after the dotcom bust, in fact! Startups were not the most exciting thing to do. People even said that the internet was supposed to be a fad that was going to fade away. 

I did not hear about the first startup events until 2008! 

And even then it was too small, and not too many investments were happening. 

Of course, by 2014 everything will change, and there will be a massive venture capital boom in India. The money will shift from public markets to venture capital and PE, putting firms like Induslaw at the center of maximum action. However, could one imagine that back in 2000?

They did not foresee, of course. They were not even trying to become a big law firm with national presence back in 2000. It was a 4 partner practice, and they wanted to have their own identity. That means getting a few clients was enough. 

Being small and agile helps when you are getting started, you can afford to target small niches that do not make sense for bigger setups. It is a competitive advantage!

Indus grew very organically in the initial years, and it was not until 2008 that they started thinking about growing fast, becoming a multi-city firm and adding lawyers rapidly to the practice.

Still, how did they get the first set of clients?

It was a slow start. All four founders had grown up in Bangalore. Their friends were getting into business – real estate, IT startups, and other things. Personal networks of the founders were critical in the beginning. They also began to target startups, knowing that they could not land the venture capital or private equity funds as clients to begin with.

They went to startup events (I am amazed to know that there were startup events back in 2000 in Bangalore) and counseled startup founders. They gave free talks. Engaging with the startup and early entrepreneurship network led to a string on initial clients who sought help while raising investment. It must have been easy, because I doubt any other law firms were talking startups back then.

In 2012, I took a deal to my partner in a big law firm (I was an A0 associate). It was a series A round worth 2 million. The partner thought it was too small for him to take up. I referred it to a friend who was doing boutique investment deals. That company went on to raise much bigger rounds later, of course. I am just pointing out what big law firms now consider amazing opportunity was totally no-go back then.

The first 8-10 instructions were from startups, and then Indus landed the first instruction from a VC fund. That was really good because a fund will instruct them at least 5-6 times a year! 

When some client companies grew bigger and went on to acquire other companies, they instructed Indus. That’s how the M&A practice took off.

Even working with startups which subsequently failed paid off for them, because the founders went on to work with bigger companies, and hired Indus through their employers when they needed help. 

The network effect kicked in overtime. Things continued to grow organically. I presume that as Bangalore emerged as the startup capital of India, the circle of influence of Indus continued to grow!

The real inflection point came when they decided that it was time to grow big, and go national. 

Teaming up with Delhi based firm G&D, and renaming themselves IndusLaw with the future vision of penetrating all of the important legal markets in India was a game changer for Indus.  

However, this is where a lot of firms screw up. Bad partnerships that rock the boat, and later lead to demoralizing and costly demergers. What did Indus do right?

Firstly, the merger with G&D was not instant. Unlike some firms which grew too fast in too many cities by recruiting partners rapidly, and then crumbled, IndusLaw took it slow. The partners of both firms worked together and collaborated for over one and a half years before actually sealing their fate together. And once they did, there was no looking back.

Keeping partners together have been really hard for a lot of law firms. Only the firms that managed to keep their flock together managed to grow sustainably! Trilegal, for example. Could it have its tri-city dominance in Bangalore, Mumbai, and Delhi if the founding partners fell out? I doubt it. 

Many other similarly placed firms remained locked to one or two areas of good practice and stayed put in one city only, because of their inability to add good partners in other important cities. That’s what kept them at Tier 2 or Tier 3 over decades. 

You cannot aim to become a Tier 1 law firm with only one city presence. Tiny offices that function as back-offices without the real ability to generate significant work in that location do not count. 

That was not what happened at IndusLaw. 

What was the secret to keeping partners from different cities together? How did they keep the founding partners together for almost two decades (one of the founding partners left in 2009)?

IndusLaw was not a single-player game. It was not about a combination of a few superstar partners. It was a team play. That is what stands out most in the IndusLaw story. It was built as a brand. All equity partners had equal shares from the beginning and focussed on investing in the brand of the firm rather than personal glorification. 

Putting the firm before individual partners was a key decision that paid off.

Yes, some founding partners may have brought in more work at times or done more work than others, but that did not mean that they get more equity or more compensation or a higher seat at the table. This was clear from the beginning, and all the founders unequivocally subscribed to it. 

The victory of IndusLaw is, in a way, victory of the pursuit of a common long-term strategic goal rather than personal ego or short term incentives. 

It is hard to find such partners and bring them together, and much of IndusLaw’s success, I would attribute to this factor.

The other thing that Suneeth emphasized on was constant communication amongst partners, especially in the early days. They made sure to meet twice a week like clockwork for a discussion. Even to this day, the founding partners meet physically at least once a month. 

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It is not at all surprising that IndusLaw has grown quite fast in Mumbai as well, despite not having any local founding partner. How did that work?

And that is where comes another masterstroke of IndusLaw. 

Unlike most law firms, IndusLaw involved its fee-earning lawyers in management work from the beginning. And it was not just lip service. They set up committees of lawyers who decided critical policy issues – like leave policy, dress code, what would count as work from home, what will be the holidays, how to do training and knowledge management, how the firm’s branding would look and so on.

Taking responsibility for the success of the firm, rather than just personal success, or success of your practice group or team, is in the DNA of IndusLaw. 

The difference in results is quite evident even if you take a look at the firm’s corporate website, which looks more like that of a startup than a law firm.  

As young lawyers got involved in the firm’s management, they also felt more responsible for the firm they were building! They felt a proud ownership. It is truly a unique way amongst Indian law firms to promote loyalty among the fee-earners. 

Note that while many law firms have such committees, often, people in the committee know that their job is to quietly agree with the managing partner or his wife. Else, they need to find out what the managing partner thinks before taking a call. But not in IndusLaw.

And that is perhaps what led to building a culture in IndusLaw that promoted taking responsibility for the firm’s ultimate success.

What kind of culture did they want to build? Did they consciously try to build a certain kind of culture?

Absolutely. The idea was to create a cool and yet intense culture, that would be different from traditional workplaces and help IndusLaw to attract good talent. 

IndusLaw wanted to build a new age law firm without family influences, a workplace that would be casual and open, but focus on the quality of work. It helped that most of their clients initially were startups and VC funds, who themselves promote a similar kind of work culture among their employees. 

I personally, and the millennial lawyers I know, would always prefer to work at an open, transparent, informal workplace rather than stifling and orthodox ones that swear by traditions and old values. 

When I joined Trilegal instead of Luthra, AMSS or some other law firms after law school, this was a reason that played in my mind too. I did not even sit for Khaitan interview at that time, not because I actually knew something about the firm, but simply because I did not know enough about it! Trilegal came across as a more cool law firm than the older ones. This was, of course, by design. Trilegal came and made a presentation on the campus and told us some amazing things that really impressed me. We didn’t understand all of it perhaps, but the coolness was undeniable. 

IndusLaw has the cool flavor too. I think IndusLaw has benefitted tremendously over the years from that DNA and the branding that comes with it. This is also something that is incredibly hard to retain as a law firm scales up and new lawyers and partners and cities and practice areas get added to the mix. 

That brings another question in its wake.

The biggest challenge while scaling a law firm is maintaining quality. How does IndusLaw tackle that issue? Given the major drive for growth in the last few years, that must have been a major headache for the management?

The answer is in training and knowledge management, according to Suneeth. IndusLaw attacks the quality issue with a lot of inhouse training, which are organized frequently. It is a hard problem to solve, but a relentless focus on training has helped a great deal. 

The other strategy for managing quality that has worked has been hiring only Tier 1 partners, and not those Tier 1 partners who left because they were not doing well, or because they wanted more work-life balance. Only the rising stars were hired from Tier 1 firms, and this has been a conscious strategy from day 1.

Also, IndusLaw prefers to hire from its long term internship programs rather than campus recruitment. Although now it is harder to eschew campus recruitment given the hiring volumes required, they still prefer hiring long term interns as far as possible, irrespective of their college of origin, after seeing their work, dedication and fit with the firm culture. 

This, probably, is another major reason for succeeding with quality management. There are a lot of firms who are good and bringing in new clients, but not so good at retaining them over the years. IndusLaw is definitely not one of those, because the entire basis of its long-term success appears to be its ability to retain clients over a very long period.  

And that comes from a powerful vision and very good execution. 

What is ahead for IndusLaw?

It certainly looks like the firm is ready to challenge the hegemony of big full-service law firms. It has been increasing the number of partners and areas of practice. It is definitely on the growth curve. 

It remains to be seen when clients or the legal industry will begin to consider it as a part of the exclusive club of big law in India.

I am looking to interview more successful law firm founders and bring you more stories from which we can learn about the legal industry and the profession. Please connect me with the lawyers that you think I should speak with.

Also, if you want to check out our law practice management course, here is the link.

We are taking enrollment in several courses that can prepare you to do practical legal work that is in very high demand in today’s economy:

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 Story of the startup law firm that is knocking on the door of greatness appeared first on iPleaders.

This article is written by Gurkaran Babrah, a first year law student at Symbiosis Law School. Noida. This article provides an overview of European Union Competition Law and mergers under European Union Competition Law.

Introduction

Merger is a legal agreement between two or more existing companies to get together and form a company. In other words, it’s a combination of two companies to form one legal entity. Mergers and acquisitions come under competition law. In some countries, it’s also called Antitrust laws. For example: the U.S. European competition law regulates and controls the activities within the European Union. The objective of European Union competition law is to maintain the competition within the European single market. It does by regulating anti-competitive conduct by companies, to ensure that they do not create cartels and monopolies as it would damage the interest of the others.                    

Under European Union, there is a treaty called The Treaty On The Functioning Of The European Union (TFEU). This treaty is the basis of European Union law. Articles 101 – 109 of this treaty comprises a series of regulations and directives of European competition law. There are four main policy areas:                    

• Control over cartels, collusion and other anti-competitive practices under Article 101 of TFEU;
• Dominant market positions under Article 102 of the TFEU;
• Control over mergers, acquisitions and joint ventures;
• Control of direct and indirect aid given by members of the European Union under Article 107 of TFEU.

Terminology 

The meaning of ‘merger’ and ‘concentration’

Merger  

Merger is a voluntary activity by two companies to get together and set up one legal entity. Companies which merge together are usually equal in terms of size, customers, scale of operations, etc. Generally companies merge to increase their market share, reduce their production and operating costs, expand their territories, unite common products, grow revenues and increase their overall profits. 

Concentration 

Under EU competition law, a concentration arises when there is a change in the control of an entity engaged in economic activity, which the European Commission calls an undertaking, on a lasting basis. It either involves:

• The merger of two or more previously independent undertakings;
• The acquisition of direct or indirect control of an undertaking; or
• The acquisition of joint control over a “full-function joint venture”.

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The Horizontal, Vertical and Conglomerate Mergers 

Horizontal Merger 

When two companies operating in the same type of industry mutually agree and merge together to form one legal entity is known as a horizontal merger. It’s a part of consolidation between two competitors offering the same kind of products or services. The goal of the merger is to have a large business, large market share and large scale of economies. The synergy formed by the merger enhances the efficiency of the business performance and financial gains. The cost-efficiency also leads to increased margins of the company. For example – The merger of Daimler-Benz and Chrysler.

But it has its effects. These kinds of mergers tend to reduce competition in the market. It usually emerges as a monopolist agenda from the combinations of powerful enterprises, along with the unemployment which has a very adverse effect on the economy of the country. As the competition is reduced, it gives companies the power to fix prices as per their wish. They can charge unnecessarily high prices from the consumers. Therefore, these kinds of mergers are often scrutinised for the above-given reasons.

Vertical Merger

A vertical merger is a merger between companies that have an actual Supplier-customer relationship. It’s a merger between players that are complementary to each other. Vertical mergers also have their effects but are different from horizontal mergers. Examples of vertical mergers are – Producer and retailer, car parts producer and car producer, cement producer and concrete producer.

Vertical mergers have their effects and they are not without controversy. Whenever, vertical mergers are planned, antitrust laws or competition law are always taken into consideration. Vertical mergers can reduce competition in the market. They can block their rival firms from accessing raw materials or completing certain stages within the supply chain.

Conglomerate Merger 

Conglomerate merger is a merger which is neither horizontal nor vertical. It is a different kind of merger. It is a merger between the firms which are non-competitive in nature. The firms may operate in different industries or geographical regions. For example – Walt Disney Company and The American Broadcasting Company. Conglomerate merger is further divided into two categories. These are Pure conglomerate merger and mixed conglomerate merger.  

A pure conglomerate merger involves the merger of two firms that have nothing in common. They are involved in different kinds of business. Whereas a mixed merger involves the merger of companies which are looking for product extensions or market expansions. Their main purpose of the merger is to expand their market.

Merger Activity

As stated above, companies combining with each other is known as merger or merger activity. Merger activity helps to expand markets, bring benefits to them and to the economy, but some combinations may reduce competition. Merger activity further helps to develop new products more efficiently and to reduce production and distribution costs. Through the increased efficiency the market may become more competitive and consumers may benefit from higher quality goods at fair prices. 

As mentioned above, some mergers may reduce the competition in the market by creating a dominant player in the market. This is likely to harm the consumers as it will give the companies the right to exploit consumers by charging high prices and reducing the consumer’s choice. Mergers are capable of increasing competition in the European industry, improving the conditions of growth and raising the standard of European Union (EU). Reorganisations or mergers are welcome but they should not violate competition laws and should not impede the fair competition.            

The Proliferation of Systems of Merger Control

The proliferation of merger review around the world has given rise to a broad number of commercial and strategic issues. These issues are for those parties who intend to engage in merger activities. The process of merger at an international level has added significant layers of complexity and has made the merger process very bewildering and expensive.

A large number of jurisdictions are now involved in the merger review process. The thresholds for merger filings are many, the timing of merger review is different and it is subject to different levels of procedural complexity. 

Why do firms merge?

Economics of scale and scope

Economies of scale are the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreases with increasing scale. The merger will help the company to increase the scale of operations and economies of large scale can be achieved. A merged company will have more resources as compared to an individual company.. A large economy can occur because of intensive utilisation of production facilities, distribution network, research and development facilities. These economies will be in horizontal mergers because the companies will be dealing in the same line of products, where the scope of more intensive use of resources will be great. These economies can occur only to a certain point. That point is known as the optimal point. It’s a point where the production cost is minimum. If the production will increase from this point then the cost per unit will also increase.

Other efficiencies

Mergers help the firms to increase their efficiency in different ways. They help to expand research and development opportunities or more robust manufacturing operations. Sometimes companies may want to combine to leverage costly manufacturing operations. By merging, companies complement a current product or service. Two firms may be able to combine their products and services to gain a competitive edge over the others in the market.

National champions

National champion is a government policy in which large organisations seek profits and advance the interests of the nation. They usually set the policies which favour these organisations. By giving an unfair advantage against market competition, the policy promotes economic nationalism domestically and global pre-eminence abroad contrary to the free market. This policy is mostly practised in every country’s sector. 

Greed, vanity, fear and drugs

Sometimes mergers are fuelled by the speculative greed of individuals or companies or the personal vanity of a particular swashbuckling senior executive. Some mergers seem to be motivated by fear. If an undertaking in a particular sector appears to be involved in mergers, it may be considered important not to be left behind in the process of industry consolidation. For some individuals, the deal-making process can be the same as the feet of mood-changing drugs, altogether more exciting than the mundane task of managing a firm well.

Increasing market power

One of the reasons behind the merger is increasing market power. By merging the companies they eliminate competition, increase their market share, control over demand and supply and raise prices according to their own wish. These kinds of mergers tends to reduce competition in the market. It usually emerges as a monopolist agenda from the combinations of powerful enterprises, along with the unemployment which has a very adverse effect on the economy of the country. As the competition is reduced, it gives companies the power to fix prices as per their wish. They can charge unnecessary higher prices from the consumers. Therefore, these kinds of mergers are often scrutinised.

What is the Purpose of Merger Control?

The fundamental question which arises here: is there a need to control the mergers in the market? There are many reasons why governments, shareholders, consumers, and firms may object to these mergers. A government may not like the merger of a foreign firm with the native firm, or a merger may not fit with the industrial policy of the government, or if a merger leads to unemployment the government may not approve that.  A firm may object to the merger because it can become a target of a hostile bid, or a merger can give an edge to the other firms. Shareholders may think that the merger may have an effect on the value of their shares. These are individual interests of different entities but the competition law focuses on maintaining the competition with the aim of maximizing consumer welfare. 

Merger control is the process of reviewing the mergers under competition/antitrust law. More than 100 countries throughout the world have adopted the process to control the mergers. The European Union Commission and The US Antitrust laws are mostly entrusted with the role of reviewing mergers. Merger control regimes are adopted to prevent anti-competitive consequences of mergers. There are different types of mergers under the competition law and these mergers have adverse effects on competition in the market. Majority of significant issues are associated with the horizontal mergers. Companies which are involved in the same process either of production or of distribution they come together and merge into each other. This usually leads to the emergence of a monopoly. Competition in the market is reduced. Companies start exploiting customers by charging unnecessary high prices.

Is Merger Control Necessary?

The article 102 under TFEU strongly forbids the abuse of market power. The article not only focuses on simply preventing future abuses but it talks about maintaining competitive market structures which leads to better outcomes for consumers.

Therefore, Article 102 of the TFEU says that –

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

Such abuse  may, in particular, consist of:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

This article strongly forbids the abuse of market power. It’s not about simply preventing future abuses but it is maintaining competitive market structures which leads to better outcomes for consumers.

Assessing the competitive effects of mergers 

Theories of competitive harm

Unilateral or non-coordinated effects

Unilateral effects are also known as non-coordinated effects. These arise when the competition between the products of the merging firms is eliminated. It allows the entity to unilaterally exercise power over the market like a dominant entity. It can raise the price of the one or both merging parties’ products. 

Consider this example:

Assume that if firm A is going to acquire a competitor, firm B. But before the merger, if firm A raises its price, it will lose customers to other firms in the market, including firm B. The fear of losing those customers and suffering lower profits limited firm A’s incentive to raise prices. After the merger, however, firm A has different pricing incentives. Firm A’s customers that switched (or diverted) to firm B in light of an increase in A’s prices are now effectively recaptured because they are still purchasing from the merged entity. This recapture of diverted customers makes a price increase more likely to be profitable. The greater the number of sales diverted from firm A to firm B, the greater the recapture and the more profitable that price increase is likely to be. This is the essence of why a merger creates incentives for the merged firm to unilaterally increase price.

Coordinated effects

Coordination does not require a written or explicit agreement. It is an implied understanding among the market participants. Coordinated effects talks about whether the merger will make it more likely for a group of firms to coordinate and raise prices or not. There are a number of factors whether the participants are able to:

• Align their incentives and reach a common understanding 
• Collectively raise market prices
• Monitor and detect deviations
• Punish deviations from the common understanding or agreement.

Vertical effects

In microeconomics and management vertical merger is an arrangement in which a supply chain of a company is owned by that company. Each member of the chain supplies a different product and combine it to satisfy a common need.

Consider this example – if a car manufacturer purchases tires from a particular shop who further supplies to many car manufacturers. Eventually, that car manufacturer purchases the shop or merges with the tire supplier. Then, the car manufacturer may control the supply of tires to the market and may destroy fair competition.

Vertical merger leads to lower transaction costs, lower uncertainty and higher investment, ability to monopolize market throughout the chain by market foreclosure and strategic independence.

Conglomerate effects

Conglomerate merger is a merger in which firms are involved in totally unrelated business activities. These types of mergers have several effects. They lead to diversification, an expanded customer base, and increased efficiency. As the companies diversifies the risk of loss also lessens.

For example – if one business unit performs poor or not up to the mark, other units of the company can compensate for losses. For example – if A company is specialised in radio and merges with company B specialised in manufacturing watches to form company C, company C will then have access to a large customer base to which it can sell its different products

The Counterfactual

The counterfactual method can be used to assess the effects of an actual event. It has always played an important role in EU competition law. Counterfactuals are discussed under Article 101 guidelines and Article 102 guidance paper of TFEU.

The term counterfactual refers to the hypothetical situation in which merger could not take place. If the commission finds the counterfactual to be significantly more pro-competitive than the merger situation, it would oppose the transaction unless the parties offer adequate remedies. Because EU merger control takes place prior to the implementation of the merger, the counterfactual in merger cases is usually the status quo ante (previously existing state of affairs). However, in certain circumstances, the commission has adopted a more dynamic interpretation of the counterfactual.

Guidelines

There are a number of guidelines on the substantive assessment of mergers. Many competition authorities have published guidelines on substantive assessment. Horizontal guidelines of the US, joint guidelines of the OFT (Office of fair trading) and competition commission in the EU are some important guidelines. The European Commission has published guidelines on the assessment of horizontal mergers and guidelines on the assessment of non-horizontal mergers. Guidelines must strike a balance between providing guidance for firms and their advisers as to what might be expected of a system of merger control and avoiding too much speculation, which can lead to a loss of certainty.

A specific problem in systems of merger control is whether a merger which reduces competition but which leads to gain in efficiency should be permitted or not. In certain circumstances, the European commission’s horizontal guidelines take efficiencies into account within the overall assessment of a merger. Another issue that sometimes arises is whether a merger should be allowed in order to save a failing firm even though there will be less competition in the market after the merger than before. A failing firm defence does exist in US law has been applied under the EUMR and is recognised in an appropriate case under the guidelines of the Uk competition authorities.

Remedies

It is very common that most aspects of a particular merger gives rise to no competition concerns. However, it can be possible that there are certain parts of the businesses of A and B that may overlap horizontally. In that case a competition authority, rather prohibiting the entire transaction, may look for a remedy whereby its competition concern is relieved and the rest of the deal is allowed to proceed. Some cases may require a complex remedy, for example, a right of access to an essential facility or the licensing of technology to competitors on reasonable and non-discriminatory terms. The OECD published Merger remedies in 2004 following roundtable discussions in which a number of recommendations as to best practice were made. In 2005 the European Commission published a merger remedies study in which it reviewed the effectiveness of 96 remedies.

Evaluation of merger decisions

Competition authorities increasingly evaluate the impact of their decisions to clear or modify mergers. This process of self- evaluation enables authorities to test the accuracy of their predictions about individual mergers and to improve the quality of future decision making.

Merger Control and the Public Interest

A number of arguments can be made against the mergers that have nothing to do with the maintenance of competitive markets. It would be possible to conceive a system of merger control that allows intervention for non-competition reasons. 

Loss of efficiency and ‘short-termism’

Some commentators argue that mergers, far from promoting economic efficiency, have a disruptive effect upon the management of one or both of the merged firms and may be detrimental to their long term projects. This claim is made in particular of contested takeover bids, where it is possible that the management of the target company will either be removed by the new shareholders or will resign rather than stay on in the new conditions. Sceptics of the way in which the market for corporate control functions would argue that it is not inevitable that the decisions of shareholders will produce the best result in the public interest, although it may yield the best financial deal for the shareholders themselves. In particular, many would argue that a problem with takeovers is that they are motivated more by short-term profit-taking than by genuine concern for the long term prospects of the company. 

Concentration of wealth

Some may object mergers on the grounds that they lead to firms of such size with such power as to be contrary to a balanced distribution of wealth. This is a socio-political argument, but one which has become more widely accepted as aggregate industrial concentration (it is concerned with the measurement of large enterprises) with has increased. In the US the merger control provisions laws were strengthened at a time when this problem was a dominant concern.

Unemployment and regional policy

This is another objection to mergers. Some say that mergers lead to the closure of factories or offices and result in serious unemployment. Mergers that appear to have no regard for the social problems that may follow attract particular opprobrium (criticism) from the sceptics of the free market. 

Overseas control

Mergers may result in the control of indigenous firms passing to overseas companies, in which case any economic advantages of the merger may be thought to be outweighed by the desirability of maintaining the decision-making process and profits at home. Strong opposition was expressed in the US 2006 when the possibility of seaports there coming under the control of Dubai ports became known. Many Uk firms have expanded abroad, in particular into the US. the case for intervention against foreign takeovers may be more compelling where there is a lack of reciprocity between the laws of the two countries: if the law of the country A prevents inward investment, whereas country B permits it, there may be a case for blocking a takeover by a firm from A of a firm in B.

Special sectors

Some sectors of the economy – for example, the electronic and print media – are especially sensitive and this may mean that concentration of ownership within them requires special consideration. In the UK, as in several other countries, media mergers are subject to special provisions and mergers in industries such as oil, banking, and defence may be particularly closely scrutinised; the UK also has a special regime for mergers in the water industry and the Communications Act, 2003 contains special provision on change of control. Article 21 (4) of the EUMR specifically recognises that member states may have a legitimate interest in investigating a merger other than the grounds of harm to competition.

Designing a system of merger control

Whenever a country decides as a matter of policy to adopt a system of merger control, a number of issues have to be addressed. The following are some of the issues that must be confronted while designing a system of merger control.

• Which transactions should be characterised as mergers? How should the acquisition of minority shareholdings and of assets be dealt with?
• Will joint ventures be considered as a matter of merger control or under the legal provisions that prohibit cartels and other anti-competitive agreements?
• To what extent should a system of merger control should apply to transactions consummated outside a country but which have effects within it?
• What should be the time period within which a merger investigation must be completed?
• Who should make decisions in merger cases? A commission, A court, or A minister in the government?

Conclusion 

As discussed in the article, it can be observed that there are many outcomes of mergers under EU competition law. There are always a number of reasons behind the mergers. Therefore, it is important to figure out the possible outcomes, both negative and positive before merging. If not properly examined and evaluated, it may lead to huge losses. 

References

• https://blog.ipleaders.in/combination-under-the-competition-law/
• https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284449/OFT1254.pdf
• slaughterandmay.com/media/64572/the-eu-merger-regulation.pdf

The post European Union Competition Law: Mergers appeared first on iPleaders.

This article is written by Shriya Sehgal, a first-year student pursuing BBA.LLB. from Symbiosis Law School, Noida. This is an exhaustive article dealing with the various aspects of the Collection of Statistics Act, 2008. A comparison is also made between the 1953 Act and the 2008 Act.

Introduction

The collection of statistics is considered to be an essential task across the world for various governments and organisations. It is implied that the government needs to be aware of the complete reality in order to formulate a solid policy and to have an effective implementation of the same. In order to impose a new policy or plan it is imperative for the policymakers to understand the issues before they find a solution to the same by making relevant provisions. In India, there are two legal acts conducting the data collection directly: 

1. Census Act, 1948
2. Collection of Statistics Act, 2008

The Collection of Statistics Act, 2008 is considered to be primary and principal legislation in India for the collection of economic, social, demographic, scientific, and environmental data. Under this Act, the government is empowered to make the rules and pass instructions for the collection of statistical data.

Under Section 33 of the Act, the Central Government is empowered to make the rules. Consequently, the Rules have been made under the Collection of Statistics Rule, 2011. It consists of 16 Rules which are read along with the Act.

Timeline of Notifications

Object and scope

Scope

The Act extends and applies to the whole of India.

Earlier this Act was not applied to Jammu and Kashmir, however after the Collection of Statistics (Amendment) Act, 2017, the jurisdiction has been extended to Jammu and Kashmir as well.

Objective

The Collection of Statistics Act, 2008 enhances the scope of data collection as well as overcomes the limitations of the Collection of Statistics Act, 1953. It has done the same in the following ways:

Collection of Statistics

Chapter II (Section 3 to Section 8) of the Collection of Statistics Act, 2008 deals with the ‘Collection of Statistics’. It states that the appropriate government can direct the collection of statistics on various topics including the following:

1. Matters related to industry or class of industries;
2. Matters related to commercial or industrial concern or class of commercial or industrial concerns and in particular, any matter relating to factories;
3. Matters related to the welfare of labours or condition of labours including:

• Price of commodities;
• Attendance; 
• Indebtedness; 
• Rent (of dwelling house); 
• Wages (and other earnings);
• Provident fund (and other funds provided to the labour);
• Hours of work;
• Benefits and amenities to labour;
• Living conditions (including housing, water supply, and sanitation);
• Industrial and labour disputes;
• Labour turnover;
• Employment and unemployment;
• Trade unions. [1]

Exceptions to the Provisions of this Act

1. Nothing in this Section authorizes a State Government to issue any direction under this Act with respect to the collection of statistics relating to matters falling under the entries specified in List I(Union List) in the Seventh Schedule to the Constitution;
2. Where the Central Government has issued any direction under this Section for the collection of statistics relating to any matter, no State Government shall, except with the previous approval of the Central Government, issue any similar direction for so long as the collection of statistics by the Central Government remains to be completed;
3. Where a State Government has issued a direction under this Section for the collection of statistics relating to any matter, the Central Government shall not issue any similar direction for so long as the collection of statistics by the State Government remains to be completed, except in cases where statistics have to be collected with reference to two or more States.

Appointment of Statistics Authority

Section 4 of the Act deals with the ‘Power of appropriate government to appoint statistics officer, etc.’ 

• The appropriate Government may appoint an officer to be the statistics authority.
• They are appointed for the purpose of collecting statistics directed by the government to be collected.
• The officer can be appointed for any geographical unit for the purpose of collecting statistics directed by the government to be collected.

Power of Statistics Authority to call for Information or Returns

Section 5 of the Act deals with the ‘Power of statistic officer to call for information’. It provides for following provisions

1. The owner of an industrial or commercial concern or on any other person may serve or may be caused to serve a notice requiring him to furnish information or returns as may be prescribed. Such information or returns can be related to any matter in respect of which statistics are to be collected.
2. The information or returns should be furnished in a prescribed form and manner in the particulars to the designated person or authorities.
3. The notice referred above may be served or communicated through telephone, or email, or telefax, or any electronic mode. It can also be communicated in a combination of different modes for different sets of information.

The returns which the owner may be required to furnish under the notice shall contain certain particulars, as indicated in the notice. Such particulars include: 

• Identification particulars; 
• Nature of ownership and management;
• Number and strength of motors;
• Installed capacity;
• Sales to different types of customers;
• Stocks of fuels materials and products; etc.

Right of Access to Records or Documents

Section 8 of the Act deals with ‘Right of access to records or documents’. It states that for the purpose of collection of any statistics under the Act, the statistics authority, or any person authorised by him have access to any relevant record or document. Such authorisation must be given in writing.

Such information or return can be furnished only when the statistic authority or a person authorised by him:

• Enter at a reasonable time;
• Enter any premises, where he believes such document or record to be;

He may inspect or take copies of such records or documents. He is also authorised to ask any necessary questions for obtaining any information, provided such information is furnished under the Act.

Restrictions on the Publication of Information and Returns

Chapter III (Section 9 to Section 14) of the Act deals with ‘Disclosure of information in certain cases and restriction of their use’.  This chapter states that the following cannot be published:

• Information; 
• Individual return;
• Part of an individual return;

With respect to any particular industrial or commercial concern given for the purpose of this Act, provided, there is previous consent of the owner in writing. 

No person shall be permitted to see any information or records referred above, who is not engaged in the collection of statistics under this Act. One can only be permitted to see the information or records for the purpose of prosecution under this Act or under the Indian Penal Code.

Penalties

Chapter IV of the Act deals with ‘Offences and penalties’. Provisions for penalties against the informant are included in the following sections:

Offences by Companies

Section 23 of the Act deals with the ‘Offences by companies’. Under this Section, a ‘company’ refers to any body corporate, including a firm or other association of people whereas a ‘director’ refers to a partner in the firm.

This Section provides that in case an offence is committed by the company then every person is deemed to be guilty if he was responsible for and in charge of the company for the conduct of the business of the company as well as the company. Thus, they should be held liable and proceeded against and punished accordingly.

However, a person may not be held liable to any punishment under this Act if he proves that:

1. The offence was committed without his knowledge; or
2. He exercised all his due diligence to prevent the commission of the offence.

If an offence is committed by a company under this Act, and it is proved that the offence is committed with the:

• Consent; or
• Connivance; or
• Is attribute to any neglect;

On the part of any director, secretary, manager or any other officer of the company, then such person shall be deemed to be guilty of that offence. Thus, they should be held liable and proceeded against and punished accordingly.

Penalty for Improper Disclosure of Information or Return

Section 9, 10, 11, 12, 13, and 14 of the Act deal with provisions relating to disclosure of information and restrictions to their use. These rules should be effective during the period of collection of statistics and govern the use of information collected under the Act.

A person who is engaged in the collection of statistics, directly or indirectly, under this Act and willfully discloses any information or contents of any return given or made under this Act shall be punishable with imprisonment for a term of six months, or with a fine of one thousand rupees, or both. However, this doesn’t stand true in case the information is disclosed:

• In the execution of a person’s duties under this Act; or
• For the purpose of prosecution of an offence under this Act; or
• Under the Indian Penal Code.

Cognizance of offences

Section 24 of the Act deals with ‘Cognizance of offences’. This Section states that the cognizance of an offence can be taken under this Act only when a complaint is made by the appropriate Government. Also, any offence punishable under this Act can be tried by:

1. The statistic officer; or 
2. A metropolitan magistrate or a Judicial Magistrate of the first class (no court inferior to these can try an offence under this Act)

No prosecution of offence can be instituted without the sanction of the statistic authority and without the consent of the appropriate government, as the case may be.

Power of Central Government to give directions

Section 28 of the Act deals with ‘power to give directions’ and is a part of Miscellaneous Chapter (chapter VI). This Section states that the Central Government has the power to give directions to the following bodies or institution regarding the implementation of provisions of this Act:

1. State Government,
2. Union territory administration,
3. Local Government (Panchayats or Municipalities).

Protection of action taken in good faith

Section 31 of the Act deals with ‘Protection of action taken in good faith’ and is a part of the Miscellaneous Chapter (chapter VI). This Section states that no suit or legal proceeding should lie against the following bodies or institutions when something is done in good faith or done in pursuance of this Act or rules and regulations issued under this Act:

• Statistic authority, or
• Appropriate government, or
• Any other person acting under the authority of an appropriate government or the statistic authority.

Power to make rules

Section 33 of the Act deals with ‘Protection of action taken in good faith’ and is a part of the Miscellaneous Chapter (chapter VI). This Section states that the appropriate Government has the power to make rules for the purpose of this Act, subject to the previous publication by notification in the Official Gazette.

Rules may be made under this Section without prejudice to the generality of the foregoing power on any of the following:

• The form and manner in which the information and returns may be furnished;
• The particulars which the information and returns contain;
• The intervals within which and the authority to which the information or returns may be published;
• The manner in which the right of access to documents and the right of entry conferred by Section 6 may be exercised;
• Any other matter which is prescribed under this Act.

In cases where the rule is made by the State Government, it shall be laid before the State Legislature as soon as it is made.

In cases where the rule is made by the Central Government, it shall be laid before each House of Parliament as soon as it is made. The rule should be laid down for a period of thirty days while the House in session. If both houses agree that the rule should not be made then the rule shall have an effect either by modification or have no effect by annulment.

Collection of Statistics (Amendment) Act, 2017

The Collection of Statistics (Amendment) Act, 2017 was introduced by Mr.D.V.Sadananda Gowda, the ‎Minister of Statistics and Programme Implementation, in Lok Sabha on March 20, 2017. [2]

This Act seeks to amend the Collection of Statistics Act, 2008. The purpose of this Act was as follows:

• To facilitate the collection of statistics related to social, economic, demographic, scientific and environmental aspects governments at all levels, that is, central, state and local governments.
• To extend its jurisdiction to Jammu and Kashmir for collection of statistics as the 2008 Act was not applicable to Jammu and Kashmir. The collection of statistics was related to the subjects contained in Union List and the Concurrent List including citizenship, education, labour, banking etc.
• Under the 2008 Act, the information collected under this Act could only be used for statistical purposes and nothing else. However, the Bill removed this provision and gave the Central Government the power to determine the manner in which such collected information can be used.
• Provision for appointment of nodal officers by the State or Union Government was added by this Bill. The Union Government can determine the power and duties of such officers. The main function of the officer is to coordinate as well as supervise statistical activities under the government who has appointed him.

Conclusion

The Collection of Statistics Act, 2008 enhances the scope of data collection as well as overcomes the limitations of the Collection of Statistics Act, 1953. For instance, the scope of the collection of data has been enhanced to the Local Government, that is, panchayats and municipalities. The statistic authority could earlier be appointed only by Central or Government but now, statistic officer can be appointed for each geographical unit and for each subject of data collection by any other government organisation or department in the Central or the State or the Local government. Many more improvements have been made by the Act, thus enhancing the scope of data collection.

 References

1. http://www.mospi.gov.in/1412-collection-statistics-act1953/#Collection_of_statistics
2. https://www.prsindia.org/billtrack/collection-statistics-amendment-bill-2017

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This article is written by Neelabh Keshav Sinha, a first-year student from Symbiosis Law School, Noida who is pursuing BBA LLB. The article provides an overview of the piracy, what constitutes piracy, the laws preventing it and so on.

Introduction

A person’s possession, be it his work or belongings, is his ultimate brainchild, and the last thing he wants to happen to it is for it to be stolen and misappropriated by someone else.

Piracy has differed in meaning over the course of time, and the perspective and opinion on piracy changes with the generation it is referenced in. However, what remains uniform is the fact that piracy was, is, and probably will remain an unlawful act, regardless of the context in which it is interpreted. 

This article will go over the definition of piracy, how it evolved over time, the legal consequences of piracy, how to prevent it, and services that use pirating methods.

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Definition of piracy

In medieval presets, the term piracy was often used for the act of raiding or looting, which involved the ship-borne looters, who then attacked dwellers of another ship or a coastal area, with the primary purpose being to loot them of their belongings, such as cargo or other valuables.

However, in today’s world piracy is a more relevant and commonly used term, which constitutes theft on copyrighted and trademarked grounds i.e. unlawfully stealing and infringing someone else’s work and produce it as one’s own.

Piracy in the digital realm can be compared to physical theft and piracy, because when a person illegally distributes a digital file on the internet or locally for free, he prevents the profit from the purchase of that item from going to the creator, creating an economic impact comparable to when actual pirates looted cargo.

Types of piracy

Piracy, when elaborated in terms of software, can be classified into 5 types, those being –

• Counterfeiting: It is the illegal acquisition, duplication, and distribution of any copyrighted material, which directly imitates the copyrighted product. The nature of the distribution of the said product may be a sale, or not. The most common way of distributing such pirated works is through compact discs.
• Internet Piracy: Internet piracy is the act of downloading a file from the internet, or by procuring an online software through a compact disc. Methods of conducting internet piracy are websites offering free downloads of software, auctions selling illegally obtained software or P2P servers which transfer programs.
• End-User Piracy: This form of piracy involves the user illegally reproducing software which he isn’t authorized to do. An example would be a user using one license to the software and installing it on multiple systems, or upgrading an already pirated software.
• Client-Server Overuse: In a computer network, when the number of clients exceeded the number prescribed in the server license, then it is termed as overuse piracy.
• Hard-Disk Loading: This occurs when a business sells new computers with illegal copies of software loaded onto the hard disks to make the purchase of the machines more attractive.

Piracy in movies

The act of illegally acquiring, copying, reproducing and then distributing film media, without having any legal right or license to do so, is considered movie piracy. The most common occurrence of this is the distribution of these movies on websites. Traffic for these sites tends to spike whenever a new blockbuster movie releases as a pirated version will very likely be hosting these movies in a downloadable format on their servers.

Piracy in software

Software piracy describes the act of illegally acquiring, copying, reproducing, and distributing software without a license to do so. Software piracy has become much more rampant in this generation of technology, as most software has converted into a one-user license i.e. it can only be redeemed once by one user for his use alone. Distributing this software, such as sharing with a friend, or via the internet, is illegal.

Online Piracy

Online piracy is still a new arena in the world of piracy as compared to its offline older brother, and it has only grown more intricate with advancements in technology. Any piece of digital content, be it movies, music or games, are now accessible online through the BitTorrent client service, which strings together several pieces of the data from a swarm of users, then downloads and compiles them onto the user’s computer. It’s simple, efficient, widely used, and difficult to crack down on.

Pirating movies

Movie piracy has become a more controlled art in recent times, from shaky recordings on camcorders to dedicated sites, apps, and add-ons to physical hardware, piracy has grown more subtle yet more dangerous as a practice. In the UK, over a third of people who are above the age of 16 pirate movies.

The method of pirating movies and uploading them online has also grown more intricate and difficult to track. Pirates often make use of BitTorrent to upload their files and store them online. The data travels to the user who requests the file is supplied with the file through the contribution of a huge group of seeders i.e. pirates who upload the files in bits and pieces. However, with the recent crackdown on online piracy, and links for pirated files being shut down, pirates save files offline, and these same games and movies are then sold via optical discs at grey markets.

Law for piracy

Surprising as it may be, there is no definitive international law that governs piracy as a whole, at least for the digital equivalent of piracy. Under international law, the statute of piracy only covers ‘physical’ piracy, i.e. the actual looting and plundering of goods and valuables via ship-borne thieves.

Copyright

Copyright is one tool to prevent the intellectual property of a person from being pirated. It is the legal right granted to a creator of any intellectual property to be able to reproduce and redistribute his work, at his discretion. Although back then, and even today, copyright doesn’t exactly prevent piracy, it does protect the legal interests of the party negatively affected and prescribe legal consequences for the perpetrator, in the event that copyright infringement(piracy) does occur.

Copyright holders routinely invoke legal and technological measures to prevent and penalize copyright infringement.

Filming a movie

An act of piracy that involves recording a movie or a video, especially without prior authority from the creator or purchased license to do so. The most notable method of movie piracy is known as camcorder piracy, in which a camcorder or a small recording device is often snuck into a theatre, and the entire movie, recorded onto the camcorder, is distributed online via the internet, either on pirated sites for free or sold on gray markets.

Websites to pirate movies

Websites that host pirated content are one of the most popular sources to acquire pirated content, as most of these sites offer the content for free, which sees them experience a lot of network traffic due to their popularity, and the sheer number of users accessing their domains to get their hands on the latest pirated songs, games or movies.

While several governments have encouraged ISPs(internet service providers) to block these sites by default on their services, these sites are still regularly visited through the use of VPNs(Virtual Private Networks). Some of the most popular sites to pirate movies are –

• The ‘YTS’ domains
• The Pirate Bay
• Torrentz2 

Law of copyright in India

To handle copyright and copyright infringement related disputes, the Indian Constitution has the Copyright Act, 1957, which acts as the main statute for all copyright-related laws in India.  Under section 13 of the Act, copyright protection is conferred on literary works, dramatic works, musical works, artistic works, cinematograph films, and sound recordings. 

The Copyright Act, 1957 handles protection of copyrighted material via classification of the same into two categories of rights, those being –

• Economic Rights: The scope of this Act falls under originally conceptualized work including literary works, dramatic works, musical works, artistic works, cinematograph films, and sound recordings. The owners of these intellectual properties and works are given exclusive rights which they can exercise when it comes to the reproduction and distribution of these works, and to have a share in the profit of any sales of the product made by a licensed third-party. 
• Moral Rights: Section 57 of the Act splits moral rights into two basic rights, right of paternity and right of integrity. The former enables the original creator of the intellectual property to be able to claim ownership of it and prevent any others from claiming ownership. The latter enables the creator to restrict any and all ‘distortion, mutilation or other alterations of his work, or any other action in relation to said work’ which may damage his reputation.

Piracy in India

India is one of the few countries that has multiple dominant box office film industries, in Bollywood, Hollywood, and Tollywood. As such, piracy is a much more dominant force considering there is a lot more material to pirate which the local audience would be interested in. Internet users often use VPNs to visit torrent sites which host songs, games, movies and the like. Local vendors at technological hubs often carry compact discs with pirated movies and games, which are sold at cheap prices. Modding video game hardware to play pirated discs is also a booming industry in India.

Pirating movies in India

Considering the viewership of cinema in India with the three major cinema industries, the traffic of sites that host pirated content is also considerably higher in the country. While the above-mentioned torrent sites, which are the most used across the world, are relatively popular in India, people often tend to visit piracy sites that host Bollywood or Tollywood content exclusively. Some of these sites are – 

• Filmywap
• Todaypk
• Bolly4u
• Tamilrockers

Punishment for piracy

Illegal downloading of movies

The Union of India recently issued an amendment to the Cinematograph Act, 1952, in order to clearly define the punishment which can be faced by pirates who, without the written authorisation of the copyright owner, use any recording device to make or transmit a copy of a film. It is not necessary for the film to be fully recorded, or even distributed via the internet. If the perpetrator attempts to record the movie while inside the theatre, he is guilty under the act.

The punishment for this is generally imprisonment, a fine, or both. This punishment can also extend to those who download said pirated movies.

Charges for piracy

Since the crime of piracy is not limited to only the movie industry, the punishment specified above isn’t the only one dealt to pirates. It varies with the industry in which they are committing an act of piracy. The most notable forms of punishment are covered in the provisions of the Copyright Act, 1957 and Information Technology Act, 2000. The punishments specified are as follows-

• Copyright Act: If a person uses a pirated computer program, or a program that has been manufactured or acquired through copyright infringement, on any computer device, he shall be liable for imprisonment no less than 7 days, extending up to 3 years, and a fine no less than Rs. 50 thousand, which may be extended up to Rs. 3 lakh.
• IT Act: If a person gains access to a computer, a network of computers, or computer systems, then proceeds to view, copy and extract the data present on the computer, either through digital means or through a removable storage medium(pen drive or hard disk), without prior authorization from the owner of the computer, he is liable to pay damages as compensation which can go up to a sum of Rs. 1 crore. Any person who downloads said stolen data will also be liable for the same amount.

Prevention of piracy

While the legal consequences associated serve to act as an effective deterrent against piracy, they are not nearly enough to act as a solid preventive measure, considering actual prosecutions against digital pirates are few and far in between. This is because most intellectual property owners tend to just get a cease-and-desist(termination) order against sites which host pirated content, which are just orders to take down the download links for the content.

Therefore, there are, while loosely-defined, some effective ways to prevent piracy, i.e. deter users themselves from seeking out and downloading pirated content. These are as follows –

• Price Regulation: By offering digital goods and services at a lower, realistic price, producers can hope to at least lessen the number of users pirating their content by a wide margin. It won’t stop piracy completely but reducing the incentive for people to make use of pirated content will certainly prevent piracy to a large extent.
• Barriers to Entry: This is a mode of prevention that rests more within the jurisdiction of the government. Most governments instruct and encourage ISPs to restrict entry into sites which host pirated content, mostly by blocking the sites on their servers. Directly barring users from accessing these sites helps reduce the pirate users by a large amount, as most don’t have the technical know-how i.e. how to use VPNs which is required to circumvent the sites being blocked.
• User Confrontation: A lot of TV and streaming services often use a combination of both the above-listed methods, but with some real-time interaction with the users. Pirate users often get real-time messages which notify them that the producer is aware of them using pirated content. Game developers often use this to troll pirate gamers in hilarious, game-breaking ways.
• Cooperation between industries: The above-listed methods to prevent piracy, while working great on their own, often fail and fizzle out when there is one bad link in the chain. That one bad link can be a producer who is lenient with his content being pirated or doesn’t know about the extent of piracy. That is why, all of the above methods, if executed systematically and efficiently by all relevant producers at once, can be one of the biggest deterrents to pirates.

Camcorder Piracy

Camcorder piracy refers to the method of piracy used in pirating movies. This involves the pirate recording the entirety of the movie while in the theatre using a camcorder. These movies are generally referred to as ‘Cam print’ movies. Keep in mind, camcorder piracy is not limited solely to the use of camcorders. Any device capable of recording video qualifies under camcorder piracy.

Despite the quality of these pirated movies being very poor, with constant shaking, foreign audio, and low video pixels, these movies are downloaded in large quantities, largely due to the timing of their upload, which is usually a couple of days after the release of the movie. A lot of these movies are often repacked into optical drives for sale in black markets via local vendors.

Need to prevent camcorder piracy

While not as prevalent of a force as it was in the early 2000s, camcorder piracy is still a huge threat in the cinema industry, especially in the Indian box office. Since Bollywood and Tollywood often come out with lower-grade, cheap entertainment movies to make a quick buck out of the middle to lower classes, these movies are quick to be pirated via camcorder recording and are spread wide over the internet.

This causes major damage to the movie industry considering the more the movie is pirated, the lesser net earnings are made by the box office. A lot of studios never even get back their original investment in the production of the movie. If the loss through piracy is bad enough, it can lead to a loss of jobs due to low earnings, and the black market sales of such pirated products can also help sponsor organised crime. Therefore it can have a hugely adverse impact on the economy in general.

The legality of recording movies in the theatre

As per the amended Cinematograph Act, 1952, the recording of movies in the theatre by any recording device, in order to produce a pirated ‘cam print’ of the movie, is illegal and punishable by law. The act of recording by itself is punishable in law, the rest of the process to successfully pirate the movie is irrelevant in deciding the guilt of the pirate.

Pirates who record movies via camcorder can face legal consequences, the provisions for which are described under the Act. The punishment for the same is imprisonment for up to 3 years and a fine payable up to Rs. 10 lakh.

How does piracy affect the film industry?

When talking about one of the biggest blows that piracy has dealt to the film industry, the most notable attack is one carried out right before the release of the star-studded action film, ‘The Expendables 3’. According to this Forbes article, the movie was acquired illegally by pirates and the entire thing was leaked online for download. Statistics estimate the viewership of the pirated movie to be close to 70 million viewers.

This sets a dangerous precedent for the economic success of these movies, especially today when movies can be downloaded and streamed on almost every device out there, be it phones, tablets, laptops, desktops or even video game consoles. This leads to a larger viewership of pirated content. More views equal more deduction from the profit margin of the producers of the movie.

And this reduced profit margin does not mean less income for the producers only, it also affects the other employees working in the entertainment industry. This includes composers, set designers, electricians

Losses incurred by the film industry because of piracy

The losses which the studios incur as a result of piracy are no small amount. The losses climb up to 7-8 digits, wherein losses are measured in the millions. The large amount of people accessing pirated content is also a contributory factor in these losses.

Taking the above case regarding ‘The Expendables 3’ as an example, it has been estimated that the movie lost about $100 million in revenue due to the pirated leak of the movie before release, and the views during the release of the film.

India’s box office, as of August 2018, is worth almost $21 billion. However, in terms of piracy, it is also a leading juggernaut. It is ranked among the top five countries with the maximum P2P(connection type for torrent downloads) downloads. Through this, it has lost around $2.8 billion of its annual revenue.

Reporting piracy: how to go about it

Reporting acts of piracy is perhaps one of the most overlooked techniques which helps in preventing piracy. While few, there are associations that exist to counteract piracy and shut it down. However, they need surveillance and vigilance from their users in order to do so. Some of these associations which offer online piracy reporting services are –

• Software and Industry Information Association: This domain serves as an extension of the SIIA, a regulatory authority based in Washington, DC that extends its services across the globe. These strive to deal with acts of computer and software piracy at an organisational level.
• Recording Industry Association of America: The RIIA deals exclusively in cases of music theft and piracy in the United States to protect artists from losing revenue through illegal music distribution and sales.
• Copyright Alliance: The Copyright Alliance is a unique organisation in terms of its function, as, instead of directly attempting to put a stop to any rights of copyright infringement, it notifies the producers of the content themselves, so that they may take appropriate action as they see fit.

Aside from these organisations, there is a lot more that you can do at a local level. Other than condemning piracy yourself and refusing to take part in it, you can also act as a deterrent for movie piracy, by reporting any and all suspicious activity, which may be camcorder recording, to the nearest security official.

How do movie pirates make their money?

Movie pirates can be categorised into two types – ethical and unethical, which is ironic considering their main bread and butter is unethical by itself, but there is more to that story.

Ethical pirates mostly upload and make their pirated content available just for the sake of spreading entertainment and making content available early, and for free. Most of them do not have profit as a primary objective and earn revenue only to pay for their website’s server costs and to keep it running. This is mostly done through ads that pay per click, and since most pirated content sites involve a lot of clicking by a lot of users, they generate a lot of money.

Moving on to the unethical pirates. These pirates do not have user entertainment and convenience as their agenda. They actually operate in cooperation with cybercriminals who set up malware on the website’s body. This malware actually steals user data, and the pirate who hosts the site gets paid a hefty sum.

Pirates also earn money through streaming i.e. they stream their pirated content on specialised ‘Kodi boxes’, the sales of which earn them money.

BitTorrent: How does it work?

BitTorrent, at its core, is a communication protocol, much like HTTP or IP. It serves as a mini-client that hosts a P2P connection. These connections are then used to host and distribute data and electronic files.

The functioning of BitTorrent is completely based on the P2P connection system. In BitTorrent’s case, the two peers are the ‘leechers’ and the ‘seeders’, and the combination of both in the BitTorrent system is known as a ‘swarm’. Inside this swarm, there is no central server. All the data circulated is amongst the leeches and the seeders. Once a user enters the swarm, it is connected simultaneously to all the computers inside the network, depending on what file it wants to download. The client then starts downloading bits and pieces of the same file from different ‘seeder’ computers, which are then simultaneously compiled into one file locally on the leecher’s system.

This entire process is monitored through tracker files present within torrents. These trackers, while not influencing the downloads themselves, allow the client service to keep reconnaissance on which files are being downloaded and through what system.

Is piracy a felony?

To determine if an act of piracy is a felony or not, we must establish the structural difference between what crime and felony are. While crime is a generic definition of what is an illegal activity that harms others, a felony is an extension of the definition of crime.

A felony is determinable only through the seriousness of the original crime. A felony can be anything that warrants a punishment of more than one year’s imprisonment or the death penalty.

Any crime which warrants a lesser punishment is classified as a misdemeanor.

Therefore, if we analyze the punishments doled out in cases of piracy, the punishments can be extended up to 3 years along with a monumental fine in India. The length of the punishment given alone is enough to classify piracy as a felony.

What are the effects of leaking a movie through the censor board?

Earlier, movies to be submitted to the Censor Board for review were submitted on a DVD format. This made them a relatively easy target for pirates, and a lot of movies were leaked online, even before official release. The pirated prints of these movies often had a watermark that said ‘For Censor’, making it evident that these were pirated through the DVD copies of movies submitted to the Censor Board for review.

The Censor Board eventually did take action, and changed the format of submission from standard DVDs to an encrypted file format, commonly known as DCP-KDM format.

DCP is the encrypted format in which the movie is submitted to the Censor Board, either on a hard disk or USB Pendrive, which is then run off of the theatre’s main central server. The KDM part of the file contains a serial key which is then used to decrypt the movie for viewing.

Rules, Acts and Laws excluding Copyright Act

Information Technology Act

While the Copyright Act acts as a general supervisor to monitor acts of piracy and punish the perpetrators accordingly, the Information Technology Act’s scope of piracy only extends to the unauthorized use of computers or a network of computers. Any data then copied or reproduced from that system onto an external storage device counts as an act of piracy.

The punishment for piracy, when governed under the Information Technology Act, is direct payment of damages, which may amount to compensation up to Rs. 1 crore.

The determination of how much the pirate will have to compensate  is quantified through these factors –

• The amount of gain or unfair advantage, wherever quantifiable, made as the result of the default 
• The amount of loss caused to any person as a result of the default 
• The repetitive nature of the default.

Internet Service Providers, however, are exempted from the provisions of this Act, if they can prove that they had no existing knowledge of the act of piracy committed.

Trademark Act

A trademark is the primary identification mark of intellectual property and is represented by the universal symbol (TM or ®), used by a particular organisation, which signifies that the intellectual property is unique and under their sole ownership. Trademarks can either be registered or unregistered, although being registered offers many more legal remedies.

The owner of a registered trademark can file a suit to protect the intellectual property registered under it from any infringement or unauthorized use of the trademark. They can file an action of infringement which is a statutory relief, which can either be an injunction to prevent unauthorized use of the trademark or enable the claim of damages by the injured party.

In the case of an unregistered trademark, the owner can file a suit under the action of passing off for the same remedies as an action of infringement, except the benefits are limited to only the geographical area in which the owner operates.

Conclusion

The menace of piracy, despite having faced many obstacles to try and curb it, is still going strong as a practice and has a farther reach than ever. More devices are optimised to use pirated content, and in hydra-like fashion, for every site taken down, two more take its place.

This isn’t to say that piracy is immortal. More governments are becoming more vigilant in regard to how big threat to piracy is. The current situation is very volatile, as there is no way to tell if piracy will grow weaker with the increasing crackdown on it, or will remain omnipotent.

As a producer, one can only enforce the methods available to them. They can’t stop it, but the most they can do is try to reduce the harm done to them as much as possible.

References

• https://www.nortonlifelock.com/about/legal/anti-piracy/types-piracy
• http://www.legalserviceindia.com/article/l195-Copyright-Law-in-India.html
• https://uk.movies.yahoo.com/movie-piracy-much-dangerous-think-102710365.html?soc_src=social-sh&soc_trk=ma
• https://www.britannica.com/topic/piracy-international-law
• https://www.fightfilmtheft.org/camcorder-privacy.html
• https://indianexpress.com/article/india/thanks-to-censor-board-move-last-year-plug-on-movie-leaks-4816773/
• https://www.howtogeek.com/141257/htg-explains-how-does-bittorrent-work/
  

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This article is written by Pulkeshwar Rajpurohit, a student of School of Law. Christ University, Bangalore.

Introduction

Cyber Crime in India is characterized by the IT Act. Living in an innovation-driven condition makes individuals defenseless to crimes that occur in the cyberspace which is known as cybercrime. There are different approaches to handle cyber crimes in India and you can begin with setting solid passwords, keeping interpersonal interaction locales in private mode, and by not sharing each close to home data on the web.

Cyber Crime in India has been quickly advancing since the beginning of the mechanical period. Consistently, truth be told, you get the chance to hear various stunts, tricks and numerous different offences being submitted on the cyberspace. There are numerous kinds of cybercrime in India that have just been recorded under the Information Technology Act, 2000, recommending different sorts of crimes. Likewise so as to pursue the rules of cybercrime act in India, in significant urban communities, numerous cybercrime cells in India have been set up (1).

With the headway of innovation, on-going instances of cybercrime in India have additionally expanded. Today, numerous crimes like seizing, extortion, hacking, and information robbery are being carried out with the assistance of the web. Crooks who perform such exercises are frequently alluded to as “programmers”. A considerable lot of the cybercrime cases in India are enrolled under the IT Act.

Digitalization is unbridled nowadays and the Internet has made life simpler for everyone, with everything only a tick away. From desk crimes to assaults by fear monger associations, the quantity of cybercrimes in India has additionally expanded. It has made man subject to the innovation for each and every essential need. Today each need is secured online like web-based shopping, requesting nourishment, internet gaming, making installments and so forth.

What is Cybercrime in India?

In India, cybercrime can be characterized as a crime or an unlawful demonstration where the PC is utilized either as a device, an objective or both. In different terms, cyber crimes in India can be characterized as an unapproved access to some PC framework without the authorization of legitimate proprietor or spot of crime and incorporate everything from web-based breaking to refusal of administration assaults.

A few instances of cybercrime incorporate phishing, mocking, DoS (Denial of Service) assault, Visa misrepresentation, online exchange extortion, cyber slander, kid sex entertainment, and so on (2).

Reasons for Cybercrime in India

Cybercriminals consistently pick a simple method to profit. They target rich individuals or rich associations like banks, gambling clubs and budgetary firms where the exchange of an enormous measure of cash is made on an ordinary premise and hack touchy data.

Getting such crooks is troublesome. Consequently, that builds the quantity of cyber-crimes. PCs are helpless, so laws are required to secure and shield them against cyber lawbreakers. Following are the explanations behind the helplessness of PCs:

Simple to get to – The issue behind defending a PC framework from unapproved access is that there are numerous conceivable outcomes of break because of the unpredictable innovation. Programmers can take access codes, retina pictures, propelled voice recorders and so forth that can undoubtedly trick biometric frameworks and sidestep firewalls can be used to move beyond numerous security frameworks (3).

Ability to store information in relatively little space – The PC has the special normal for putting away information in a little space. This makes it significantly simpler for individuals to take information from some other stockpiling gadget and use it for their very own benefit.

Complex – The PCs keep running on working frameworks and these working frameworks are customized of a great many codes. The human personality is flawed, so they can do botches at any stage. The cyber hoodlums exploit these holes.

Carelessness – Negligence is one of the qualities of human direct. In this way, there might be a likelihood that securing the PC framework we may make any carelessness which gives a cyber-criminal the entrance and authority over the PC framework.

Loss of Evidence – The information identified with the crime can be effectively wrecked. In this way, Loss of proof has turned into a typical and evident issue which deadens the framework behind the examination of cyber-crimes.

Sorts of Cybercrime in India

Cybercrime can be carried out in two different ways – one in which the PC is the objective of a cyber assault, and the other in which the PC is utilized to perpetrate a cybercrime against any individual or element.

Cybercrimes in India are classified into principle four sorts which include:

Cybercrime against an individual: This kind of cybercrime is carried out against an individual utilizing an electronic area as a medium. Cybercrime against an individual incorporates:

Cyberstalking: Generally, the term ‘stalking’ signifies, rehashed demonstrations of badgering somebody. Though, Cyber stalking is online provocation when an individual is stalked utilizing the web as a medium. By and large, the stalker knows about the person in question or gains learning about injured individual’s family and their exercises, rather than stalking them in all actuality, the stalker monitors an individual’s online exercises to stalk the person in question. A Stalker can utilize the web, messages, SMS, webcams, telephones calls, sites or even recordings to pester his objective.

Hacking: Hacking means getting unapproved access to somebody’s close to home data put away in a PC framework without the consent of either legitimate proprietor of the PC or individual responsible for that specific framework for unlawful gains or abuse. Each demonstration focused on breaking into a PC framework and/or system is hacking. Programmers gain admittance to the client’s close to home and touchy data. They can likewise screen each online movement of an individual like signing in, qualifications included, banking exchanges made, and so on.

Splitting: Crack by and large alludes to the methods for accomplishing programming breaking. Splitting alludes to carefully evacuating the Copyright insurance code which avoids replicated or pilfered programming from taking a shot at PCs which don’t have the Software merchant or proprietor’s authorisation. The individual who is engaged with such action is unique in relation to a programmer and is known as a wafer. Saltine utilizes his insight to overstep the cyber law and messes with the PC.

Slander: Online or cyber maligning includes harming somebody’s notoriety in the public eye utilizing a PC or the web as a medium. This is finished by composing a censorious explanation about an individual via web-based networking media, posting disgusting pictures or recordings, sending critical E-mail to the unfortunate casualty’s companions, and so forth.

Online Fraud: Online misrepresentation is one of the most widely recognized sorts of cyber crime. It includes taking an individual’s delicate data like financial accreditations by utilizing phishing destinations and pulling back cash from the unfortunate casualty’s record. Online lottery tricks are likewise widespread nowadays, one such model is the Nigeria lottery tricks.

Spread of Obscene Material: It incorporates the conveyance of profane materials or sex entertainment via web-based networking media. It incorporates facilitating of sites containing obscene material which tends to debase or degenerate the brains of people.

Kid sex entertainment: Circulation of any material that tends to corrupt the brain of the minor youngsters is likewise a cyber crime. It includes the utilization of electronic gadgets to make, disseminate or get to material which is indecent in nature and tend to degenerate youthful personalities.

Caricaturing: Spoofing includes deception of the inception of any information. While an Email/SMS is created from one source, it demonstrates that it has been produced from another. Cyber offenders utilize this way to get individual data of the client like bank subtleties, and so on.

Phishing: It includes sending spam messages to the client while professing to be a set up big business so as to acquire his own data.

Cybercrime against property: Cybercrime against property is perpetrated utilizing an electronic gadget as a medium. Here, the property doesn’t mean any steady property however incorporates portable and elusive property like PCs, Intellectual Property, and so forth. Distinctive cyber crimes against property are:

Transmitting infection: A PC infection is a malware program that contaminates documents, plate drives, and PC programs. Projects that increase like infections and spread from PC to PC are called ‘worms’. Infection, Worms, Trojan Horse, Timebomb, Logic Bomb, Rabbit, and Bacterium are a few instances of noxious programming that taint the PC.

Cybersquatting: Cybersquatting is when at least two people guarantee a similar space name. Crouching is unlawfully involving a uninhabited spot. The programmer asserts that he was the first to utilize the space name before the genuine proprietor of the area name.

Cyber Vandalism: It includes the obliteration of information on any electronic medium during the period when the system administration isn’t accessible.

Licensed innovation Crimes: IPRs are immaterial property rights. IPR robberies are the most widely recognized cyber crimes in India and incorporate online robbery, programming robbery, encroachment of licenses, structures, trademark, copyright, burglary of source code, and so forth.

Cybercrime against Government: The administration of a nation may turn into the objective of cybercrime too. Any cybercrime carried out against a legislature is perpetrated to undermining the solidarity, respect, and security of the objective nation. Cybercrime against government incorporates:

• Cyber Warfare: Cyber fighting is an Internet-based war strife wherein the cyber crime is politically propelled. It can incapacitate official sites and systems, disturb basic administrations, for example, Internet association, take arranged information, for example, Sensex subtleties and separate delicate information like the installment entryway.
• Cyber Terrorism: It is a demonstration of making dread in the brain of individuals by utilizing the web as a medium. Segment 66-F of the Information Technology Act, 2002 arrangements with Cyber Terrorism.
• Cybercrime against society: When a cybercrime is carried out against various people, it is known as cybercrime against society. Cybercrime against society incorporates:
• Web-based Gambling: Gambling is restricted in India under the Public Gambling Act, 1867. Internet betting is illicit all over India, aside from in Sikkim.
• Cyber Trafficking: Trafficking includes managing unlawful exchange exercises, for example, human dealing, slaves (4).

How to Counter Cybercrime?

To manage the circumstance of cybercrime adequately, one needs to set up multi-dimensional open private joint efforts between law authorization offices, the data innovation industry, data security associations, web organizations, and monetary foundations.

In contrast to this present reality, cyber culprits don’t battle each other for amazingness or control. Rather, they cooperate to improve their abilities and even help out one another with new chances. Thus, the standard strategies for battling crime can’t be utilized against cyber crimes in India.

Utilize Strong Passwords: Use the diverse secret word and username mixes for various records and oppose the impulse to record them.

Keep Your web based life accounts private: Be certain that you keep your long range informal communication profiles (Facebook, Twitter, YouTube, and so on.) private. Make certain to check your security settings. Be cautious about what data you post on the web. When it is on the Internet it is there until the end of time.

Secure your Mobile Devices: Many individuals don’t know that their cell phones are likewise helpless against malevolent programming, for example, PC infections and programmers. Make certain to download applications just from confided in sources. It is additionally vital that you stay up with the latest. Make certain to introduce against infection programming and to utilize a protected lock screen too. Else, anybody can get to all your own data on your telephone on the off chance that you lose it or even put it down for a couple of minutes. Somebody could even introduce pernicious programming that could follow your each development through your GPS.

Secure your information: Protect your information by utilizing encryption for your most delicate documents such money related records and government forms.

Ensure your personality on the web: When it comes to securing your character online it is smarter to be excessively wary than not careful enough. It is important that you be mindful when giving out close to home ID, for example, your name, address, telephone number and additionally money related data on the Internet. Be sure to ensure sites are secure when making on the web buys, and so forth. This incorporates empowering your protection settings when utilizing/getting to informal communication destinations.

Keep your PC current with the most recent fixes and updates: One of the most ideal approaches to fend off aggressors from your PC is to apply patches and other programming fixes when they become accessible. By consistently refreshing your PC, you square aggressors from having the option to exploit programming defects (vulnerabilities) that they could somehow use to break into your framework.

Ensure your PC with security programming: Several sorts of security programming are fundamental for essential online security. Security programming basics incorporate firewall and antivirus programs. A firewall is generally your PC’s first line of barrier. It controls who and what can speak with your PC on the web. You could think about a firewall as a kind of “police officer” that watches every one of the information endeavoring to stream all through your PC on the Internet, permitting interchanges that it knows are protected and blocking “awful” traffic, for example, assaults from regularly arriving at your PC.[v]

Cybercrime and Cyber Laws

So as to check the danger brought about by the cybercriminals, the legislature has authorized the Information Technology Act, 2000 whose prime target is to make an empowering domain for powerful utilization of the web alongside revealing the cybercrime in India.

The IT Act is a thorough law that manages innovation as for e-administration, web-based business, and e-banking. The cyber law additionally sets out the punishments and cybercrime discipline in India.

The Indian Penal Code was additionally revised to incorporate crimes like misrepresentation, imitation, burglary, and so forth perpetrated over the web or through an electronic medium (6).

(1) https://www.myadvo.in/blog/cyber-crime-in-india/

(2) https://www.itgovernance.co.uk/blog/the-rise-of-cyber-crime

(3) https://www.myadvo.in/blog/cyber-crime-in-india/

(4)http://www.helplinelaw.com/employment-criminal-and-labour/CCII/cyber-crimes-in-india.html

(5) https://krazytech.com/technical-papers/cyber-crime

(6) https://www.myadvo.in/blog/cyber-crime-in-india/

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This article is written by Amarnath Simha, pursuing a Diploma in Companies Act, Corporate Governance and SEBI Regulations from LawSikho.com. Here he discusses “Five Interesting Points In Sebi (Issue And Listing Of Debt Securities By Municipalities) Regulations, 2015”.

The Sebi (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015 was amended on 27.09.2019 wherein the Regulations became Securities and Exchange Board of India (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (hereinafter ILMDS Regulations).

Introduction

The SEBI allowed the Municipalities to issue debt bonds to the public for raising funds for meeting the financial requirements of its projects, by virtue of its above regulations.  The Municipality has been defined as the institution of self-government constituted under Article 243Q of the Constitution of India (vide Regulation 2(m)). Under Article 243Q, the institutions are (1) Nagar Panchayat for a transitional area i.e., an area in transition from a rural area to an urban area (2) Municipal Council for a smaller urban area and (3) Municipal Corporation for a larger urban area.   Hence, grama panchayats or village panchayats have been left out. Any of the three bodies can raise money from the public by issuing debt securities.

Amendments on 27.09.2019

The Regulations were extensively amended on 27.09.2019 by SEBI (https://www.sebi.gov.in/legal/regulations/sep-2019/securities-and-exchange-board-of-india-issue-and-listing-of-debt-securities-by-municipalities-amendment-regulations-2019_44519.html).  The need for such amendments was explained in a consultation paper on review of the regulations which were released for public comments on 20.05.2019 by SEBI (https://www.sebi.gov.in/reports/reports/may-2019/consultation-paper-on-review-of-sebi-issue-and-listing-of-debt-securities-by-municipalities-regulations-2015_43039.html).  

Some of the interesting aspects of the regulations are considered herein

Issuer: Meaning

Prior to the 2019 amendment, only Municipality under Article 243Q was allowed to raise funds.  The word ‘issuer’ was expanded vide Regulation 2(l) to include even a statutory body/board/corporation authority/trust/agency established or notified by any Central or State Act or any Special Purpose Vehicle notified by the State Government or Central Government subject to the condition that it undertakes one or more functions that may be entrusted under Article 243W of the Constitution of India.  The issuer may also include any structure set up under the Pooled Finance Development Fund Scheme. It also includes a body corporate to which the corporate act, 2013 applies and set up by the Government for the purpose of raising funds for a person performing one or more functions entrusted under Article 243W.  

Escrow Accounts

The regulations mandate the opening of three different escrow accounts.  They are

1. No lien escrow account: Regulation 2(p): i.e., the account created for the specific purpose of receiving and disbursing funds towards discharge of contractual obligations.
2. Interest payment account: Regulation 2(j) i.e., the account wherein the interest amounts due to be paid by the borrower/issuer is deposited.
3. Sinking fund: Regulation 2(y): the account created specifically for repayment of municipal debt securities.

The need for these accounts can be better understood by looking at the consultation paper.  The unamended regulations contained proposals for maintenance of 100% asset cover at all times by municipality sufficient to discharge the principal amount of the debt securities issued.  It was felt that maintenance of the 100% asset cover could not be effective as the charge on the municipality fixed or immovable assets could not be easily enforced by the creditors and it was going to face legal challenges.  The proposals for the amendment were for the establishment of escrow account wherein the funds owed to investors/creditors are earmarked to such an account which provided protection to the investors regarding payment of their dues by providing charge on receivables of a municipality.

The ‘No lien escrow account’ was recommended to be created wherein all tax revenues, user charges, grants etc., as detailed in the offer document/placement memorandum are deposited. The ‘Interest Payment Account’ was recommended on the basis that throughout the tenure of the debt securities, an amount equivalent to two interest obligations is to be kept in the account vide a transfer from ‘No lien Escrow account’ to this account.  Sinking fund account was recommended so that the principal amount due for repayment is periodically transferred to this account from the ‘No lien escrow account’.

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Regulation 19 states that the issuer should create a structured payment mechanism and maintain specific escrow accounts for the purpose of debt servicing as specified by SEBI from time to time.

Trust Deed and Debenture Trustee

Regulation 20 provides that the issue proceeds should not be utilized until the execution of the Trust Deed.  The Trust deed should be executed for securing the issue of municipal debt securities by the issuer in favour of the debenture trustee.  Such a trust deed must contain details as required under the Schedule IV of the SEBI (Debenture Trustees) Regulations, 1993. The trust deed should not contain any clauses which limits/extinguishes the obligations/liabilities of the debenture trustees or the issuer.  The trust deed should not contain any clauses limiting/restricting/waiving the provisions of the Statute/Regulations/circulars and guidelines by the SEBI. The trust deed should not indemnify the debenture trustees for the damage/loss caused by their acts and omission.  

Regulation 26 provides for the obligations of the Debenture Trustee.  The Debenture Trustee is vested with the requisite powers for protecting the security holders.  He is expected to carry out the functions with due care, diligence and loyalty in accordance with the regulations, trust deed, the offer document/placement memorandum.  But most importantly, he is needed to monitor the separate escrow accounts maintained in respect of the earmarked revenue and shall ensure disclosure on an ongoing basis at all material events.  He should supervise the implementation of the obligations cast on the issuer.  

In the unamended regulations, provisions were made for the appointment of a monitoring agency such as a scheduled commercial activity or public financial institution to monitor the earmarked revenue in the escrow account.  It also provided for obtaining a viability certificate or detailed project appraisal report from a public financial institution or a scheduled commercial bank. Even in respect of the project, a separate project implementation cell to monitor the progress of the project was provided.  All these regulations were felt to be putting additional burden on the municipality without commensurate protection to the security holders and hence those mechanisms were withdrawn and the entire responsibility of carrying out the monitoring functions was to cast on the Debenture Trustee itself.  Hence, the role of the Debenture Trustee has enlarged under the amended regulations.

Disclosures

The issuer is mandated to disclose the details as per Schedule I to the Regulations under Regulations 6 and 27.  These disclosures are to be made in the offer document and placement memorandum. Regulation 27 states that all material facts shall be disclosed by the issuer in the offer documents issued/distributed to the public and the issuer shall ensure that such disclosures are true, fair and adequate with no misstatements or misleading statements.  Regulation 6 states that the issuer and the lead manager shall ensure the draft offer document contains the details as required by Schedule 1 and Schedule 1A of the regulations and other SEBI mandated disclosures. The lead manager is mandated to exercise due diligence and satisfy himself about the veracity and adequacy of such disclosures.  

The disclosures at Schedule 1 include among others, 

1. General Information about all the persons involved in the issue
2. Details about the issuer and its capital structure
3. Objects of the issue
4. Tax Benefits
5. Issue specific information
6. Financial information
7. Legal and other information
8. Government Approvals
9. Undertaking by the Issuer
10. Documents to be submitted
11. Risk factors
12. Such other details felt necessary.

Looking at the role of the lead manager and the issuer, the municipality, a constitutionally recognized body, is made to undergo the same strenuous process of obtaining the SEBI approvals and other SEBI mandated norms which a public or private limited company has to undergo.

A Conspectus of a few other significant aspects

The issuer cannot issue debt securities if it has defaulted in repayment of debt securities or loans obtained from banks or financial institutions during the preceding 365 days (Regulation 4©.  The issuer must obtain a credit rating from a registered credit rating agency and that credit rating must be disclosed in the offer document. (Regulation 4B). The debt securities must be issued in Demat form.  (Regulation 4C) and the debt securities must be listed on a recognized stock exchange (Regulation 4E).  

The issuer has to have a surplus income in any of the immediately preceding three financial years as per its Income and Expenditure Statement (Regulation 5(a).  The issuer has to ensure that every application form issued by the Issuer is accompanied by a copy of the term sheet containing various disclosures as detailed in Schedule 1A of the Regulations (Regulation 10). 

Private placement of up to 200 persons excluding the institutional investors is allowed by the Regulations (Regulation 14-15).  The minimum subscription amount per investor in private placement is Rs.10 lakhs (Regulation 15).  

The issuer has the option of buy-back (Regulation 17).  The issuer has the option of recall (call) or can provide for redemption prior to maturity date (put).

The issuer has to utilize the funds only for the purposes indicated therein under the objects (Regulation 18A (1)) and shall disclose the schedule of project implementation (Regulation 18(4)).  The issuer has to contribute 20% of the project cost from its own resources (Regulation 18B). Provision of rollover is also provided under certain circumstances (Regulation 21). The issuer has to comply with continuous listing conditions as specified in Schedule V including continuous disclosures.

Conclusion

The consultation paper reveals that as on 20.5.2019, only seven municipalities had raised Rs.1,389 crores through the issuance of debt securities.  Hence, the amendment was carried out to make the right to issue debt securities available to more entities as well as make the process smoother and at the same time providing for investor protection.  The effect of the amendment will have to see in the coming days.

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 Five Interesting Points In Sebi (Issue And Listing Of Debt Securities By Municipalities) Regulations, 2015 appeared first on iPleaders.

In this article, written by Parth Verma, he tells about the introduction, and the present- day scenario of Labour and Employment Laws.

Introduction

Labour laws and employment laws have been essentially derived from socialist republic state. Only the socialist republican state can best define the true usage of industrial labour laws because moral and ethical standards are the bedrock of a Social republican state and are hence given high importance. Labor and employment laws are quite important as they give structure to workplace, define what both employees and employers are responsible for and in some cases, also outline the federal regulations in order to give both parties, the direction necessary for resolving workplace conflict. These laws are also important because they enable businesses to devote more of their focus to productivity and profitability rather than giving constant energy and resources to problem-solving.

Industrial Jurisprudence

The theory or philosophy of law pertaining to the labour and employment laws for the industrial sector comes from the industrial revolution. When people became aware of their rights and felt a need to be more aware of how they should be treated, they started protesting for their rights hence Industrial laws were born.

Industrial Revolution of India

India got its industrial revolution a little late, as compared to the western countries. Though because of its complex relations with Britain which was ruling over India and using Indian people for further equipping their industrial revolution, hence as a consequential truth, Indian Industrial jurisprudence arose a bit late.

Evils of Industrialisation

Though there are many ill- effects of industrialisation, however they can be classified into two broad categories: Economic and Social ill- effects.

Economic ill- effects

Child labour 

Child Labour started to prevail which caused a severe economic problem (if seen in a large and a broad-minded context), as the children, which were now employed perhaps for helping their parent’s day to day monetary desire, if would have studied further would have gained better employment and hence they would have been taken to greater economic level. Thus a global economic level declined because of the Industrial revolution. This was further accompanied by a decline in the moral and ethical standards decline as poverty is anyday a breeding ground for all such evils.

Diseases

Diseases were another great cause of trouble as with modern machinery there were numerous smoke-related diseases and injuries caused by the operation of the machinery.

Some diseases that were a part of the Industrial Revolution were smallpox, typhus, typhoid, dysentery, diphtheria etc. The factories created a huge amount of smoke due to coal, which had huge carbon content, made environmental problems and breathing problems, that were new to people. The problem got further deepened because of the economic problems which people were facing due to low payment or payment not being given on- time. They were therefore not able to pay their medical bills hence their good health was delayed which further accompanied their further monetary growth as they were not able to go to their job, thus creating a vicious cycle and hence made them poorer.

Social problems

Workers had a very bad social aspect attached to their lives. They were severely maltreated. Their rights weren’t valued, they were treated nearly the same as slaves by their authority. There was nothing being done for their human rights. This deteriorated their working potential because of their low value and hence influenced low self- esteem. This created a lot of social disruption and discrimination between people pertaining to their standards. Low- class people then began feeling a need to rise and hence starting roaring for their status, by means of strikes and agitations of various sorts. The lower class then began uprising and started dominating the higher class to buy the means of collective conscience.

Working conditions were horrible in the industrial sector which caused many emotional and psychological problems. The working conditions were depressing which caused a very bad impact on the employees. The boss was usually very rude to the employees under him. Further that boss’ boss used to be rude with him, hence the main sufferers were the ones who were employed in the manual labour, as they were at the lowest level and had nobody to blame as such. Their hearts were not advocating their actions and hence the industrial potential wasn’t up to the level it should have been. They were doing the work just for the sake of it.

Industrial Peace and Industrial Harmony

Industrial peace is a two-way process, it doesn’t happen one-sided. Both the employer and the employee need to cooperate for the same. There are a few means by which any industry can attain peace and harmony like:

Induction of Spirit of Harmony

Inculcation of the spirit of harmony and brotherhood amongst employees and employers. Once given entry in the company must be accepted the way they are and the cultural, social, psychological (etc.) differences should be set aside and they all should work as one. Everybody must unite together in a company and work together for one cause. In the mean process, one should not forget or take for granted moral and ethical values.

Strict enforcement of rules

There should be strict enforcement of protocols pertaining to the soft conduct of both the employers and the employees. Government intervention here is very necessary because if the government frames laws it will be very easy for the industrial sector to promote better unity as by merely following them as they are, they can achieve social stability by the enforcement of such laws, as we cannot take this fact for granted that cultural differences make various disruptions (at times) as what may be good for one may be bad for another and vice- versa, hence by merely following the structure of such laws in the form of protocols, we can make it a universal deal which could promote social solidarity which is to say that every good thing shall be then perceived as good by all, no matter what.

Consent of employer and employee while drafting laws

The policies of a company must be constructed in consultation with the workers so that there is no confusion later on. The rules or terms must be stated explicitly and in clear terms so that it is clear in the mind of both parties and that it later doesn’t become a cause of dispute.

Industrial Relations

Effective communication is the key to achieve great heights in the modern world. One can make his/ her task 100 percent more effective, if there is a clear communication between people working in a particular sector and people of different sectors. Hence, special and explicit attention on effective communication within and outside an industry must be given.

People of different industries must honour each other and give honour where honour is due. 

The transactions must be clear and precise with no scope of confusion and it should be such which creates no confusion amongst industries, cash transactions are very important as its all about cash which very industry works for.

Trust should never be compromised on and must always be maintained no matter what. Industries must always be faithful to whatever they commit to one another in any circumstances, “frustration scenario” however is any day an exception to this. Companies should work by maintaining good contacts with other companies so that their overall production is on the higher side. Friendly relations with other companies helps in better functioning as then companies get to have better output as then there are more minds working upon an agenda hence better sharing of ideas takes place.

Industrial Adjudication

In legal terms, industrial adjudication is very important as it is a wonderful way to escape the disputes that arise in a company, in a formal yet best way possible, which is polite yet strict.

Practically, Industrial dispute primarily refers to the disengagement between employers and their employees. It is not a personal dispute of any one person. It engages a large number of workers’ association having a correlated interest.

In the Industrial Disputes Act, 1947, industrial dispute means, “Difference between employer and employer or between employer and workmen or between workmen and workmen, or any dispute among these which are related to the employment or non-employment or terms and conditions of employment of any person”. The industrial dispute machinery as per industrial disputes Act, 1947 has the following branches: Credits: Toppr.com

Laissez faire

It is an ideal concept which advocates less government intervention in the market. This term has French roots, which essentially “mean to stay away”. It’s an economic philosophy of free-market capitalism. Laissez-faire offers the following benefits such as Autonomy, Innovation, Absence of taxes.

Theory of ‘hire and fire’

This is another theory according to which an employer is free to remove the employee, whenever he/she wants, which is usually done on a discriminatory basis and purely on the will of the employer. This is important, from the view of production, as it increases the potential of production, as everyone is competing for better production so that they can be hired. Hence in the mean process the production keeps on getting gets better and better. There are reasonable restrictions also on the part of employer (at times). Usually while dealing with a labour class population however such restrictions are not seen. This theory is seen bad as an employer cannot remove an employee merely based on discrimination which the employer assumes to be a true fact and hence justify discrimination.

Guiding principles of Industrial Adjudication

There are certain principles which guides the Industrial Adjudication process. These principles were kept in mind while drafting the laws pertaining to the Industrial disputes like the Industrial disputes Act, 1947. These principles are:

1. Public interest
2. Industrial harmony and goodwill
3. Development of industrial justice
4. Expert assistance
5. Socio-economic effects
6. Reference to facts and circumstances of each case
7. Tribunal to act in a judicial manner
8. Expediency is no consideration
9. Acceptability of decisions
10. Natural justice

Labour Policy

In India, we have many laws in India for various industrial aspects. We have plethora Labour laws in India, however their implementing specially in the rural areas we find major missing implementation of all these laws. However, in India we have many laws pertaining to employees and employers such as:

1. Minimum Wages Act, 1948, Payment of Wages Act, 1936.
2. Payment of Bonus Act, 1965, Payment of Bonus Act, 1965.
3. Employees’ State Insurance Act, 1948.
4. Labour Welfare Fund Act (of respective States).
5. Payment of Gratuity Act, 1972.
6. Factories Act, 1948.
7. Industrial Employment (Standing Orders) Act, 1946.
8. Shops and Commercial Establishments Act (of respective States).

Labour Problems

It is needless to say that there are a number of problems in India pertaining to labour- employer relations. Particularly the employees in rural areas are ill- treated. Ranging from long working hours to no payment of their wages, they are severely maltreated. They are treated like slaves and are suppressed of their rights in every possible sense. They are deprived of their human rights to a huge extent. 

Labour laws is very crucial for a country like India wherein there is not just a huge population but a variety of economic standards as well. It is important to control the rich population so that they don’t overpower or suppress the poor population. India now has labour laws which tackles the related problems to a large extent.

Principles of Labour Legislation

There are various principles of labour legislations such as:

• Principle of Protection
• Principle of Social Justice
• Principle of Regulation
• Principle of Welfare
• Principle of Social Security
• Principle of Economic Development
• Principle of International Obligation

There are two main principles, i.e. social justice and social equity. There are other principles too.

Principle of Social justice

The principle of social justice essentially states that all social groups must be treated the same, no matter what. It aims to remove social inequality, as it can be clearly seen that certain groups have been subject to social disability in terms of employment or labour. It aims to provide equal employment opportunity to all regardless of social status of a person.

Social equity

This principle is essentially based on maintenance of legislations which is based on social equity of labour. Laws are to be updated from time to time, circumstances are not permanent, they keep on changing from time to time, hence there is a necessity to bring changes in the law accordingly. This intervention by the government for making modifications or amendments, to suit the changed situations are based upon the principle of social equity. In a nutshell, Social equity is setting up of equitable standards for all by means of legislative provisions and obligations to do so.

International uniformity

For this principle, the role of ILO (International Labour Organization) is noteworthy. It has produced a good number of International Conventions and Recommendations which covers the aspects like unemployment, general conditions of employment, wages, hours of work, young people, women, industrial health, etc.

National Economy

This principle states that, while enacting a labour legislation, the general economic situation of the country must be taken into consideration. Because in any country the state of national economy is a key factor in influencing labour legislation.

Social Security

From the point of view of, “Principles of Labour Legislation and Industrial Jurisprudence, Dr. Soumitra Kumar Chatterjee” is the concept of social security is an important part of social justice. It is based on ideas of human dignity and social justice. It essentially means that state must protect every citizen which in any way contributes to the promotion of the country’s welfare.

Its measures are significant from two viewpoints:

First, they constitute an important step towards the goal of a welfare state;

Second, they enable workers to become more efficient and hence increases the industrial power and potential.

Adoption of Social Security measures in India has been done through the implementation of Acts like:

• The Workmen’s Compensation Act, 1923.
• The Trade Union Act, 1926.
• The Industrial Employment (Standing Orders) Act, 1946.
• The Industrial Disputes Act, 1947.
• The Minimum Wages Act, 1948.
• The Employees State Insurance Act, 1948.
• The Factories Act, 1948.
• Maternity Benefits Act, 1961.

Growth of Labour Legislation in India

In the eighteenth-century, India was not just a great agricultural country but also a great manufacturing country. Both the European and Asian markets were mainly fed because of the looms supplied by India. British government in India, as a matter of policy discouraged Indian manufacturers, so that they could encourage new manufacturers of England. Their policy essentially was to make Indian people grow only the raw materials. The British oppression in India continued for some time, which led to the growth of Indian nationalism. 

In the twentieth century, the national movement took a new turn and hence there was a demand for Indian goods. A non-cooperation movement, which is known as Swadeshi movement, was started, which urged the people to use the goods which were made in India and to boycott the goods which were foreign- made. 

In India, the plantation industry in Assam was the first one to attract the legislation. Several new acts were passed from 1863 onwards for the regulation of recruitments. These legislations had more focus on the protection of interests of the employers rather than safeguarding the interest of the workers. Although, The Factories Act was passed in 1881 and the Mines Act was passed in 1901. But the most important Act which was passed to protect the interests of the workers was The Workmen’s Compensation Act, 1923. Some of the other important social security legislations are: The Employees State Insurance Act, 1948, The employees Provident Funds Act, 1952 etc.

Laws were also made to regulate the labour management relations. Some of them are: The Industrial Disputes Act, 1947. The Trade Unions Act, 1926, and The Industrial Employment (Standing Orders) Act, 1946. Labour legislations ensuring labour welfare and minimum standards were also enacted. Some of them are: The Factories Act, 1948. The Minimum Wages Act, 1948. The Payment of Wages Act, 1936, and The Payment of Bonus Act, 1965.

Further, by the setting up of International Labour Organisation (ILO), India saw many revolutionary changes like the amendment in The Factories Act, 1881. All these amended and enacted legislations make provisions for both, general welfare and protection of interest of the labours in India. The positive influence of ILO was seen in the form of recognition of many new kinds of rights that were not available to the labour class but were made available post creation of ILO. It is important to note that until 1919, there were no important labour legislations in India, but with the establishment of ILO, there have been many changes in the labour legislation of our country.

The following are the main Acts enacted by the Central government for improving labour conditions.

The way Central government provides for labour laws, every state government also has certain typical and particular Acts which provides for labour laws in respect to the best interest of their culture and ethnicity, such as:

• Maharashtra Contract Labour (Regulation and Abolition) Rules, 1971;
• Maharashtra Factories Rules, 1963;
• Industrial disputes (Bombay) rules, 1957;
• The Bombay Industrial Relations Act, 1946;
• Maharashtra Workmen’s Minimum House Rent Allowance Act, 1986;
• Payment of Gratuity (Maharashtra) Rules, 1972;
• The Motor Transport Workers Gujarat Rules, 1965;
• Payment of Gratuity (Gujarat) Rules, 1976;
• Gujarat Payment of Wages Rules, 1963;
• Bombay Shops & Establishment Act, 1948;
• Gujarat Workmen’s Compensation Rules, 1967;
• Madhya Pradesh Factories Rules, 1962; etc.

Disciplinary proceedings

Let us look at some of the cases, so that we can get to have a better understanding of our topic:

West Bokaro Colliery (TISCO) Ltd. v Ram Pravesh Singh, (2008)

Facts of the Case:
Here the respondent who was a workman, was working as a Senior Dumper Operator under the Management of plaintiff. During his first shift in the company working hours, he left the place of his duty before time and went to Rajiv Nagar. In Rajiv Nagar, Shri Harbans kumar, Senior Officer (Security), and a number of security personnel along with other workers were discharging their duty, to prevent the unauthorized constructions on the Company’s land. The respondent along with few others, approached Shri Harbans Kumar and using abusive language, started shouting at him and threatened him with bad consequences if the unauthorized construction was demolished. Shri Harbans Kumar also got injured on their face and other parts of the body as the respondent had assaulted him with his hands and bricks.

Plaintiff issued a charge sheet against respondent whereby respondent was asked to show cause, why shouldn’t any disciplinary action be taken against him. The respondent denied all the allegations imposed on him. Hence, the management held an inquiry. The enquiry officer, concluded that the charges levelled against the respondent were established beyond reasonable doubt. Considering the report, the punishing authority recommended dismissal of workmen with immediate effect. Therefore he was dismissed.

The respondent raised an industrial dispute, which was referred to the tribunal for adjudication by the Ministry of Labour. The Industrial Tribunal got the order of dismissal passed against the respondent,set aside and ordered that he must be reinstated with 50% back wages.The Management then filed a Writ Petition before the High Court which was dismissed. Now the plaintiff, appealed before the Supreme Court.

Decision: The Supreme Court accepted the appeal. It set aside the order which was passed by the High Court and Labour Tribunal. It also held that the acquittal in a criminal case would not operate as a bar for drawing up of a disciplinary proceeding against a delinquent.

For further reference, kindly read the judgement here for better and full understanding.

Hombe Gowda Educational Trust v State of Karnataka

One Venkappa Gowda (now shall be referred to as the Respondent), was a lecturer in Kuvempu Mahavidyalaya, (Appellant No.2 herein). The said institution is under the management of the Appellant No.1. Private institutions in the State of Karnataka are governed by the Karnataka Private Educational Institutions Discipline and Control Act, 1975 (For further reference, read Pg. 143 of this document).

The Respondent here was alleged by the means of a disciplinary proceeding for assaulting the Principal of the Mahavidyalaya with a ‘chappal’. He was found guilty of the said charge and was hence dismissed from service.

An appeal was filed by Respondent before the Educational Appellate Tribunal. A preliminary issue framed, was whether the departmental proceedings held against the Respondent, was in agreement with the provisions of Rule 14(2) of CCS (CCA) Rules, or not. While deciding the preliminary issue, it was held that the departmental proceeding was invalid in law.

The Management, being aggrieved filed separate writ petitions before the Karnataka High Court. The High Court in its judgment essentially mentioned:

When the action of the petitioner in assaulting the Principal with chappal stands proved by the evidence of R.Ws. 1 to 5, whatever may be the provocation for such a conduct, the said conduct of the Petitioner is not justified no matter what. Therefore the Tribunal was fully justified in holding that the misconduct alleged against the Petitioner stands proved partly.

For further reference, kindly read the judgement here for better and full understanding.

Ramana v APSRTC, (2005)

The facts of this case are:

The plaintiff here, was working as a conductor in the organization of Andhra Pradesh State Road Transportation Corporation. Charges were made against him as he failed to collect fares and issue tickets to persons who were getting-off at their destinations and thus, not properly maintaining records of tickets and fare.

Explanation of the plaintiff was considered and was not found satisfactory and disciplinary proceedings were initiated. The Enquiry Officer found him guilty of the charges levelled and after giving him opportunity of hearing as regards the quantum of punishment, order of removal from service was passed.

For further reference, kindly read the judgement here for better and full understanding.

BHEL v M. Chandrasekhar Reddy, (2005)

Facts of the case are as follows: 

The defendant in this case, was an employee working as Assistant Grade-I in the stores department of the plaintiff, at Hyderabad. Defendant by depositing the title deeds of his properties as securities, borrowed house- building advance and hence created an equitable mortgage in favour of the plaintiff.

As per the terms of the mortgage deed, till the entire amount of the loan with interest was discharged, the title deed of the property belonging to the defendant was to be in custody of the plaintiff.

The plaintiff’s officers came to know that certain public notices were published in the local Newspaper which called upon the willing buyers for making their offers for the purchase of the property belonging to the defendant (which was mortgaged to the plaintiff by deposit of title deeds), while the mortgage was still subsisting and an amount of Rs. 1,34,951/- was due on the part of defendant.

When the plaintiff came to know about this, its officers approached the advocate who on behalf of the defendant had issued the publication. Then they came to know that the original title deeds which were supposed to be in deposit of the company was in his custody. It was stealthily taken away from the custody of the plaintiff. Based on these facts, a departmental enquiry was done. The reports submitted by the Enquiry Officer held the plaintiff guilty of the misconduct and taking into consideration the seriousness of the charge, the services of the defendant were terminated.

Being aggrieved by the said decision of the plaintiff, the defendant approached the Additional Labour Court, challenging the said enquiry report and the consequential punishment which was imposed on him. The Labour Court after considering the report of the Enquiry Officer and examining certain witnesses summoned by it said that the findings given by the Enquiry Officer and the confirmation of the said findings by the Disciplinary Authority was valid.

Being aggrieved by the said order, which directed the reinstatement of the defendant, the plaintiff filed a writ petition before the learned Single Judge, the defendant also being aggrieved by the order, filed a writ petition before the High Court. The learned Single Judge after hearing the parties dismissed both the writ petitions. The learned Single Judge said that, “There is any amount of spectrum of discretion vested with the Tribunal in taking into consideration the facts and circumstances of the case. The decision relied upon by the learned Counsel for the Management has to be taken into consideration based on the facts and circumstances of the case”.

On the above basis, writ petitions of the plaintiff and defendant were dismissed. Against the judgment which was given by the learned Single Judge, both the appellant and respondent then filed appeals before the Division Bench of the High Court which also dismissed the appeal.

For further reference, kindly read the judgement here for better and full understanding.

Narendra Nath Bhalla v State of U.P.

The appellant in this case was an employee and was working as a stamp clerk. On finding certain irregularities and misconduct, which are said to have been committed by him he was given suspension. A charge sheet was also issued to him; an inquiry officer was appointed who after completing the inquiry submitted a report holding that certain charges were proved against him. The disciplinary authority on consideration of that inquiry report which was submitted and the materials placed on record and looking to the charges held, proved agreed with the inquiry report and passed an order dismissing the appellant from the service. The appellant filed a claim petition, before the UP Public Services Tribunal, challenging the correctness and validity of the order of dismissal from service. The Tribunal dismissed the petition. He then, filed a writ petition before the High Court challenging the order which was passed by the UP services Tribunal. The Division Bench of the High Court, after considering the rival contentions, taking into account, the materials placed on record for consideration, dismissed the writ petition and hence affirmed the order passed by the Tribunal.

For further reference, kindly read the judgement here for better and full understanding.

Karnataka SRTC v A.T. Mane

The respondent in this case, was working as a conductor in the “Chikodi” depot of the plaintiff-corporation. One day, when the bus in which he was doing his duty returned back to the depot after getting done with its trip from Haragiri to Chikodi. A surprise check was conducted wherein, he was found to be in possession of unaccounted money of Rs.93/- which is even above the amount equivalent to the tickets issued by him. Under the rules applicable to the defendant, he was not supposed to carry more than Rs.5/- as his personal money, during the period of his duty. This rule was laid down in order to avoid the defence of the delinquent conductors, that the excess money was their personal money. Based on these facts, the plaintiff came to a conclusion that this excess amount of “Rs.93/-” was the amount collected by the defendant from the passengers, without issuing any tickets or issuing tickets of lower denomination as compared to what he was supposed to issue. On this investigation report, a departmental enquiry was instituted against the defendant. The defendant, was found guilty of the said charge. He was awarded punishment of dismissal of his services, by the disciplinary authority.

Being aggrieved by the said order, the defendant filed a claim before the Additional Labour Court, Hubli praying to set aside, the order of dismissal and for reinstatement in the services. The Labour Court after hearing both the parties concerned, concluded that the inquiry conducted by the management was completely fair.

However, it came to the conclusion that the only charge against the defendant was being in possession of Rs. 93/- which was in excess of the sale of tickets, but no presumption could be drawn that it was on amount received by non-issuance of tickets to passengers. It was held that the corporation ought to have examined the passengers whether from them, such amount was collected without issuing tickets or by issuing tickets of lesser denomination. Since, this was not done, the Labour Court concluded, that dismissal should not be given as it was highly disproportionate as compared to the smallness of the amount (Rs.93/-). Hence, it made an award, directing the reinstatement of the defendant with full back wages and continuity of service.

The aggrieved corporation hence filed a writ petition before the High Court of Karnataka. Learned single Judge, agreed with the decision of the Labour Court on the ground that the punishment awarded was excessive.However he reduced the back wages to 75% as compared to the full back wages earlier awarded by the Labour Court. Further an appeal was filed against the said judgment before the Division Bench of the High Court of Karnataka which came to be dismissed by the Division Bench.

For further reference, kindly read the judgement here for better and full understanding.

Criticism of Indian Labour Laws

There are many laws and Acts which are made by the Government, however their implementation is a big question. The answer to this rhetoric is obviously no. These laws are not at all implemented to the level they should be implemented. Especially in rural areas, these laws are not at all taken care of and there is no one to supervise if the law is being implemented at the ground level or not. Forget about the rural areas, these laws are being exploited even in the urban areas that too to a great extent. In modern day companies, firms, etc. we see corporate working staff burdened like anything, yet there is no one to stop it. In the name of human- rights, rights are merely limited to paper-work and not ground-work. Working people in companies of cities like Delhi, specially ones working in the corporate sector are mentally tortured by heavy work- load, over- time work hours etc. for which they are not even paid ! That’s truly a big irony for the government which is purely ignored by the government.

Economic survey 2005-2006 gives an account of how there are loopholes in the Indian Labour Laws, and how there is a lack of implementation of Indian Laws when it comes to the ground reality. All such aspects can be clearly seen from this report.

Second National Commission on Labour

If we talk about this report in the context of the article written by G. Shivaji Rao titled, “India: The Report Of The Second Indian National Labour Commission-2002: An Overview” we see that under the recommendations made, one of them states that the existing set of labour laws should be broadly grouped into five groups of laws, i.e. laws pertaining to:

Industrial relations, Wages, Social security, Safety, Welfare and working conditions, now it is clear that here merely these five groups are not enough. For example, the labour laws pertaining to factories do require all such above mentioned criteria but it further requires a lot more things which are not mentioned above, like machinery related laws, laws pertaining to human rights, rights pertaining to justice which somehow are operating at ground level, between an employee and his/her immediate head, which is missing if we classify strictly into these categories, the existing set of labour laws.

We often find that the employees’ working protocols are altered by their immediate heads and this causes the employees, various kinds of injury, which could be mental or emotional in nature, which is not seen, yet is there.

It’s true that these labour laws are “Too Inflexible”! “Not, flexible enough”! These laws are very strict in their nature and don’t change very easily. Another criticism for the labour laws is the “report on 47th Indian Labour Law Conference”, which has many points (outcomes) which are not appropriate as it’s a narrow interpretation of what is required for the ground level implementation to be made effective. There needs to be a broad look for the outcomes of such reports which covers a multitude of things and not just a small amount of things.

Conclusion

There are many laws and Acts which are made by the Government, however their implementation is a big question. These laws are not at all implemented to the level they should be implemented. Especially in rural areas, these laws are not at all taken care of and there is no one to supervise if the law is being implemented at the ground level or not. Forget about the rural areas, these laws are being exploited even in the urban areas that too to a great extent. In modern day companies, firms, etc. we see corporate working staff burdened like anything, yet there is no one to stop it. In the name of human- rights, rights are merely limited to paper- work and not ground- work. Working people in companies of cities like Delhi, especially ones working in the corporate sector are mentally tortured by heavy work- load, over- time work hours etc. for which they are not even paid! That’s truly a big irony for the government which is purely ignored by the government.

Yet it is important to note that these laws define labour conditions to a major extent and does wonders to labour conditions. They make labour conditions, wonderful to a major extent. Employees have at least something to rely upon and hence some standing in the court of law based on the existing laws, which is a wonderful thing as if these things weren’t there, all employees would have been exploited beyond imagination (in the name of money). These laws help in giving structure to the labour conditions which are prevalent in India. Hence it protects equity and good conscience along with the betterment of people.

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 Introduction of Labour and Employment Laws appeared first on iPleaders.

This article is written by Madhuri Pilania, a first-year student pursuing BBA.LLB. from Symbiosis Law School, Noida. This is an exhaustive article dealing with the appointment and qualification of directors under the Companies Act, 2013 with the latest amendments of 2014 rules and 2018.

Introduction

A school comprises of students and teachers and in the same way a company comprises of shareholders, directors, and employees. Directors play a major role in the functioning of a company. What are the responsibilities of a director? How do they get appointed? And a lot more questions inspire us to gain information about directors and shareholders of a company. This article will give you a glance of how directors are appointed, why are they important for the company and all the associated information. Amendments of the previous years are also mentioned. A director serves several duties like to avoid conflict of interest, not to accept benefits from third parties and to exercise reasonable skill and diligence.

Organs of the Company

The Board of Directors is the primary organ of any company. The directors and the managers direct and control the company. 

Board of Directors

Every company is required to have a Board of Directors that consists of individuals as directors and should have- 

• A minimum number of three directors if it is a public company and two directors in the case of a private company and one director in case of a One person company;
• maximum of fifteen directors are required.

A company can appoint more than fifteen directors after passing a resolution. Such a class of companies shall have at least one woman director.

Every independent director is required to be in the first meeting of the Board in which he is participating as a director. After that, the director may attend the meetings every year or whenever there is any change in the circumstances which may affect his status as an independent director. 

The Board of Directors of a company may exercise the following powers on behalf of the company by the resolutions passed at meetings of the Board which are-

(a) to make calls on shareholders for money unpaid on their shares;

(b) to authorize buy-back of securities under Section 68;

(c) to issue securities, including debentures, whether in or outside India;

(d) to borrow monies; 

(e) to invest the funds of the company;

(f)) to approve financial statement and the Board‘s report;

(g) to diversify the business of the company;

(i) to approve amalgamation, merger or reconstruction; 

(j) to take over a company or acquire a controlling or substantial stake in another company; 

The Board of Directors of a company may contribute to bona fide charitable and other funds. 

Directors

A director is not a servant of any master, they are rather the officers of the company. A director is, in fact, a director or controller of a company and he manages all the affairs of the company. However, a director can work as an employee in a different capacity. For instance, Lee v. Lee’s Air Farming Ltd.

Directors are basically registered under the companies act and are duly appointed by the company to direct and manage the business of the company. They are sometimes described as agents, as trustees and sometimes as managing partners.

Position of directors

Directors as agents

In the eyes of law, directors are termed as the agents of the company. It was recognized in the case Ferguson v. Wilson, 1886. In this case, F(plaintiff) had an option to subscribe for some shares of the company and therefore he applied for them. The directors of the company allotted the whole of the shares that are authorized capital to other people including themselves. Later on, the option which was given to F was of no worth and he sued W who was one of the company’s directors to transfer some of his shares to him and pay damages. However, the claim of F failed because the directors were only acting as agents of the company and are not responsible for personal liability. 

However, the directors are not completely like agents as agents are appointed but directors are elected. Directors are more like managing partners.

The court said that the company is not a person, it acts through directors and in regards to this it is the case of principal and agent. 

Directors are the agents of the company and he conducts the business. They act on behalf of the company and he makes the company liable not himself. In other words, directors cannot be held personally liable for any default of the company. The responsibility of an agent compels the directors to conduct the business of the company in the same way as agents do. They should handle the work with care, skill, and diligence. They are accountable for all the assets of the company that is under their control and the profits from the company’s assets.

Directors cannot deal with the company’s affairs on their own and they are required to disclose their personal interest if they have any in the transactions of the company. Directors represent the shareholders to conduct the business of the company on their behalf. Directors perform many roles in a company like allotment of shares, raising of loans and investment of funds in the company.

But, directors cannot bind other shareholders unlike partners.They are elected and can also retire.

Directors as trustees

Directors are also described as trustees of the company. They must account for all the money over which they have control. Directors must act and deal with the benefit of the company. They should exercise with honesty and it should be in the interest of the company as they occupy a fiduciary position. They are trustees of-

• Money and property of the company that are under their control.
• The powers that are entrusted to them.

Directors are the trustees of the company and not of individual shareholders. This principal came in the case of Percival v. Wright, 1902.

In this case, the directors purchased the shares of the company but before this company’s sale was undergoing without disclosing this. The plaintiff claimed that this non-disclosure was a breach of contract and fiduciary trust. It was held by the court that no fiduciary duty exists. Hence, the directors were not bound to disclose.

A trustee is the owner of the property and deals with it as principal. He also deals as an owner and a master. On the other hand, the director is not the owner of the property and is only the agent of the company.

Directors as organs

The board of directors is also recognized as the primary organ of the company. Example, Bath v. Standard Land Co.

Personal liability of the organ

According to the Companies Act, 2013 a director is liable for any loss, damages or costs suffered by the company either direct or indirect consequence, he or she will be liable if they have breached certain provisions of the company.

Appointment 

Casual vacancies 

A casual vacancy occurs when the director’s office is vacated before the expiry of the term of the director. Such a vacancy can be filled by the procedure or the process prescribed by the articles. If any clause is absent in the articles then the power is given to the directors so that he can fill the vacancy at the board meeting. The person who has been appointed by this procedure, hold the office until the expiry of the period for which the outgoing director would have held the office.

Additional directors 

Considering the powers of the directors, additional directors can be appointed by the board. There can be an addition to directors but total members of the directors should not exceed the maximum limit as mentioned in the articles. If the strength of directors is below the minimum limit of the members then the addition of directors is valid.

However, the additional directors can hold the office only up to the date of the next meeting which is held annually. The additional director is exempted to fulfill the requirement of consent under Section 264.

Appointment by Central Government

The central government has the power to appoint directors for the purpose to prevent mismanagement under Section 408. This power is applied when a petition has been filed to the National Company Law Tribunal to prevent mismanagement.

Consent to act as directors 

Every person who has appointed as director shall furnish a consent in writing to the company as such in Form DIR-2. The director must submit such consent with the registrar in Form DIR-12 within thirty days(30 days) of the appointment of the director.

Qualifications of directors

Share qualification

The articles of the company provides that every director should hold a certain number of shares. Such shares are known as qualification shares. A director must obtain the required number within two months of the appointment. If a director is not appointed as a director he cannot be compelled to obtain qualification shares. Also within a period shorter than two months of the appointment, he cannot be compelled to obtain the qualification of shares. The value of the qualification shares cannot be more than five thousand rupees except when the nominal value of the share is more than the amount of the share. A director can hold only shares and not share warrants. A director may suffer if he fails to obtain his qualification shares as advised. He can suffer in two ways:

• His office can fall vacant.
• He will be liable to pay a penalty if he continues to act as a director. The director is required to hold the shares in his own right.

Disqualifications 

The minimum requirements for the eligibility of members are laid down in Section 274. A person is not capable of being appointed as a director in some cases that follow:

• When the person is of unsound mind and he is certified by the court.
• A person who is unable to pay his debts and it cannot be covered by his assets and he(director) has initiated proceedings against him.
• When the director is adjudicated as insolvent.
• When the director has been sentenced to imprisonment of at least six months for the offense that involves morally wicked behavior and five years have not passed from the date of expiry of the sentence.
• When he has not paid for call of his shares for six months.
• Where he has been disqualified for preventing fraudulent persons under Section 203.

If a private company is not a subsidiary of a public company can further add to disqualifications. In other words of the Supreme Court, a public company and its subsidiaries cannot add or increase any other disqualifications.

Vacation of office 

The director shall vacate the office in case-

• He sustains any disqualifications that are specified in Section 164;
• If the director absents himself from all the meetings of the Board of Directors that are held during a period of twelve months without obtaining leave of absence by the Board;
• If the director fails to disclose his interest in any contract that is in violation of the provisions of Section 184;
• If the director becomes disqualified because of the order of court or tribunal;
• If the court convicts the director for any offense for which he is imprisoned for not less than six months;
• If he is removed because of the provisions of the Act.

Removal of directors

A company may remove a director who is not a director appointed by the tribunal under Section 242, before the expiry of the period of his office. But it is important to hear his side to give a reasonable opportunity. A special resolution is required to remove a director under the section or to appoint any other director in place of the director so removed.

Removal by shareholders

As per Section 242, a company can remove a director before the expiration of his period of office. A special resolution is required to remove a director under the section or to appoint any other director in place of the director so removed. 

Removal by Central Government 

A director can be removed by the Central Government, Companies Act enables the Central Government to remove managerial personnel from office on the recommendation of the Company Law Board. The Government can make a reference to the Company Law Board when needed. The power of Central Government can be exercised in removal of directors if:

• The managerial personnel is guilty of fraud, misfeasance or persistent negligence in carrying out legal obligations or breach of trust. 
• The business of the company is not conducted in agreement with sound business principles.
• If the person has conducted business with the intention to defraud or the purpose is unlawful subject to public interest. 

Removal by Company Law Board 

When an application is sent to Company Law Board to prevent mismanagement it may terminate or set aside any agreement of the company with a director or managing director.

Resignation

The provisions of resignation in a company is mentioned in Section 318 in which no director is entitled to compensation if he resigns his office. If there is a provision for resignation in the articles but if there is no provision resignation will take effect in agreement with terms. Notice can be oral or written. A director can effectively resign even if no other director is in office but a director cannot evade his obligations even if he has resigned.

Once a director has given the notice of resignation to the company he cannot be entitled to withdraw that notice. But withdrawing the notice must be with the consent of the company exercised by the managers. 

Powers of directors 

Section 291 says the board of directors of a company is entitled to exercise all the powers as the company is authorized to do. The powers of the directors are co-extensive with those of the company mentioned in the memorandum and articles of the company. The director has almost all the power once he is elected for the operations of the company until he is removed. However, there are two important restrictions on the powers of the directors. 

1. When the board is not competent to do what the act, memorandum, and articles require that is done by the shareholders in general meeting. 
2. The directors are required to act according to Act, memorandum, articles and other regulations that are consistent with the general meeting.

When shareholders can interfere

Malafide 

Directors of the company are the persons who conduct litigation in the name of the company but when they themselves are the wrongdoer, they have said to be acted malafide. In such cases, conflict between their personal interest and duty arises in which they cannot take steps to redress for the wrong done to the company. 

For example, Marshall’s Valve Gear Co Ltd v Manning Wardley & Co Ltd. The duty of the court is confined to honesty, Integrity, and fairness for the conduct of the director.

For instance, there were two parties. A and three other people were the four directors of a company M. They had subscribed to the whole capital. A was the majority shareholder but less than three fourth of the shares. Another company was N who was infringing the trademark of company M and three other directors.

The company M declined to sanction any proceeding against company N. A in a general meeting of the shareholders resolved the infringement. The other three directors applied for striking down the name of the company. It was held that the majority of the shareholders had the right to control the actions of the directors.

Board incompetent

The majority of the shareholders can exercise a power vested in the board when for some reason directors have become incompetent to act. One situation is when all the directors are interested in a transaction of the company. Example, Viswanathan v Tiffins B. A. & P. Ltd. In this case the power to fill delegated to the board. The appointments made by the shareholders were held to be valid as at that time no director was validly in the office. The circumstances were such that a valid board could not be constituted and the majority of the shareholders acted to protect the interest of the company. Hence they could conduct the defense by company in a pending suit against it.

Deadlock 

A third occasion for the shareholders is that when directors are unwilling to act on account of deadlock. Deadlock means in a company where two directors owe fifty percent may not agree with each other at every level. So in the legal sense when the directors do not agree with each other, it is said that the company is deadlocked. This deadlock generally hinders the performance of the company. For example, Barron v Potter, in this case, there were two directors on the board of a company where one director refused to act with another. There are no provisions in the articles to reduce or increase the number of directors in the company. If there is a deadlock in the administration, as a result, the directors become unwilling to act and exercise their powers.

The company has the inherent power to take steps to ensure the working of the company and to appoint additional directors for the purpose.

Residuary powers

The residuary powers of a company reside in the general meeting of shareholders. The power to allot shares is conferred by the articles of a company on its directors. If they act in excess of that power a residuary power remains in the company for the allotment in a general meeting.

Statutory provisions

Under statutory provisions, company is an artificial legal person having a legal and independent existence in the eyes of law. Being an artificial person, it has no mind and cannot act on its own.

Audit Committee 

A public company with share capital is required with not less than five crores rupees. It is required to constitute a committee of the board of directors is known as the Audit Committee. Membership- Not less than three directors and such number of other directors as the board may determine. Two-thirds of the members must be directors other than the whole time managing directors. The committee is required to act in accordance with the terms specified by the board in writing. The members need to elect a chairman from the committee itself.

The internal auditors and the director in charge of the finance department shall attend and participate in meetings of the audit committee but they do not have the right to vote. The committee is required to discuss with auditors on a regular basis about internal control systems. The committee observes and reviews half-yearly and annual financial statements before they submit to the board. 

Board’s sanction for contracts in which directors interested

Powers of individual directors are restricted under Section 297. The company deals with sales, purchase, and supply of materials and or services or underwriting of shares and debentures with directors or firms. When such a director is a member, the consent of the board of directors must be obtained. However, in some cases consent is not necessary.

• When the contract is made for made at the prevailing market prices.
• The transactions of a banking or insurance company.
• When the contract is related to goods in which the company does not exceed the value of five thousand rupees in any year.

 However, such contracts can be made in case of emergency beyond five thousand rupees but approval of the board must be obtained within three months. If the approval is not obtained or it is refused the contract will be voidable at the option of the board.

In 1974 there was an amendment that extended the restriction to contracts for underwriting the subscription of shares or debentures of the company. The amendment further provides that in case the company has paid share capital of rupees one crore or more, contracts of this nature shall not be entered except when the central government has given the approval.

Power to make political contributions 

Earlier companies were not permitted to make contributions for political purposes before the Amendment Act, 1985. Now there is no such restriction except in cases of Government companies and the companies which have been in existence for less than three years. All the companies except them have the permit to contribute money to any political party or any other person for political purposes. However, the amount of money should not exceed five percent of the company’s net profit during the three preceding financial years. Remember these three years must be immediately preceding. A donation is given as a support for the political party and it would also be considered as a contribution for publication of souvenir, brochure or pamphlet. The amount of money given should be recorded in the annual accounts. If a company is in default it will be punishable with three times that amount. The defaulting officers can also be fined and imprisoned which can be extended to three years.

Contributions to National Defence Fund etc. 

1. The Board of Directors of any company or any person or authority exercising the powers of the Board of Directors of a company, or of the company in general meeting, may, notwithstanding anything contained in Sections 180, 181 and Section 182 or any other provision of this Act or in the memorandum, Articles or any other instrument relating to the company, contribute such amount as it thinks fit to the National Defence Fund or any other Fund approved by the Central Government for the purpose of national defense.
2. Every company shall disclose in its profit and loss account the total amount or amounts contributed by it to the Fund referred to in Sub-section (1) during the financial year to which the amount relates.

Duties of directors

The powers vested with the directors should be regulated not only for public good but also for the protection of the investors. 

Duty of good faith

Directors must act honestly, without negligence and in good faith in the bona fide best interests of the company. The presumption is that a Director, acting within his or her authority, has acted in good faith.

Liability for breach of trust

Initially, the duties of directors were not enacted by the statute. They were inherited from the common laws which mean developed through cases. But now legislation of companies of some countries have taken steps to remove this tradition. In a company the director stands in a fiduciary relationship towards the company and should have utmost good faith towards the company. The company demands that the directors should act honestly and with the greatest good faith in their duty. When a director earns a bonus from the other company by providing a business facility to the company, the director can be held liable for the profits although the company could not have earned the bonus.

Trading in corporate control

In the case of Regal (Hastings) Ltd v Gulliver, the plaintiff company was the owner of a cinema in Hastings. The directors wanted to acquire two more cinemas in Hastings. After acquiring cinemas, they would sell the whole property. The purpose was to acquire new cinemas and offered a lease of two cinemas. The landlords required a guarantee of rent by the directors. The intention was that the plaintiff company should hold all the shares in the subsidiary. 

It was held that the directors other than chairman were in a fiduciary relationship and therefore liable to repay the profit they have made on the shares. The solicitor was not liable because he was not in a fiduciary relationship.

The plaintiff company had to establish two things:

• The directors were related to the affairs of the company and said to be in course of management and in the utilization of their opportunities and special knowledge as directors. 
• What they did should result in profit for themselves.

Misuse of corporate information

If the director exploits any unpublished and confidential information of the company, it is a breach of duty and the company can ask the director to make good its loss. Any knowledge generated by the company is the company’s property commonly known as intellectual property. Profit margins, turnover of the business, list of customers and any personal use of such knowledge equivalent to misappropriation of property. The use of the company’s information can be restrained by an injunction.

Competition by directors

As such, there is no competition amongst the directors.

Duty of care

Duty of care refers to a fiduciary responsibility held by company directors which requires them to live up to a certain standard of care. This duty—which is both ethical and legal requires them to make decisions in good faith and in a reasonably prudent manner.

• Duty of care is a fiduciary responsibility held by company directors which requires them to live up to a certain standard of care.
• The duty requires them to make decisions in good faith and in a reasonably prudent manner.
• The duty of care also applies to other roles within the financial industry including accountants, auditors, and manufacturers.
• Failure to uphold the duty of care may result in legal action by shareholders or clients.

Liability for Negligence

The faithful director alone is not enough. A director has to perform his functions with reasonable care. The work assigned to the director should be attended with due diligence and caution. Every director should exercise the powers and discharge the duties of his work honestly, good faith and in the best interests of the company.

Duty to attend board meetings

Directors are under an obligation to attend the board meetings under the articles or the chairman of the board.

Liability for non-attendance

Duties of directors are not of continuous nature to be performed. In other words, they are not bound to pay continuous attention to the affairs of the company. A director is not bound to attend all the meetings of the company although he is under the obligation to attend in some circumstances that are reasonable.

According to Section 283(g), a director can be vacated if he absents himself from three consecutive meetings of the company or from all the meetings of the board, for three months whichever is longer without the leave of absence. The habitual absence of the director can become evidence of negligence on his part. 

Duty not to delegate

Liability for co-directors defaults

A director has to perform his functions personally, they are bound by the maxim “ delegatus non-potest delegare”. A delegation can be made to the extent to which it is authorized by the Act or articles of association of the company. There should be certain duties which have exigencies of business and left to some other officials. A proper degree of delegation and division of responsibility is permissible but total responsibility cannot be delegated as this would undermine the responsibility of the board of directors that is important for corporate governance. 

Duty to disclose interest

Every agent here director occupies a fiduciary position towards his principal. It is his duty to see that his personal interest and duty to principal do not conflict. For efficient productivity, the director should be free from any conflicting interests. The conflict arises when a director is personally interested in a transaction of the company. In the case of Aberdeen Railway Ltd v Blaikie, Blaikie had a conflict of interest as a director and chairman of the company of the firm supplied office furniture to the company. Despite the fact that the price paid by the company for furniture was fair, the company was entitled to set the contract aside.

Meetings of directors

The directors of the company have the right to exercise most of their powers at periodical meetings of the board. In section 285 it is mentioned that the directors shall attend the meeting of the board of directors at least once every three months at least four meetings in a year. Notice of every board meeting has to be given in writing to directors who are present in India. 

Quorum 

Quorum means the strength of members, so quorum of the board is one-third of its total strength or two directors whichever is high. When this quorum cannot be formed, then the number of directors who are not interested (not less than two) shall be the quorum. If the quorum is not fulfilled in any meeting then it stands adjourned till the same day next week. However, if the day is a public holiday, the meeting will be held at the next succeeding day which is not a public holiday. The quorum cannot be dispensed because one of the directors is abroad. A meeting attended by one director is held not to be valid.

For example, A company’s articles provided that the total number of directors was fifteen but at the material time only six directors were in office, it was held that quorum meant only one-third of six directors and therefore a meeting attended by two directors only was also considered valid. 

Register of directors

Every company should keep a register that contains particulars of the directors and managerial personnel. The register will include the details of securities or bonds held by each company. A return of the particulars and documents of the directors can be filed with the registrar within thirty days(30 days) from the appointment of the director. 

Register of directors 

The first important register that is maintained is known as the Register of Directors. Every company needs to maintain the registered office a register of directors, managing director, managing agents, secretaries and treasurers, manager, and secretary. The register needs to maintain the following particulars:

• The full name of the director and such details with the father’s name, and address. A married woman, her husbands’ name, nationality of origin, his business and particulars of any office held by the director in any other company and his date of birth.
• In case any of the above offices are held by a body corporate then its corporate name and registered office and details are required specified in the clause. The details of each of the directors is necessary if the same body corporate holds the office in some other company. 
• If any of the above offices are held by a firm then the name of the firm should be given and also the details specified in the clause, of each partner in the company. 
• If any of the directors have been nominated by a corporate body, the name of such a company should be given and the particulars of each of its directors.

If any director has been nominated by a firm, the particulars of such a firm should be given.

A duplicate copy of the prescribed form of the contents of the register shall be sent to the registrar within a period of thirty days of the appointment of the first directors. If any change occurs in the managerial personnel, a notification of the change should be sent within thirty days from the date of the change. 

Shareholders have the right to do an inspection of the register without any charge and any member of the public who pays one rupee for each inspection. The general meeting or the articles of shareholders can impose reasonable restrictions on hours of inspection but it should not be less than two on each day. 

Register of directors’ shareholding

For the information of shareholders and the general public, companies are required to maintain a register of the shares held by the directors. The number of shares or debentures that directors hold should be specified and his holdings in the company should be shown. Also, his other subsidiaries need to be specified. The register should give the details of the shares held by the director. A director can request that the nature and extent of his interest over the shares should also be recorded. The register inspects the members subject to reasonable restrictions which may be imposed by the company. The register must remain open during the period of fourteen days before and three days after the annual general meeting for the inspection of shareholders during business hours not less than two hours a day. If any company does not allow inspection, the Central government or tribunal may compel can order for an immediate inspection of the register. 

Register of contracts, etc. 

The company also requires to maintain a register of such contracts in which a director is interested and of contracts with companies or firms in which the director may be interested. The register maintains particulars regarding the date of the contract, the name of the parties, important terms and conditions of the contract and the date on which it was put before the board of directors. It also contains the names of the directors who were neutral or the ones who voted for or against the contract. 

Loan to directors 

The act of lending of money by a company to the directors is now strictly regulated. Loans to directors are not allowed except in some cases:

• Loans to the director of the company or holding company or to any partner or relative of any director.
• Loans to a firm in which the director or his relative is a partner.
• If the director is a member or director of a private company it can take loans. 
• Any corporate body in which the directors’ control twenty-five percent voting in the general meeting can take loans.
• Any company whose board or other managers are usual to act in agreement with the instructions of the board of directors can take loans. 

Section 301 prohibits direct lending of money by a company to its directors and also giving of any guarantee for loan taken by the director from any other person and providing security for any such loan. It also prohibits providing any guarantee or security for a loan given by a director to any person. For example, the sale of a flat of the company to a director who paid half the price at once and rest in installments was held that it is not a loan.

Remuneration of directors

The remuneration of directors is regulated because of several reasons like the prevention of diversion of corporate funds for personal use. Section 309 says that remuneration payable to directors should be determined either by the articles of association of the company or by a resolution in general meeting. Here resolution means a firm decision taken by the company regarding remuneration. It can be ordinary or special as required by the article. The amount or mode of payment will be subject to the provisions of Sections 198 and 309.

Section 198 lays down the overall maximum remuneration that can be paid by a public company or a subsidiary of a public company. The managerial remuneration payable to directors in a financial year should not exceed eleven percent of the net profits of the company. Sometimes the company does not make adequate profits but this does not mean that directors will remain unpaid, in this case, the company will minimum remuneration authorized by the central government.

In the case of a public company or its subsidiaries, the remuneration of directors cannot be increased in any way without the approval of the Central Government.

Compensation for loss of office 

A company can make payment to a managing director or a director holding the office of manager by way of compensation for loss of office or as consideration for retirement from office. No other director is entitled to compensation. No compensation is payable in the following cases:

• When the director resigns his office in view of the merger of the company and he is appointed in the company resulting from the merger. 
• When the director resigns for a reason. 
• When the director vacates the office under Section 203. This section empowers the court to restrain fraudulent persons from managing companies. 
• When the company is winding up and this is due to the negligence or default of the director. 
• When the director is guilty of fraud or breach of trust or negligence in the affairs of the company.

Director with unlimited liability 

A director’s liability can be unlimited even if the liability of the company is limited. 

Prevention of management by undesirable persons 

An undischarged insolvent person is someone who cannot pay his debts have insolvency proceedings initiated against him. So a person who is undischarged insolvent is disqualified from being appointed to any managerial office. Section 203 provides the power to restrain fraudulent persons from managing companies. 

Prohibition of assignment 

A director cannot assign his office to anyone else. Any such assignment is void. For instance, a person formed a private company and transferred his business to it. He became the first managing director and had a right to appoint a successor by his will. He died and his nominee assumed office. The other members challenged the appointment. The Bombay High Court held that the word assignment should mean appointment. 

Irregular appointment and validity of Acts 

Section 290 contains provisions for the validation of acts and directors. This section says that acts done by a person as a director will be valid. The provision does not cover acts that have been done after the defect in appointment. An example of this is Dawnson v African Consolidated Land Co. 

Alternate director

An alternate director is a person who is appointed to attend a board meeting on behalf of the director of a company. In other words, if the director is absent for a period of three months or more then an alternate director is appointed. The alternate director holds the office only for a period for which the original director would have been in office. He vacates the office on the expiry of such a period and when the original director returns to the state.

Appointment to place of profit

The persons that can be appointed to a place of profit under the company in the following cases:

• Any director of the company.
• Any partner or relative of such director.
• Any firm in which such a director or relative is a partner. 
• If remuneration exceeds a director or a manager of a private company. 

Gobind Pritamdas Malkani v Amarendra Nath Sircar, (1980)

A company known as National Cash Registers Co. earlier known as N.C.R. Corporation was incorporated with limited liability in the U.S.A. The company had its registered office in the USA. and was carrying on business in India within the jurisdiction of Calcutta court at Madras, New Delhi. The company then was known as American Company and was importing and marketing in India of various accounting and other machines. The plaintiff, Gobind Pritamdas Malkani was employed in the company as the manager of the Bombay branch of the company. 

An agreement was signed on 6 February 1974 between the American company and the defendants. The American Company had agreed to sell and transfer the business to the defendants. The American Company was a going concern with effect and will all benefits, assets, properties, losses, book debts and liabilities that were equivalent to two lakhs rupees.

According to the agreement, the transfer of the company should be completed on or before the 1st of June 1974. All had to be done after the consent and approval of the Reserve Bank Of India under the provisions of the “Foreign Exchange Regulation Act”. The vendee (he is the buyer) will take over but the employment will remain like the staff, employees, workmen, and other personnel who were employed by the American company. The terms and conditions of the services by the employees of the American company would remain the same. Also, the Indian company would allow the employees to participate in the share capital of the company to the extent of fifteen percent.

The defendants who were the first directors incorporated another defendant director in Cash Register Co. India Private Ltd. under the Companies Act 1956. The defendants one, two and three were known as the first directors of the company under articles of association. They will be the first directors until one of them voluntarily retired because of personal reasons. None of the directors are liable to retire by rotation. 

Some of the articles which were involved are as follows: 

• Article 62 provides that unless it is determined by the company in general meeting, the directors are not required to hold more than one share in the share capital of the company as qualification for his or her eligibility as a director. 
• Article 60 provides that it is necessary for directors that the number of directors shall be not less than two or more than seven in the general meeting. 
• In Article 68 it is provided that the office of the director should be vacated ”ipso facto”( by that very fact) if he ceases to hold the qualifying shares. 
• In Article 71 it is provided that in the general meeting of the company, new directors can be appointed from time to time and may impose, increase or reduce share qualification of any type for the eligibility of the directors. 
• Article 1 provides the rules and regulations contained in table A in the First Schedule of the Companies Act, 1956 will be applied to the company. 
• As specified by the American Company and order of the Reserve bank of India, all the employees including Mr. Malkani were taken over by the Indian Company under the same terms and conditions and Mr. Malkani continues as the branch manager at Bombay. 

The Indian Company was satisfied with the work of Mr. Malkani, the petitioner and offered him to be the fourth director. As per the agreement, he would have equal rights as the other three had in respect of shareholding, rights, and responsibilities in terms of articles of association. Mr. Malkani would be the working partner or director of the company at a remuneration decided after the business of the American Company is transferred to the Indian Company. 

The company announced to the employees to participate in the shareholding but did not show him as a director of the company. On the other hand, defendant number one wrongfully and illegally alleged that Mr. Malkani was only a tentative director. Soon after that the plaintiff, Mr. Malkani filed a suit against the other directors. The petitioner filed an application for injunction to restrain the defendants for interfering with his position as director and removing his services as a branch manager.

Necessary orders were passed considerably so that the other employees are not affected by the dispute amongst the directors.

The judges referred to the case Ram Sadan Biswas v. Mathura Mohan Hazra and submitted that the power of the court is not limited to grant injunction in case of provisions of the Specific Relief Act. The article of the association has been amended and it says that it is no longer necessary for a director to hold any qualification shares and he is not disqualified from acting and holding himself as a director of the company.

In Section 303 of the Companies Act, it is necessary for the company to maintain a register that contains the names of its directors, managing directors, secretary, and other particulars. The court said in this case the company has not produced such a register to show the actual position of the director. “ No injunction can be granted for the specific performance of a contract which is determinable at the will of the parties”.

From the above facts, it appeared that under the terms of the contract of service the plaintiff’s or the petitioner’s service was terminable at the will of the employer by giving him three months’ notice or salary in lieu of three months notice. The court held that the plaintiff is not entitled to get injunction under specific performance of the contract of personal service nor is he entitled to get a permanent injunction restraining the respondent from authorized with his services or terminating his services. In this case, the plaintiff would get compensation as damages only and not the injunction. Under the articles of association of the company, it is a company that has the right to take in a new director at a general meeting of the company and the directors are not entitled under the articles of association of the company to take any new director. Moreover, the directors have no right to enter into any agreement where the company is not a party to it to bind the company with such an agreement. Whether there was such a valid agreement or not would be the subject-matter of this suit but at the moment certain factors are important for the purpose of a decision for granting an interim relief pending the disposal of the suit. It is an admitted case that Mr. Malkani, although required to take a qualification share of Rupees hundred, failed to do so in terms of the articles of association of the company.

A R Sundarasanam v Madras PHJS Nidhi Limited (1985)

After reading the case a provision revealed that two prohibitions can be anticipated, one is regarding the director and the other one about the relative of the director. The prohibition says that a director cannot hold any office or place of profit except the special resolution. According to the consent of the company, it is passed at the general meeting of the company held for the first time after the holding of such office or place of profit. The second is that no relative of director will hold any office or place of profit carrying a total monthly remuneration of five hundred rupees or more until the consent of the company was obtained either in the general meeting of the company held for the first time. This would happen after the holding of such office or place of profit or within three months from the date of appointment, whichever happens later. Pointing out the second provision which provided further that where a relative of director or a firm in which such relative is a partner, is appointed to an office or place of profit under the company without the knowledge of the director, the consent of the company may be obtained either in the general meeting as said or within three months from the date of the appointment, whichever is later the counsel submitted that in so far as there is no emphasis as “such director” in that provision, even if a relative of any director of the company, he is liable to vacate office as provided in s. 314(2). 314(1)(b) is restricted to a relative of such director, meaning thereby the director holding any office or place of profit referred to in s. 314(1)(a) but not any ordinary director. The deeming vacation of the office of the director visualized under s. 314(1)(a) will apply to a director who holds any office or place of profit without obtaining the consent referred to above.

It was held that a relative of any ordinary director cannot hold office or place of profit of even a sum of five hundred rupees under Section 314(1)(a) but a relative of a director who holds office or place of profit. In this case, the applicant did not succeed in establishing that the third defendant was a relative of such a director holding any office or place of profit. It is true that the third respondent is the son of the second defendant, but then the second respondent is only an ordinary director, but no one holding any office or place of profit as defined in section 314(1)(3) of the Act. If that is so, there can be no violation of Section 314(1)(b) of the Act. The result is, the application failed and was dismissed but without costs.

The Companies (Appointment and Qualification of Directors) Rules, 2014

Meetings of Board through video conferencing or other visual means- a company can conduct the Board meetings through video conferencing or any other audiovisual means. 

• The chairperson of the meeting and the company secretary should take reasonable care. 
• Storing and safekeeping the electronic recordings as a part of the records of the company before the completion of audit if that year. 
• To ensure that no person other than the director has access to the proceedings of the meeting that is done through video conferencing or any other mode. 
• To ensure that the audio is clear and participants are able to hear everything. 
• The notice of the meeting should be sent to all the directors in agreement with provisions of the act. 
• If the director has not informed anything before it will be assumed that the director will attend the meeting. 

Women director on Board- Every listed company, any public company having paid-up share capital of one hundred crore rupees or more and a public company of turnover three hundred crore rupees or more should appoint at least one woman director. 

Number of Independent director- The companies should have at least two directors as independent directors. Such companies shall have:

• The public companies who have paid-up share capital of ten crore rupees or more;
• The public companies who have a turnover of one hundred crore rupees or more;
• The public companies having aggregate, outstanding loans, debentures and deposits that exceed fifty crore rupees.

In case a company is covered under this rule it is required to appoint a higher number of independent directors because of its framework of the audit committee. The public company who are not listed will not be covered under the sub-rule and three of them are-

1. A joint venture;
2. A subsidiary which is wholly owned;
3. An inactive or dormant company is defined under Section 455 of the Act.

Qualification of Independent- Under this an independent director should possess the appropriate skills, experience, and knowledge in subjects like finance, law, sales, administration, marketing, research and any other fields related to the business. 

It is given that relatives of independent director will not be-

• Indebted to the company or holding or associate company or directors;
• He or she has given a guarantee or provided any security in connection with the indebtedness of any third person to the concerned company. 

The relatives of the director will not be liable for an amount of fifty lakhs rupees during two financial years or during the current financial year. 

Conformity required by a person who is eligible and willing to be appointed as an independent director-

1. Any individual who has been appointed as an independent director in a company, should within a period of three months in the amendment rule from such commencement;
2. Any individual who wants to get appointed as an independent director of a company either after the commencement or before the commencement.

Consent to act as director- Every person who is appointed to hold the office of a director should give his or her consent in writing to act as in form DIR-2 either before the appointment or on the appointment. The company should file a consent with the registrar in Form DIR-2 within thirty days of appointment along with the fees. 

KYC of directors- Every person who is holding a Director Identification Number (DIN) is required to submit an e-form DIR-3-KYC as per the rules in the financial year to the Central government. The director shall already have been allotted the DIN. 

Copy of resignation by the director- A director is required to submit a copy of his resignation to the Registrar, within a period of thirty days from the date of resignation along with the reasons of resignation in Form DIR-11. 

Disqualification of directors under sub-section of section 164- Every director is required to inform the concerned company about his disqualification in Form-8 before he is appointed.

Allotment of DIN- A Direction Identification Number is required to be generated on the submission of the Form DIR-3 and the payment is to be done online. After paying the fees, a provisional DIN is generated by the system automatically which should not be used until the DIN is confirmed by the Central government. 

A document Signed by DIR-2, Appointment Letter of Director and MBP-1 as declaration for Interest in other Entities.

Notice for Appointment

Copy of PAN (Permanent Account Number) and Address Proof is to be submitted to the board.

Digital Signature of Director for Appointment or Resignation

Director Identification Number of Appointee Director (if not available same can be made available for rupees two thousand extra for DIN and DSC).

Rupees one lakh for becoming a Director (to be refunded to the director after he is regularized), only in case of a public company.

The Companies (Appointment and Qualification of Directors) Amendment Rules, 2018

The Ministry of Corporate Affairs has notified the Companies (Appointment and Qualification of Directors) Amendment Rules, 2018. The process of allotment of Director Identification Number has been revised and now the DIN should be allotted through a SPICe form for a maximum of three directors. It should be done at the time of the appointment of a director. Form DIR-3 and DIR-6 has been amended.

Under Sections 149 and 168 with Section 469 of the Companies Act, 2013 the Central government has made some rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014.

Form NO. DIR 6- Indication of change in particulars of Director or designated partner is to be given to the Central government.

It must be noted that Form DIR-3 which is an application for Director Identification Number is used only by the existing companies for the appointment of new directors who do not have their Director Identification Number. The persons who incorporate a new company and do not have DIN can apply for the same through SPICe(INC-32). It can be done for a maximum of three directors and for more directors, a separate application is to be submitted in Form DIR-12. 

Conclusion 

As we have seen earlier that directors play the role of trustees, agents, and managing partners but they are not agents or trustees of managing partners completely. The position of directors is a combination of all three and more than that. Directors have a fiduciary relationship with the company as well as the shareholders. Director Identification Number is the amendment that came in 2014 and it was further amended in 2018. Directors have the power and the Act is suitably amended so that there are checks and balances so that the director’s office does not become absolute. The rules that came in 2014 enforces that women as directors should be given opportunities. Director Identification Number acts as a proof of identity so that the rate of any crime or malpractices are reduced.

References

• Indiankanoon.com
• Ministry Of Corporate affairs (www.mca.gov.in)
• Taxguru.in
• www.bareactslive.com
• Company law by Avtar Singh

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 Arushi Gupta, 4th year BA LLB student of D.E.S. Law College, Pune University. In this article she discusses “Patent: Procedure for filing an Application”.

Introduction

The World Trade Organisation defines intellectual property rights as the rights given to persons over the creations of their minds. Patent is such form of intellectual property rights, similar to Copyright, Trademark and Design. Patent gives exclusive rights over the use of such creations for a specific period of time. In India, patents are governed by the Patents Act, 1970, which enumerates provisions regarding everything about patents, including the procedures for filing applications for patent.

Who may apply for a Patent?

Section 6 of the Act provides for the persons entitled to make an application for a patent. Any person who is the first and true inventor of an invention can apply for a patent in regards to that invention in the patent office. However, such a right to make an application can be transferred in favour of an assignee of the first and true inventor of the invention. In such case, the application has to be accompanied by a proof of right to make an application[1] along with a declaration that the person so claiming is the first and true inventor of the invention[2].  An application for a patent may also be filed by a legal representative of a deceased person who was entitled to such patent before his death. 

Different types of Applications under The Patents Act, 1970

Convention Application:

According to Section 135 of the Act, a convention application is an application made under the Act within 12 months from the date on which the application for a patent in respect of an invention in a convention country[3] (also called ‘basic application’). The application is filed in terms of an international treaty such as the Patent Cooperation Treaty (PCT) designating India. In such a case, the priority date of the complete specification is the date on which the basic application was filed, if the claim is based on the matter disclosed in the basic application. 

For the purpose of determining the period of 12 months in case the applicant has furnished two or more similar applications, the period of 12 months starts from the date on which the earliest application was furnished.

International Application:

International application is an application that is filed in accordance with the Patent Cooperation Treaty. Such applications provide patent protection in a large number of countries through a single application instead of filing a number of regional applications. Such application is treated as an application for a patent under the Act if it is filed before the Controller in India. The filing date of such application is considered to be the international filing date as accorded under the Patent Cooperation Treaty. The complete specifications include descriptions, drawings, abstracts and claims filed along with the International application under the Act.

Divisional Application:

Section 16 of the Act deals with the division of an application. Such application may be made either at the desire of the applicant before the grant of the patent or on the demand of the Controller to remedy the objection raised by him on the grounds that the claims of the complete specification relate to more than one invention. In such case, the applicant may file further application in respect of the invention mentioned in the provisional or complete specification, as the case may be, along with the already mentioned application. However, the complete specification furnished with the further application must not include anything not already mentioned in the specification filed along with the previous application. 

It may be noted that the further application filed along with the complete specification is deemed to be filed on the date on which the previous application has been filed and is proceeded with accordingly as a substantive application.

Application for Patent of Addition:

Section 54 of the Act states that when an applicant has made an application for patent of an improvement or modification of an invention described in complete specification filed and the applicant has either applied for the patent of that invention or is the patentee of the invention, then he may be granted a patent for that improvement or modification as the patent of addition. 

Form of Application for a Patent

Ordinary Application

According to Section 7 of the Act, the application for a patent shall be filed in the Patent Office in the prescribed form. Every application for a patent shall be accompanied by a provisional or complete specification. Such provisional or complete specification need not be accompanied in case of convention application or an application made under the Patent Cooperation Treaty.

In case the applicant has furnished provisional specifications along with the application, he shall submit a complete specification within 12 months from the date of filing the application, failure of which may result in the abandonment of the application[4]. In case two or more applications are filed regarding cognate inventions and where such inventions can be included in one patent, a single complete specification may be filed in respect of all the inventions, at the discretion of the Controller[5]. After furnishing of the complete specification, the provisional specification is cancelled and the application is post-dated to the date on which the complete specification is filed.

Convention Application

In case of a convention application, it shall be accompanied by the following[6]:

• The complete specification;
• The date and the convention country in which the application was made or in case of two or more applications, the first application was made.
• A statement purporting that no application has been made before that date in any convention country by the applicant or by any person from whom he derives the title.

In addition to the aforementioned, a convention application may also include the following[7]:

• Any specifications or corresponding documents, in addition to the complete specification filed or deposited by the applicant in the patent office of the convention country, within the time period as specified by the Controller;
• If the document is in a foriegn language, the translation of the same along with an affidavit, as required by the Controller;
• A certificate by the the official chief or the head of the patent office of the convention country certifying the date on which the application was made in the convention country

What Constitutes a Specification?

Every specification, whether provisional or complete shall contain the following:

• A description of the invention, beginning with the title indicating the subject matter of the invention;
• A detailed drawing of the invention (if required by the Controller)
• A model or sample of anything that illustrates the invention or anything alleged to constitute an invention[8].

In addition to the aforementioned, every complete specification shall also constitute[9]:

• Full description of the invention including its operation, use and the method by which it is performed;
• Disclosure of the best way to perform the invention and which ensures safety as well;
• Claim defining the scope of invention;
• An abstract describing the technicalities of the invention. 

In the case when the applicant files a complete specification after the provisional specification, the complete specification shall include the developments or the additions that has taken place in respect of the invention mentioned in the provisional specification, being the developments or additions that would entitle the applicant to make separate application under the provisions of Section 6 of the Act. 

Priority Date 

According to Section 11 of the Act, the priority date of the claims which are based on the matter disclosed in the complete specification is the date on which such complete specification is furnished. Following are the ways in which priority dates are decided in different scenarios:

When a Complete Specification is filed in Pursuance of a Single Application:

According to Section 11(2) of the Act when a complete specification is filed in pursuance of a single application along with which  provisional specification and a specification as mentioned in Sub-section (3) of Section 9 is filed, and the claim is based on the subject matter disclosed in those specifications, then the priority date is the one on which the relevant specification is filed.

When a Complete Specification is furnished in Pursuance of Two or More Applications: 

Section 11(3) of the Act provides for the priority date of the claim when a complete specification is furnished in pursuance of two or more applications filed along with the provisional specifications. In such cases, if the claim is based on the subject matter disclosed in one of the specifications, then the priority date shall be the date on which such application which was accompanied by the specification was filed. Whereas in cases where the claim is based on the subject matter disclosed partly in one specification and partly in the other one, then the priority date shall be the date on which application accompanied with specification was filed later than the other(s). 

When Complete Specification is filed based on a Previously Filed Application[10]:

When a complete specification is filed in India based on a previously filed application within twelve months from the date of filing of the application and the claim is based on the subject matter disclosed in the previous application, then the priority date of the claims shall be the date on which the previous application was filed.

When a Complete Specification is filed in Pursuance of Further Application:

When a complete specification is filed in pursuance of a further application (or divisional application) as mentioned in sub-section (1) of section 16, and the claim is based on the subject matter disclosed in the provisional or complete specification furnished with the previous application, then the priority date of the claim is the date on which the previous application was filed.

Priority Date in Other Cases:

• When the priority date of the claim of a complete specification is more than one date, then the priority date of that claim would be the earliest date.
• When none of the aforementioned provisions apply, then the priority date would be the one on which complete specification was filed.

Priority Date in Case of Convention Application:

According to Section 135 of the Act, when an applicant has made a convention application along with a complete specification within 12 months of the filing of the basic application in the convention country, then the priority date of the claim of the complete specification is the date on which the basic application was filed, provided that the claim is based on the subject matter was disclosed in the basic application.

When a claim of complete specification is based on matters disclosed in two or more basic applications, then the priority date of the claim is the date on which the earliest application was filed in which the matter was disclosed[11].

Publication of Application

Section 11A of the Act provides for the publication of an application for a patent. Ordinarily, no application is made open to the public for a time period specified by the Controller. However, the applicant before the expiry of such term may request the Controller to publish the application. The Controller, on his discretion may publish the same except in the following conditions:

• when secrecy direction is imposed under section 35; 
• When the application has been abandoned under sub-section (1) of section 9; or 
• When the application has been withdrawn three months prior to the period specified under sub-section (1).

The publication of the application shall include the date of the application, the number of the application, name and address of the applicant and an abstract.

Examination of Application

According to Section 11B of the Act, the applicant or any other person interested shall make a request for examination of the application in the prescribed manner within the prescribed time period. If no such request is made, then the application shall be treated as withdrawn by the applicant. After the request is made, the Controller by virtue of Section 12 refers the application to an examiner to make a report. The examiner shall investigate, for the purpose of the application the following:

• Whether the claim of complete specification has been anticipated by any publication published before the filing of the complete specification by the applicant and dated on or after 1st January 1912;
• Whether the claim claimed by the applicant is the claim of any other complete specification published on or after the date of application made by the applicant and the priority date of which is or is claimed to be earlier than the date of the application made by the applicant;
• Whether the invention so claimed has been ascertained by a publication or any other document before filing of the applicant’s complete specification.

If the Controller has objections regarding the application made by the applicant, he shall communicate the same to the applicant. On being satisfied that the application or any other document does not comply with the provisions of the Act, the Controller may refuse the application or require it to be amended to his satisfaction before proceeding further. As per Section 17, after amendment, if the Controller directs, the application or the specification or any document shall be deemed to be made on the date it was so amended or on the date it was refiled after being returned to the applicant.

According to Section 18, if the claim of complete specification as filed by the applicant has been claimed in any other complete specification, then the Controller may refuse the application unless:

• The applicant shows that the priority date is not later than the date on which the other document was published;
• If the applicant amends the application up to the satisfaction of the Controller;
• If the applicant’s claim of complete specification is claimed in any other complete specification, on the discretion of the Controller, a reference to the other complete specification may be inserted in the applicant’s complete specification by way of notice to the public.

According to Section 19, if the Controller considers that there is a risk of potential risk of an infringement of claim of any other patent, then he may also direct to insert a reference of that patent in the applicant’s complete specification by a notice to the public. Such reference may not be required to be inserted if:

• The applicant establishes reasonable grounds to contest the claims of the other patent;
• The applicant amends the complete specification up to the satisfaction of the Controller.

The Controller may remove the reference to the other patent, if inserted, in the following cases:

• If the other patent is revoked or ceases to be in force;
• The relevant claim is deleted from the complete specification of the other patent;
• If the Controller is convinced that the claim of the other patent is invalid or is not infringed by the working of the applicant’s invention.

According to Section 21 of the Act, the applicant has to comply with all the requirements as imposed by the Controller in relation to the application, complete specification or any other documents within the period specified by the Controller, failure of which would result in the abandonment of the application.

Anticipation

In order to obtain a patent for an invention, it is important to establish the novelty of the invention. It is important that the invention is original and includes some inventive steps. 

Anticipation by Previous Publication:

Section 29 of the Act states that the invention shall not be deemed to be anticipated merely because it has been mentioned in any other claim of complete specification in India before 1st January 1912. The invention shall not be deemed to be anticipated if the applicant proves that the priority date of the claim of complete specification is earlier than the priority date of the claim of other complete specification. 

Anticipation by Previous Communication to Government:

An invention shall not be deemed to be anticipated merely because the invention has been communicated to the government or any official of the government for the purpose of being investigated for its use or merit.

Anticipation by Public Display:

An invention claimed in the complete specification shall not be deemed to be anticipated by the reason being shown or used with the consent of the true and first inventor at an industrial or other exhibition. It shall also not be deemed to be anticipated by the reason of the publication of its description at such exhibition. If the invention is used after the display of the same at such exhibition without the consent of the true and first inventor then the application shall not be deemed to be anticipated. It is important that the true and first inventor of the invention shall make the application for patent within 12 months from the display or use of the invention at such exhibition.

Application by Use and Publication of Provisional Specification

When a complete specification is filed in pursuance of an application filed along with the provisional application, then the controller cannot refuse or revoke a patent merely because the matter described in provisional specification was used or published in India after the filing of the provisional specification.

Opposition to the Patent

Section 25 of the Act states that any person may object to the application for patent after it has been published. There are two types of objections:

• Pre-grant objection
• Post-grant objection

Pre-grant Objection

Section 25(1) states that after the publication of the application and before the grant of the patent, any person in writing may represent their opposition against the grant of the patent. These are pre-grant objections which are raised before the grant of the patent. The grounds on which such objections can be raised are mentioned in Section 25(1) of the Act.

Post-grant Objection

Post-grant objections are raised after the grant of the patent to the applicant. These objections are supposed to be raised within one year of the publication of the notice of grant of patent by way of giving notice of opposition to the Controller. The grounds on which such objections can be raised are mentioned in Section 25(2) of the Act.

Upon receiving the notice of opposition, the Controller shall notify the patentee of such objection after giving the patentee a reasonable opportunity to be heard, may maintain, amend or revoke the patent. 

Grant of Patent

According to Section 43 of the Act, the patent may be granted to the applicant or in case of joint application, to the joint applicants, as expeditiously as possible if the Controller is satisfied that the application of patent is in order for the grant of the patent and is not in contravention of any provisions of the Act. The patent shall have the seal of the patent office and the date on which the patent was granted shall be recorded in the register. On grant of the patent, a notice of such grant is published and the application and other documents related are made open for public inspection. 

References

[1] Section 7(2) of the Act

[2] Section 7(3) of the Act

[3] Section 133 of the Act

[4] Section 9(1) of the Act

[5] Section 9(2) of the Act

[6] Section 136 of the Act

[7] Section 138 of the Act

[8] Such model or sample may be furnished on the demand of the Controller but shall not deem to be a part of the specification – Section 10(3) of the Act.

[9] Section 10(4) of the Act.

[10] Section 11(3A) of the Act

[11] Section 137(2) of the Act

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This article is written by Shristi Suman, a second-year student of Symbiosis Law School, Hyderabad. In this article, the laws relating to meetings under the Company Law have been discussed.

Annual General Meeting

An Annual general meeting refers to the meeting which is held annually by the companies. It is important for every type of company whether it is a private company or a public company, limited by shares or guarantee to conduct an annual general meeting once in a year. There shouldn’t be a gap of more than 15 months between two annual general meetings. An exception is given when a company is incorporated, in such a case the company may not conduct an annual general meeting in the year at all. After incorporation, the company needs to conduct an annual general meeting within 18 months.

According to Section 166 of the Companies Act, the first meeting after incorporation of the company must be held within 18 months. Subject to the exception of incorporation, there shouldn’t be a gap of more than 15 months between two annual general meetings. Except for in the case of the first annual general meeting, the Registrar has the power to extend the annual general meeting for a time period which should not be more than 3 months. A notice must be given for annual general meeting specifying details such as date, place of the meeting. The notice served must specify that the meeting is the annual general meeting and the time and date assigned for it must be during business hours, and on a date which isn’t a public holiday. The place of the meeting should be the registered office of the company and if not so, then it must be within the town, city or village in which the company is officially registered.

According to Section 167 of the Act, in case there is a default by the company in conducting the annual general meeting and any member of the company files an application for the contravention of the said default, the Regional Director of the Company Law Board may call for a meeting or direct holding of a meeting and then that meeting would be counted as the annual general meeting. Where the provisions of Section 166 and 167 of the Act are contradicted, then in such a case, a fine can be imposed on the Company and every officer of the company responsible. A notice is to be served in advance of 21 days for the annual general meeting but in case the notice is not served before 21 days and all the members who are entitled to vote in the meeting agree for an annual general meeting, then the meeting can be called with shorter notice.

The matters which are taken up to be discussed in an annual general meeting are known as ordinary business. These are the matters which are discussed in every annual general meeting. Ordinary business constitutes of discussion on annual accounts, important reports such as director’s report and auditor’s report, declaration of dividend, the appointment of directors, etc. Apart from ordinary business, a special business can also be discussed in annual general meeting.

Extraordinary General Meeting

The matters which constitutes to be the ordinary business of the company is discussed in a statutory meeting and annual general meeting. To discuss the matters apart from ordinary business i.e. special business extraordinary general meeting is called for. Any meeting which is called apart from statutory meeting and annual general is called an extraordinary meeting. Extraordinary general meeting is usually called for discussing matters which are urgent and can’t wait to be discussed in the annual general meeting. The extraordinary general meeting can be called by the directors of the company as well as by the shareholders who hold at least one-tenth of the paid-up share capital of the company. Shareholders can make a requisition to the board of directors of the company to call a meeting. If the meeting is not arranged for even after requisition by Shareholders then the Shareholders may convene the meeting.

According to Section 186 of the Companies Act, Company Law Board has the power to call an extraordinary general meeting but not an annual general meeting. Shareholders of the company are empowered to convene a meeting within 3 months if it is not convened within 21 days of requisition by the Company Law Board.

In an extraordinary general meeting matters like alteration of clauses of Memorandum of Association, changes in the Articles of Association, schemes in relation to share capital are usually discussed. Any matter which needs to be discussed upon in urgent also calls for extraordinary general meetings.

In case, the extraordinary general meeting can’t be held due to some reasons then, the Company Law Board may call the meeting on its own initiative. A notice is to be served in advance and it should include details like the cause of such meetings, the interest of directors, managers or shareholders in the matters which caused need to call for the meeting. The special resolution which is passed in the meeting has to be filed to the Registrar within 15 days.

Power to Call Board Meetings

The Secretary or a director of a company has the power to call board meetings. The board meetings can be called by the Secretary or a director by following the procedure which is laid down by the Companies Act, 2013. The meeting can be called on the direction of the Chairman/Managing Director. Any director can requisite to convene a board meeting and then on such requisition, the Manager, Secretary or any Director can summon a board meeting. Notice for such a meeting is to be served in advance and it should be done under the company’s authority. If a notice for a board meeting is sent without any authority, then it will be considered to be an improper notice. In case, a director wants to convene a board meeting to discuss some urgent matters, then he must do so with the permission of the Managing director of the company.

In the case of Sanjiv Kothari v Vasant Kumar Chordia, it was observed that if a meeting is convened by the Managing director on requisition by the director on the same date at the registered office to discuss the same matters which was brought forward by the director then, the director must attend that meeting and should not arrange any other meeting on the same date at some different place.

Procedure of Meetings

It is the responsibility of the director of the company to ensure that the procedure followed for conducting the meetings of the company is valid and in accordance with the Companies Act. The decisions that are taken in the meeting should be according to the sections of the Companies Act. It is the duty of the director to ensure that the members of the meeting are notified of the details of the meeting like the place, time and date of the meeting, type of the meeting, the business that will be considered at the meeting and the notice should also include motions and resolutions that will be put forward to the members during the meeting.

It is important to confirm that there is a quorum present before the meeting commences and also it is important to ensure that the quorum is maintained during the process of meeting as it is necessary for a valid motion to pass. If the quorum is achieved, the meeting may commence and all the voting and passing of resolutions during the meeting should be in conformation with the rules under the Companies Act and it should be accurately recorded in the minutes of the meeting. If the meeting is not conducted in accordance with the rules of the Companies Act, then the directors of the company will be held responsible and be liable for a fine.

A meeting must be chaired by a chairperson. The chairperson is responsible to control the proceedings of the meeting. He introduces and concludes the meeting. The chairperson has to ensure that proper notice is served to the members of the meeting and go through the minutes of the last meeting. He ensures that the meeting takes place and gets over within the time prescribed for it. He keeps order and facilitates the meeting, ensures everyone gets an equal opportunity to share their views. The chairperson receives motions and puts a vote on such motions. In case of a tie, the chairperson has to cast a final vote and declare the result.

Notice

A notice of a meeting is served to all the members of the meeting to discuss the business at the meeting. A notice is to be served to the members of the meeting in a manner which is prescribed under the Companies Act. Notice for the general meetings must also be served to directors, auditors, and to any such member who is entitled to a share in case a member of the meeting dies. In case, a company accidentally fails to serve a notice to a person who is entitled to receive it, the meeting would not be considered invalid. All the members of the meeting are entitled to vote in the matters raised in the meeting.

The contents of the notice depends on the type of meeting which is called for, if the company has called for annual general meeting, it will include all ordinary business which will be discussed in the meeting and if extraordinary general meeting is called by the company, then the notice will include the special business and resolutions which will be discussed in the meeting. Annual general meeting needs a notice to be served to the members of the meeting in advance of 21 days whereas, in the extraordinary general meeting notice is needed to be served in advance of 14 days.

In the case of Parker and Cooper Ltd v Reading, it was observed that when the notice which was served to the members of the meeting is improper but still the members of the meeting attended the meeting, then the notice can be made good and the meeting can be considered to be a valid meeting irrespective of the fact whether notice which was served for the meeting was proper or improper.

Contents of notice

The notice must contain the following contents:

• Place where the meeting will be conducted
• Date, day and time on which the meeting will be conducted
• The business which will be discussed in the meeting
• Brief of business 
• The date on which notice is served
• Signature of the convener of the meeting

Quorum

Section 103 of the Companies Act lays down the Quorum which is required for the meeting. The quorum refers to the minimum number of members required to conduct a meeting. According to Section 174 of the Companies Act, one-third of the total number of members to the meeting constitutes a quorum for the meeting. In a meeting, a minimum of two directors are required to attend the meeting but where the company is owned by a single person then, in that case, the condition does not apply. 

According to Section 174(1) of the Companies Act, It is possible for a director to attend a meeting through a video conference call. A director attending a meeting through video conference will also be considered while counting for a quorum.

A quorum of the meeting has to be maintained throughout the meeting. In order to ensure that quorum is present throughout the meeting, a roll call is to be made by the chairperson before the commencement, in between after every break and at the time of when the meeting is being concluded. In case the quorum is not present then the meeting will be called off.

Chairman

A meeting is chaired by a chairperson. The chairperson is also known as the chairman and is responsible to control the proceedings of the meeting. He introduces and concludes the meetings. The chairperson has to ensure that proper notice is served to the members of the meeting and has to go through the minutes of the last meeting in the beginning of each meeting. He ensures that the meeting takes place and gets over within the time prescribed for it. He keeps order and facilitate the meeting. It is the duty of the chairman to ensure that each member of the meeting gets an equal opportunity to share their views. The chairperson receives motions and puts votes on such motions. The chairperson also has a right to cast a vote in the meetings. In case there is a tie, the chairman can cast his final vote and declare the result. The chairman of the company is also the chairman of the Board and in case if there isn’t a chairman in a company then the directors may choose one of them to be a chairman.

Voting Rights

In case, there is a matter which needs to be decided on in the meeting, it is done by the votes of the members of the meeting. According to Section 50(2), every member who is limited by company shares and holds equity share capital will have a right to vote on all the resolutions which lie before the company. Section 188(1) states that the members who are entitled to vote shall have voting rights on a poll in proportion to the shares held by him to the paid-up equity share capital of the company.

The members of the company who are limited by shares and holds preference share capital have a right to vote on polls in which the resolution that is placed before the company directly affects the right of the member related to his preference shares. The members of the company also have a right to vote on resolutions such as winding up of the company, for repayment or for reduction of the company’s equity or preference share capital. Voting polls are conducted in a meeting to pass a resolution. The procedure is preceded by the chairman. The common methods used for voting is by showing or raising hands, voice votes, raising method (by standing for votes in against or for the motion), ballot, a proxy or postal votes, etc.

Resolutions by Postal Ballot

According to Section 110 of the Companies Act, a postal ballot is a method of voting which is used when a member who is entitled to vote cannot be physically present to vote. In such a circumstance, the member who is entitled to vote can send his vote by posting it. Postal ballot refers to the method of voting by post. This method enables members to vote, who otherwise would not have been able to because of their physical absence.

The postal ballot can be used for voting in meetings except for when the poll is for deciding on ordinary business or in a case where a business in which it is important to attend and hear directors or auditors in the meeting. When it is decided that the resolution placed before the company will be passed by postal ballot, it shall send a notice regarding it to all the members of the meeting annexed with a draft resolution in which reasons for the poll are explained. They are requested to send their votes on the motion. The method of postal ballot includes voting by post or through any electronic means. The vote shall be sent within 30 days from the date on which the notice for the passing of the resolution was sent to the members.

The vote can be sent through a registered post, courier service, speed post or by electronic means such as email. Postal ballot can’t be used in a case where the company is a one-person company or in case the company has up to 200 members.

Electronic Mode

Voting for a resolution by electronic means is known as casting vote by electronic mode or electronic voting. Voting by electronic mode includes voting by punched cards, optical scan voting system and specialized voting kiosks, telephones, private computer networks, internet, etc. Section 108 of the Companies Act includes the provision for electronic mode of voting. A company listed under the Companies Act, 2013, having 1000 or more shareholders should provide to its members, the facility of casting vote through electronic mode. A member gets the right to vote even if they are not physically present in a meeting through electronic modes. The electronic mode of voting can be used in place of the postal ballot. The electronic mode of voting is more convenient and time-saving.

Representation of Government in Meetings of the Companies

A member can be appointed by the Government to attend meetings of the company in case the Government is a member of the company. The member appointed can be any person who the Government thinks to be fit to attend the meeting. The person who is appointed as a representative of the Government shall attend the meeting as any other member of the meeting and shall exercise similar rights and powers.

Kinds of Resolution

A resolution can be defined as a decision which is taken by limited company directors or shareholders and is legally binding. A resolution can be passed by the members of the meeting if a majority of votes are received in favour of the resolution. There are three kinds of resolutions namely, ordinary resolutions, special resolutions and written resolutions.

• Ordinary resolutions: refers to the resolutions that can be passed by a simple majority. It can be used for all kinds of matters unless there’s a need to for special resolution. The ordinary resolutions are generally filed with a government body i.e. Companies House.
• Special resolutions: the resolutions which are needed to be passed by a majority of at least 75% of the total votes in favour of the resolution at a general meeting is referred to as special resolutions. It is generally used in cases where a resolution can’t be passed by an ordinary resolution and consists of special or extraordinary matters.
• Written resolutions: it is used when the resolution which needs to be passed is an ordinary resolution or a simple resolution but doesn’t need a general meeting for it. It is done by shareholders by simply signing and casting their votes for a resolution. In case the resolution is an ordinary resolution then it can be passed by a simple majority and in case of a special resolution, 75% of votes are needed.

Circulation of Members’ Resolutions

The chairperson who is elected by the board precedes the meeting. In case, the chairperson is not available then, the meeting is to be preceded by the Managing Director. Where it is agreed by at least one-third of the total directors of the company to propose a resolution under circulation in order to be decided in a meeting, it is the chairperson’s responsibility to put the resolution for consideration. The proposed resolution should be sent in a draft together with other necessary documents to all the members of the meeting on the same day. The draft of the proposed resolution can be passed and circulated to the members of the meeting by handing it over to them, by speed post, by courier, by email or any other recognized electronic means. The resolution which is proposed to be passed should be explained in a note and sent along with the draft of the resolution to the members of the meeting. When the resolution is approved by a majority then the resolution is passed.

Minutes

The minutes of a meeting is an essential document in which all the points, discussions, decisions which were taken in the meeting are recorded. It is an official document and is mandatorily referred to before starting a new meeting. Minutes are final when it is approved by the members of the meeting and signed by the chairperson. Minutes are written in a factual manner which gives the gist of the meeting. It generally comprises of details of meeting such as the date of the meeting, members who attended or failed to attend the meeting, proposed motions and amendments in the meeting, the proposer of such motion and members who approved it, details of the procedure of voting, recommendations and decisions taken in relation to the motion, etc.

Publication of Reports and Proceedings

According to Section 121 of the Companies Act, every public listed company is needed to prepare a report for each annual general meeting. The report is further needed to be filed with the Registrar within 30 days of the annual general meeting. 

The other companies also have to inform the registrar about the proceedings of meetings and contracts which they entered into under Section 193(2) under the Companies Act, 2013.

Service of Documents on Members

A document can be served on members or officers of the company according to Section 20 of the Companies Act, 2013. The document which needs to be served can be sent to the member or officer of the company at the registered office of the company. The document needs to be served by registered post, courier service, by manually dropping it in the office, or by a recognized electronic means. If the member prescribes a mode of delivery of the documents, then the documents should be delivered to him through that mode. The cost of delivery is to be paid by the member in an annual general meeting for the prescribed mode of delivery.

Service of Documents on the Company

The service of documents on the company is included under Section 20 of the Companies Act, 2013. A document can be served to a company by sending it to the company at the registered office through a registered post, courier service, by dropping it at the registered office or by a recognized electronic means. Electronic means includes transmission of documents by registered email id, or such other means by which the identity of the sender can be recognized.

Meeting of Audit Committee

An audit committee consists of board of directors of each listed company and the companies similar to such listed companies that are prescribed under the Companies Act. The committee must mandatorily have a minimum of three directors with independent directors forming a majority. The members of the audit committee and the chairperson must be in a condition to read and understand the financial statements that are put before the committee.

Section 177 of the Companies Act, 2013 deals with the Audit Committee. 

It is desirable for the Audit Committee to meet at least 4 times a year. The meetings are preceded by the chairman. The quorum exists when the chairperson and at least one other member is present in the meeting. The Group’s Chief Financial Officer (CFO) serves as the secretary of the meetings. All the members of the Board and the Chief Executive Officer of the company are entitled to attend meetings of the audit committee. It is the Audit Committee’s responsibility to prepare a schedule for an annual meeting. The schedule prepared must include the main issues of the agenda that is decided to be taken up in the meeting. The financial statements and interim reports which is related to resolution or matter discussed in the meeting have to be given to the members of the meeting at least before 24 hours from the meeting. Minutes of the Audit Committee’s meetings are required to be drawn up without any delay and it should be signed by the Chairman and the secretary.

Conclusion 

A company is an association of persons. All the matters of the company have to be decided by the members of the company. The discussions which take place in order to decide on the matters of the company are known as meetings of the company. The Companies Act contains many provisions in relation to the meetings of the company. The meetings of the company for deciding on ordinary business and special business or extraordinary business takes place by following separate procedures and rules. The meetings may take place at different levels of the company to decide on matters which lie before the company. Shareholders as owners of the company have a right to convene a meeting to pass a resolution. The chairperson of the meeting precedes the meetings. A mandatory quorum is needed for the convention of a meeting. The discussions which take place in order to decide on the matters of the company are known as meetings of the company. The Companies Act contains many provisions in relation to the meetings of the company.

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This article has been written by Anubhav Garg, a student of Delhi Metropolitan Education. In this article, he has explained the idea of slavery with the reference to the movie The Birth of a Nation covering the points like why this idea prevailed in the first place, behaviour towards the slave, the provisions of IPC abolishing slavery, etc.

The author has tried to explain the idea of slavery to the best of his knowledge and has tried to relate it to the movie “The Birth of a Nation” (hereinafter referred as the movie), which is based on the real instance in the United Kingdom. He has also cited provisions of IPC at various instances where they can/could be applied to establish the relevance of the topic with Law of Crimes. 

What is the idea of slavery?

The very idea of slavery was that humans were treated as commodities. In slavery, black people from the African countries like Nigeria, South Africa, Libya, etc were abducted and sold in European and American nations for money as slaves. Though these slaves can be made to do anything as per the will of their owners, from a normal cleaning work to prostitution, they were mainly made to work in the cotton farms, tea plantations, coal mines, jungles, etc of white people. Some slaves, who were fortunate enough also gets to assists the white mothers in taking care of their children and other household works. 

According to the author, the idea of slavery was mainly fuelled by two things: –

1. The idea of the superiority of white people over black people (racism) and
2. The demand for labour (slaves).

Superiority

The very idea of white superiority over blacks was the reason, that white people use to buy black slaves and the problem of slavery took the colour of the problem of racism also. The author also believes that the converse can also be true, that is, the racism against the blacks was also somewhere responsible for the casting of the act of slavery over blacks. This is the reason that even the government at that time supported this form of human trafficking.

The main element in play when a white guy is buying a slave (always black people) was racism, that is, to show that blacks are inferior to them and they can make the black people do anything of their will. Racism is in the crux of slavery. 

These slaves were voluntary kept illiterate, or if the movie is referred, then were presumed to be incapable of studying or learning and were deemed as born to slave for white people and therefore they were denied of any kind of education and were forced to stay illiterate. The motive behind this presumption was that if slaves get enlightened by the education, then they would start a rebel against the white people and will not slave for them. This presumption can be observed in a scene, where when Nat (a slave black child) tries to pick-up to read a book, the owner of the Nat stops him and tell him that, “These books are for white folks, and therefore is incapable for the likes of you to understand”. 

The slaves were not treated much different from animals. As shown in the movie, whenever their owners had to cut cost, they use to reduce the number of a meal of slaves. Slaves use to live in a barn with the cattle and no proper sanitation. In a very horrific scene in the movie, a white girl has been shown to put a rope in a black girl’s neck like the collar is put on the neck of a dog and play with her while running in this scenario. If slaves refuse to eat, their teethes were broken from chisel and hammer. 

On the top of that, there were slave hunters, who make sure that if a slave comes out of his master’s mansion or tries to steal something, they get punished or sometimes they were even shot to death. These observations, made from the movie clearly shows how prevalent the idea of white superiority was in that time and how this idea was projected in the form of slavery and the inhuman treatment towards slaves. 

The demand of labour (slave)

When Europeans arrived on the new land, they wanted to cultivate their sugar plantations their as well, which has witnessed a phenomenal growth in past decades. But instead of going with Indians as slaves because they thought they are not numerous and resilient; they choose to bring slaves from West Africa because they found an existing slave system there. To these white people who use to buy slaves, the benefit of having a slave were immense. Buying a slave as a one-time investment and you buy a thing (as they didn’t treat them like living creatures) which will do literally do anything for you. From working in your farms to beating/raping them pleasure you can do anything to them and if they resist you inflict pain on them or even shoot the slave right where he is standing.

Due to the influx of cheap slaves to produce vast quantities of sugar, a commodity in great demand in Europe and one that yielded humongous wealth the European economy flourishes. And due to this, the words for economic gains from the cheap slaves in Europe also spread in other European and American countries. 

Seeing this, The Spanish enthusiastically adopted similar systems in their Caribbean colonies, as did the British in Barbados and Jamaica. In North America, too, where tobacco became the most important crop, the supply of cheap African slaves became vital to economic growth. This increased the demand of the slaves in the world for having economic gains, consequently and unfortunately promoting the idea of slavery. 

Cruelty towards slave women

It’s been shown in movie that slave women were being raped by their owners or their guests for the money. In one of the scenes in the movie, a slave woman was serving dinner to her master’s guests and the guests inappropriately touch her on her thighs in front of her master. This shows the amount of dignity and integrity given to slave women and how vulnerable their conditions were, that they didn’t know with whom they might have to sleep tonight because of the will of her master. In another scene, it’s been shown that a slave woman was gang raped by 3 men just because she was found outside of her master premises without a pass. 

In another scene, it’s been shown how inhuman treatment slave women were given, when they were sold in an auction like a table as sex slaves.  

What if the slaves resist?

In one the instances, a slave refuses to eat. They were tied in a barn where cattle shit, with their mouths being covered from a metal cover. Then the owner breaks every single teethes of the slave from a chisel and hammer and put a funnel in his funnel. Then he forcefully fills his mouth with this weird looking gravy thing they use to give slave as food. Other instances were, they were made to take dog bites or live outside in cold for the whole day without any warm clothes.

When Nat starts a rebel against this and gathered the force of black men to take over the control from the British people for his freedom, many of his slave friends died from the hands of whites because they didn’t have arms and ammunition with them. After this rebel, white people started hanging the full-fledged families of a slave to death just to capture Nat irrespective of women, old or child. This shows how less value the slave as human hold for whites at that time and to what extent the whites can go to punish if black resist to their will. 

What provisions of IPC abolish slavery?

1. Human trafficking

Section 370, which reads as follows:

“370. Trafficking of person.—(1) Whoever, for the purpose of exploitation, (a) recruits, (b) transports, (c) harbours, (d) transfers, or (e) receives, a person or persons, by—

First.—using threats, or

Fourthly.—by practising fraud, or deception, or

Fifthly.—by abuse of power, or

Sixthly.— by inducement, including the giving or receiving of payments or benefits, in order to achieve the consent of any person having control over the person recruited, transported, harboured, transferred or received,

commits the offence of trafficking”

This section of abolishes the purchasing of slaves, therefore, cutting the slavery from its very roots. In the movie, it was shown that under the slavery system of Africa, people were kidnapped/abducted and were sold to Portuguese traders as slaves. If this instance would have taken place in modern India, these traders would have been penalised under section 370.

2. Kidnapping for slavery

 Section 367 of the Indian Penal Code, which reads as follow: –

“Kidnapping or abducting in order to subject a person to grievous hurt, slavery, etc.—

Whoever kidnaps or abducts any person in order that such person may be subjected, or maybe so disposed of as to be put in danger of being subjected to grievous hurt, or slavery, or to the unnatural lust of any person, or knowing it to be likely that such person will be so subjected or disposed of, shall be punished with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.”

This section of Indian Penal Code basically abolishes the slavery, it provides that if anyone is kidnapped/abducts a person and that abduction leads to the slavery of the abducted, the culprit will be punished for 10 years and with a fine. The kidnapper/abductors mentioned in the above example would have been penalised under Section 367  only.  

3.Cruelty towards slaves

Section 358, reads as follow: –

“358. Assault or criminal force on grave provocation.—Whoever assaults or uses criminal force to any person on grave and sudden provocation given by that person, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to two hundred rupees, or with both.

Explanation.—The last section is subject to the same Explanation as section 352.

Of Kidnapping, Abduction, Slavery and Forced Labour”

In one of the instances in the movie, a slave argues with his master over some verses in the Bible, and the master punishes him by whipping him (100 hits). If this case would have happened in modern India, this guy would have been booked under article 358 only.

Conclusion

From the above discussion, we can conclude that the main reason slavery originated and prevailed for such a long period of time and was so hard to abolish was 1. The idea of white people being superior to black people and 2. The demand for labour in the form of slaves. Slavers use to suffer from every kind of imaginable torture and pain and the sad part was, with legal sanction. The conditions of women were worst because men had to please their masters only by their labour, but women were also asked to offer their body. 

The abolishment of slavery in the UK via the Slavery Abolition Act, (1833). In British history, an act of Parliament that abolished slavery in most British colonies, freeing more than 800,000 enslaved Africans in the Caribbean and South Africa as well as a small number in Canada. It received Royal Assent on August 28, 1833, and took effect on August 1, 1834. The same was done in America by Abraham Lincoln in 1865 and in the opinion of the author, it is the best thing ever happened to the world after eradication of smallpox disease. No one can be sold like a dog to do hard labour and other obscene works and get separated from his family just because a bunch of people didn’t like the colour of their skin.  

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 idea of slavery with reference to the movie “The Birth of a Nation” appeared first on iPleaders.

This article has been written by Neha Wagel.

Introduction

Intellectual Property Rights have played a major role in widening the scope of the Fashion Industry. Fashion Industry and Intellectual Property Rights are so closely connected to each other that the very existence of the Fashion Industry would be in doldrums if not protected by Intellectual Property.

Fashion Industry as we know is one of the most glamorous industries in India, generating revenue of INR 12,546 million in 2019 (1). Several fashion events like the Lakme fashion week, India Fashion Week, India Runway week etc are conducted every year across different cities in the country. These events provide a platform for designers to showcase their creative talent, attract media attention and build awareness around their brand (2).

The advancement in trade and communication coupled with digitalisation has brought about a paradigm shift in the fashion industry. It became convenient for designers to showcase their creativity and talent through various channels such as social media and online advertising through which they are now able to directly reach the consumers. However, it is rightly said, with great inventions comes the great misery. The technology and digitalisation brought along with themselves newer ways to infringe upon the rights of the creators in the fashion industry.

This brings us to the question of how the works of fashion designers can be protected in this highly digitalised and competitive world. Well, the solution for this conundrum can be found through Intellectual Property Rights.

Intellectual Property Rights in relation to the fashion industry bestows on the designer’s protection in the form of:-

• Patents for innovations
• Copyright for creativity and artistic work
• Trademarks for protection of brand or logo
• Designs for protection to designs that are new and original
• Geographical indications (GI) to distinguish products that have specific geographical origins and possess qualities or a reputation that are closely associated with their place of origin.
• Trade Secrets for the protection of such information of enterprises from its competitors which, if disclosed in the market would result in unfair advantage to the competitors.

Of the above, trademarks, copyrights and designs are most widely used by designers to protect their work.

A continuing dispute relating to intellectual property rights in the fashion industry has been regarding the preference of Copyright Law versus Designs Law to effectively protect the rights of designers in their creative works. In a bid to resolve this ever-continuing conundrum, this article delineates differences in the two laws, and explores previous instances where the two have been pitted against one another.

Copyright v/s Designs….the battle continues

One of the biggest challenges faced by the designers in the fashion industry today, are knock offs of their designs. Knock offs or Copying of the designs has become a rampant trend in the fashion industry causing not only huge monetary losses but also severely affecting the rights of the original creators, and in some cases causing reputational damages to the original designers. Lack of knowledge of intellectual property law further aggravates the problem. Copyright and Designs law affords the best means of protection for the works of the original creators. However, the question arises, which of the two is appropriately applied in the situation faced by the creator?

The dilemma inapplicability of the Copyright law and Designs law first came before the Honourable Delhi High Court in 2006 in Microfibers v/s Girdhar (3) case where the court drew a clear distinction between Artistic works that qualify for copyright protection and those that involve industrial application. This article aims to study in-depth the provisions along with the applicability of the same.

Protection under Copyright Law

Governing law-

The Copyright Act,1957.

In order to qualify for the protection of Copyright, it is necessary that the Fashion design –

1. Is new and Original;
2. Work is published within the territorial limits of India, and;

iii. In case of works first published outside India, the author at the time of publication must be domiciled in India

Some of the Relevant Provisions (in relation to the current Article) –

Section 2 (c) – Definition of Artistic Works

Section 13- Works in which Copyright Subsists

Section 14(c )- Meaning of Copyright (Artistic Works)

Section 15-Special Provisions regarding copyright in designs registered or capable of being registered under the provisions of Designs Act,2000

Section 17- Owner of Copyrights

Section 22- Term of Copyright

Section 44-Register of Copyrights

Section 51- When Copyright is Infringed

Protection under Designs law

Governing law –

The Designs Act, 2000

According to Section 2(d) “design” means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or

 chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device, and does not include any trade mark as defined in clause (v) of sub-section (1) of section 2 of the Trade and Merchandise Marks Act, 1958 (43 of 1958) or property mark as defined in section 479 of the Indian Penal Code (45 of 1860) or any artistic work as defined in clause (c) of section 2 of the Copyright Act, 1957

In order to register under the provisions of the act, it is necessary that the –

1. Design is new and Original
2. It should not be previously published

iii. Must be cable of being distinguished from known designs or combinations

1. Must not contain scandalous or obscene matter

Some of the Relevant Provisions (in relation to the current Article) – 

Section 2(d)- Definition of Designs

Section 4- Prohibition on registration of designs

Section 11- Copyright on registration

Section 22- Piracy in Designs

In light of the above legal provisions let us now understand the applicability of both laws with an example

In case of Garments, let’s take an example of a fashion designer named ‘X’ who has designed an exclusive evening gown in her production house  She wishes to showcase her talent in one of the upcoming fashion show (4). In this case, would she be eligible for protection under the Copyright law or Designs law?

Once an idea of design is executed in an expression which might be in form of a drawing or a sketch by Miss X, it will automatically qualify for protection under the Copyrights law as an artistic work as long as it passes the test of creativity and originality as per provisions of Section 13 of Copyright Act, 1957(Works in which Copyright subsist). It should be noted that the protection of exclusivity is bestowed by Copyright Law once the work comes into existence. Mere non- registration of the copyright does not deprive the owner of his rights over the work. As a result of which Copyright is often termed as an inherit right.

However, the biggest issue arises when Miss X decides to materialise her drawing or sketch into a dress, then firstly the provisions of section 15 of Copyright Act, 1957 shall apply to the production and post-production the extent of copyright protection will exist up to 50 dresses, post which the copyrights protection afforded to Miss X will cease to exist.

So then the questions that arise are:

1. Does the protection of exclusivity awarded to Miss X end on the production of 50 dresses?
2. What would happen after the production of 50 dresses?
3. Can her work post manufacture of 50 dresses be copied easily?

Let us now explore these questions by taking a look at what would happen if Miss X registers her designs under the Designs Act, 2000.

In order to register her work under designs law, it is necessary that the work of Miss  X is original and is not to disclose to the public. Once Miss X applies the design on objects like a garment – unlike Copyright law, under Designs law the owner of the design shall be entitled to protection on registration. Miss X, on registration, can protect her work from infringement by the third party for a period of 10 years with a clause for renewal of a further 5 years. 

However, the biggest issue in registering a design under the Designs Act,2000 is that the fashion Industry is highly susceptible to change. Trends in the fashion industry keep changing at a rapid rate, and the time involved in registration tends to exceed the life of the trends in the industry creating confusion among fashion designers. (5)

This again leaves Miss X to question if the time and expenses involved in registration of Designs is worth it in the end? Or will it outrun the trends?

These unanswered questions under Copyright law and Design’s law can read in light of some of the most important judicial decisions that have been delivered by the Honourable courts.

Judicial Decisions 

1. Rajesh Masrani v/s Tahiliani Designs Pvt. Ltd ……2008 PTC (38) 251 DEL (6)

Facts of the Case

The instant case was filed under order XLIII Rule 1 of Civil Procedure Code 1908 against the order passed by the learned Single Judge of the Honourable Delhi High Court. By this order the application was filed by the respondent who is currently the plaintiff in the current suit for restraining the appellant, currently the defendant from involving in any process of reproduction, printing, publishing, distribution or selling in any manner the subject matter of the suit (the fabric) in any manner to amount to be the colourable imitation or substantial reproduction.

The Respondent (earlier a plaintiff) is private Limited Company under the leadership of renowned fashion designer Mr.Tarun Tahilani.

It was alleged that along with the drawings or sketches made for purpose of developing accessories or garments , the printed patterns or embroidered works on the fabrics also qualify for protection under the provisions of section 2 (c) (i) and Section 2(c) (iii)of the Copyright Act,1957 respectively.

It was also contended by the plaintiff to be owner of all the disputant products under section 17(c) of the Copyright Act,1957 as they were the product of their own creativity and artistic skills.

On further examination of the details produced before the learned single judge, an ex-parte ad interim injunction was granted on 2nd February,2007.

The present appeal was filed by the defendants who are the appellant in the current case (Rajesh Masrani)

Issues

1. Whether the pattern made by the plaintiff on the fabric qualifies for ‘design’ or ‘artistic work’?
2. Whether the product in question is the subject matter of artistic work as per the provisions of Copyright Act, 1957 as alleged by the plaintiff?

iii. Whether the copyright actually subsists in the plaintiff’s agreements as per Section 15 of the Copyright Act, 1957?

1. Lastly, whether the registration of the work under the Copyright Act is compulsory or the registration is not a condition precedent for maintaining the suit for infringement of copyright?

Judgement

The honourable court, in this case, held that the works of Tarun Tahilani constitutes as ‘artistic works’ and hence comes within the ambit of Copyright Act,1957.

It was further held that Section 15(1) shall not be applicable to the present case as the Section 15(2) of the Copyright Act,1957 is applicable in cases where the copyright in any design is capable of being registered under Designs Act, 1911 but has not been registered and the copyright in the said design shall cease to exist as soon as any article to which the design has been applied has been reproduced more than 50 times by an industrial process.

However, in the present case as per the contentions made by the plaintiff, not more than 20 pieces of any single costume were produced by the plaintiff, along with the fact that the said costume possessed the element of exclusivity and was limited to only a few copies. This brings to the conclusion that provisions of sec.15(2) continue to be applicable to the plaintiff.

The Court further held that since all of the creative work was done either by Mr Tarun Tahiliani, for and on behalf of the guidance and supervision of the Plaintiff`s Company on a contractual basis. The Plaintiff Company was held to be the first owner of the copyright.

With regards to the final issue pertaining to the question of registration, a reference was made to the decision delivered by honourable Bombay High Court in the case of Burroughs Wellcome (India) Ltd. Vs. Uni-sole Pvt. Ltd. and Another; 1999 PTC Vol. 19 p 188 in the following words:

Copyright it is a form of intellectual property. With the advancement in technology, it is very easy to copy. The basic test in actions based on the infringement of the copyright is that if a thing fetches a price, it can always be copied and therefore, it needs adequate protection. It is well settled that although under the Copyright Act 1957, there is a provision of registration, under Section 44(Register of Copyrights) of the Act. It is not in doubt that the said procedure is an enabling provision and registration is not compulsory for the purpose of enforcing copyright. Section 44 of the Act provides for registration of work in which copyright exists but in order to claim copyright registration is not necessary. This is because registration is only to raise a presumption that the person shown in the certificate of registration is the author. This presumption is not conclusive, but no further proof is necessary unless there is a proof rebutting the contents of the said certificate. Under Section 48 of the Registration Act therefore, the act of registration is ex- facie prima facie evidence of the particulars incorporated in the certificate. There is no provision under the Act which deprives the author of his rights on account of non-registration of the copyright. There is nothing in the Act to suggest that the registration is condition precedent to the subsistent of the copyright or acquisition of copyrights or ownership thereof or for reliefs of infringement of copyrights. The sine-qua-non of the existence of copyright is the expenditure of skill, labour and capital on any work expanded by a person/author and unless the original work is produced in Court to prima facie show that the work has originated from the author, no relief can be granted.

Thus, the final question with regards to registration was settled in favour of the fact that copyright shall subsist even in the absence of the formal process of registration.

2. Ritika Pvt Ltd. v/s Biba Apparels Pvt.Ltd….. CS (OS) No.182/2011 (7)

Facts

The Plaintiff is a famous boutique apparel designer brand in India. The Defendant is also a famous apparel designer and manufacturer in India. Both companies design attractive contemporary ethic wear – creative fusion fashion.

The Plaintiff brought a suit against the Defendant seeking an injunction against the Defendant from reproducing, printing, publishing, selling or offering etc. prints or garments which are a reproduction of the Plaintiff’s prints and garments. The Plaintiff claimed to be the first owner of the copyright in the artistic works related to these garments and also claimed trade secret violation by its ex-employees.

It is, however, to be noted that the plaintiff`s designs were not registered under the provisions of the Designs Act,2000

Issue

1. In cases where the work of plaintiff is copyrighted and is then passed through the process of manufacturing exceeds 50 in number, whether the plaintiff loses the ownership over the copyright works
2. What relief is available to the plaintiff if he fails to register his work under Designs act 2000 when it qualifies for the same?

Judgement

The court in this instance made a clear distinction between designs eligible for copyright protection under the provisions of the Copyright Act, 1957 and that of the Designs Act,2000.

It held that copyright protects the original expression of the “artistic work” and offers limited protection to the commercial exploitation of the same, whereas the Designs Act is the chief tool to protect the industrial application of the design, however, the design need not to be always original.

Reference was also made to provisions under section 15(2) of the Copyright Act,1957 (Special Provisions regarding Copyright in Designs)

The decision was then delivered in favour of the defendants and the suit was thus dismissed, relying on the bar set under the provisions Section 15(2) of the Copyright Act, 1957. 

In the case of Jewelleries and Ornaments

The situation that we are exploring is not limited in its impact to garments but also affects the designs in Jewelleries and ornaments which too forms a significant part of the fashion industry.

As stated earlier in this article, Copyright law through the Copyright Act,1957 conferrers protection on sketches and designs. But as per provisions of section 15 of Copyright Act, 1957 if any design qualifies for protection under the provision of Designs Act,2000 then in such cases the Copyright shall cease to exists after producing it for 50 times. One such decision highlighting the importance of registering under the Designs Act has been delivered by honourable Bombay High Court in

Pranda Jewellery and Ors. v/s Arya 25kt and Ors…… (2015)  (8)

Facts of the case

The instant case the Plaintiff no.1 was involved in the business of branded jewellery and the plaintiff no.2 and plaintiff no.3 held 49% and 51% equity respectively in the business of the Plaintiff no.1.

Plaintiff no.1 was indulged in the business of designing, making and selling of gold sheet articles of deities and religious symbols under the brand name of Prima Art. The drawing pertaining to which was designed by the Plaintiff no.1 through a computer software with the aid of a graphic designer under his employment. Based on these drawings the Plaintiff no.3 would manufacture the articles in Thailand and the same were imported from Thailand and then sold in India by plaintiff no.1 and Plaintiff no.2.

It came to the notice of Plaintiff in 2010 that the Defendants in the instant case had copied his 22 product designs. Defendant no.1 a partnership firm of which Defendant 2 to Defendant 7 were indulged in producing identical gold sheet articles and religious symbols. Thus, a suit for Copyright infringement was filed by the Plaintiff.

Issues

1. Whether the alleged work constitutes a Design within the meaning of Designs under the Designs Act,2000?
2. Whether the images of deities and religious figures and signs in gold plates are a reproduction of the artistic works in a material form including depiction in three dimensions or articles “to which the design has been applied….. by an industrial process.”

Judgement

The Court, in this case, held that the work shall constitute as artistic work as long as it falls within the ambit of section 2(c) of Copyright Act,1957. But when the same has been put to industrial use, it would qualify for protection under the provisions of Designs Act,2000 failure of which the Copyright in the articles shall cease to exist after 50 products as per provisions of Section 15 (2) of the Copyright Act,1957.

Conclusion

This brings us to our root issue as to whether Miss X can seek protection under Copyright law or Designs Law, well as per the provisions of the Copyright Act,1957 and Designs Act,2000 read in light of the Judicial decisions brings us to the conclusion  that it is necessary to understand the intention of the designer before deciding  on the applicability of law.

If the intention of the designer is to develop ideas by producing it by an industrial process more than 50 times either on own or through a license, Designs law is the best suited to protect the rights of the creators. Otherwise Copyright law holds an edge.

References

Books

• B.L.Wadehra, Law Relating to Intellectual Property,(5^th edition 2017)
• Naraynan, Intellectual Property Laws,(3^rd edition 2018)

Statutes

• The Copyright Act,1957
• The Designs Act,2000

Websites

1. Statista from https://www.statista.com/outlook/244/119/fashion/india; last seen on 22^nd November 2019
2. John Zarocostas, Role of IP rights in fashion Business:US prespective available at World Intellectual Property Magzine from https://www.wipo.int/wipo_magazine/en/2018/04/article_0006.html; last seen on 24^th November 2019
3. Microfibres Inc vs Girdhar And Co. And Ors. ,2006 (32) PTC 157 Del available at https://indiankanoon.org/doc/1210059/; last seen on 22^nd November 2019
4. Sunanda Bharti, Legal Protection of Fashion Design in Apparels in India: A Dilemma under the Copyright and Design Law available at journals.du.ac.in/humsoc/pdf/Bharti_Final_9.pdf; last seen on 24^th November 2019
5. IP and Business: Intellectual Property in Fashion Industry; WIPO Magzine available at https://www.wipo.int/wipo_magazine/en/2005/03/article_0009.html; last seen on 24^th November 2019

6. Rajesh Masrani vs Tahiliani Design Pvt. Ltd., FAO (OS) No.393/2008, available at https://indiankanoon.org/doc/111285241/; last seen on 24^th November 2019
7. Ritika Private Limited vs Biba Apparels Private Limited, CS(OS) No.182/2011 available at https://indiankanoon.org/doc/20292476/; last seen on 24^th November 2019
8. Pranda Jewelry Pvt. Ltd. And 2 Ors vs Aarya 24K And 5 Ors, available at https://indiankanoon.org/doc/196384280/; last seen on 24^th November 2019

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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