This article is written by Amarnath Simha, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here he discusses “How Should You Customize Or Draft Boilerplate Clauses in a Commercial Contract? (Even If You Take Them From Another Website Or Someone Else Document)”.

Introduction

The term “boilerplate” dates back to the 1890s when printing plates of text for advertisements or syndicated columns were cast or stamped in steel ready for the printing press and distributed to newspapers around the United States. They were called boilerplates because of their resemblance to the thick, tough steel sheets used to build steam boilers (https://www.lexology.com/library/detail.aspx?g=7e0158de-2456-4035-b62e-069b9b1b4cf8).  Subsequently, the term ‘boilerplate’ came to denote the clauses which were part and parcel of each agreement without any changes because they were so set and standardised.  Sometimes they are categorised into Miscellaneous provisions of the contract. These are rarely negotiated between the parties and is assumed to denote only the existing provisions in the earlier contract.  However, there is no set definition of ‘boilerplate clause’ and is used to denote a set of clauses which are common in all contracts. For some contracts in particular industries like construction, contracts have a determined set of boilerplate clauses which may not be found in other contracts.  Hence, there is no firm opinion as to whether the boilerplate clauses are restricted to a few clauses or not. Some opinions include the clauses at the beginning of the agreement in the boilerplate clauses while most of the opinion includes only the clauses at the end of the agreement in the boilerplate clauses.

Boilerplate Clauses

Some of the boilerplate clauses used in various contracts are mentioned hereunder:

• Parties Clause
• Definitions and Interpretation Clause
• Confidentiality clause
• Announcements clause
• Assignment clause
• Costs and expenses clause
• Joint and several liability clause
• Exclusion of liability clause
• Exclusive/Non-exclusive Remedies Clauses
• Equitable relief clause
• Dispute Resolution clause
• Health and Safety clause
• Time of the essence clause
• Force Majeure Clause
• Waiver Clause
• Further Assurance Clause
• Amendment Clause
• Severance Clause
• Reliance/No Reliance clause
• Conflict with other Agreements
• Entire Agreement Clause
• Conflict within an Agreement clause
• Notices clause
• No partnership or agency clause
• Language clause
• Governing Law clause
• Jurisdiction clause
• Counterparts clause
• Testimonium clause

Is it necessary to have Boilerplate Clauses?

It is not necessary for the validity of the agreement to contain the boilerplate clauses.  It is extremely necessary to ascertain whether for the effective enforcement of the obligations, a boilerplate clause is required or not.  This ascertainment has to be done for each agreement separately, though they are boilerplate clauses. This is because, each of the clauses have its own effect and can ultimately give rise to litigations or favour one party to the contract in the litigation.  For e.g., if the notice clauses state that the notice has to be given by a particular manner only i.e., by post, then any other mode of communication like through email might be held to be invalid and all communications including termination of the contract may become invalid.  If such a notice clause was not included in the agreement, then the communication through email would have become valid. Hence, it is necessary to ascertain as to whether a particular clause is required or not.  

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Effect of Boilerplate Clauses and their Language

It is necessary to have knowledge of the existing law to understand the effect of the boilerplate clause.  For e.g., in the parties clause at the beginning of the agreement, it is routine to include the word ‘assignee’ of the party also being referred to as a party.  In the absence of an assignment clause prohibiting the assignment, the question would arise whether the contract can be assigned. That would depend upon the question whether the obligations are of a personal nature or not.  In the case of Kapiilaben and others vs. Ashok Kumar Jayanthilal Sheth (CA No. 10683-86 of 2014), the Hon’ble Supreme Court held that a development agreement for a housing scheme is not assignable even if there is no prohibition against assignment as it was based upon the certain personal understanding between the parties.  This decision expounds the meaning of Section 15(b) of the Specific Relief Act.

A testimonium clause came up for consideration before the Hon’ble Supreme Court in the case of Alka Bose vs. Parmatma Devi (CA 6197 of 2000).  It was a case of an agreement to sell containing a testimonium clause which was as follows: In witnesses whereof, the parties hereto have

hereunto set and subscribed their respective hands and seals on these presents.  The Hon’ble Supreme Court observed that the agreement is in an archaic form which has lost its meaning and the parties no longer subscribe their respective hands and seals.  It further observed that it is true that the format obviously refers to signatures of the parties. The question arose in that case as to the validity of an agreement to sell which was executed only by the vendor and not by the purchaser.  The validity of the agreement was upheld in spite of the testimonium clause which stated the signature by both the parties. This was arrived at by looking in other evidence on record regarding the conduct of the parties. However, this interpretation may not adhere in respect of other agreements and contexts.  Hence, clauses by themselves sometimes become inconsequential and it is better to be aware of the effect of those clauses in different circumstances.

In All India Power Engineers Federations and others vs. Sasan Power Ltd and others (CA 5881 of 2016), the question arose as to whether there was an amendment and a waiver.  The requirement under Article 6 of the Power Purchase Agreement was 95% of the contracted capacity while it was submitted that 17% of the contracted capacity was accepted and hence there was a waiver.  The clauses regarding amendment and waiver are as follows: 

18: Miscellaneous Provisions

18.1 Amendment

The Agreement may only be amended or supplemented by a written agreement between the Parties and after duly obtaining the approval of the Appropriate Commission, where necessary.

18.3. No Waiver

A valid waiver by a Party shall be in writing and executed by an authorized representative of that Party. Neither the failure by any Party to insist on the performance of the terms, conditions, and provisions of this Agreement nor time or other indulgence granted by any Party to the other Parties shall act as a waiver of such breach or acceptance of any variation or the relinquishment of any such right or any other right under this Agreement, which shall remain in full force and effect.

It was argued based on the emails that there was an amendment.  The Hon’ble Supreme Court went into the emails to see whether there was an amendment or not and came to the conclusion that there was no such amendment.  But the fact is that the Hon’ble Supreme Court went into the email correspondence to see if there was an amendment or not. If the language of clause 18.1 was in writing and signed by parties, then the question of going into email correspondence may not have arisen as those emails could be argued to not have been signed.

More importantly, it was urged clause 18.3 was only with regard to the mode of waiver and not with regard to the waiver itself and ultimately waiver was to be looked from the aspect of Section 63 of the Indian Contract Act, 1872.  The court held that in the question of waivers under contracts, Section 63 would be applicable. In the facts of that case, it was held that since the PPA was of a public interest contract, no waivers of such kind could be allowed to pass the musters and hence the submission of waiver being applicable was rejected.  However, the Hon’ble Supreme Court also later in the judgment went into the email correspondences to see whether there was a waiver and came to the conclusion that it was not. If the language of clause 18.3 was that the waiver had to be signed by the authorised representative of the party and not just in writing, it would have been interesting to see the Hon’ble Supreme Court held that the emails sent could be interpreted as being signed as the party sending it. Hence, it is necessary to properly word the clauses and understand the meaning and effect of each word before using them.

In the case of Governing Law clause and Arbitration clause, they are always subject to the law of the land. In fact in the case of TDM Infrastructure Private Limited vs. UE Development India Private Limited (Arbitration Application No.2 of 2008), the Hon’ble Supreme Court rejected the contention of an Indian company to hold the arbitration as per Malaysian law and in Malaysia only because the directors of that company were in Malaysia by relying upon Section 28 of the Indian Arbitration and Conciliation Act, 1996.  A similar question as to whether two Indian nationalities could have arbitration outside India was not considered in the case of Sasan Power Ltd vs. North American Coal Corporation India Private Limited (CA No.8299 of 2016). Hence, the Governing Law clause is not a straight forward copy paste clause and requires an understanding of the contract and parties at hand.

Conclusion

Hence, while considering any boilerplate clause, the need would be to see if there is a requirement for it, the effect of its language and the applicable law before incorporating the same into the agreement.

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

The post How Should You Customize or Draft Boilerplate Clauses in a Commercial Contract? (Even If You Take Them From Another Website Or Someone Else Document) appeared first on iPleaders.

So today is the day! We are finally announcing the winner of our Blog Writing Competition of 4th week of November 2019 (From 25th November 2019 To 1st December 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

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

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This article is written by Madhuri Pilania, a first-year student pursuing BBA.LLB from Symbiosis Law School, Noida. This article deals with the Doctrine of Res Judicata.

Introduction

How would you know if a person can file a suit again or not? In which conditions a person can file a suit again? So here is the answer to such questions in this article about Res Judicata under Section 11 of the Civil Procedure Code. 

Brief history and origin of Res Judicata

The concept of res judicata has evolved from the English Common Law System. The Common Law system has been derived from the overriding concept of judicial consistency. Res judicata took its place first in the Code of Civil Procedure from Common Law and then into the Indian Legal System. If either of the parties in a case approaches the same court for the judgment of the same issue then the suit will be struck by the doctrine of res judicata. Res judicata plays a role in administrative law as well. It helps to administer how efficiently the Judiciary works and disposes of the case. The doctrine of res judicata becomes applicable where there is more than one petition filed in the same or in some other court of India with the same parties and same facts. The parties involved in a case may file the same suit again just to harass the reputation of the opposite party and may do to get compensation twice. So to prevent such overloads and extra cases, the doctrine of res judicata plays a major role and importance in the Code of Civil Procedure.

Earlier res judicata was termed as Purva Nyaya or former judgment by the Hindu lawyers and Muslim jurists according to ancient Hindu Law. The countries of the Commonwealth and the European Continent have accepted that once the matter has been brought to trial once, it must not be tried again. The principle of res judicata is originated from the Seventh Amendment to the U.S. Constitution. It addresses the finality of judgments in a civil jury trial. Once a court has rendered a verdict in a civil trial, it cannot be changed by another court except there are very specific conditions. 

Res Judicata meaning

Res means “subject matter” and judicata means “adjudged” or decided and together it means “a matter adjudged”. 

In simpler words, the thing has been judged by the court, the issue before a court has already been decided by another court and between the same parties. Hence, the court will dismiss the case as it has been decided by another court. Res judicata applies to both civil and criminal legal systems. No suit which has been directly or indirectly tried in a former suit can be tried again.

Res Judicata example

• ‘A’ sued ‘B’ as he didn’t pay rent. ‘B’ pleaded for the lessening of rent on the ground as the area of the land was less than the mentioned on the lease. The Court found that the area was greater than shown in the lease. The area was excess and the principles of res judicata will not be applied. 
• In a case, ‘A’ new lawsuit was filed in which the defendants requested that the Court dismiss the lawsuit with a plea of res judicata. She was barred from bringing a claim of res judicata because her previous claim was dismissed for fraud. The Court said that the defence of res judicata must be proved by evidence. 

Principle of Res Judicata

The principle of res judicata seeks to promote the fair administration of justice and honesty and to prevent the law from abuse. The principle of res judicata applies when a litigant attempts to file a subsequent lawsuit on the same matter, after having received a judgment in a previous case involving the same parties. In many jurisdictions, this applies not only to the specific claims made in the first case but also to claims that could have been made during the same case.

Pre-requisites for Res Judicata

 Prerequisites of res judicata includes:

•  A judicial decision by proficient court or tribunal,
•  Final and binding and
•  Any decision made on the merits
•  A fair hearing 
•  Earlier decision right or wrong is not relevant.  

Nature and Scope of Res Judicata

Res judicata includes two concepts of claim preclusion and issue preclusion. Issue preclusion is also known as collateral estoppel. Parties cannot sue each other again after the final judgment on the basis of merits has reached in civil litigation. For example, if a plaintiff wins or loses a case against the defendant in the case say A, he cannot probably sue the defendant again in case B based on the same facts and events. Not even in a different court with the same facts and events. Whereas in issue preclusion it prohibits the relitigation of issues of law that have already been determined by the judge as part of an earlier case. 

The scope has been decided in the case of Gulam Abbas v. State of Uttar Pradesh. I  this case the court incorporated the rules as evidence as a plea of an issue already tries in an earlier case. Judgment of this case was difficult as the judges should apply res judicata. It was decided that res judicata is not exhaustive and even if the matter is not directly covered under the provisions of the section it will be considered as a case of res judicata on general principles.   

Rationale

The principle of res judicata is founded upon the principles of justice, equity, and good conscience and it applies to various civil suits and criminal proceedings. The purpose of this principle was to inculcate finality into litigation. 

Failure to Apply

When a  court fails to apply Res Judicata and renders a divergent verdict on the same claim or issue and if the third court faces the same issue, it will apply a “last in time” rule. It gives effect to the later judgment and it does not matter about the result that came differently in the second time. This situation is typically the responsibility of the parties to the suit to bring the earlier case to the judge’s attention, and the judge must decide how to apply it, whether to recognize it in the first place.

Doctrine of Res Judicata

The double jeopardy provision of the Fifth Amendment to the U.S. Constitution protects people from being put on a second trial after the case has been judged. So the doctrine of res judicata addresses this issue and it bars any party to retry a judgment once it has been decided. 

Section 11 of the Civil Procedure Court incorporates the doctrine of res judicata also known as “ rule of conclusiveness of judgment”. The doctrine of res judicata has been explained in the case of Satyadhyan Ghosal v. Deorjin Debi. The judgment of the court was delivered by Das Gupta, J. An appeal was made by landlords who attained a decree for ejectment against the tenants who were Deorajin Debi and her minor son. However, they have not been yet able to get possession in execution soon after the decree was made. An application was made by the tenant under Section 28 of the Calcutta Thika Tenancy Act and alleged that they were the Thika tenants. This application was resisted by the landlords saying they were not Thika Tenants within the meaning of the Act. 

The tenants moved to the High Court of Calcutta under the Civil Procedure Code. The court applied the principle of res judicata to achieve the finality in litigation. The result came that the original court, as well as the higher court, can proceed for any future litigation on the basis that the previous decision was correct. 

The doctrine of res judicata says –

• That no person should be disputed twice for the same reason.
• It is the State that decides there should be an end to a litigation
• A judicial decision must be accepted as the correct decision.

Constructive Res Judicata

The rule of constructive res judicata in Section 11 of the Civil Procedure Code is an artificial form of res judicata. It provides that if a plea has been taken by a party in a proceeding between him and the defendant he will not be permitted to take pleas against the same party in the following proceeding with reference to the same matter.  It is opposed to public policies on which the principle of res judicata is based. It would mean harassment and hardship to the defendant. The rule of constructive res judicata helps in raising the bar. Hence this rule is known as the rule of constructive res judicata which in reality is an aspect of augmentation of the general principles of res judicata. 

In the case of State of Uttar Pradesh v. Nawab Hussain, M was a sub-inspector and was dismissed from the service of D.I.G. he challenged the order of dismissal by filing a writ petition in the High Court. He said that he did not get a reasonable opportunity of being heard before the passing of the order. However, the argument was negatived and the petition was dismissed. He again filed a petition on the ground that he was appointed by the I.G.P. and had no power to dismiss him. The defendant argued that the suit was barred by constructive res judicata. However, the trial court, the first appellate court as well as the High Court held that the suit was not barred by the doctrine of res judicata. The Supreme Court held that the suit was barred by constructive res judicata as the plea was within the knowledge of the plaintiff, M and he could have taken this argument in his earlier suit. 

Res Judicata and Estoppel

Estoppel means the principle which prevents a person from asserting something that is contrary to what is implied by a previous action. It deals in Section 115 to Section 117 of the Indian Evidence act. The rule of constructive res judicata is the rule of estoppel. In some areas the doctrine of res judicata differs from the doctrine of estoppel –

• Estoppel flows from the act of parties whereas res judicata is the result of the decision of the court. 
• Estoppel proceeds upon the doctrine of equity, a person has induced another to alter his position to his disadvantage can not turn around and take advantage of such alteration. In other words, res judicata bars multiplicity of suits and estoppel precludes multiplicity of representation of cases. 
• Estoppel is a rule of evidence and is enough for the party whereas res judicata expels the jurisdiction of a court to try a case and prevents an enquiry at the threshold (in limine). 
• Res judicata forbidden a person averring the same thing twice in the litigations and estoppel prevents the person from saying two opposite things at a time.
• According to the principle of res judicata, it presumes the truth of decision in the former suit while the rule of estoppel precludes the party ton deny what he or she has once called truth. 

Res judicata and Res Subjudice

The doctrine of res judicata and res subjudice varies in some factors – 

• Res sub judice applies to a matter that is pending trial whereas res judicata applies to a matter adjudicated or arbitrated. 
• Res subjudice prohibits the trial of a suit that is pending decision in a previous suit whereas res judicata prohibits the trial of a suit that has been decided in a former suit. 

Res judicata and Issue Estoppel

A person who has once been tried by a court of proficient jurisdiction for an offence and convicted of that offence cannot be tried again for the same offence as long as acquittal operates. This is given under Section 300(1) of the Civil Procedure Court. A party cannot proceed to reopen the case if the matter is finally decided by a competent or proficient court. This principle applies to criminal proceedings and it is not allowed in the stage of the same proceedings to try a person for an offence for which he has been acquitted. 

Res Judicata and Stare Decisis

Res judicata means a case that has already been decided or a matter settled by a decision or judgment. Res judicata and stare decisis both are related to matters of adjudication (arbitration). Stare decisis rests on legal principles whereas res judicata is based on the conclusiveness of judgment. Res judicata binds the parties while stare decisis operates between strangers and bins the courts to take a contrary view on the law already decided. Stare decisis is mostly about legal principle while res judicata relates to controversy. 

What is Res Judicata and Collateral Estoppel?

The doctrine of collateral estoppel says that an issue or case that has been litigated cannot be litigated again. For collateral estoppel to apply, the following requirements are required.

The issue in the first and second case is the same; The party against whom the doctrine is invoked had the full opportunity to litigate the issue; That party actually litigated the issue; The issue litigated must have been necessary to the final judgment.

The doctrine of res judicata bars the re-litigation of a claim that has already been litigated. There are four factors that must be satisfied for res judicata to apply:

• A previous case in which the same claim was raised or could have been raised;
• The judgment in the prior case involved the same parties or their privies;
• The previous case was resolved by a final judgment on the merits;
• The parties should have a fair opportunity to be heard.

For example, Abela sued John who is a supervisor for sexually harassing her and due to that, she had to quit her job. Abela provided the evidence by producing emails written by him. But John argued that the emails were not real but the judge said that the emails were real and could be submitted as evidence. After a few months after the trial, Abela filed a lawsuit against her employer as he did not take any action about the complaint. If the emails that were submitted by Abela, were not genuine the issue would fall under collateral estoppel. The issue of authenticity of the emails was already decided in the previous case and hence the court cannot redecide the issue.

Res Judicata landmark cases

Brobston v. Darby Borough 

In the case of Brobston v. Darby Borough,  Brobston was the plaintiff who was injured while driving a vehicle on a public highway in the Borough of Darby. Due to a transit company that was occupying the street, the steering wheel of the machine operating pulled by the driver’s hand. This resulted in injury to the complainant. A suit was filed against the street railway in the Court of Philadelphia to recover damages. It was proved that negligence was there on the part of both the parties also known as contributory negligence. The judgment was passed in favour of the defendant. Later action was again brought against the same defendant based on the same cause of action and against the same transit company. The judgment in the first proceeding was brought to the attention of the court. The plaintiff admitted that Brobston was the same person who was the plaintiff in the action brought earlier in Philadelphia. 

The action was brought for injuries occurring at the same place and the verdict of the court was in favour of the defendant. The facts and cause of action were the same but the only difference was the name of the defendant. The legal question involved was what are the rights of the plaintiff in this case. The court refused the facts which were proven by the counsel. Hence a nonsuit was entered because of the earlier judgment. The plaintiff should have been permitted to call the witness but no merit was seen. 

These conditions were entered in the record to enable the Court to pass the legal question involved. The plaintiff had the right to recover under the circumstances. The counsel made an offer to prove the facts which the court had refused to do. A complaint was made that the plaintiff must have been permitted to call the witness to establish the matters. The facts were essential for the legal determination of liability before the court and consent of both the parties were needed.

Lowe v. Haggerty

In the case of Lowe v. Haggerty, a question was raised considering the effect of former judgment for defendant when he was sued by the guest. It was held that a suit was bar by the driver of the car which had been struck by any other person. There was no previous record that disclosed what was in the first proceeding. It was held that it was not possible to determine what was the issue involved in the previous suit. A different situation was there the court disposed of the record made by the parties. Nonsuit was not granted in this case and the plaintiff’s appeal was refused.

Henderson v. Henderson

Henderson v Henderson was a case in which the English Court confirmed that a party can not raise a claim in litigation which was raised in the previous suit. In 1808, two brothers Bethel and Jordan Henderson became business partners and they operated in both Bristol and Newfoundland. In 1817, their father died on a date that was not recorded. The wife of Jordan Henderson was appointed as the administrator and she brought legal proceedings in the Court. She also brought separate proceedings and claimed that he had failed to provide an account as executor of the will. The Court of Appeal held that there was no estoppel by convention and that the proceedings were an abuse under the rule in Henderson v Henderson. The Court of Appeal held that just one of Mr Johnson’s claims should be struck out for a reflective loss.

Johnson v. Gore Wood and Company

Johnson v Gore Wood and Company is a leading UK case in which the House of Lords decided the case relating to litigating issues that had already been determined in the previous litigation.  Mr Johnson was a director and majority shareholder in a lot of companies, including Westway Homes Limited and Gore Wood & Co were a firm of lawyers who acted for the companies and also occasionally worked for Mr Johnson in his personal capacity.

In 1998, Gore Wood was acting for the company and served notice to acquire land from a third party upon the lawyers for that third party. The third-party alleged that this was not service, and refused to convey the land. Legal proceedings followed and ultimately the company succeeded. However, because the third party was penurious and was funded by legal aid, the wood company was unable to regain the full amount of its losses and legal costs.

Accordingly, the wood company issued proceedings against Gore Wood for negligence and alleged that their losses would have been entirely prevented if Gore Wood had properly served the original notice on the third party instead of the third party’s lawyers. 

Gore Wood ultimately settled those claims, and the settlement agreement included two provisions that were later proved that they were important. Firstly, it included a clause stating that any amount which Mr Johnson wished to subsequently claim against Gore Wood in his personal capacity would be limited to an amount, excluding interest and costs. The confidentiality clause contained an exception which permitted the settlement agreement to be referred which Mr Johnson brought against Gore Wood.

Mr Johnson then issued proceedings against Gore Wood in his personal name, and Gore Wood made applications to dismiss some or all of the claims on the basis that it was an abuse of process to seek to litigate again the issues which had already been compromised in the agreement.

Res Judicata landmark cases in India

Daryao v. State of Uttar Pradesh

In the historic case of Daryao v. State of Uttar Pradesh, the doctrine of res judicata is of universal application was established. The Supreme Court of India placed the doctrine of res judicata on a still broader foundation. In this case, petitioners filed a writ petition in the High Court of Allahabad under Article 226 of the Constitution. But the suit was dismissed. Then they filed independent petitions in the Supreme Court under the writ jurisdiction of Article 32 of the Constitution. The defendants raised an objection regarding the petition by asserting that the prior decision of the High Court would be operated as res judicata to a petition under Article 32. The Supreme Court dismissed and disagreed with the petitions.

The court held that the rule of res judicata applies to a petition under Article 32 of the Constitution. If a petition is filed by the petitioner in the High Court under Article 226  of the Constitution and it is dismissed on the basis of merits, it would be operated as res judicata to bar a similar petition in the Supreme Court under Article 32 of the Constitution.

Devilal Modi vs. Sales Tax Officer

In the leading case of Devilal Modi vs. STO, B challenged the validity of an order of assessment under Article 226. The petition was dismissed on the basis of merits. The Supreme Court also dismissed the appeal that was made against the order on the basis of merits. B again filed another writ petition in the same High Court against the same order of assessment. This time the petition was dismissed by the High Court. The Supreme Court held that the petition was barred by the principle of res judicata. 

Avtar Singh v. Jagjit Singh

A peculiar problem arose in the case of Avtar Singh v. Jagjit Singh. A filed a civil suit, a contention regarding the arbitration of the Court was taken by B. The objection was sustained and the plaint was returned to the plaintiff for the presentation. The Revenue Court did not have any jurisdiction when A approached the Revenue Court so he returned the petition. Once again A filed a suit in the Civil Court. B contended that the suit was barred by the doctrine of res judicata. 

Mathura Prasad v. Dossabai N.B. Jeejeebhoy

In the case of  Mathura Prasad v. Dossibai N.B. Jeejeebhoy, it was held that res judicata constitutes between the parties to the previous case and cannot move again in collateral proceedings. Generally, a decision by a competent court operates as res judicata even on point of law. However, a question of law which is not related to facts that gives rise to the right, will not operate as res judicata. When the cause of action is different or the law is different, the decision has been already altered by an authority. The decision made will be declared as valid and res judicata will not operate in the subsequent proceeding. 

Exceptions to res judicata

Cases where Res Judicata does not apply

The principle of res judicata does not apply in the Writ of Habeas Corpus as far as High Courts are concerned. Article 32 gives power to the Supreme Court to issue writs and some power is given to High Courts under Article 226. The Courts need to give proper reasoning while applying the doctrine of res judicata. There are some exceptions to res judicata which allow the party to challenge the validity of the original judgment even outside the appeals. These exceptions are usually known as collateral attacks and are based on jurisdictional issues. It is not based on the wisdom of the earlier decision of the court but the authority to issue it. Res judicata may not be applicable when cases appear that they need relitigation. 

Instalment Supply private limited vs. Union of India

In cases of income tax or sales tax, the doctrine of res judicata does not apply. It was discussed in the case of Instalment Supply private limited vs. Union of India where the Supreme Court held that assessment of each year is final for that year and it will not govern in the subsequent years. As it determines the tax only for that particular period. 

P. Bandhopadhya and others v. Union of India and others

In the case of P. Bandhopadhya and others v. Union of India and others, The appeal was made in the Bombay High Court and the appellants asserted that they will be entitled to receive an amount as damages. The Supreme Court bench held that the appellants were not entitled to receive damages which were pensionary benefits under the Pension Rules 1972. They were entitled to receive benefits as the case was barred by the principle of res judicata. 

In the case of Public Interest Litigation, the doctrine of res judicata does not apply. As the primary object of res judicata is to bring an end to litigation so there is no reason to extend the principle of public interest litigation. 

Dismissal of special leave petition in limine does not operate as res judicata between the parties. A fresh petition will not be filed either under Article 32 or under Article 226 of the Constitution.  

Beliram and Brothers v. Chaudhari Mohammed Afzal

In the case of Beliram and Brothers v. Chaudhari Mohammed Afzal, it was held that a minors suit cannot be brought by the guardian of the minors. However, it was brought in collaboration with the defendants and the decree obtained was by fraud within the Indian Evidence Act, 1872 and it will not operate res judicata. 

Jallur Venkata Seshayya v. Thadviconda Koteswara Rao

In the case of Jallur Venkata Seshayya vs. Thadviconda Koteswara Rao, a suit was filed in the Court so that certain temples are called public temples. A similar suit was dismissed by the Court two years ago and the plaintiff contended that it was negligence on the part of the plaintiffs (of the previous suit) and therefore the doctrine of res judicata can not be applied. However, the privy council said that the documents were suppressed which means that the plaintiff in the earlier suit had bona fide intention( something that is genuine and there is no intention to deceive). 

Can Res Judicata be waived?

In the case of P.C. Ray and Company Private Limited v. Union of India it was held that the plea of res judicata may be waived by a party to a proceeding. If a defendant does not raise the defence of res judicata then it will be waived. The principle of res judicata belongs to the procedure and either party can waive the plea of res judicata. The court can decline the question of res judicata on the ground that it has not been raised in the proceedings. 

How to defeat Res Judicata? 

The doctrine of res judicata would not apply to the case until the conditions are met. The essential condition for the applicability is that the succeeding suit or proceeding is founded on the same cause of action on which the former suit was founded. The principle of res judicata can be defeated when the party has filed the suit on a reasonable ground for example in case a public interest litigation has been filed there is no reason not to extend the doctrine of res judicata. The PIL has been filed with a bona fide intention and the litigation cannot end. 

Res judicata as a concept under administrative law

Administrative Law deals with the structure, functions, and powers of the organs of administration. Administrative Law is also known as regulatory law and it is enforced by some type of government body. The law derives its power to enforce regulation from the government body. This applies to all public officials and agencies. An administrative body of government may rulemaking or enforce a specific agenda. It is technically considered as a branch of public law. The administrative authority is different from the legislative and judicial authority and necessitates the power to issue rules and regulations that are based on grant licenses and permits. The basic principles of this law are that no person shall be unheard or deprived of his right and a person cannot be a judge on his own in a case. 

Res judicata works as a working principle under administrative law and has been adopted from the Civil Procedure Code. 

Criticism to Res Judicata

Res judicata can also be applied to judgment that may be contrary to law. The doctrine of res judicata has been used for a long time and it encloses the general effect of one judgement upon another trial or proceeding. It includes matters not only those of bar but also those matters which should be litigated. For example, if a case has been dismissed on a specific ground by a court of law or equity and it is not deemed as a final judgment and technically res judicata will apply but it is not justified. If the chancellor has denied equitable relief on a principle but it was held by the court that the plaintiff is barred from proceeding as a legal remedy. Most of the equity cases involve res judicata and do not get beyond collateral estoppel. As it raises the difficulty of overlapping more than the failure to litigate issues. 

The title to real estate and the right to collect rent depended upon one and the same construction of a will. In an interpleader over the rents, A got the decree. B appealed, without supersedeas, and secured a reversal, but, before his appeal was decided, A had sued him in ejectment, invoking the decree, and recovered a judgment for the real estate. B did not appeal from this judgment, but, after the reversal of the decree, he sued A in ejectment for the land, relying upon the reversal.

Conclusion

The Doctrine of Res Judicata can be understood as something which restricts either party to “move the clock back” during the pendency of the proceedings. The extent of res judicata is wide and it includes a lot of things which even include Public Interest Litigations. This doctrine can be applied outside the Code of Civil Procedure and covers a lot of areas which are related to the society and people. The scope and the extent have widened with the passage of time and the Supreme Court has elongated the areas with its judgments.

References 

• (https://williamsmestaz.com/business-litigation-blog/what-is-the-difference-between-collateral-estoppel-and-res-judicata/)
• Civil Procedure with Limitation Act, 1963 by C.K. Takwani
• Indiankanoon.com
• www.legalserviceindia.com
• https://www.jstor.org/stable/41854045

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 Res Judicata: All You Need to Know About appeared first on iPleaders.

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

What is the biggest hurdle for young lawyers and law students on the way to success as a lawyer?

I would say it is the general negativity and environment of doom and gloom that every young lawyer in this country is subjected to. Junior lawyers are given horrible advice all the time.

I was watching a video today, where a woman was being interviewed. She was driving a truck. When she was asked, she informed that she is a lawyer, but when her husband died she was forced to turn to drive a truck for regular income. 

Here is the link of the video: https://youtu.be/qzNMjp2NKfM

I was appalled. Why is it that a lawyer cannot earn enough that she has to turn to driving a truck? 

She didn’t say it was her life’s dream to drive a truck. She was forced to do so in order to earn money. She studied law, practiced law and then left to drive a truck clearly because driving trucks made her more money. So please do not tell me that it is a beautiful thing and that there is nothing wrong with her driving a truck.

It is a failure of the entire system that thousands of lawyers fail to earn a decent livelihood from the practice of law. A primary reason for their failure is that they do not get enough practical training.

It is a bit like engineering education. Technology companies are always short of good techies. Ask me, we have such a great deal of difficulty finding good developers for our tech team. 

Click Here

Still, there are tens of lakhs of engineering graduates who are not finding jobs, because they have not been taught any marketable skills. They got their degree, but they do not know any craft for which they would be hired. 

Very sad situation.

This is exactly what is happening in law as well!

So many lawyers are registered to practice in the court without having any ability to getting any work done! They are dependant on their seniors to learn even the very basics. And seniors do not really have the time and someone not even the intention to teach.

Hence it may take a decade to learn what should have been taught in months!

However, injustice does not end here. 

I would say that the practical skills in the legal profession are not very difficult to learn. A reasonably clever person can learn all the skills needed to practice law on their own. It may take way more time to do so, but it is totally possible to learn a vast majority of these skills over time on your own, with minimal guidance.

Of course, it is better to learn the same faster, under proper guidance, but learning late is better than learning never. This is why we in LawSikho are thriving – we teach what people learn over many years from their seniors within a matter of months.

However, most junior lawyers do not prioritize learning and are actively discouraged from investing their time and effort towards building a skill repertoire or a client base. They are told to do lame things like reading a caselaw every day that does not help anymore in the age of internet where even clients and interns can find any case law at a moment’s notice. 

They are especially discouraged to apply any sort of creativity. They are not taught how to get their own clients. They are not taught how to develop and grow a practice. 

Instead, they are told that they need to spend 10 years in poverty, building the elusive face value in the court. They need to start by carrying around files of seniors for a year or two. They are told that if they don’t get a job in a law firm or PSU or MNC, they have no future.

They are told that the only way to succeed in court practice is to keep spending more time in court so judges and lawyers get familiar with you, and then apparently they will begin to refer you cases.

All weakass, ridiculous, unrealistic strategies that do not work anymore even if they did in the past. 

Most of all, junior lawyers are subjected to tremendous negativity and told that there are not enough matters in the market itself. In reality, there are huge swathes of unaddressed markets where legal services are not being provided.

Even those who work in law firms face a different kind of negativity. They are brainwashed to think that the world outside is cold and terrible and that you will not survive if you left these hallowed law firms and tried to make it on your own. This is absolutely not true but a vast majority of law firm lawyers truly believe in this. 

There are other myths like only children of judges will do well, or that first-generation lawyers are very less likely to succeed in litigation. 

What nonsense. It is a tough profession indeed, but why create these stereotypes when hordes of first-generation lawyers are doing extremely well in every single court in this country?

You definitely need to develop the ability to get yourself some clients in order to succeed, and rapidly develop relevant skillsets that you can then demonstrate in your work, in the same way you would do in any other business – networking, building your brand, making your existence known, demonstrating the value you bring to the table, proving over time that you are reliable and you are not going away anytime soon and hence you are worthwhile.

Today I met a lawyer who did her law degree from IIT Kharagpur, and she is specialized in IP. She is being told by lawyers around her that there is very little work in IP in India. Are you serious?

There is not enough IP work?

I do not even know where to begin. 

Please stop surrounding yourself with losers who think that there is not enough work in the legal industry, immediately. Please associate with lawyers who have built successful, exciting practices in the last 4-5 years, not the ones who have built a practice 10-20 years back. You will see a huge difference in approach. 

I gave this lawyer a concrete plan she can begin to execute in the coming weeks. I hope she would do so and get back soon with some good news. 

Btw, when I mentioned to her about the great demand for lawyers in the media industry, she said “but is there much work in media law in India?” I was incredulous. I told her that media is the fastest growing industry in India, and proceeded to tell her all the different kind of media law work existing today. And then I realized, it is the environment around us that tells us all the time: there is not enough work in that. There is not much scope in that. You should do a CS instead. Damn it!

There is not enough scope in sports law? I recently interviewed the founder of Kreeda Legal in the LawSikho office. Check out a snippet of that. Sports law is truly a small niche, but even then Kreeda Legal has grown to over 15 lawyers!

If you are a young lawyer, and your mentors, seniors, etc tell you there is not much scope, or that you need to remain poor for many years to be a successful lawyer, run in the other direction. Don’t take that nonsense from anyone. 

There is no harm in starting small if you are not well prepared. But it is a lie that there is not enough money to be made for junior lawyers in this profession. All you need to develop the right skill sets.

And senior lawyers, for fudge’s sake, please stop passing on your failures, rejections, dejectedness, and negativity onto the younger generation of lawyers. There is so much to achieve in the legal profession, so much money to be made, and so many untapped opportunities, that you have only yourself to blame if you have still failed to succeed. And a whole world of changes is on its way, from which the younger tech-savvy lawyers are tremendously benefitting.

If you want to learn how to rapidly develop a law practice with new grammar and new syntax of the world that is emerging from the ashes of the past, please check this out. Just like any of our premium courses, this is also protected by a full money-back guarantee. Here is the refund policy in case you have not read it yet.

Also, here are the courses which can help you to rapidly learn practical skills that you will otherwise take many, many years to learn:

DIPLOMA

Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions)

EXECUTIVE CERTIFICATE COURSES

Certificate Course in Legal Practice Development and Management

Certificate Course in Advanced Criminal Litigation & Trial Advocacy 

Certificate Course in Real Estate Laws

Certificate Course in Prevention of Sexual Harassment at the Workplace

Certificate Course in National Company Law Tribunal (NCLT) Litigation

LIBRARY

Litigation Library by LawSikho

Corporate Law Library by LawSikho

TEST PREPARATION

Judgment Writing and Drafting Course for Judicial Services

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

The post Why is this lady lawyer forced to drive a truck to make ends meet? appeared first on iPleaders.

In this article, Parth Verma, from Symbiosis Law School, a first year student, talks about the plethora of types of companies that exist and certain legal aspects which are there in a company.

Introduction

This article has been written in the context of “The Companies Act, 2013”. Hence this article must be read in the light of The Companies Act, 2013. For downloading the said Act, click here.

According to Sec. 2 (20) of The Companies Act, 2013, a “company” means a company incorporated under The Companies Act, 2013 or under any previous company law.

The Indian Companies Act, 2013 has replaced the Indian Companies Act, 1956. The Companies Act, 2013 makes the provisions to govern all listed and unlisted companies in the country. The Companies Act 2013 implemented many new sections and repealed the relevant corresponding sections of the Companies Act 1956. This is a landmark legislation with far-reaching consequences on all companies incorporated in India.

It is needless to say that we have a multitude of companies of various kinds. From corporate companies to one person company, we have so many kinds of companies. Mainly these companies can be classified on the basis of size of the company, number of members, control, liability and manner of access to capital. This article shall be talking in-depth about all such, and various other kinds of companies too.

Classification of companies:

On the basis of size or number of members in a company:

Private Company:

According to section 2(68) of the Companies Act, 2013 (as amended in 2015), “private company”  is essentially defined as a company having a minimum paid-up share capital as may be prescribed, and which by its articles, restricts the right to transfer its shares. A private company must add the word “Private” in its name. It can have a maximum of 200 members.

Public Company

Section 2(71) of the Companies Act, 2013 (as amended in 2015), defines a “public company”. A public company must have a minimum of seven members and there is no restriction on the maximum number of members. A public company having limited liability must add the word “Limited” at the end of name. The shares of a public company are freely transferable.

One Person Company:

The Companies Act, 2013 also provides for a new type of business entity in the form of a company in which only one person makes the entire company. It is like a one man- army. Under section 2(62), One Person Company (OPC) means a company which has only one person as a member.

On the basis of control, we find the following two main types of companies:

Holding Company:

Such type of company directly or indirectly, via another company, either holds more than half of the equity share capital of another company or controls the composition of the Board of Directors of another company.

A company can become the holding company of another company in any of the following ways: 

• by holding more than 50% of the issued equity capital of the company,
• by holding more than 50% of the voting rights in the company,
• by holding the right to appoint the majority of the directors of the company.

Subsidiary Company:

A company, which operates its business under the control of another (holding) company, is known as a subsidiary company. Examples are Tata Capital, a wholly-owned subsidiary of Tata Sons Limited.

Click Here

On the Basis of Ownership, companies can be divided into two categories:

Government Company:

“Government company”under Section 2(45) of the Companies Act, 2013 is essentially defined as, that company in which equal to or more than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments (more than one state’s government), or partly by the Central Government and partly by one or more State Governments, and includes the company, which is a subsidiary company of such a Government company.

A government company gives its annual reports which have to be tabled in both houses of the Parliament and state legislature, as per the nature of ownership.

Some examples of government company are National Thermal Power Corporation Limited (NTPC), Bharat Heavy Electricals Limited (BHEL), etc.

Non-Government Company:

All other companies, except the Government Companies, are known as Non-Government Companies. They do not possess the features of a government company as stated above.

Associate companies

The provisions of Section 2 (6) of the Companies Act, 2013 and the Rule 2 of Companies (Specification of definitions details) Rules, 2014, essentially explains (defines) “associate company” as;

For companies say X and Y, X in relation to Y, where y has a significant influence over X, but X is not a subsidiary of y and includes joint venture company. Here X is an associate company. Wherein;

1. The expression, “significant influence” means control of at least twenty percent of total voting power, or control of or participation in business decisions under an agreement.
2. The expression, “joint venture” means a joint agreement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

When a company under which some other company holds either 20% or more of share capital, then they shall be known as Associate Company.

If in case a company is formed by two separate companies and each such company holds 20% of the shareholding then the new company shall be known as Associate Company or Joint Venture Company. The Companies Act 2013 for the first time had introduced the concept of the Associate Company or Joint Venture Company in India through section 2(6). A company must have a direct shareholding of more than 20% and indirect one is not allowed.

For example, A holds 22% in B and B holds 30% in C. In this case, C company is an associate of B but not of A.

The Doctrine of Ultra Vires

Background: MoA of any company is the basic charter of that company. It is a binding document that narrates about the scope of that company, about which it’s written.

Ultra vires in literal sense is a Latin phrase, which means “beyond the powers”. In the legal sense, the “Doctrine of Ultra Vires” is a fundamental rule of the Company Law. It states that the affairs of a company has to be in accordance with the clauses mentioned in the Memorandum of Association and can’t contravene its provisions.

Therefore, any act or contract is said to be void and illegal if the company is doing the act, attempts to function beyond its powers, as prescribed by its MoA. So, it can be stated that for any contract or any act to not fall under this criteria, has to work under the MoA.

It is noteworthy that a company can’t be bound by means of an ultra vires contract.

Estoppel, acquiescence, lapse of time, delay, or ratification cannot make it ‘Intra Vires’ (an act done under proper authority, is intra vires).

An act being ultra vires the directors of a company, but intra vires the company itself, can be done if members of the company, pass a resolution to ratify it. Also, an act being ultra vires the AoA of a company, can be ratified by a special resolution at a general meeting.

The Disadvantage to this doctrine

This doctrine stops the company from changing its activities in a direction agreed by all members, which if done would be profitable to the company. This is because clauses of the MoA don’t allow the company to go in that direction.

If any Act done by the directors, on behalf of the company, contravenes the clauses of MoA, the MoA can be amended, by virtue of passing a resolution, pursuant to which the aforesaid Act will become intra vires, vis-a-vis MoA. This defeats the whole purpose of having such a Doctrine, as then any act can be done, no matter what, since the clauses of the MoA can be amended anytime in order to make any action legal.

Advantages of private company

 A private limited company enjoys the following advantages:

Ease of formation:

A private company can be formed merely by two persons. It can start its business just after incorporation and doesn’t have to wait for the certificate of com­mencement of business.

Greater flexibility:

There are comparatively lesser legal formalities which are to be performed by a private company as compared to the public company. It also enjoys special exemptions and privileges under the company law. Thus it can be concluded that there is a greater flexibility of operations in a private company.

Quick decisions:

In a private company, lesser number of people are to be consulted. The core people of the company who are to make decisions have a closer relationship (so to say) and thus a better mutual understanding hence, obtaining consent is usually not a problem therefore it makes the process of making decisions faster.

Secrecy:

A private company is not required to publish its accounts or file several docu­ments. Therefore, it is in a much better position than a public company when it comes to the maintenance of business secrets.

Continuity of policy:

Same core people (having close relations) continue to manage the affairs of a private company. Due to their close relations, the continuity of policy can be maintained, as there is a mutual trust and a low dispute- attitude.

Personal touch:

There is comparatively, a greater personal touch with employees and customers in a private company. There is also a comparatively greater incentive to work hard and for taking initiative in the manage­ment of business.

When private limited company becomes a public limited company

The private limited company is usually preferred by businessmen because of all the special privileges it enjoys. In private limited company, the capital is derived from close friends, relatives and known persons and not from the public. Therefore, the Companies Act, 1956 does not impose stringent rules and regulations on private limited companies when compared to Public limited companies. However, in certain circumstances, a private limited would become a public company.

They are:

1. Conversion by default
2. Conversion by operation of law
3. Conversion by choice or by option

Conversion by default

A private company:

1. Restricts the right to transfer shares,
2. Limits the maximum number of members to 50,
3. Prohibits inviting the public for subscription of shares or debentures.

Upon the violation of any of these terms, a private company would become a public Company by default.

Conversion by operation of law: Deemed Public Company

A private company is converted into a public company (by the operation of law):

When equal to or more than 25% of the paid-up share capital of a private company is held by one or more public companies,

When the average of total turnover of a private company is more than or equal to Rs.25 crores for three consecutive years,

When the private company holds more than 25% of the paid-up share capital of a public company.

When the private company invites, accepts or renews the deposits from the public.

Conversion by Choice or Option

If desired, then out of its own free will, a private company, can get itself converted into a public company. Generally, when private companies want to expand and therefore require more capital resources, the private companies  by themselves can convert themselves into public companies.

By becoming public companies, they (the private companies) can issue shares or debentures to the public and hence can get the amount of capital required. In India, many organizations which have commenced their operations as private companies, got themselves converted into public limited companies in order to expand and diversify.

Any private company which desires to get converted into a public company has to make the necessary changes in its  Articles and follow the below mentioned steps:

1. It should call for a general meeting and therein pass a special resolution by following proper protocols, hence alter the Articles.
2. The copy of the resolution along with amended Articles is to be then filed with the registrar within 30 days of passing the special resolution.
3. The number of members should be increased to 7.
4. The company has to apply to the registrar, in order to obtain a fresh certificate of incorporation wherein the word ‘Private’ is deleted from its name.

Conversion of public into a private company

Certain pre-requisites for filing an application for conversion from Public to Private Company :

Limit of Shareholders:

Although no limit for maximum strength of Shareholders in a Public Limited Company is there, however, post-conversion into Private Limited Company, it becomes mandatory to ensure that the maximum strength doesn’t cross the threshold of 200 shareholders.

Non-invitation of funds from Public:

Post conversion, no funds/capital should be raised from the  general public, either through the issuance of prospectus or any other means.

Non- listing of Company:

Prior to conversion, it must be assured that the company was never listed on Stock Exchange and if it all it was listed, all necessary procedures were complied for delisting of the shares in accordance with the applicable e- laws, as prescribed by the Securities Exchange Board of India (“SEBI”).

Procedure for conversion of public limited company to private limited company:

Steps for Conversion

Step 1

The first step is to hold a meeting of the Board of Directors (“BOD”) of the Company for the following purposes:

• For considering the reason of conversion and suitable alterations in the Memorandum of Association (“MOA”) and Articles of Associations (“AOA”) of the Company reflecting the changes arising due to conversion;
• To provide authorization for filing the necessary application for conversion with the adjudicating authority.

Step 2

Next step essentially is to hold a General Meeting of Shareholders of the Company for obtaining their consent to the said conversion and the necessary alterations in the MOA and AOA, by means of passing a special resolution.

Step 3

To fill the  prescribed e-form with Registrar of Companies (“ROC”) within 30 days of the passing of the aforesaid special resolution.

Step 4

To file an application for conversion to the adjudicating authority within 60 days from the date of passing special resolution in the General Meeting of Shareholders. However, before proceeding with filing of the application, the company must at least 21 days before the date of filing application with RD, advertise notice of conversion both English and other regional newspaper widely circulating in the state wherein the Registered office of the Company is situated.

Step 5

The Company must serve individual notice of conversion to each of its Creditors by registered post. Further, the Company must also serve individual notice of the conversion to both; the RD and ROC or any other authority which regulates the Company by registered post.

Step 6

Post the necessary publications and serving of notice of conversion, the company shall within 60 days file the Application for conversion with Regional Directorate (“RD”) in the prescribed e- form, from the date of passing special resolution along with the following documents:

1. The Draft copy of altered MoA and AoA of the Company and copy of the Minutes of General Meeting of Shareholders wherein the said conversion was approved by the Shareholders;
2. Copy of board resolution giving the authorization to file such an application with RD;
3. Prescribed declarations from Directors/KMP (key management personnel) of the Company with respect to restriction of total number of members to 200, non-acceptance of deposits in violation of the law and various other matters as elucidated under the relevant section of the Act;
4. list of creditors drawn not older than 30 days from the date of filing Application supported by an Affidavit which duly verifies the said list.

Step 7

In case no objections are received, then the RD shall pass an order duly approving the application within 30 days from the date when the application was received.

Step 8

On the receipt of order, the same is to be filed with the ROC in the prescribed e-form within 15 days from the date of order. ROC will then close the former registration and issue a fresh certificate of incorporation, thereby evidencing the conversion from Public Limited Company to Private Limited Company.

Step 9

The Company has to now apply for conversion in the database of all tax authorities i.e. PAN/TAN, and all other registrations. The company has to ensure that the letterheads, invoices, name plate, and/or any other correspondences are amended/altered and undertake the necessary updation of bank records.

Foreign companies

A foreign company, as per The Companies Act, 2013 means a company or a corporate body which is incorporated outside India which either has a place of business in India whether by itself or through an agent, either physically or through an electronic mode and conduct any business activity in India in any other manner.”

Accounts of foreign company

Section 381 of The Companies Act, 2013 states the rules or instructions about how a foreign company’s accounts are to be handled. It states that:

1. Every foreign company must, in every calendar year;

(a) make a balance sheet and profit and loss account in such a form which contains all such particulars and includes or has annexed or attached thereto such documents as may be prescribed,

(b) must deliver a copy of those documents to the Registrar, provided that the Central Government may, by notification, direct that, in case of any foreign company or class of foreign companies, the requirements of above- pointer “a” wouldn’t apply, or would apply subject to such exceptions and modifications as may be specified in that notification.

2. If any document as is mentioned in Section 381(1) of The Companies Act, 2013 is not in the English language, there shall be annexed to it, a certified translation thereof in the English language.
3. Every foreign company shall send to the Registrar along with the documents required to be delivered to him under sub-section (1), a copy of a list in the prescribed form of all places of business established by the company in India as at the date w.r.t. reference to which the balance sheet referred to in sub-section (1) is made out.

 Prospectus of company

Types of Prospectus under the Companies Act, 2013

There are mainly four types of a prospectus, as discussed in The Companies Act, 2013, which are as under:

1. Abridged Prospectus: Mentioned in Section 2(1) of the Act,
2. Deemed Prospectus: Mentioned in Section 25(1) of the Act,
3. Shelf Prospectus: Mentioned in Section 31 of the Act
4. Red Herring Prospectus: Mentioned in Section 32 of the Act.

Matters which must be stated in a prospectus

• We find the matters which must be stated in a company’s prospectus, under the Companies Act, 2013, under which;
• Every prospectus which is issued by or on behalf of a company must be dated and that date would, unless the contrary is proved, be regarded as the date of its publication.
• It shall state such information and set out such reports on financial information as may be specified by the Securities and Exchange Board of India in consultation with the Central Government.
• Every director or proposed director his agent must sign a copy of the prospectus and that copy of prospectus must be delivered to the registrar on or before the date of publication.
• It is important that every prospectus that is issued to the public should mention that a copy of the prospectus along with the specified documents have been filed with the registrar.
• If the prospectus has a statement which is made by an expert, then that expert must not be engaged, interested in the formation or promotion or in the management of the company. A written consent of the expert should also be obtained before issuing the prospectus with the statement.
• It is important to note that a prospectus must not be issued more than 90 days after the date on which a copy of that prospectus is delivered for registration. If a prospectus is issued it will be deemed to be a prospectus whose copy has not been delivered to the registrar.
• A prospectus should make a declaration pertaining to the compliance of the provisions of the Act. The declaration should also state that nothing contained in the prospectus is in contravention of the provisions of the Companies Act, Securities Contracts (Regulation) Act, 1956 and Securities Exchange Board of India Act, 1992.
• A company can vary the terms of a contract, which are referred to in the prospectus or objects for which the prospectus was issued, provided the approval of an authority which is given by the company in general meeting by way of special resolution is obtained. For further reference, click here.

Offer of Indian Depository Receipts (Section- 390):

The Central government makes the rules for: 

1. The offer of the Indian Depository Receipt;
2. The requirement of disclosure in prospectus or letter of offer issued in connection with Indian Depository Receipt;
3. The manner in which Indian Depository Receipt shall be dealt with in a depository mode and by custodian and underwriters; and
4. The manner of sale, transfer or transmission of Indian Depository Receipts,

by a company either incorporated, or which is to be incorporated outside India, whether the company has or has not been established or, will or will not establish any place of business in India.

Government Companies

A “Government company” is defined under Section 2(45) of the Companies Act, 2013 as “any company in which not less than 51% of the paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company”.

Government Company is that company or an organization in which at least 51% of the paid-up share capital is held by the central or state government or partly by both central and state government. Examples for government companies are Steel Authority of India Limited, Bharat Heavy Electricals Limited, etc.

Features of a Government Company

There are several features of a government company which are helpful in increasing the potential and efficiency of the company to a great extent.

Separate legal entity

Perhaps one of the most important features of a government company is that a government company is a separate legal entity, which helps a government company in dealing with many legal aspects. One main legal aspect is the non-dependence on any other body, in legal terms as it is a separate entity in itself, this makes the system more fluent and better efficient.

Incorporation under The Companies Act 1956 & 2013

A government company is incorporated under “The Companies Act, 1956 & 2013”. This gives government company boundaries to work under and hence it profits the end-users of the services, as their are lesser chances of fraud or improper working. Also, the employees get better working conditions and are not exploited, as they have Law as their back- up, to protect them.

Management as per provisions of The Companies Act

Management, in a government company, is governed and regulated by the provisions of The Companies Act. This makes sure that employees are not exploited and overburdened. This further ensures the smooth functioning of the company.

Appointment of employees

The appointment of employees is governed by MoA and AoA (Memorandum of Association and Articles of Association). This ensures a fair appointment on the basis of meritocracy and people don’t misuse their contacts and enter government company.

Fund Raising

A government company gets its funding from the government and other private shareholdings. The company can also raise money from the capital market. Hence, a government company has several fund raising mechanisms, which helps it to be financially less burdened as finances in a government company can be raised with a lot of ways.

Limitations of a Government Company

• Government company usually has to face a lot of government interference and has the involvement of too many government officials. Hence, it has to go through lots of checks in order to make a stable decision. Governmental decisions are usually late as they follow an elaborate procedure before actual implementation.
• These companies evade all constitutional responsibilities of not answering to the parliament because these companies are financed by the government.
• The efficient operations of these companies are hampered, as the board of such companies comprises mainly of politicians and civil servants, who have special emphasis and interest in pleasing their political party’s co-workers or owners and are less concentrated on growth and development of the company. They (politicians and civil servants) essentially are focussed on their promotions which essentially is in the hands of their seniors, hence they keep on pleasing their seniors. In order to please their seniors, they usually make wrong decisions too.

Holding company and subsidiary company

Section 2 (46) of The Companies Act, 2013 defines holding company as, “Holding company, in relation to one or more other companies, means a company of which such companies are subsidiary companies”.

According to Section 2 (87) of The Companies Act, 2013;

“Subsidiary company or subsidiary in with respect to any other company (that is to say the holding company), means a company in which, either the holding company controls the composition of the Board of Directors or exercises/controls more than half of the total share capital either on its own or together with one or more than one of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Further Explanation

• The composition of a company‘s Board of Directors would be deemed to be controlled by another company if that other company by the exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
• The expression “company” includes any body corporate;
• ”Layer” in relation to a holding company means its subsidiary or subsidiaries”

What Is a Subsidiary company ?

A subsidiary company is that company which is both owned and controlled by another company. The owning company is called a parent company or a holding company.

The parent of a subsidiary company may be the sole owner or one of several owners, of the company. If a parent company or holding company owns the full other company, that company is called a “wholly-owned subsidiary.”

There is a difference between a parent company and a holding company, in terms of operations. A holding company has no operations of its own and it owns a controlling share of stock and holds assets of subsidiary companies.

A parent company is simply a company that runs a business and owns another business — the subsidiary. The parent company has its own operations , and the subsidiary may carry on a related business. For example, the subsidiary might own and manage property assets of the parent company, to separate the liability from those assets. 

Holding company and subsidiary has certain common grounds on which they share relationship, such as;

Consolidated Balance Sheet

It is the accounting relationship between the holding company and the subsidiary company, which shows the combined assets and liabilities of both companies. The consolidated balance sheet shows the financial status of the entire business enterprise, which includes the parent company and all of its subsidiaries.

Management and Control

The autonomy of a subsidiary company may seem to be merely theoretical. Besides the majority stockholding, the holding company also controls important business operations of a subsidiary. For example, the holding company takes the charge of preparing the by-laws which governs the subsidiary, especially for matters pertaining to hiring and appointing the senior management employees.

Responsibility

The subsidiary and holding companies are two separate legal entities; any of them may be sued by other companies or any of these companies may sue others. However, the parent company has the responsibility of acting in the best interest of the subsidiary by making the most favourable decisions which affect the management and finances of the subsidiary company. The holding company may be found guilty in a court, for breach of fiduciary duty, if it does not fulfil its responsibilities. The holding company and the subsidiary company are perceived to be one and the same if the holding company fails to fulfil its fiduciary duties to the subsidiary company.

Investment in holding company

A subsidiary company can’t hold shares in its holding company. Any company can, neither by itself nor through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a holding company to its subsidiary company would be void:

Provided that nothing in this subsection shall apply to a case;

(a) where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company:

Illegal associations

Illegal associations are taken care of by section 464 of The Companies Act, 2013. This section states that no company, association or partnership consisting of more than 50 people be formed in order to carry on any business for gain unless it is registered under The Indian Companies Act. It may also be registered under some other Indian law too. For example, a limited liability partnership, which is formed for carrying on business for gain by professionals, registered under the Limited Liability Partnership Act, 2008 is a legal body corporate. There is no limit to the maximum number of members in such a limited liability partnership. The objective of such associations must be to carry on a business for gain. Section 464 doesn’t apply to Non- Profit- Organizations or Charitable Associations because the objective is not earning profit.

Rules for counting the number of people

• A person, either natural or artificial (an artificial person is an entity created by law and given certain legal rights and duties of a human being. It can be real or imaginary and for the purpose of legal reasoning, is treated more or less as a human being. For example, corporation, company, etc.), would be treated as one person. Therefore, a company is treated as a single person.
• Similarly, a joint Hindu Family managed by Karta is also treated as a single person.
• If two or more joint hindu families form an association, all the adult members of the family would be taken into consideration while counting the number of members.
• It is also important to note that any partnership firm is not a separate legal entity. All the partners would be treated as different persons.
• If two or more persons hold a share jointly, they would be treated as one single person.

Consequences of an Illegal Association;

No Legal Existence:

Any Illegal association cannot enter into binding contracts. Neither the association nor the members can file a suit against a third-party who has contracted with it. One member cannot sue other member in respect of any matter connected with the association. Further, a member cannot file a suit against the association.

Unlimited Personal Liability of the Members:

The liability of the members is unlimited. Every member of such an association is personally liable for all the liabilities incurred in the business. The third party can take action against the members. If the number of members in an illegal association comes within the statutory limit, the illegal association would not become legal merely by virtue of such reduction.

Case Law

In Badri Prasad v. Nagarmal, the Supreme Court held that in the case of an illegal association no relief will be granted to its associates or members as the contractual relationship on which it is founded is illegal (ab – initio), but subscribers will be entitled to sue for recovery of their subscriptions.

Conclusion

We, hence, saw different kinds of companies and their functions. We saw that each one is important and is one of a kind. Every company is important for Global development. We can hereby conclude that The Companies Act, 2013 is extremely important as it gives a boundary to companies because of which their legal scope remains defined. This defined scope, ultimately helps the end-users as the companies have a legal framework under which they are bound to work. Hence, these companies remain under a certain boundary wall and hence they don’t misuse their power. Thus it helps in many ways like the employees get protected in terms of their labour rights, the end-users get good quality products and the society as a whole face comparatively less company-related fraudulent issues because the law has got it all in its hands. The companies Act of 2013, replacing The Company law of 1956, has given wonderful amendments which have improved the “quality of this law” to a great level.

Companies Act is required because it provides for class action suits for shareholders which means that The Companies Act, 2013 narrates concept of class actions suits in order to make shareholders and other stakeholders, more informed and knowledgeable about their rights.

The said Act provides more power to shareholders. It stipulates appointment of at least one woman Director on the Board (for certain class of companies), hence it improves women’s employment in the corporate sector. It stipulates certain class of companies for spending a certain amount of money every year on activities or initiatives which reflects corporate social responsibility. It has introduced the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal in order to replace the company Law Board for industrial and financial reconstruction. Such tribunals relieve the courts of their burden and simultaneously provides specialised justice. It permits cross border mergers, in both ways; a foreign company merging with an Indian Company and vice versa, but with the prior permission of RBI.No independent director shall hold office for more than two consecutive terms of five years.

It states that all the listed companies should have at least one-third of the board as independent directors. Such other class or classes of public companies as prescribed by the central government shall also be required to appoint independent directors.

It states that at least seven days’ notice to call a board meeting must be given. The notice may be sent by electronic means to every director at the address under which he is registered in the company. Another beauty of this The Companies Act, 2013 is that it doesn’t restrict an Indian company from indemnifying (compensate for harm or loss) its directors and officers like The Companies Act, 1956. It also provides for the rotation of auditors and audit firms in case of publicly traded companies. It prohibits auditors from performing non-audit services to the company where they are an auditor to ensure independence and accountability of auditor. It makes the entire process of both rehabilitation and liquidation of the companies in the financial crisis, time-bound.

Bibliography

Types of Companies:

On the basis of size or number of members in a company- 

http://www.economicsdiscussion.net/company/types-of-companies/31784

Associate company-

https://www.caclubindia.com/articles/an-overview-on-associate-company-27387.asp

https://www.setindiabiz.com/learning/associate-company/

Ultra Vires-

https://www.toppr.com/guides/business-laws/companies-act-2013/doctrine-of-ultra-vires/

Circumstances under which a private limited company becomes a public limited company-

https://accountlearning.com/under-what-circumstances-a-pvt-company-be-converted-to-public-company

Conversion by Operation of Law or Private Company to be Deemed Public Company:

https://www.businessmanagementideas.com/organisation/types/conversion-of-a-private-company-into-a-public-company/8936

http://www.mca.gov.in/SearchableActs/Section381.htm

Prospectus of a company- 

https://blog.ipleaders.in/information-prospectus-company/

Government Companies-

https://www.toppr.com/guides/business-studies/private-public-and-global-enterprises/government-company/

http://www.arthapedia.in/index.php?title=Government_Company

Holding company and subsidiary company-

https://smallbusiness.chron.com/relationship-between-holding-subsidiary-company-14683.html

https://blog.ipleaders.in/difference-between-holding-and-subsidiary-company/

Illegal Association-

https://www.owlgen.com/question/write-a-note-on-illegal-association

Salient Features of Indian Company Act, 2013-

https://www.clearias.com/indian-companies-act-2013-salient-features/

Referred books:

• Company Law

Author: Avtar Singh

Publication: Easter Book Company

15th Edition

• The Companies Act, 2013 (Bare Act)

Publication: Universal Law Publication

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This article is written by Asgar Ali, pursuing a Diploma in Industrial and Labour Laws from LawSikho.com. Here he discusses “Leave Related Provisions In Shops and Establishments Vs. Standing Orders Rules”.

At every workplace, for bringing Safe, Healthy and productive work culture a standard Leave and Attendance policy play an important and beneficial role. Such Leave policy should be designed keeping in view business need, socio-economical requirements and most importantly the compliance fulfilment of all applicable statutory norms i.e. Factories Act 1948, applicable state factory rules, shop and establishments acts and standing order rules applicable to that industry or establishment in Industrial employment and labour laws context. This Context shall go wider in near future after the enforcement of provisions of new labour codes in India which shall be helpful in bringing transparency in leave related provisions vested into Industrial relation statutes, safety and labour welfare matters in our Indian Industrial employment and labour laws context.

The Industrial Employment (Standing Orders) Act, 1946, obliges the employer to define and issue the uniform working conditions of employment in his Industrial establishment in case of 100 or more than hundred workers are employed on any day of the previous year. A model or certified standing order is more important than HR Policies and procedures of an organization. Though, in standing order, there are many matters of disciplines and uniform conditions at every type of industry like Entrance and Leaving, working Hours, wage rate, Shift schedules, Misconduct provisions, process of Inquiry, investigation, termination, separation etc., but in this article, specific to standing order rules, Shop and Establishment Acts, the matter related to Attendance and Leave provisions have been mentioned.  

In compliance of a certified and Model standing order, The Leave related provisions are covered into leave and attendance policy of any organisation to which the employees and workmen of that organisation are agreed to comply this policy likewise all other internal policies of that organisation. Such things are specifically mentioned into employment agreements of all employees and workmen under the clause of “Leave policy” or any other similar names. In such clauses, it is clearly mentioned that how many leaves one would be entitled to take in a certain time period. 

Leaves and Holidays related Provisions as per Indian Employment and Labour Laws  

The matters related to Holidays and Leaves of employees and workers working in any organisation in India are predominantly governed by the Factories Act, 1948 and shops and establishment acts applicable state wise. Leaves and Holidays related provisions can be categorised into following sub-sections: 

1. Provisions of Leaves and Holidays to Factory Workers 
2. Provisions of Leaves and Holidays to Non- Factory Workers 
3. Provisions of Leaves Carry Forward and its Yearly Encashment
4. Provisions of compensatory or extra leaves 
5. Weekend Holidays
6. National Holidays  
7. Other Provisions of Leaves 

Provisions of Leaves and Holidays to Factory Workers: 

A Worker as per Factories Act is defined as any person who is employed, directly or indirectly through contractor (or manpower supply agency), with or without brought into knowledge of principal employer which may be with or without remuneration in any process of manufacturing, any cleaning work of machines, manufacturing premises, allied work activities of manufacturing process. Hence, the implied meaning of worker as per the Factories Act, 1948 covers its employees also. 

The Factories Act says that every worker who has been worked in any factory up to or above the period of 240 working days is eligible to take leaves with his wages in the succeeding year @ one leave for every twenty man-days worked by him during the preceding year. In case of a non-adult person, he shall be eligible to take leaves with his wages in the succeeding year @ one leave for every fifteen (15) man-days worked by him during the previous year.

Click Above

So it can be said that any worker who has been employed or worked in a factory on the first day of January of a Calendar year and has been worked for two-third of the total number of days in a year then he shall be eligible for the leaves during the rest of that calendar year.

Provisions of Leaves and Holidays to Non-Factory Workers (Shops and Establishments Act)

Likewise, the Factories Act, 1948, similar provisions have been adopted under the various Shops and Establishment acts applicable in different states of India. 

For instance, the following provisions are given to any person employed in an establishment situated in Delhi related to his leaves provisions as per Delhi Shops and Establishments Act, 1954, which mandates:

1. 15 Nos. Privilege leave (PL) after every 12 working months i.e. any worker is entitled to gain at least 5 days of privilege leave (PL) for every 04 months of his continuous employment.
2. 12 Nos. Casual Leaves (CL) and Sick Leave (SL) every year – means any worker is entitled to gain at least 01 days of casual Leave (CL) for every working month of his continuous employment.

Provisions of Leaves Carry Forward and its Yearly Encashment ( for Factory workers as well as Non – Factory workers) 

A worker in any establishment/organisation is allowed to carry forward his leaves to the next year in case the worker is availing the whole of the leaves permissible to him. Though, such carry forward of accrued holidays is constrained to maximum thirty days in case of an adult worker and forty days in case of a non-adult worker. The employer sometimes interprets Section 80 of the Factories Act by different ways as per their nature of work adding dearness allowance or cash equivalent of regular remunerations such as concessional food or other articles, So it varies from one organisation to another due to its nature of work.

In fact, the leaves related matters are directly linked to the business, working culture and vision of an organisation, that’s why now most of the multinational companies in India are promoting leave earning by extra work hours, carry forward and encashment so that their business working might not get interrupted. Hence, leave encashment policy is considered as an important part of HR (Human Resource) Policies and procedure manuals and accordingly, it helps in framing the employment contract of a worker in an organization. 

Similarly, a non-factory worker is also entitled to take benefit of carrying forwarding his leaves as per the relevant provisions mentioned in most of shops and establishment acts of their respective states. For Example, in Delhi, an employee of an establishment ( a non-factory worker) is entitled to carry forward his accrued PL (privilege leaves) to the next year subjected to a maximum of 3 times the period of PL (privilege leaves) to which he is allowed after every 12 months’  employment. However, casual leaves may not be carried forward in this context. 

Provisions of compensatory or extra leaves  

Every worker at any establishment/organisation is entitled to get compensatory leaves in lieu of working extra at any day of Weekly off or Holiday declared by that organisation as needed by that organisation. There is a provision of encashment of these leaves in case such clause is mentioned in the model standing order of that company. 

Basic wages in lieu of compensatory leaves are also to be given in case of worker is discharged, dismissed or his employment is superannuated or the separation from the company in terms of resignation as the case may be. There are strict deadlines for making reimbursement of wages of such workers in lieu of their leaves as per provisions of Factories Act, 1948.

Also, similar to the provisions as per the Factories Act, 1948 an employee is entitled to encashment of privilege leave during the time of his job separation. Though, that employee shall not be entitled to encash the casual leaves he had at that time. Casual leaves may get lapsed in such conditions.

Weekend Holidays

In our country India, in accordance to the provisions mention as per the Factories Act, 1948, the law advocates a maximum number of hours within a week where a worker cannot be employed beyond its permissible limit. An adult worker is not allowed to work for more than 48 hours a week and not more than 9 hours in a working day. As per the Factories Act, Weekly holiday is obligatory. Sunday- like a first day of the week shall be observed as a weekly holiday. It is obligatory for the employer to make sure that no worker works more than Ten (10) days without a rest day of Twenty four (24) hours. Hence, if any worker is asked to work on weekly holiday, he shall be given a full holiday on one of three immediate days or after the normal day of coming holiday as the case may be. Consequently, the weekly holiday that is one full day as holiday in every week may get changed from Sunday to any other days of a week by complying the procedure laid down under Section 52 of the Factories Act, 1948, which obliges the employer to deliver a notice to the local labour inspector before making such changes in the weekly holidays in his organization duly mentioning the appropriate reasons.
Similar provisions of Leaves are agreeable under the shops and establishment acts of respective states in India. 

National Holidays  

In India, Every State Government has the authority to declare National, Festival and any other mandatory holidays for industrial establishments under the provisions of their respective Industrial Establishment Acts, State factory rules. Several states have passed their own laws for National and Festival Holidays. For Example, The Orissa Industrial Establishments (National and Festival) Holidays Act, 1969 necessitates employees working on specific days to be paid double of wages rate or double overtime rate. The workers can also choose to get normal wages and a compensatory off on another day. 

The similar provision of Leaves on National Holidays is also applicable for Non- factory Workers i.e. workers employed under shops and establishment acts of various states  

For Example, In Delhi, The Punjab Industrial Establishment (National and Festival Holidays and Casual and Sick Leave) Act, 1965 is applicable where every worker is entitled to avail succeeding mandatory holidays which are as “Three National Holidays of one whole day each falling on every 26th January, 15th August and 2nd October” in a calendar year.

Other Provisions of Leaves 

• Maternity Leaves

The Maternity Benefits Act, 1961 was ratified with respect to the employment of pregnant women in any establishments. Such leaves are entitled to both types of Female workers i.e. Factory Workers as well as Non- Factory Workers.  

With recent amendments made to the Maternity Benefits Act, 1961, now the paid maternity leave has been extended from 12 weeks (84 days) to 26 weeks(182 days) for women working in an organisation. Such employees are also allowed to one additional month of paid maternity leaves in case of complications arising during or due to pregnancy, delivery of a child, miscarriage, premature birth, and critical health issues to newborn baby and mother, any medical surgery or operation related to maternity matters  

• Paternity Leaves

In India, there are certain provisions for employees working in the government sector to gain benefits of Paternity Leaves. In the Year 1999, the Central Government made provisions for paternity leaves by gazette notification under Central Civil Services ( Leave) Rules 551(A) which is applicable to a male Central Government employee (it also includes an apprentice and a probationer employee )with less than two surviving children. Under these provisions, such employee can take 15 days leaves in order to take care of his family within 6 months from the date of birth of a new baby. 

But, as on date, there is no such law prevails over private-sector employees and it depends upon the desecration of employers whether they have added provisions of Paternity Leaves for their employees. There are many multinational companies like Infosys, Facebook, TCS and Microsoft etc. who have added provisions of Paternity Leaves in their Leave policies. In major countries like Norway, Sweden, Iceland and Spain, there is a statutory provision of granting paternity leaves to working people.   

In September 2017, Shri Rajeev Satav introduced a bill titled as Paternity Benefit Bill, 2017 in parliament house with an aim to provide paternity benefits to a natural parent, adoptive parent or any person who is acting in loco parentis to the relevant child. Hope this bill shall become law in the near future so that paternity rights of working people can be protected.   

Conclusion

Leaves, weekends and Holidays re-energize us. Every working person has the right to take leaves during his employment in any organisation from top to bottom whether it is a factory, corporate office, shop, mall, cinema hall, Media industry, circus or any of the workplace where he is earning his livelihood. The Indian labour laws empower every working person to take leaves and holidays on festival occasions, public holidays and if he performs his duty on these days then he shall be paid more than normal working days. Leaves are one of the “Basic Needs” of every working person and helpful to remove his physical, psychological stresses and gives him pleasure. 

Aristotle says that pleasure in the job puts perfection in the work. For bringing perfection, and most importantly pleasure, the Leave policies must be good.

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

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This article is written by Nirmalya Bhattacharya, pursuing a Certificate Course in Labour, Employment and Industrial Laws for HR Managers from LawSikho.com. Here he discusses “civil and criminal liabilities of directors, managers and officers of the company for violation of labour legislations”. 

Directors, Managers or Officers mostly constitute the definition of employer for any labour legislation in India. Being a part of the employer category, they individually, or as an organization is responsible for basic functions like payment of the employees in proper right time and legally justified amount, maintaining health, safety and welfare measures in the workplace, providing them with the mutually agreed benefits including leave & holidays and treating employees fairly. Employers are the custodians of most of the statutory provisions and hence they need to abide by the laws with diligence. Any negligence on their behalf, i.e., any violation of the legal provisions can result in civil as well as criminal offences.

For the purpose of this article, I am taking into consideration the following acts and shall bring out in detail about the civil and criminal responsibilities of the Directors and/ or Managers and/ or Officers of a company.

1. Minimum Wages Act 1948
2. Payment of Wages Act 1936
3. The Contract Labour (Regulation and Abolition) Act 1970
4. The Factories Act 1948
5. The Industrial Disputes Act 1947

Statute 1: Minimum Wages Act 1948

Moreover, as per section 22C(2) of the act, when any offence in contravention to the provisions of the MW Act, has been committed by a company and either any Director or Manager or Secretary or any other officer had shown proven evidence of consent or encouragement or negligence for violation, he will be also treated as guilty and shall be liable to be judged and punished accordingly. In such cases, the offence will be treated as a criminal offence and shall be proceeded against and punitive action shall be taken accordingly.

Statute 2: Payment of Wages Act 1936

Statute 3: Contract Labour (Regulation & Abolition) Act 1970

However, this is to be mentioned as per section 25(2) of the Act, when an offence in contravention to any provision of the act has been done by a company, and it is proved that it has been done via any consent or negligence on the part of any of the Directors, Manager, Managing agent or any other officer of the Company, he will be considered guilty and shall be proceeded against or punished as it will deem fit.

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Statute 4: The Factories Act 1948

Statute 5: Industrial Disputes Act, 1947

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 Namrata K.T, student of 3rd-year BALLB from Symbiosis Law School, Pune.

Introduction

It is from the period of 1960 that Clinical Legal education has proved to be a substantial part of legal education. It was in United Kingdom in 1970, where the very first clinical legal education started. Further, it is known to have been started in Australia in 1990. Another important aspect which we need to draw our attention to is that there always exists a gap between theory and the practical and in bridging the gap between the two, clinical legal education plays an important role. Now, it becomes important for one to understand what exactly a Clinical Legal Education is all about[1]. A Clinical legal Education can be defined in the following ways- “An ideal learning environment, whereby students are required to identify, research and apply knowledge in a particular setting, which almost resembles the actual world where it is practised. The proper channelling of the legal education clinics will actually help the students in gaining better knowledge”

The actual meaning of the term ‘Clinical’- is the analogy of trainee doctors who come in terms with the actual patients in their respective medical clinics, which help them gain knowledge and experience in the initial stage of their career. Hence, it can be said that Clinical Legal Education is the only way in which both theory and practical can be brought together[2].

Evolution and development of Clinical Legal Education in India 

Dragging our attention towards the formation of roots of Clinical Legal Education(CLA) in India, it can be stated that, the CLA has derived its origin from both in Legal Aid and Legal Education Reform Movements. It was in 1855 when the Formal Legal Education started in India. Following this, a number of committees and commissions were set up in India for the sake of development of Clinical Legal Education in the Indian sub-continent. There have been numerous stages of development which the Clinical Legal Education has gone through in the years and some of the important ones have been discussed in this article

The recommendation put forth by various committees

The Bombay Legal Education Committee which concluded in 1949 recommended the following aspects

• Practical courses are to be made compulsory for the students who indent to take up law as a profession.
• It is important for the teaching method to include various aspects under its ambit like that of Group Discussions, Seminars and Moot Court Competitions[3].

The 14^th report of law commission of India

It came up to recognize the importance of professional training, and further added that this aspect plays an important role in creating a balance of both academic and vocational training. It recommended the following aspects

• University training must be followed by a professional course which would concentrate on practical knowledge.
• Professional Course should be made compulsory for only those aspirants who seek to practice law in courts.
• It dragged the attention of people towards institutionalizing and improving the overall standards of legal education which would, in turn, benefit a number of people on a larger scale.
• With regard to the above-mentioned point, the report also discussed various teaching techniques like that of Seminars, Mock Trials and Simulation Exercises and the importance of the introduction of the same[4].

Although this commission’s report didn’t directly deal with the improvement of skills, it did so indirectly which was by supporting the use of certain teaching methods that would prove to be more helpful in terms of the development of various required skills.

Introduction of the 5 year Course

It was finally in the year 1970 when a link between legal aid and legal education reform was published in a report by an expert committee of legal aid by the Ministry of Law and Justice. In 1977, National Seminar on Legal Education at Bombay, the Bar Council of India (BCI) unanimously agreed to introduce the five-year course against the three-year course, putting an end to the long-standing debate of 5 years. It was in July 1978 that the new five-year course was introduced and it was open to students of 10+2. In addition to this, the BCI also came up with the recommendation of practical training in the curriculum.

Opportunities offered by National Law School India

In order to achieve the objectives of the clinical program, there was a wide variety of opportunities offered by the NLSIU. In 1997, the Bar Council of India issued a curricular, and this was done by the BCI by using its authority under the Advocate’s Act. There was a direction given to the universities and law schools across the country to revise their curriculums[5]. In addition to all this, there was an introduction of 21 compulsory courses and 2 optional courses. Eventually, law schools were required to introduce 4 practical papers since 1998-99 and this was seen as a significant step towards inducting Clinical Legal Education in the legal curriculum.

The 2^nd UGC Report

The second UGC report was prepared by the Curriculum Development Committee, which was for the particular interest in Clinical Legal Education. They were later asked to upgrade the LL.B syllabi. In addition to all this, the NLSIU offers compulsory as well as optional courses in Clinical legal Education to the students. Currently, the compulsory courses to be studied by students are- Clinical interviewing, Counseling, Clinical integration, special clinic integrated with Special Placements of two months from 3^rd year to 5^th year of 5-year LL.B course[6].

Issues that arise while implementing it

Considering the current scenario, it can be said that legal education in India is going through a transformation phase. With the advent of the 21^st century, the law as a career is going potential, but at the same time, Indian legal education has grown pace with globalization. In terms of the ratio of lawyers to the population of the country, there is still much left to be achieved. It can be said that legal education has changed significantly in the last quarter year especially because of the globalization of trade and business. Here it can be concluded that globalization has changed the entire dynamism of polity and society[7]. A number of challenges faced by the Clinical Legal Education in India are discussed under:

• There arises a problem with regard to expertise and ability of BCI in terms of addressing the demands and the changing terms of Clinical Legal Education, as the present world requires them to be in sync with information technology and biological and scientific development.
• Lack of Funding in significant areas like that of Clinical legal Education acts as a disadvantage. Further, infrastructure, payment of an adequate payment to faculties and lastly technical requirement of a legal education pose as a challenge and act as a back foot in the long run.
• There exist loopholes in inspection and recognition of colleges by BCI, and this acts as a bigger challenge to the smooth functioning of Clinical legal Education in India.
• Implementation of separate accreditation or rating system for legal education in India, makes it fall back in terms of competition on an overall scale, this in acts as an escape mechanism of the overall competition that should actually exist in terms of education system across country.

The role played by of Jurists, Lawyers and Students

 Laws for the regulation of professional legal education in India are made by the parliament of India with reference to entry 66, 67 & 78 of List I (Constitution of India), which includes two regulatory bodies:

The Bar Council of India (BCI) as a height body regulating the standards of the legal profession (U.P. vs. State of U.P., [1973[8]]), and;

The University Grants Commission as an umbrella organization for all institutions of higher education. All the issue relating to admissions, practice, ethics & standards are addressed by BCI in consonance with state bar councils. The powers of BCI are also envisaged under the Advocates Act, 1961 under Section 7.

Over the period of time, it has been observed that it is the clinical legal education which actually encourages lawyers and law professionals to start showing interest in human rights issues, and it also further encourages them to street law and to take up more of pro-bono cases. This leads to the understanding of professional skills in the law field. Also, holding conferences and meetings and paying visits to internal and external legal clinics acts as a great advantage in the law career.

The best way for a legal professional to become familiar with the new issues is by interacting with the law students and professionals. It was seen that, by the way of performance of various programs in legal clinics, the professionals become more interested in dealing with different spheres of law and this also helps in fighting more of pro bono cases.

Legal clinics improve the knowledge of professional groups such as school teachers, employers and judges concerning human rights issues based on their needs and talents. Therefore, each group requires its special instruments of human rights education. Our research shows that it would be successful to teach the rights of each class to the opposite class such as educating employee’s rights to employers and children rights to teachers and the rights of accused to judges.

Significant contributions made by Students

Students are considered to be one of the main elements of Clinical human Rights Education. The reason for this is that, they are first trained as a trainee, then they step up and learn legal skills and at the same time work as educators in the law field. Some of the important contributions can be listed as- First, the focus of this method is rather on students learning it rather than teachers teaching it, hence amble amount of work is put into it by the students itself. Second, when it comes to theoretical norms, they are usually tested and operated upon by the students and teachers and even here it reflecting the working of both teachers and students for the purpose of attaining a common goal[9].

This particular method gives attention to the resolution of disputes the same kind of attention which is given to the content of the rules. Fourth, the clinical method gives complete freedom to the students to use creativity, helps them to come up with self-determined solutions to the problems faced by them and this acts in contrary to the formal structure which imposes strict rules.

Suggestions to Improve the Current Scenario

The major loopholes which exist in these circumstances are that even most of the law schools in India have not addressed this issue to the fullest and hence, the students end up not having practical experience. Therefore, various other methods to be undertaken in order to ensure the proper functioning of the Clinical Legal Education in a more precise way and bring into effect and make it work in the advantage of various people. Following are the few developments listed which if implemented in the right way would work as an advantage.

• The BCI has to amend rules to allow law professors to practice in the course of teaching a clinical class and encourage law schools to dedicate faculty to teaching clinics and offer students credits for participating in clinics.
• Vice-Chancellors and other law school administrators have to devote resources to hiring clinical faculty and offering clinical courses with low student-teacher ratios.
• Law professors should develop sustainable clinics and work with law school administrations to implement them.
• Non-governmental organizations have to collaborate with law schools to work with communities and advance the social justice mission of education.

Conclusion

Despite considerable efforts to educate human rights around the world and declaring the years 1995-2004 as the decade of education, the teachings of human rights still have not been completely and correctly entered into societies. One of the most important problems is the use of ineffective methods for human rights education. It is of great importance to find an active, effective, collaborative, comprehensive and sustained educational method for human rights. Based on our research, legal clinics have an effectual role in creating these features for human rights education as far as clinical human rights education can be introduced and recommended as a premier method to increase human rights knowledge in the community.

National law school model established post-independent Indian legal education has done a great job in the development of legal education in India with a strong commitment to improving existing legal infrastructure. Certainly, with this spirit, these schools have also phased critical changes in syllabus and structure to cater to the new generation of lawyers.

Bibliography/References

Online Sources

• Abhay Rai, The future of law teaching institutions, The Hindu (JULY 30, 2002) https://www.thehindu.com/todays-paper/tp-features/tp-educationplus/the-future-of-law-teaching-institutions/article28469058.ece…………………………………………………………………………………….. 6
• Anam Ahmad, Clinical law semester, Academica (10/30/2016) https://www.academia.edu/RegisterToDownload#RelatedPapers………………………………………… 3
• Jon-Paul Knight, Paralegals: the importance of gaining as much experience as you can’ by Amanda Hamilton, Open Justice (July 18, 2019) http://www.open.ac.uk/blogs/openjustice/?author=8….. 4
• Malveka Nautiyal, Legal Education in India Vis-à-vis other Asian Nations, Ipleaders (October 12, 2018) https://blog.ipleaders.in/legal-education-in-india/……………………………………………………………… 3
• Archana K, Practicability of Clinical Legal Education in India- An Overview, Journal of education and practice (July 26, 2013) file:///C:/Users/Admin/Downloads/9866-12075-1-PB.pdf……………….. 8
• Shweta Tiwari, Clinical Legal Education As A Means To Advance Access To Justice In India Live Law(3 July 2017)………………………………………………………………………………………………………………….. 5

Books

• Indu Bhan, Legal Eagles: Stories of the Top Seven Indian Lawyers, Random House India, 31-Aug-2015 – Law – 256 pages…………………………………………………………………………………………………….. 5
• Richard Susskind, Tomorrow’s Lawyers: An Introduction to Your Future, Oxford University Press, 2017 – LAW – 241 pages…………………………………………………………………………………………………. 4

Endnotes

[1]Malveka Nautiyal, Legal Education in India Vis-à-vis other Asian Nations, Ipleaders (October 12, 2018)  https://blog.ipleaders.in/legal-education-in-india/.

[2]Anam Ahmad, Clinical law semester, Academica (10/30/2016) https://www.academia.edu/RegisterToDownload#RelatedPapers.

[3] Jon-Paul Knight, Paralegals: the importance of gaining as much experience as you can’ by Amanda Hamilton, Open Justice (July 18, 2019) http://www.open.ac.uk/blogs/openjustice/?author=8.

[4] Richard Susskind, Tomorrow’s Lawyers: An Introduction to Your Future, Oxford University Press, 2017 – LAW – 241 pages.

[5] Indu Bhan, Legal Eagles: Stories of the Top Seven Indian Lawyers, Random House India, 31-Aug-2015 – Law – 256 pages.

[6] Shweta Tiwari, Clinical Legal Education As A Means To Advance Access To Justice In India Live Law(3 July 2017)

https://www.livelaw.in/clinical-legal-education-means-advance-access-justice-india/.

[7]Abhay Rai, The future of law teaching institutions, The Hindu (JULY 30, 2002) https://www.thehindu.com/todays-paper/tp-features/tp-educationplus/the-future-of-law-teaching-institutions/article28469058.ece.

[8] U.P. vs. State of U.P AIR 453 1978.

[9]Mrs. Archana K, Practicability of Clinical Legal Education in India- An Overview, Journal of education and practice (July 26, 2013) file:///C:/Users/Admin/Downloads/9866-12075-1-PB.pdf.

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

The post Realizing the Importance of Clinical Legal Education In India appeared first on iPleaders.

This article is written by Kartikeya Kaul, a first-year student pursuing a BA.LLB. from Symbiosis Law School, Noida. This is an exhaustive article dealing with the Minority Protection under Company Law.

Introduction 

Historically, we have seen the majority shareholders in the company have the absolute right and power in the operations and the working of a company. This may also lead to abuse of power by the majority and the minority shareholders suffer because of this. This often leads to mismanagement of the company and oppression of the minority.

Despite the provisions laid out in the Companies Act 1956, the minorities didn’t have enough time and resources, so they found themselves incapable of exercising their rights. So, this leads to the formation of Companies Act 2013, in which the interests of minority shareholders were taken into consideration and they were protected.

So, if in case, the minority has been treated unfairly in the company, the freedom to approach an appropriate body should be established in the course of law in order to protect the interests of the minority shareholders.

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The rule in Foss v Harbottle

A Rule of Corporations law: shareholders do not have a separate course of action for anything wrong which may be inflicted by a corporation.

Acts Ultra Vires

The doctrine of ultra vires is a fundamental rule in company law. It states that the affairs of the company has to be in accordance with the clauses in the memorandum of association and cannot contravene its provisions.

Fraud on minority

Fraud on minority refers to the unjust exercise of voting powers done by the majority shareholders of the company. It is based on the evidence of failure to cast votes that would benefit the company as a whole. As the majority of the company commits a fraud on the minority, a resolution is passed which makes the voting voidable.

Acts requiring a special majority

This happens in Section 114 of the Companies Act 2013, where a resolution becomes a special resolution when the intention to propose a resolution as a special resolution has been duly specified in the notice calling, the notice calling or other resolution given by the members. Also, if a notice under this act is duly given and whether the votes are cast in favour of the resolution, whether by show of hands/electronically/ballot paper or in any form of a poll, as the case may be, by members who vote in person or proxy or by ballot post, are needed to be three times the number of votes, if any, cast against the resolution of members so entitled to voting.

Wrongdoers in control

It has been seen that where the wrongdoers control the company and thus prevent it from bringing into action, the courts will allow shareholders to do so, on the company’s behalf in order to obtain redress by way of a derivative action. By liberalising and adapting an extensive reading into the scope of the wrongdoer control test, this decision provides useful judicial clarification on the rights and the remedies present in a true deadlock situation.

Individual membership rights

There are certain rights of members of a company which they can enjoy in their individual capacity. These rights are contractually based and cannot be taken away except with the written consent of the concerned member. The individual rights of a member arise in part in the form of a contract between the company and a member who is known to be a member of the company, and in part from the general law. Under the contract of his membership, some individual/personal rights are- 

• He is entitled to have his name and shareholdings entered in the registrar of members and to stop unauthorised additions or alterations to entry, to vote at meetings of members. 
• To receive dividends which have been duly declared or which have become due under the article.
• The execute pre-emption rights over other members shares which are conferred by the articles. 
• To have his capital returned in the proper order of priority in the closing of a company or a mere reduction of the capital that is authorised.
• Under the general law, he is restrained from such acts which are ultra wires. 
• He should have a reasonable opportunity to speak at the meeting of members. 
• To move amendments to resolutions at such meetings to transfer his shares.
• The supreme court in the case of LIC v. Escorts Ltd., the rights of the shareholders was recognised in the court to elect directors, to participate in the management, to enjoy the profit, to hare on winding up etc.

Prevention of Oppression and Mismanagement

Prevention of oppression

Section 397(1) of the Companies Act provides that any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to the public interest or it is oppressive to any member or members may apply to the tribunal for order thus to protect his or her statutory rights.  

Section 397(2) of the Companies Act states that the tribunal may grant relief in Section 397 if it is of the opinion that-

• If the company’s affairs are handled in a manner prejudicial to the public interest or in a manner oppressive to any member or members. 
• To wind up the company that would be unfair to its member or members, but that otherwise, the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound. 

The tribunal with the view of all the matters that were complained to them, may then afterwards give their final decision as they may deem fit.

Who can Apply?

Section 397 of the Companies Act states the members of an organization shall have the right to use under Section 397 or 398 of the Companies Act. According to Section 399 wherever the company is with the share capital, the application should be signed by a minimum of a hundred members of the company or by a tenth of the total range of its members, whichever is a smaller amount, or by any member, or members holding a tenth of the issued share capital of the company.

Where the company is without share capital, the application needs to be signed by a fifth of the entire range of its members. A single member cannot gift a petition under Section 397 of the Companies Act. The personal representative of a deceased member whose name is once more on the register of members is entitled to petition under Section 397 and 398 of the Companies Act.

Under Section 399(4) of the Companies Act, the Central Government if the circumstances exist authorizes any member or members of the corporate to apply to the court and also the demand cited above, may be waived. The consent of the requisite number of members is needed at the time of filing the application and if a number of the members withdraw their consent, it will in no way build any impact within the application. The other members may very well continue with the proceedings.

Meaning of oppression

Oppression is the exercise of authority or power during a heavy, cruel, or unjust manner. It may also be outlined as associate act or instance of oppressing the state of being oppressed, and the feeling of being heavily burdened, mentally or physically, by troubles, adverse conditions, and anxiety.

The Supreme Court in Daleant Carrington Investment (P) Ltd. v. P.K. Prathapan, held that increase of the share capital of a company for the sole purpose of gaining control of the company, where the majority shareholder is reduced to a minority, would amount to oppression. The director holds a fiduciary position and will not issue shares on his own. In such cases, the oppressor wouldn’t be given a chance to buy put the oppressed.

Prevention of Mismanagement 

The present Companies Act 2013 provides the meaning of the term “mismanagement”. When the affairs of the company are conducted in a manner to be prejudicial to the interests of the company or its members against the public interest, it amounts to mismanagement.

Power of Central Government to appoint directors 

The power to appoint a director of a company when his position is vacant falls under Section 167(3) of the company Act, where the promoters of the company, or their absence, the government at the centre shall hold the power of the appointment of the required number of directors to hold the office until the directors are appointed by the company in a general meeting. 

Although the standard operating procedure does not mention anything about where the central government shall call for such a general meeting to get the required number of directors appointed, it states that the shareholders can appoint the minimum number of directors.

Power to prevent change in board 

Here, we are referring to Section 409 company law – Power of Company Law Board to avoid change in the Board of directors prone to influence company preferentially or prejudicially: 

1. Where a complaint is made to the Company Law Board by the overseeing director or some other director or the administrator, of a company so that because of a change which has occurred or is probably going to happen in the ownership of shares held in the company, an adjustment in the Board of directors is probably going to happen which (whenever permitted) would influence preferentially the issues of the company, the Company Law Board may, whenever fulfilled, after such request as it might deem fit to make that, it is simply and legitimate so to do, by request, direct that no resolution passed or that might be passed or no move made or that might be produced to results an adjustment in the Board of directors after the date of the grievance will have impact except if affirmed by the Company Law Board; and any such request will have impact despite anything unexpectedly contained in some other arrangement of this Act or in the notice or articles of the company, or in any concurrence with, or any goals cruised all in all gathering by, or by the Board of directors of, the company. 
2. The Company Law Board will have control when any such protest is gotten by it, to make a between time request with the impact set out in subsection (1), preceding making or finishing the request previously mentioned. 
3. Nothing contained in sub-section (1) and (2) will apply to a privately owned business, except if it is an auxiliary of an open company.

Investigations

The Companies Act 1956 provides for investigation of companies under Sections 235 – 250A of this act. The central government may appoint investigators to focus on issues regarding public interest or on the basis of a special resolution, or on the request of courts/tribunals or from members of the company having a specific amount of shares, as specified.

Power of Investigation 

On members’ application

When an investigation has been ordered with the request of an applicant, the central government will recover the expenses of the investigation from the applicant itself.

On the report given by Registrar 

The registrar may also have the power to call for documents, records as required under the law. If from some random scrutiny, sufficient grounds arise warranting investigation of the company, the same may be considered by the central government.

Power of Inspectors

The Central government may select any official of government, any private expert or gathering/firm of experts as an inspector for examination. It ought to anyway be guaranteed that there is no irreconcilable situation. The Inspector/Investigator or his accomplices ought not have any material association with the corporate entity or its holding or auxiliary elements.

The present arrangements identifying with forces of the inspector, duties of directors, officials or different people throughout the investigation, discipline for non-creation of records and furnishing of bogus data and other related issues might be held. The Act may accommodate appropriate punishment for wrecking or ravaging company’s records by its director or officials. The arrangements of examination ought to likewise be stretched out to remote organizations which are doing business in India.

Investigation of ownership of the company 

The law should lay down the liability for compliance for management/owners controlling the interests of the companies, combined with a system of oversight through random scrutiny of the filing of documents by the companies.

Investigation of ownership of shares

The central government may also hire investigators and may investigate the company having a requisite number of shares as may be specified.

Restrictions upon transfer of shares and debentures 

Section 250, the imposition of restrictions upon shares and debentures and prohibition of transfer of shares or debentures in certain cases.

1. Wherever it seems to the company Law Board, whether or not on a reference made to it by the Central Government in reference to any investigation under Section 247 or on a complaint filed by any person in this behalf, that there’s a sensible reason to seek out the relevant facts regarding any shares (whether issued or to be issued) and therefore the Company Law Board is of the opinion that such facts can’t be identified unless the restrictions laid out in sub-section (2) are imposed, the company Law Board could, by order, direct that the shares shall be subject to the restrictions obligatory by subsection (2) for such period not exceeding 3 years as could also be laid out in the order.
2. So long as any shares are directed to be subject to the restrictions imposed by this sub-section –

• Any transfer of these shares shall be void;
• Wherever those shares are to be issued, they shall not be issued; and any issue thereof or any transfer of the right to be issued thereupon, shall be void;
• No right shall be exercisable in respect of these shares;
• No additional shares shall be issued in right of these shares or in pursuance of any supply created to the holder therefrom, and any issue of such shares or any transfer of the right to be issued thereupon shall be void; and
• Except during a liquidation, no payment shall be made from any sums due from the company on those shares, whether or not in respect of dividend, capital or otherwise.

Wherever a transfer of shares in a company has taken place and as a result therefrom a change within the composition of the Board of administrators of the company is probably going to take place and therefore the Company Law Board, is of the opinion that any such amendment would be prejudicial to the general public interest, it may, by order, direct that –

• the voting rights in respect of these shares shall not be exercisable for such period not exceeding 3 years as could also be laid out in the order;
• no resolution passed or action taken to impact an amendment within the composition of the Board of Directors before the date of the order shall have an impact unless confirmed by the Company Law Board.

1. Wherever the corporate Law Board has reasonable grounds to believe that a transfer of shares in a company is probably going to require place whereby an amendment within the composition of the Board of directors of the corporate is probably going to require place and therefore the Company Law Board is of the opinion that any such change would be harmful to the general public interest, the company Law Board could, by order, direct that any transfer of shares within the company throughout such amount not exceeding 3 years as could also be laid out in the order, shall be void.
2. The company Law Board could, by order at any time, vary or repeal any order created by it under sub-section (1) or sub-section (3) or sub-section (4).
3. Any order created by the Company Law Board under sub-section (5) shall be served on the company among fourteen days of the creation of the order.
4. Someone who:

• • Exercises or purports to exercise any right to get rid of any shares or of any right to be issued with any such shares when to his knowledge, he’s not entitled to try and do therefore by reason of any of the aforementioned restrictions applicable to the case under sub-section (2).
  • Votes in respect of any shares whether or not as holder or proxy, or appoints a proxy to vote in respect thereof, once to his knowledge he’s not entitled to try and do this, by reason of any of the aforementioned restrictions applicable to the case under sub-section (2) or by reason of any order created under sub-section (3).
  • Transfers any shares in dispute of any order created under sub-section (4).
  • Being the holder of any shares in respect of that an order in sub-section (2) or sub-section (3) has been created, fails to provide notice of the very fact of their being subject to any such order to someone whom he doesn’t know to be aware of that fact however whom he is aware of to be otherwise entitled to take respect of these shares, whether or not as holder or as a proxy, shall be punishable with imprisonment for a term which can reach six months, or with fine which can reach fifty thousand rupees, or with both.

Wherever shares in any company are issued in dispute of such of the restrictions as could also be applicable to the case in sub-section (2), the company, and each officer of the corporate who is in default, shall be punishable with fine which can reach fifty thousand rupees. A prosecution shall not be instituted under this section except by, or with the consent of the Central Government. This section shall apply in regard to debentures because it applies in reference to shares.

Administrative and Quasi-judicial Controls

Administrative and quasi-judicial controls imply that the company may have such controls over the member’s shareholdings.

National Company Law Tribunal and Appellate Tribunal

National company law tribunal is a quasi-judicial body that relates to issues regarding Indian companies.

Advisory Committee 

An advisory committee is also set up by the government of India, giving its advice regarding the problems faced based on company law.

Power of Securities and Exchange Board of India

Securities and Exchange Board of India (SEBI) is a statutory administrative body entrusted with the responsibility to direct the Indian capital markets. It screens and directs the protections to advertise and ensures the premiums of the financial specialists by authorizing certain standards and guidelines.

Conclusion 

Hence, we can say that Company Law is one of the most important laws in the country as it helps in protecting the interest of people, especially minority shareholders. Now, after the amendment of the company act, we can see that minorities can no longer be exploited against and are fully protected under this Act. 

References

• https://www.jstor.org/stable/43950620
• https://indiankanoon.org/search/?formInput=administrative%20order%20and%20quasi%20judicial%20order
• https://www.advocatekhoj.com/library/bareacts/companies/250.php?%20Title=Companies%20Act,%201956&STitle=Imposition%20of%20restrictions%20upon%20shares%20and%20debentures%20and%20prohibition%20of%20transfer%20of%20shares%20or%20debentures%20in%20certain%20cases
• http://www.mca.gov.in/MinistryV2/investigation+under+the+companies+act.html
• https://indiankanoon.org/doc/445276/
• https://taxguru.in/company-law/special-ordinary-resolution-companies-act-2013.html
• http://www.duhaime.org/LegalDictionary/R/RuleinFossvHarbottle.aspx

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

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This article is written by Pranjal Rathore studying in Maharashtra National Law University, Aurangabad pursuing B.A.LL.B.(Hons.). The author has explained and covered some major intricacies of Payment of Wages Act, 1936.

Introduction 

With the development of ventures in India, issues identifying with payment of wages to people employed in the industry took a bad turn. The mechanical units were revolt making, payment of wages to their workers at ordinary interims and wages were not uniform. The mechanical workers had to raise their heads against their misuse. In 1926, the Government of India kept in touch with nearby governments to find out the position with respect to the delays which happened in the payment of wages to the people employed in Industry. 

The material so gathered was put before the Royal Commission on Labor which was designated in 1929. On the report of the Commission, the Government of India rethought the subject and in February 1933 the Payment of Wages Bill, 1933, was presented in the Legislative Assembly and coursed for the purpose of extracting opinions.

In 1935 the Payment of Wages Bill, in light of indistinguishable standards from the prior Bill of 1933 yet altogether overhauled(restored) was presented in the Legislative Assembly on 15th February 1935. The Bill was referred to the Select Committee. The Select Committee displayed its report on 2nd September 1935. Consolidating the proposals of the Select Board of trustees, the Payment of Wages Bill, 1935 was again presented in the Legislative Assembly.

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Objects and Application of this Act

This Act manages the payment of wages to specific classes of people employed in industry and its significance can’t be under-evaluated. The Act ensures payment of wages on schedule and with no reasonings aside from those approved under the Act. The Act accommodates the obligation regarding payment of wages, fixation of the pay period, time and method of payment of wages, an obligation to look for the endorsement or approval of the Government for the acts and consent for which fines might be imposed by him and furthermore fixing of the fines. 

The Act doesn’t have any significant bearing to people whose payment or wage is Rs. 24,000/ – or more every month. The Act additionally gives such that a worker can’t contract out of any privilege or right is given or conferred to him under the Act. 

According to Section 1(4) of this act, It applies primarily to the installment of wages to people utilized or employed in any production line or to people employed (generally than in a factory) upon any railway by a rail route organization or either legitimately or through a sub-temporary worker which can also be a subcontractor, by which an individual is satisfying an agreement with a rail route organization and people utilized in a modern or other foundation which are indicated in sub-clause (a) to (g) of clause (ii) of section 2. 

Payment of Wages and Deductions from Wages

Responsibility for payment of wages

Responsibilities for payment of ages are mentioned in Section 3 of the Payment of Wages Act, 1936. Every employer is liable for the payment of all wages to every one of the workers that he utilizes or employes for his work. In some other cases, if the employer names an individual, or on the off chance that there is an individual capable of the business or is designated, at that point, such an individual is liable for the payment of wages. 

Notwithstanding anything contained in sub-section (1), the business is capable to make the payment of all wages which the Act expects him to make. Actually, if the temporary worker or the individual that the employer assigns to make the payment neglects to do as such, at that point the duty lies with the employer. Each employer will be answerable for the payment to people utilized by him of all wages required to be paid. 

• On account of the industrial facility, the administrator of that manufacturing plant will be obligated to pay the wages to workers utilized by him. 
• On account of mechanical or different foundations, the duty of supervision will be subject to the payment of wages to workers utilized or employed by him. 
• On account of railroads, an individual named by the rail line organization for determined territory will be at risk for the payment of wages to the workers. 
• On account of a contractual worker, an individual assigned by such a temporary worker who is straightforwardly under his charge will be at risk for the payment of the wage to the representatives. On the off chance that he neglects to pay wages to representatives, individuals who employed the workers will be at risk for the payment of wages.

Fixation of wage period

Each individual who is liable for the payment of wages under section 3 will fix periods in regard to which such wages will be payable. No wage period will surpass one month. That implies pay can be paid on day by day, week by week, fortnightly (for at regular intervals) and month to month as it were. Payment of wage period for payment of wages to representatives by manager ought not to surpass 30 days, for example, one month.

In any case, compensation can’t be paid quarterly, half-yearly or once in a year.

Time of payment of wages

Each individual employed upon or in: 

Any railway, production line or modern or different foundations upon or in which the complete number of employed people is short of what one thousand, must get his wages before the expiry of the seventh day from the most recent day of the pay time frame for which the wages are payable. Some other railway, industrial or mechanical or different foundations, must get his wage before the expiry of the tenth day from the most recent day of the compensation time frame for which the wages are payable. 

•  If the employer ends the work of an individual, at that point he should guarantee that the fired employee gets his wages before the expiry of the second working day from the date of the end of employment. 
• The Appropriate Government can exclude to such a degree and furthermore subject to such conditions in the request the individual liable for the payment of wages to utilize or employ people. 
• The business or the individual answerable for paying wages must guarantee that the wages are paid on a working day.

Wages to be paid in current coins or currency notes

The employer or the individual answerable for making the payment of wages must pay in money coins or cash notes or in both. Further, he can’t pay in kind. Additionally, the employer can pay the wages by means of a cheque or a direct deposit to the bank of the representative subsequent after taking a composed approval from him. Provided that the appropriate Government may, by notification in the Official Gazette, specify the industrial or other establishments, the employer of which shall pay to every worker employed in such industrial or other establishments, the wages only by giving a cheque or by crediting the payment in his bank account.

Deduction which may be made from wages 

At the time of payment of the salary to personnel, the business enterprises should make deductions in step with this act simplest. The employer should no longer make deductions as he likes. Every quantity paid by the employee to his enterprise is referred to as deductions.

The following are not referred to as the deduction:-

• Stoppage of the increment of worker
• Stoppage of the promotion of the worker
• Stoppage of the inducement lack of overall performance by using employee
• The demotion of the worker
• Suspension of the worker

The above-stated movements taken via the company have to have top and sufficient reason.

Deductions which are acceptable according to this act

Fines

Fine ought to be forced by the employer on worker with the endorsement of the state government or recommended authority. The employer ought to observe the guidelines referenced underneath for and before forcing of fine on the worker.

• Notice leading body of fines on workers ought to be shown in the work premises and it ought to contain exercises that ought not to be made by the representative.
• Fine ought not to be forced on the worker until he gives the clarification and causes for the demonstration or omission he made.
• The aggregate sum of fine ought not to surpass 3% of his pay. 
• Fine ought not to be forced on any representative who is younger than 15 years. 
• Fine ought to be forced for one time just on the pay of the employee for the demonstration or exclusion he made. 
• Fines ought not to be recovered in the method for portions or payments from the representative. 
• Fine ought to be recuperated or recovered within 60 days from the date on which fine was forced. 
• Fine ought to be forced on the day act of exclusion made by the worker or the employee. 
• All fines gathered from the worker ought to be credited to basic reserve and use to help the employees.
• All fines and all acknowledge thereof will be recorded in a register to be kept by the individual answerable for the payment of wages under section 3 in such structure as might be prescribed, and all such acknowledge will be applied uniquely to such purposes useful to the people employed in the factory or foundation as are affirmed by the recommended authority.
• No fines forced on any employee or worker should be recuperated from him after the expiry of 90days from the day on which the fines were forced.

Deductions for absence from duty

Deductions can be made by the employer for the nonattendance from duty by the employee for one day or for any period. The sum deducted for nonappearance from the duty ought not to surpass a total which bears a similar relationship to the pay payable in regard to the pay time frame as this time of nonattendance does to such wage-period. (For example:-: if the compensation of a worker is 6000/ – every month and he was missing for obligation for one month. Finding from the compensation for nonattendance of obligation ought not to surpass 6000/-) 

Employees present for the work spot and will not work without an appropriate explanation will be regarded to be missing from duty. On the off chance that at least 10 people together missing for the duty with no notification and without sensible reason, the employer can make 8 days of wages as a deduction from their pay.

Deductions for damages or loss 

The employer should offer a chance to the employee to clarify the explanation and cause for the harm occurred and deductions made by an employer from the worker compensation ought not to surpass the worth or measure of harm made by the employee.[Sec 10 (2)] All such findings and all acknowledge thereof will be recorded in a register to be kept by the individual answerable for the payment of wages under area 3 in such structure as might be endorsed.

Deductions for services rendered 

House-convenience courtesy or administration gave by the employer ought to be acknowledged or accepted by the worker, than just the employer can make a deduction from the wage or salary of the employee. Deduction ought not to surpass a sum equal to the estimation of the house-settlement pleasantry or administration provided.

Deductions for recovery of advances

If there should be an occurrence of the advance paid to the workers by the employer before business started, such advance ought to be recuperated or recovered by the employer from the principal payment of the wages/pay to the employee. In any case, the employer ought not to recuperate or recover the advances given for the voyaging cost for the worker.

Deductions for recovery of loans

Conclusions for the recuperation of advances conceded for house-building or different purposes will be dependent upon any guidelines made by the State Government directing the degree to which such advances might be allowed and the pace of intrigue payable subsequently.

Deductions for payment to co-operative societies and insurance schemes

Reasonings for payments to co-operative societies or deductions for payments to insurance schemes kept up by the Indian Post Office or with worker acknowledgement deductions made for payment of any premium on his extra security strategy to the Life Insurance Corporation will be dependent upon such conditions as the State Government may force. 

Maintenance of registers and records [Section 13A] 

Each employer ought to keep up such registers and records giving such points of interest of people employed by him, the work performed by them, the wages paid to them, the deductions made from their wages, the receipts given by them and such different specifics and in such structure as might be recommended. 

Each register and record required to be kept up and safeguarded for a time of three years after the date of the last entry made in that. It implies for each exchange made inside employer and worker ought to have 3 years of record.

Authorities Under the Act

The state government may appoint an authority for the purpose of this act. Every authority shall be deemed to be a public servant within the meaning of the Indian Penal Code, 1860 [Section 14(5)]. 

Inspector

The state government may designate a monitor for the purpose of this act. Each Inspector will be regarded to be a community worker or public servant inside the importance of the Indian Penal Code, 1860 [Section 14(5)]. 

(a)Rights of Inspector 

The inspector of this act is having powers referenced below: 

• Inspector can make inquiries and assess whether the employers are appropriately complying with the guidelines referenced under this act. 
• Inspector with such help, assuming any, as he thinks fit, enter, investigate and search any premises of any railway, production line or mechanical or other foundation at any sensible time to do the objects of this Act. 
• Inspector can manage the payment of wages to people employed upon any railway or in any factory or mechanical or other foundation. 
• Seize or make duplicates of such registers or archives or bits thereof as he may consider significant in regard to an offence under this Act.

(b)Facilities to be afforded by Inspector

Each employer will bear the cost of an Inspector every sensible office for making any entry, review, supervision, assessment or request under this Act. 

Authority to hear the claim

To hear and choose all cases emerging out of findings from the wages, or deferral in payment of the wages, of people utilized or paid, including all issues, accidental to such claims, there will be an official referenced beneath delegated by the fitting government. 

•  any Commissioner for Workmen’s Compensation; or 
•  any official of the Central Government practising capacities as – 

•  Regional Labor Commissioner; or 
• Assistant Labor Commissioner with at any rate two years’ understanding; or 

• any official of the State Government not underneath the position of Assistant Labor Commissioner within any event two years’ understanding; or 
• a directing official of any Labor Court or Industrial Tribunal, comprised under the Industrial Disputes Act, 1947 (14 of 1947) or under any comparing law identifying with the examination and settlement of mechanical debates in power in the State; or 
•  some other official with experience as a Judge of a Civil Court or a Judicial Magistrate, as the power to hear and choose for any predefined territory all cases emerging out of conclusions from the wages, or deferral in installment of the wages, of people utilized or paid around there, including all issues accidental to such cases. 
• Suitable Government thinks about it essential so to do, it might select more than one expert for any predefined zone and may, by general or exceptional request, accommodate the conveyance or portion of work to be performed by them under this Act. 

Single application in respect of claims from the unpaid group 

The above-mentioned title is mentioned in the section of this act. There is no need for numerous applications if there are numerous workers whose wages have not been paid. Such all workers can make one application to the expert for payment of wages as indicated by this act. 

Appeal

The provision of appeal is mentioned in section 17 of this act. In the accompanying circumstances the parties who at any point disappointed can appeal to the district court: 

• On the off chance that the application was rejected by the above authorities 
• Employer forced with remuneration surpassing or exceeding 300/- rupees by the authorities. 
• On the off chance that the sum surpassing 25/ – rupees retained by the employer to the single unpaid worker. 50/- if there should be an occurrence of numerous unpaid workers.

Power of authorities appointed under Section 15

Taking proof and of implementing the attendance of witnesses and compelling the creation of reports.

Conditional attachment of property of the employer or another person responsible for payment of wages

Where whenever after an application has been made under sub-section (2) of section 15 the authority or where whenever after an intrigue or appeal has been filed under section 17 by an employed individual or any legitimate professional or any authority of an enlisted worker’s organization approved recorded as a hard copy to follow up for his sake or any Inspector under this Act or some other individual allowed by the power to make an application under sub-section (2) of Section 15.

The Court alluded to in that segment is fulfilled that the business or another individual answerable for the payment of wages under section 3 is probably going to sidestep payment of any sum that might be coordinated to be paid under section 15 or section 17 the authority or the court as the case might be with the exception of in situations where the authority or court is of conclusion that the parts of the bargains be crushed by the postponement.

In the wake of giving the employer or other individual a chance of being heard may coordinate the connection of such an extensive amount the property of the employer or another individual liable for the payment of wages as is in the assessment of the authority or court adequate to fulfil the sum which might be payable under the heading. The arrangements of the Code of Civil Procedure 1908 (5 of 1908) identifying with connection before judgment under that Code will so far as might be applied to any request for connection under sub-section (1).

Miscellaneous 

Penalty for offences under the Act

(a)Purposes behind punishment:-

• Delay in payment of wages 
• Unreasonable deductions 
• Overabundance reasoning for nonappearance of obligation 
• Overabundance reasoning for harm or misfortune to business 
• Overabundance reasoning for house-settlement courtesy or administration 

(b)Punishable with fine which will not be under 1000/- rupees yet which may stretch out to 7500/ – rupees 

• On the off chance that Wage period surpass one month 
•  Failure  in payment of wages on a working day 
• Wages not paid in type of current coin or money notes or in both 
• Inability to keep up the record for gathered fines from employees 
• Ill-advised utilization of fine gathered from employees 
• Failure of the worker to show notice containing such edited compositions of this Act and of the rules made

(c)Punishable with fine which may stretch 3000/ – rupees 

• Whoever blocks an Inspector in the release of his obligations under this Act 
• Whoever adamantly will not deliver on the interest of an Inspector any register or other records. 
• Whoever won’t or wilfully fails to bear the cost of an Inspector any sensible office for making any entry, review, assessment, supervision, or request approved by or under this Act 

(d)Punishable with fine which will not be under 1000/ – rupees however which may stretch out to 7500/ – rupees 

• Whoever repeats a similar offence submitted previously. 
• Detainment for a term which will not be short of what one month yet which may reach out to a half year and fine which will not be under 3750/- rupees yet which may broaden 20500/ – rupees.

Procedure in the trial of offences

• No Court will take discernment of an objection against any individual for an offence under subsection (1) of section 20, except if an application in regard of the realities establishing the offence has been displayed under section 15 and has been allowed entirely or to a limited extent and the authority engaged under the last section of the investigative Court conceding such application has authorized the creation of the grievance. 
•  Before authorizing the creation of a protest against any individual for an offence under subsection(1) of section 20, the power enabled under section 15 or the Appellate Court, all things considered, will give such individual a chance of demonstrating cause against the allowing of such approval, and the assent will not be conceded if such individual fulfils the position or Court that his default was expected to— 

•  a bona fide error or bona fide dispute with regards to the sum payable to the employed individual, or  the event of a crisis, or the presence of remarkable conditions, with the end goal that the individual answerable for the payment of wages was not able, however practising sensible persistence, to make brief payment, or   the failure of the employed individual to apply for or acknowledge payment. 
•  No Court lobby take awareness of a repudiation of section 4 or section 6 or of negation of any standard made under section 26 aside from on an objection made by or with the assent of an Inspector under this Act. 
• In forcing any fine for an offence under subsection (1) of section 20 the Court will think about the measure of any payments previously granted against the charged in any procedures taken under section 15. 

Bar of suits 

 No Court will engage any suit for the recovery of wages or of any deduction from compensation to the extent that the entirety so guaranteed-

• structures the subject of an application under section 15 which has been displayed by the offended party and which is pending before the power selected under that section or of intrigue under section 17; or 
• has shaped the subject of a course under section 15 for the offended party; or 
• has been decreed, in any proceeding under section 15, not to be owed to the offended party; or 
• could have been recovered by an application under section 15. 

Contracting out 

Any agreement or understanding regardless of whether made previously or after the beginning of this Act, whereby an employed individual gives up any privilege given by this Act will be invalid and void to the extent that it implies to deny him of such right. 

Display by notice of abstract of the Act 

The individual liable for the payment of wages to people employed in a plant will cause to be shown in such processing plant a notification containing such abstracts of this Act and of the standards made thereunder in English and in the language of most of the people employed in the industrial facility, as might be recommended. 

Delegation of powers

The suitable Government may, by warning in the Official Gazette, direct that any power exercisable by it tinder this Act will, in connection to such issues and subject to such conditions, assuming any, as might be indicated toward the path, be additionally exercisable –

(a) where the suitable Government is the Central Government, by such official or authority subordinate to the Central Government or by the State Government or by such official or authority subordinate to the State Government, as might be indicated in the notice; 

(b) where the suitable Government is a State Government, by such official or authority subordinate to the State Government as might be determined in the notification.

Payment of undisbursed wages in cases of death of the employed person

-Paid by the employer to the individual assigned by the worker. 

-Wage stored by the employer with the recommended authority, the business will be released of his liability to pay those wages. 

-Where no such designation has been made or where for any reason such sums can’t be paid to the individual so selected, be saved with the endorsed position who will manage the sums so kept in such a way as might be recommended.

Rule-making power

Specifically and without bias to the simplification of the previous power, rules made under sub-section (2) may-

(a) require the upkeep of such records, registers, returns and notification as are essential for the authorization of the Act and recommend the structure thereof; 

(b) require the display in an obvious spot on-premises where work is carried on of notification determining paces of wages payable to people utilized on such premises; 

(c) accommodate the regular inspection of weights, measures and weighing machines utilized by employers in checking the wages of people employed by them; 

(d) recommend the way of pulling out of the days on which wages will be paid; 

(e) recommend the position capable to favour under sub-section (1) of section 8  and deductions in regard to which fines might be forced; 

(f) recommend the methodology for the inconvenience of fines under section 8 and for the creation of the deductions to in section 10; 

(g) recommend the conditions subject to which deductions might be made under the proviso to sub-section(2) of section 9; 

(h) recommend the power equipped to support the reasons on which the returns of fines will be consumed; 

(i) prescribe the degree to which advances might be made and the portions by which they might be recovered concerning clause (b) of section 12; 

(j) direct the scale of costs which might be permitted in procedures under this Act; 

(k) prescribe the amount of court-charges payable in regard to any procedures under this Act; and 

(l) prescribe the modified works to be contained in the notification required by section 25. 

(4) In making any rule under this section, the State Government may give that a contradiction of the rule will be punishable with fine which may reach out to 200 rupees. 

(5) All guidelines made under this section will be dependent upon the state of previous publication, and the date to be determined under clause (3) of section 23 of the General Clauses Act, 1897, will not be under a quarter of a year from the date on which the draft of the proposed principles was distributed.

Conclusion 

The Code endeavours to bind together the meaning of ‘wages’, which is a stage towards giving better clarity. Nonetheless, the arrangement of independent definitions for ’employee’ and ‘worker’ and their use inside the Code leaves space for confusion. Further, the Code looks to change the ‘Inspector Raj’ perception in connection to the Government’s guideline of work by presenting monitors cum-facilitators rather than simply examiners. 

The Code has made a crucial change regarding offences and punishments. Significant justification and proportionality, with a purpose to help instead of hampering the lead of business, is clear from the reformatory arrangements. 

The Code energizes innovation selection in issues, for example, method of payment of wages, assessment strategies, which are planned for accomplishing its digitalisation objectives in administration. The Code is a good-intentioned bit of enactment which means to adjust the interests of the employer and the worker. In spite of the fact that the Code contains significant sections of the revoked enactments, it makes a not too bad attempt to replace theirs out of date provisions. 

The provisions of the Code move trust in the business network and further clearness can be acknowledged once the subordinate enactments and rules under the Code are set up. It would likewise be interesting to measure how different codes identifying with government disability, mechanical wellbeing and welfare, and modern relations will associate with the Code of Wages once they are passed.

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The post Payments & Deductions of Wages under Payment of Wages Act, 1936 appeared first on iPleaders.

This article is written by Nishtha Pandey (batch 2023), student of Dr Ram Manohar Lohiya National Law University, Lucknow. In this article various sections of The Payment of Bonus Act, 1965 are explained.

Introduction

Payment of Bonus Act, 1965 is a statutory liability on the part of the employers of the establishment to pay to the labour, in accordance with the capital available for the peaceful functioning of the establishment. The purpose of the Act was to enable the employees to have a say in the profits of the company and to earn a little more than the minimum wage according to their performance in the organisation.

This Act is applicable throughout India on the factory workers and the persons employed in railways or is in contract with railways. It also includes skilled or unskilled workers, whether under the express or implied terms of the contract. 

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Establishment to include department, undertakings, and branches

The term “establishment” in this Act is of great importance. It could be divided into Public and Private establishments. However, if these establishments function as different departments or branches then those departments and branches would be treated as a single establishment, but in case, different accounts are prepared for these branches and departments, then they would be treated as different departments or branches for the sake of computation of profit for that particular accounting year.

Computation of Gross profit

Gross profit is calculated for an accounting year

(i) Banking Company– in accordance with the first schedule.

(ii) In other cases– according to the manner prescribed in the second schedule.

Computation of available surplus

The available surplus is calculated taking into account the gross profit after making adjustments of depreciation, development allowance, direct taxes of the current accounting year and all the sums specified under Schedule 3 of the Act. This gross profit has to be added to the direct taxes in respect of the gross profit for the preceding year, deducting from it the direct taxes which has been adjusted to the gross profits that are reduced to the amount of bonus, for the immediately preceding year.

Sum deductible from gross profits

The following sums need to be deducted from the gross profit:

• Any amount by way of development rebate, investment allowance or the development allowance, which is deductible from the income according to the income tax.
• Any direct tax which the employer has to pay with respect to his income, profits, and gains during that year.
• Any other sums which are specified by the employer.
• Any amount of depreciation according to the Income Tax Act, 1961 or Agricultural Income Tax law.

Calculation of direct tax payable by the employer

The direct taxes are calculated as per the present year’s income of the employer. In case the employer is an individual or part of the Hindu Undivided Family, then the income which will be considered for the taxes will be treated as the only income of the employer. 

Moreover, if the employer is a religious institute or charitable trust, not barred by Section 32 of the Act and if its income is partially or fully non-taxable then the income which is non-taxable would be treated as the income from an institution in which the public is substantially interested.

However the income would not include any loss of the previous year which is carried forward to this year under any existing law or the depreciation that need to be accounted to the depreciation allowance or any exemption under Section 84 of the Income Tax Act or any deduction under Section 101(1) of the Income Tax Act, 1961.

Eligibility for bonus

Under the present enactment, every employee is entitled to get a bonus only if he has worked for a minimum period of 30 days. 

The minimum bonus which the employee would get in an accounting year would be 8.33% of the salary or wages of the employee or ₹ 100 whichever is more. In cases where the age of the employee is less than 15 years at the beginning of the accounting year, this provision would have the same effect except in the place of ₹ 100 it would be ₹ 60.

The maximum bonus which an employee could get in an accounting year is equal to 20% of the salary or wages of the employee in the given accounting year. The employer is bound to pay the maximum bonus when the allocable bonus has exceeded the minimum bonus of that accounting year.

The employee would be disqualified for a bonus if he has been terminated from employment on account of fraud or theft, misappropriation or sabotage of the establishment’s property or has displayed violent or unruly behaviour in the premises of the establishment.

Calculation of bonus with respect to certain employees

Where the salary of the employee exceed ₹ 7000 per mensem or minimum wages applicable for such employment as fixed by the government, whichever is higher, such employee would be entitled for bonus under Section 10 or Section 11 of the Act as if the salary or wages is ₹ 7000 per mensem or minimum wages applicable for such employment as fixed by the government whichever is higher.

Proportionate reduction in bonus

If an employee has not worked for any day in the accounting year, his minimum bonus which is ₹ 100 (or ₹60) or his salary or wages subject to 8.33%, whichever is higher would be reduced proportionately.

Computation of the number of working days

The computation of the working day is an important criterion for the calculation of the bonus. The employee would be considered working even on the days when he is on leave but is paid salary or wages or he is on a maternity leave with salary or wages, or he met with an accident while in undertaking the employment or he has been laid off under an agreement or as permitted under the Industrial Employment Act, 1946 or Industrial Disputes Act, 1947 or any legal provision which is applicable on the establishment at the given time.

Set on and set off of allocable surplus

The allocable income which is left even after paying the maximum bonus at the rate of 20% on the salary or wages, would be carried forward to the next year to compensate in case there is any shortage in that year. This is called set on.

However, the set off is the complete opposite of set on in which the profit falls short to pay even the minimum bonus at the rate of 8.33%. Then, in this case, the set on of the previous year would be used to pay the bonuses of the given accounting year.

In calculating the bonus, the amount of set on and set off from the previous accounting year shall be first taken into consideration. This allocable income would be distributed to the employees in proportion to their salary or wages in a given accounting year.

Special provisions with respect to certain establishments

In the first five accounting years, after the establishment has started selling and manufacturing goods or rendering services, it has to pay bonuses only in case of profits. 

However, in the sixth, seventh and eighth accounting year, after the establishment has started selling and manufacturing goods or rendering services, the bonus shall be paid, taking into account the set on or set off. 

In the case of the sixth year, the allocable surplus of the fifth and the sixth year would be taking into account and in the case of the seventh year, the allocable surplus of the sixth and the seventh year is taken into consideration. 

Adjustments of customary or interim bonus against bonus payable under the Act

If the employer has paid any puja bonus or any other customary bonus or has paid the bonus before the date on which the bonus becomes payable, then, in that case, the employer has the right to deduct the amount of bonus from the actual bonus payable, and the employee shall get the remaining amount.

Deduction of certain amounts from bonus payable under the Act

If the employee is found to be guilty of misconduct due to which the establishment has to bear losses then such an establishment has the right to deduct the amount of loss from the bonus that has to be paid to the employee in that accounting year and shall be paid the balance if any.

The time limit for payment of bonus

Under the provisions of this Act, the employees must be awarded the bonus within 8 months from the closure of the accounting year. However, in cases of disputes (under the purview of the Industrial Dispute Act), the bonus has to be paid within 1 month from the time when the settlement becomes effective. 

Application of Act to establishments in the public sector

If any public establishment manufactures or sells any product or renders any services and the income from them is less than 20% of the gross income of such public establishment then the provisions of this Act shall apply to it in the same manner as if it is a private establishment. However, except for the above case, the provisions of this Act would not be applicable to the employees working in the public establishment.

Recovery of bonus due to an employer

In case of any amount of the bonus which is due from an employer, the employee can or any of his assignees or in case of his death his heirs, have the right to make an application to the government and if it is satisfied with the veracity of the application then it shall issue a certificate to the collector who shall proceed to recover the amount in the like manner as if it were an arrear of land revenue. 

However, such an application must be within one year after the payment has become due, if the application is made after the expiry one year and the government is satisfied with the reasons for doing so, then that application could be entertained.

Reference of disputes under the Act

In case of any dispute between the employee and the employer, that shall be treated as an industrial dispute within the meaning of Industrial Dispute Act or any other Act which is dedicated to the investigation and settlement of the disputes of like nature. Such law shall be applied as expressed.

Presumption about the accuracy of balance sheet and profit and loss account of corporations and companies

The disputes falling under the purview of the Industrial Dispute Act or any other law dedicated to the investigation and settlement of the disputes of like nature would be referred to an arbitrator or a tribunal in accordance with the above-mentioned laws. If the balance sheet or the profit and loss account of the corporations or the companies are audited by the Auditor General of India or any other auditor who is empowered to do so under the Companies Act, then there is no need to file an affidavit to prove its accuracy.

However, if the tribunal or the arbitrator is certain about the inaccuracy of the balance sheet or the profit and loss account then it can take any steps that it deems necessary to find out the accuracy of the balance sheet and the profit and loss accounts.

The trade unions or the employees, being a party to the dispute, can file an application to the authority for any clarification in the balance sheet or the profit and loss statement. The authority, after satisfying itself about the need for such clarifications, would further direct the company and corporation to tender the required clarification to the other party.

Audited accounts of banking companies not to be questioned

In case of the dispute (as per Section 22 of the Act), where one of the party is a banking company and it has rendered its account, to the authority which is duly audited, the trade union or the employee which is the other party has no authority to question the accuracy of the accounts. However, it can ask for information to verify the amount of bonus.

The trade union or the employee cannot ask for any information which the banking company is not obliged to give as per the banking regulations Act.

Audit of accounts of employers, not being corporations or companies

In case of a dispute between an employee and the other party not being a corporation or company and if it has tendered an account which is duly audited by an auditor empowered to do so under the Companies Act, 2013 then Section 23 of the Act would be applicable.

If however the accounts are not audited and the said authority thinks that it is necessary to have an audited account for making a decision, then it can direct the employer to get the accounts audited by the specified time.

If the employer fails to get the accounts audited then, in that case, the authority itself can get the accounts audited by the auditor and the authority is also entitled to levy punishments in accordance with Section 28  of this Act. The expenses incurred by the authority, in this case, shall be recoverable from the employer and if the employer does not pay the expenses then it would be recovered as per Section 21 of the Act. 

Maintenance of registers, records, etc

Every employer is responsible to maintain records and register in the manner as it is prescribed in the provisions of this Act.

Inspectors

The government by way of notification in the official gazette may appoint a person to be an inspector under the provision of this Act. 

The inspector can enter any premises at a reasonable time and ask for an examination of the accounts. The employer is legally bound to furnish the information asked by the inspector.

Penalty

If any person contravenes a provision of this Act or fails to comply with any of the directions made under this Act, it would be punishable for imprisonment which shall extend up to 6 months or fine up to ₹ 1000 or both.

Offences by companies

If any offence is committed under the provisions of this Act and the offence is committed by the company, then everyone who is in charge of the company or responsible for the affairs of this company would be liable and could be proceeded against. However, if the offence has been committed while taking all due diligence or the offence so committed was beyond the knowledge of the person, then such person shall not be punishable under this Act. 

However, if the offence so committed was in the knowledge of the director, manager, secretary or officer of the company then such person shall be liable and can be punished accordingly.

Cognizance of offences

No court shall take cognisance of the offence committed under this Act except there is a complaint by or under the authority of the government or by an officer of the government not below the rank of the regional labour commissioner or labour commissioner in the central and the state government respectively. Moreover, the court under which such complaints would be filed shall not below the court of presidency magistrate or magistrate of the first class.

Protection of action taken under the Act

The government and the government officers are protected from any suit or any other legal proceedings against them for their actions done in good faith in pursuance of the provision of the given Act.

Special provisions with respect to payment of bonus linked with production or productivity

Under the given Act, the procedure for the computation of the bonus has been delineated, however, in certain circumstances, the payment of the bonus is linked with the productivity and production of the given employee. Such an arrangement will take place when there is any settlement or agreement between the employer and the employee in this regard.

Act not to apply to certain classes of employees

• Life Insurance Corporation,
• The Indian Red Cross Society or any other institution of a like nature,
• Universities and other educational institutions,
• Institutions (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit,
• Employees employed through contractors on building operations,
• Employees employed by the Reserve Bank of India,
• The Industrial Finance Corporation of India,
• Financial Corporations,
• the National Bank for Agriculture and Rural Development,
• the Unit Trust of India,
• the Industrial Development Bank of India,
• Employees of inland water transport establishment passing through another country. 

Employees and employers not to be precluded from entering into agreements for grant of bonus under a different formula

It is provided that the employee and the employers can indulge in any agreement or settlement, for the purpose of bonus, with a different formula. If any law or rule which renders such agreement or settlement to be null and void, that law or rule would be inconsistent to that effect.

Effect of laws and agreement inconsistent with the Act

With regards to the Section 31A of the Act, the provisions of this Act shall apply even if there is an inconsistency with any other law in force at that time or with respect to any agreement or settlement.

Saving

The provisions of this Act would not be applicable to the Coal Mines, Provident Fund and Bonus Schemes Act, 1948.

Power of exemption

If the central government finds it necessary in the public interest to prevent the application of a certain provision of this Act in certain establishment or class of establishment then it may, through the notification in the official gazette, specify the time for which the application of those provisions would be ceased for that particular establishment or class of establishment

Power to make rules

The central government has the power to make rules with regard to the provisions of this Act. The government can make rules with respect to the accounting year, maintenance of records and registers, working of the inspectors under this actor any other matter which may be prescribed. The new rule shall be presented before each house of the parliament while it is in the session and if both the house have agreed that the rule shall be applicable or shall be applied will have the same effect accordingly. However, any modification or annulment made shall not be contrary to the rule previously made.

Application of certain laws not barred

Certain enactments like the Industrial Dispute Act, 1947 or any other statutory provision dedicated to the investigation and settlement of the dispute in the distribution of the be applicable in such cases. The applicability of the given legislation does not in any way bar the relevancy of other statutes.

Conclusion

The Payment of Bonus Act, 1965 seeks to legally regularise the practice of paying bonus by different establishment. It offers an objective way to calculate the bonus based on profit and productivity. It enables the employees to earn over and above their minimum wages or salary. This Act provides different procedures for different establishments like banking companies, public organisations and also for the establishments which are not a company or a corporation. Apart from the procedure, this Act also defines a robust redressal mechanism. 

References

• https://labour.gov.in/sites/default/files/ThePaymentofBonusAct1965.pdf
• https://www.indiafilings.com/learn/payment-of-bonus-act/
• https://www.expertmile.com/articles/1072/Payment-of-Bonus-Act–Balance-sheet-and-profit-and-loss-account-of-Corporations,-Audited-accounts-of-banking-companies-and-miscellaneous-provisions
• http://www.whatishumanresource.com/the-payment-of-bonus-act-1965
• Practical Guide To Payment of Bonus Act and Rules by H L Kumar
• Scindia Employees Union v/s Scindia Steam Navigation Co. Ltd.

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This case summary is written by Gurkaran Babrah, a first year law student at Symbiosis Law School, Noida.

Introduction

Golaknath v State of Punjab is one of the landmark cases in the Indian legal history. A number of questions were raised in this case. But the most important issue was whether the parliament has the power to amend the fundamental rights enshrined under Part III of the Constitution of India or not. The petitioners contended that the parliament has no power to amend the fundamental rights whereas the respondents contended that the constitution-makers never wanted our constitution as rigid and Non-flexible one. The court held that the parliament cannot amend the fundamental rights. This ruling overturned in Kesavananda Bharati vs Union of India 1973. In this, the court held that the parliament can amend the constitution including fundamental rights but the parliament cannot change the basic structure of the constitution.

Identification of Parties (including `the name of the judges)

PETITIONER: I.C GOLAKNATH & ORS

RESPONDENT: STATE OF PUNJAB 

DATE OF JUDGEMENT: 27/02/1967

BENCH: RAO, K. SUBBA (CJ), WANCHOO K.N, HIDAYATULLAH. M, SHAH J.C, SIKRI S.M, BACHAWAT R.S, RAMASWAMI V, SHELAT, J.M, BHARGAVA, VASHISHTH, MITTER, G.K, VAIDYALINGAM C.A.

Summary of Facts

The family of Henry and William golaknath were in possession of over 500 acres of farmland in Jalandhar, Punjab. Under the Punjab security and Land Tenures Act, the government held that the brothers could keep only thirty acres each, a few acres would go to tenants and the rest was declared surplus. This was challenged by the family of golaknath in the courts. Further, this case was referred to the Supreme court in 1965. The family filed a petition under Article 32 challenging the 1953 Punjab Act on the grounds that it denied them their constitutional rights to acquire and hold property and practice any profession (Article 19 (f) and (g) and to equality before the protection of the law (Article 14). They sought to have the seventeenth amendment – which had placed the Punjab Act in ninth schedule – declared ultra vires (beyond the powers). Golaknath. I.C v State of Punjab is one of the landmark cases in the Indian history. With its ruling, in this case, the court developed jurisprudence around what is known as the doctrine of basic structure. The court in 1967 ruled that the Parliament can not curtail any of the fundamental rights enshrined under the constitution of India. 

Issues before the Court 

The issue which came before the court was whether the parliament has the absolute power and the power to amend the fundamental rights enshrined under the constitution or not?

Contention of the parties 

Petitioner’s arguments

• The petitioner argued that the constitution of India was drafted by the constituent assembly and it is of permanent nature. No one can change or can try to bring change in the constitution of India.
• They argued that the word “amendment” in question only implies a change in accordance with the basic structure but not altogether a new idea.
• Further, the petitioner contended that the fundamental rights enshrined under part III of the constitution cannot be taken away by the parliament. They are the essential and integral part of the constitution without which constitution is like a body without a soul.
• The petitioner also argued that Article 368 of our constitution only defines the procedure for amending the constitution. It does not give the power to the parliament to amend the constitution.
• The last thing on which the petitioner argued before the court was that Article 13(3)(a) in its definition of “law” covers all types of law i.e. statutory and constitutional etc. And by virtue of Article 13(2), which says that the state cannot make any law which takes away the rights mentioned under Part 3, any constitutional amendment which takes away the Fundamental rights will be unconstitutional and invalid.

Respondent’s arguments 

• The respondent contended before the court that constitutional amendment is a result of the exercise of its sovereign power. This exercise of sovereign power is different from the legislative power which parliament exercises to make the laws.
• Our constitution makers never wanted our constitution to be rigid in its nature. They always wanted that our constitution to be flexible in its nature.
• The object of the amendment is to change the laws of the country as it deems fit for the society. They argued that if there won’t be any provision for amendment then, it would make constitution a rigid and non-flexible one.
• They further argued that there is no such thing of basic structure and non-basic structure.
• All the provisions are equal and of equal importance. There is no hierarchy in the constitutional provisions. 

Judgement (Ratio and Obiter)

In this case, at that time the supreme court had the largest bench ever. The ratio of the judgment was 6:5, majority was favouring the petitioners. The CJI at that time and with other justices (J.C. Shah, S.M. Sikri, J.M. Shelat, C.A. Vaidiyalingam) wrote the majority opinion. Justice Hidayatullah agreed with CJI Subba Rao and therefore he wrote a separate opinion. Whereas Justices K.N. Wanchoo, Vishistha Bhargava and G.K Mitter they all wrote single minority opinion and justices R.S. Bachawat & V. Ramaswami wrote separate minority opinions.

The majority opinion of golakh Nath shows scepticism in their minds about the then course of parliament. Since 1950 the parliament has used article 368 and have passed a number of legislations that had in one or other way have violated the fundamental rights under part III of the constitution. The majority had doubts that if Sajjan Singh remained the law of the land, a time can come when all fundamental rights adopted by our constituent assembly will be changed through amendments. Keeping in view the problem of fundamental rights and fearing that there can be a transfer of Democratic India into totalitarian India. Therefore, the majority overruled Sajjan Singh & Shankari Prasad. 

The majority said that the parliament has no right to amend the fundamental rights. These are fundamental rights are kept beyond the reach of parliamentary legislation. Therefore, to save the democracy from an autocratic actions of the parliament the majority held that parliament cannot amend the fundamental rights enshrined under Part III of the Constitution of India The majority said that fundamental rights are the same as natural rights. These rights are important for the growth and development of a human being.

Critical Analysis of the Judgement

Fundamental rights are considered to be necessary for the development of human personality. These rights are the rights which helps a man to figure out his/her own life in a manner he/she wants. Our constitution has given us the fundamental rights which also includes the rights of minorities and other backward communities. According to the Constitution, Parliament and the state legislatures in India have the power to make laws within their respective jurisdictions. But, this power is not absolute in nature. The Constitution rests with the judiciary and the power to adjudicate upon the constitutional validity of all laws also rests with the judiciary. 

If a law made by Parliament or the state legislatures violates any provision of the Constitution, the Supreme Court has the power to declare such a law invalid, unconstitutional or ultra vires. This check notwithstanding, the founding fathers wanted the Constitution to be an adaptable document rather than a rigid framework for governance. They wanted it to be a flexible document which can adjust or adapt itself according to the changing situations. 

Parliament was invested with the power to amend the Constitution. Article 368 of the Constitution gives the impression that Parliament’s amending powers are absolute and encompass all parts of the document. But the Supreme Court has acted as a brake to the legislative enthusiasm of Parliament ever since independence. With the intention of preserving the original ideals envisioned by the constitution-makers, the apex court pronounced that Parliament could not twist, damage or alter the basic features of the Constitution under the pretext of amending it. The phrase ‘basic structure’ itself cannot be found in the Constitution. The Supreme Court recognised this concept for the first time in the historic Kesavananda Bharati case in 1973. 

The basic structure of the constitution consists of:

• Supremacy of the constitution;
• Secular character of the constitution; 
• Demarcation of power among the legislature, executive, and judiciary; 
• Integrity and unity of the nation;
• Democratic and republican form of government; and
• Sovereignty of the nation.

These are the elements of the basic structure of the constitution. The parliament has the right to amend anything but it can not amend or change any of the fundamental elements of the basic structure. Majority believed that the parliament was drawing power of amendment from article 368 whereas this article only provides the producer of an amendment. The majority said that the power to amend an article of the constitution is under article 248. The miniority’s opinion was that if the decision comes in favour of the majority then the constitution will become rigid. And if the parliament will not have the power of amending the constitution then the constitution would become static. In accordance with the minority opinion the procedure of Article 368 very much correspond to the legislative process but it is different from ordinary legislation.

The judgement provided the prospective overruling of the law. The decision to overrule the earlier judgements was an important, smart and reasonable move by the judiciary of the country. This doctrine of prospective ruling said that effects of the law will only be applicable on future dates or future judgements. Past decisions will not be get affected by it. There was a reason why the majority chose the doctrine of prospective ruling. 

These reasons were:

They wanted to avoid multiple litigations which could have followed after this judgment. 

The majority also chose this to save the nation from the chaos of retrospective action. 

They also wanted to reduce the negative effect of this judgement which could have led to invalidating the previous constitutional amendments. 

This was in order to minimize the negative impact of the judgment invalidating the earlier constitutional amendments.

Another reason why the majority went for prospective overruling was that since the decision, in this case, was that the parliament has no right to amend the fundamental rights, therefore, every previous amendment will be invalid and unconstitutional. 

Conclusion

The Golakh v state of Punjab was one of the important cases in India history. The judgement of this case came at a very crucial time. It came when the democracy was suffering from the start of what later became the “darkest decade” of India. This judgment helped to stop the parliament from showing its autocracy. The majority bench was afraid of deterioration of the soul of the constitution. This judgement forbade the parliament from causing any damage to the fundamental rights of the citizens by implementing a law which had the effect of suppressing the autocracy of the parliament. 

The judgment was focused on protecting the fundamental provisions which are equal to fundamental or natural rights of mankind and no government can take it. Golaknath is a kind of victory of “rule of law” because it made it clear that even the lawmakers are not above the law. This case reinforced the faith of the citizens that the law is supreme, not the one who makes it(Parliament), neither who implements (Executive) it and nor the one who interprets it (Judiciary).

But there‘s nothing perfect in this world. The same goes with this judgment. The judgement of Golaknath is not a perfect judgement. One of the biggest flaws was that the judgement granted rigidity to the constitution. The court said if there has to be an amendment then it has to be through a constituent assembly. Secondly, the court only protected the fundamental rights from the absolute power of the parliament but it could have protected all the fundamental features of the constitution. They did not use the opportunity in a way they could have used. Due to these kind of problems in the judgement it was overruled to some extent in another landmark judgment in the case of Kesavananda Bharati v Union of India 1973. To read more about Kesavananda Bharati v Union of India 1973 refer to the link given below.

References

• https://blog.ipleaders.in/kbharatikerala/ 

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 Golaknath, I.C v State of Punjab (1967) : Overview and Analysis appeared first on iPleaders.

This article is written by Amarnath Simha, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here he discusses “What Fields Should a Contract Management Software Detect to Ensure Your Risks are Uniform?”.

Introduction

The International Association for Contract & Commercial Management describes contract management as a discipline supporting business through preparation, negotiation, implementation and oversight of contracts.  It is said to be converting technical capabilities, commercial policies and practices into specific terms and conditions that are offered to all the people associated with the business.  It is about maximizing profits and minimizing the loss in any contracts (https://www.iaccm.com/about/contract-management/).  It is increasingly being seen as high-value management information that supports strategic decision making.  It can be said an aspect of management. Some make a differentiation between contract administration and contract management.  The contract administration is said to be covering work done before the contract is executed and the contract management is said to be covering work done after the management.  Contract management is generally taken to be covering all the stages of the contract lifecycle.  

Contract Managers 

Contract Managers are said to be persons having technical, operational and commercial skills in managing a contract. 

Contract Life Cycle

A contract is said to have several stages in its life cycle.  It is sometimes divided into pre-contract phase, execution phase and post-award phase (often referred to as contract compliance/governance).  The stages are referred to as :

Request> Drafting> Negotiation> Approval> Execution> Obligations> Compliance> Amendment/Renewal

The Request: The party initiating the transaction requests for a contract i.e., usually someone from within the organisation.  

The Drafting: The necessary agreement with regard to that particular transaction will have to be given to the person making the request

Negotiation: In a business entity having multiple levels of people/offices negotiating or involved in the decision-making process, multiple changes/comments will be made before the drafts are approved.  Even after such drafts are sent to other parties, it would lead to many rounds of negotiation between the contracting parties with each contracting party having multiple levels of people/offices contributing their thoughts on the draft.

Approval: After the negotiations are over, the contracts will have to formally brought into life after attaining the finality on commercial as well as legal terms.

Compliance: There may be compliances required under the law because of the execution and implementation of the contracts and the obligations thereunder.  Sometimes audit of the contract may have to be conducted internally to see whether all the works have been done in accordance with the contracts.

Amendments/Renewals: The contracts may sometimes be amended.  Many times, the contract may be renewed in writing with mutual consent. 

Contract Management

The proper execution and oversight of all the lifecycles of a contract is difficult for a businessman who is more interested in business expansion. The contract management includes the proper execution and oversight of all the lifecycles of a contract. The need for a separate contract management system arises in big business entities involving many contracts or contracts with minute obligations, that if any obligations, timelines, renewals etc., are missed, it would lead to disputes and huge liabilities.  Contract managers require to be fully updated with all the life cycles of the contract and need to have continuous interactions between all the departments of the business entity for the smooth functioning of the contracts and consequently business. It is estimated that around 9% of the revenue is lost because of lack of proper contract management.  

The contract management requires proper storage of the contract documents.  It should enable timely retrieval for the required purposes. The contract management will have to look at timelines and intimate the necessary departments of the pending obligations or receivables.  It should look for timely requests for renewals. It should see whether the notices sent are proper as per the requirements of the contracts. It should see that the dispute resolution clauses of the contract are properly and timely invoked.  Hence, in one sense it can be said that contract management is a key management tool for the proper and efficient conduct of the business.

Contract Management Software

As in any other field, the software has also entered the field of contract management and is of extremely important nature. The contract management software is the process wherein the contract management is basically done through software and thereby ably supplementing the contract managers, if not fully replacing them.  It has reduced the time taken in contract management while also minimising the errors therein. It frees up the time for lawyers as they do not have to do routine drafting but can concentrate on transactions and negotiations which really require their time and efforts. It integrates the principles of quote to cash in the business entity.  

Click Above

In the life cycle of the contract, the role of the contract management software is sought to be looked into.

Request:  When a request is disorganised and informal, it becomes difficult to manage over time as to its origin.  If the previous templates are not properly maintained, the outdated contracts may be given as the draft. With the contract management software, the request is properly recorded on the software and the legal department can respond more quickly from the repository, with everything being recorded. 

Drafting: Once the templates are set, the contract details can be filled in the blanks and the draft becomes ready in minutes.  

Negotiation: During the negotiation phase, the most updated terms are required.  Any track changes from the other contracting party or from anybody inside any department of the business entity must be properly saved and attributed for all future reference.  The contract management software makes this clear and efficient than the track changes mechanism in the Microsoft word.

Approval:  With the approvals being done electronically, the time required becomes shorter and the process smoother.

Execution: The signature on the documents can be through electronic signature and automatic recording of the execution of the document.  The storage of the document is automated in a central repository and can be easily retrieved.

Obligations: Once the contract management software is integrated into the ERP or CRM of the business entity in both front and back ends, all obligations under the contract or changes thereunder are delivered to the sales, customers relations team and operations teams for action.

Compliance: The contract management software will update the requirement of any governmental compliances that the contract requires and will initiate the actions if permitted.

Amendments/Renewal: The contract management software will intimate the customers and all the relevant departments of the business entity about the changes in the contract in case of changes in law.  All amendments to the contracts by the contracting parties are also timely intimated to the relevant department. All renewal deadlines are properly intimated to the relevant department for necessary actions.

Hence, contract management software basically covers the entire gamut of contract management itself.

Fields which the Contract Management Software must Detect

The basic need for the contract management software is for the timely intimation about the deadlines for fulfilling obligations under the contract so that no obligation under the contract goes undetected and unfulfilled.  This would lead to huge savings and avoidance of losses.

The other thing which the contact management software must detect are the proper channels in the contract management.  It should have authentication levels for each user of the software so that all the actions are properly attributed. The business entity cannot be held to be responsible if some persons act outside their authority and place orders.  The contract management software will avoid those problems.  

The contract management software will do away with inconsistent legal language and make the language standardised.  The optimal drafts are identified for each transaction quickly and because of the existing repository of templates and the search options, the risks of inconsistent legal language are reduced. This will save time and efforts.  

The non-fulfilment of the obligations on time by the other contracting party including non-supply of goods/services or payment for the goods/services received by the other contracting party. 

^Conclusion

Artificial Intelligence is being used increasingly in the contract management software with the AI itself being able to generate contracts for the required situations within minutes or less than that.  It has slowly disrupted the legal industry because of its gradual adoption. The contract management by contract managers on traditional methods like Excel used to have inadvertent errors. But the contract management software has automated the contract management work and is only going to expand to all activities with the integration of AI into the software.

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 Fields Should a Contract Management Software Detect to Ensure Your Risks are Uniform? appeared first on iPleaders.

This article has been written by Avni Sharma, a second-year intern from National Law University Odisha. This article contains provisions of the Minimum Wages Act, 1948 in detail along with the procedures contained in it.

Introduction

India is a labour-intensive country as we have a great amount of human capital to invest in our industries and other areas of work. Minimum wage is an indispensable part of any such country because there is a huge chunk of population which is dependant on daily wages for their bread and butter.

The concept of minimum wages in India was brought in by Mr K. G. R. Chaudhary in 1920. After the International Labour Conference, 1928, the machinery of wage-fixing was brought into actual policy formulation. The bill regarding the same was brought in 1946 and by the year 1948, the bill was enforced and we had saviour rights for all the blue-collar workers. Blue-Collar Workers refer to those people whose profession requires them to perform manual labour.

The advent of this Act ensured that sweated labour was protected from any type of exploitation and their rights are duly recognized. 

Objective of the Act

There were several objectives that this Act needed to ensure:

1. Minimum wages need to be ensured to all blue-collar workers in the organized sector.
2. Prohibition of exploitation of labour in the workplace.
3. The Act would empower the government to fix minimum wages and revise those wages from time to time according to the economic situation of the country.
4. To ensure the application of this Act to a maximum number of organized sector employers.

Constitutional Validity of the Act

The Act is constitutionally valid and it can be ascertained from the following pointers:

1. The Act does not violate Article 19 of the Constitution: The constitutional validity of the Act was challenged in the cases of U. Unichonoy vs State of Kerala and Gulmuhommad Tarasaheb vs State of Bombay. The parties challenged that this law restricted their Article 19(1)(g), as it puts a restriction on freedom of trade. But, the court held in favour of the Act. It was held that, in the absence of any such Act, the employers will pay wages, arbitrarily.
2. The Act does not violate Article 14 of the Constitution: It was contended that the Act violates the ‘equal protection of laws’ clause. However, the court ruled that the Act does not violate Article 14 in the case of Bhikusa Yamasa Kshatriya vs Sangammar Akola Bidi Kamgar Union.

Salient features of the Act

The act has some salient features, let us have a look at them.

1. The Act specifies for minimum wages for all government sectors employees, both centre and state.
2. The minimum wages include House Rent Allowances. Therefore, Minimum Wages is equals to (=) Minimum Payment +  Special Allowances

1. There are several kinds of wage-fixing mechanisms:

1. Minimum Wage Rate; 
2. Minimum Piece Rate;
3. Guaranteed Time Rate;
4. Time Rate or Piece Rate Applicable to Overtime.

1. Classes of fixing minimum rates of wages :

(a) different scheduled employments;

(b) different classes of work in the same scheduled employment;

(c) adults, adolescents, children and apprentices; and

(d) different localities (zone-wise).

1. There is a standard criteria of fixing minimum wage rate. Standard family consists of four members where it is considered that three consumption units are required on one earner.
2. The food requirement must be ascertained by the regular calorie intake by the family.
3. It is considered that the family requires clothing of 72 yards.
4. The rent is considered to correspond to the minimum area.
5. The expenditure is generally considered to be 20% of the minimum wage earned.
6. The social expenditure is also considered to be 25% of the total minimum wage.
7. The minimum wages must be revised within 5 years and the revised special allowance must be announced every six months.
8. The regional labour commission shall be the authority for claiming the remedy under Section 20 of the Act. In Gujarat, Assistant Commissioner of labour shall be the authority.

Application of the Act

The application of the Act can be seen in the provisions. The provisions clearly mention all the procedures and the enactment of the laws laid down. Let us look at them one by one.

Fixation of Minimum Rates of Wages, Working Hours and Determination of Wages and Claims, etc.

Section 3 of the Act mentions all the procedures. Section 3(2) suggests that the appropriate government shall fix the following keeping all the considerations in the formulation of policies:

1. Minimum piece rate;
2. Minimum time rate;
3. Overtime rate; This must be a substitution of the rate which was pre-decided by the employer;
4. Guaranteed time rate system.

The government has to revise the minimum rates. In order to do that, the following things need to be kept in mind:

1. The rates vary from every locality, Scheduled Employment, apprentices, children, adolescents and adults.
2. The rates may be fixed, monthly, weekly, daily or hourly. This time may be fixed for a longer wage period as well.

Fixation of minimum rates of wages

The policy formulation regarding minimum wage happens only after due deliberation on the following:

1. The minimum wages must be in compliance with the cost of living index of the employees.
2. The basic wage rate with or without the cost of living allowance along with the authorised cash value of concessions pertaining to the supply of essential basic commodities at subsidized rates.
3. Comprehensive basic wage rate will include the cash value of the concessions, cost of living and the basic rate.

Minimum rates of wages

The minimum rate of wages is clearly defined in the table given below:

Procedure for fixing and revising minimum wages

Section 5 of the Act gives the procedure for fixing and revising the minimum wages. The appropriate government shall appoint committees and subcommittees that may be able to advise on the fixation of minimum wages. The appropriate government is also supposed to publish the minimum wage fixation in the newspapers so as to inform the stakeholders regarding the changes implemented. This publication has to be done at least before two months of the implementation. The stakeholders may also raise issues if any after the publication. The ascertainment of the minimum wage is then published in the Official Gazette. There may also be consultations regarding the revision of wages, with the Advisory Board. One may wonder, what constitutes an Advisory Board. Let us know what is it and its constitution.

Advisory Board

Section 7 of the Act suggests the formation of the Advisory Board. The government requires advise regarding the living cost indices, the requirements etc. An advisory board helps with the same requirements that were mandated under Section 5 of the Act.

Central Advisory Board

The Act also provides for the formation of a Board of Boards, for the management and regulation of all the Advisory Boards of India. This board shall comprise of members elected by the Central Government and the employees of the advisory boards. The formation of this board is given in Section 8 of the Act.

Composition of committees

Section 9 of the Act consists of the composition of the committees. It is mentioned that the committee shall comprise of members, who are elected by the employees of the scheduled employment. This committee will also contain the members from the scheduled employees but that must not exceed one-third of the total number of committee members.

Correction of errors

The appropriate government is provided with the liberty of correcting arithmetic and clerical errors. The correction will be published immediately in the official gazette. The notice will also be provided to the advisory board. The notice will also be up for suggestions.

Wages in kind

Minimum wages in this Act will be paid in cash only. However, if there are any concessions that are provided to the stakeholders by the government, shall be paid in the prescribed manner according to this Act. Section 11 of the Act prescribes the manner.

Payment of minimum rates of wages

The payment shall be made to the employees in order which is prescribed by law under this Act. However, it is also mentioned that nothing in this Act can affect the provisions laid down in the Payment of Wages Act, 1936 (4 of 1936). Section 12 of the Act fixes the payment of minimum wage.

Fixing hours of normal working days

Section 13 provides for the fixing of normal working hours in a working day. The fixation of normal working hours includes:

1. The fixed number of working hours will include intervals from time to time.
2. The fixed period must also include a day of rest in every seven days.
3. The rest day must also be included in the pay, payment for not less than the overtime rate.

There are certain exceptions related to those employees whose work is of nature that is irregular. Such exceptions will be provided only after the consent of the appropriate government. 

Overtime

If any employee works for more than prescribed hours then that person is entitled to excess payment for that period. However, it is also mentioned that nothing in this Act must be prejudicial to Section 59 of the Factories Act, 1948. Section 14 of the Act provides for overtime.

Wages for two or more classes of work

When two or more classes of work are performed by a single employee, the minimum wage will be altered according to the time invested in each class of work and remuneration provided in such work. Section 16 of the Act, this practice is mentioned.

Minimum time-rate wages of piece work

The minimum time rate must be given to those who are employed on the piece-rate system. The system must not be a minimum piece rate but only minimum time rate. The minimum time rate is a system, where the wages are paid on the basis of the time worked. Section 17 of the Act provides for this clause.

Maintenance of registers and records

The employers are supposed to maintain a record register in order to ascertain that all the employees are being minimum wages. This register also needs to be exhibited and must be available for perusal at all times. The authorities are supposed to check these registers. Section 18 of the Act provides for this clause.

Inspectors

Inspectors are appointed by the appropriate government in order to make sure that the administration is carried out well. There are certain powers which are given to the inspectors, which are listed below:

1. The inspectors may enter any premises in order to carry out investigations regarding the minimum wage remuneration.
2. The inspectors may examine or give any information important to the investigation.
3. They also have the seize or make copies of any of the documents important to the investigation.

Claims

Claims are heard by the authorities appointed under subsection 1 of Section 20 of the Act. Every authority appointed under sub-section (1) shall have all the powers of a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908). Claims can be made to the appropriate authority so that the appropriate action may be taken as soon as possible.

Single application in respect of the number of employees

The maximum level of compensation provided may not exceed 10 times the total excess of the aggregate. The single application in respect of a number of employees has to comply with Section 21(1) of the Act.

Miscellaneous

Penalties for certain offences

Section 22 of the provides for certain penalties that may be charged if:

1. The employers pay less than minimum wage than specified;
2. The employer does not comply with the provisions given in Section 13 of the Act

The penalties will also be considered if it can be proved that the offence has been committed by the negligence of the director or secretary or manager of the company.

General provisions for punishment of other offences

Section 22A states that the offenders will have to pay fines and may have to land up in jail if the offences are proved under this Act. The offenders may be granted a jail for a term which can extend to 6 months and/or be imposed with a fine that may extend to 500 rupees.

Cognizance of offences

The courts are not allowed to take cognizance unless there has been an application in front of the appropriate government. The court can also take cognizance when there is a complaint from the inspectors.

Offences by companies

Section 22C states that the penalties will also be considered if it can be proved that the offence has been committed by the negligence of the director or secretary or manager of the company.

Payment of undisbursed amounts due to employees

Section 22D also states about the amount that is due to be paid. The employees may also approach the court for this relief. If the employer does not pay the given amount in due time, then the authorities have the power to disburse the amount to the employees in the prescribed manner.

Protection against attachment of assets of the employer with Government

The employers have to detach their personal property for the security of the employees working. The amount that is kept as security with the government shall be used for the payment of contracts with the employees. This can be done under any decree by any competent court.

Application of Payment of Wages Act, 1936 to scheduled employments

The inspectors are responsible for the application of the Payment of Wages Act, 1936 to scheduled employments. This may be done by the notification in the Official Gazette.

Exemption of employer from liability

The employer may be exempted from liability if he or she is able to satisfy the court regarding the following contentions:

1. The person took due diligence before taking the action.
2. The action was done without his or her consent or knowledge.

If the employer is discharged from the liability then the person whose fault was that will be held liable. 

Bar of suits

The suits shall not be maintained if:

1. If the complaint has already been made in the court’s cognizance under Section 20 of the Act.
2. The sum has already formed a direction in the plaintiff’s favour.
3. Has already been adjudged that the sum will not be awarded in that circumstance.
4. Could have been recovered by an application under that section.

Exemptions and exceptions

The appropriate government may impose such conditions on the employers as they deem fit. Such official notification may be granted in the official gazette. The employer does not have to comply with these norms given in the Act if the employee is a family member.

Power of State Government to add to Schedule

The appropriate Government, after giving a notification in the Official Gazette at least three months’ notice before its intention may by notification, add to either Part of the Schedule any employment in respect of which may be minimum rates of wages should be fixed under this Act, and thereupon the Schedule shall in its application to the State be deemed to be amended accordingly. Section 27 of the Act provides for that power to the state.

Power of the Central Government to give directions

The central government has the power to give directions for the smooth functioning of implementation of the minimum wages throughout the country. Section 28 of the Act mentions about this power.

Power of the Central Government to make rules

Along with the power to give directions, the Central government has also got the power to formulate rules in favour of the functioning of the Act. The Central Government may make rules by publishing the news in the official gazette. The rules may be regarding prescribing the term of office of the members, the procedure to be followed in the conduct of business, the method of voting, the manner of filling casual vacancies in membership or the quorum necessary for the transaction of business of the Central Advisory Board.

Power of the appropriate Government to be laid before the Parliament

The Parliament of India has the authority that whenever such a rule is made regarding this Act, the same shall be laid before parliament for approval by the majority. This must happen within a period of 30 days.

Validation of fixation of certain minimum rates of wages

The fixed minimum rates of wages shall be valid until the appropriate government revises this minimum rate of wages. This is provided under Section 31 of the Act. This Act also provides for the maintenance of itself. The rules and regulations are sufficient for its own sustenance.

Conclusion

The Minimum wages Act, 1948 brought about a revolution in the employees’ wage systems because the relief provided in this Act provides for complete protection from exploitation of manual labour at the workplace.

References

1. Constitutional Validity of the Act

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This article is written by Mehar Verma, currently pursuing BBA.LLB from Jindal Global Law School (3rd year). The author in this article talks about the meaning and importance of prospectus and promoters under the Companies Act, 2013.

Introduction

Whether you are starting a new company, raising money through issuing of shares or buying shares of any company, you are required to have the necessary knowledge about the prospectus and promoters of a company. To get a better understanding of the role of the prospectus, let’s assume there is a company ABC Ltd. which is issuing its share in the market. Before issuing the shares to the public, the company will be required to file a registration statement, disclosing all the material information about the company. Part of such registration statement is a prospectus. It is based on the prospectus of a company that an investor decides whether or not to become a shareholder of that company.

As a prospectus decides the fate of the company and shareholders, concealment of any material facts or untrue statement would attract civil or criminal liability towards the company. Considering the same example, if ABC in its prospectus states that it received a profit of INR 5,00,000 in the last financial year, which in turn induced Mr. X to invest. However at a later stage, Mr. X found out that the statement was untrue and in reality, ABC ltd had incurred a profit of only INR 4,00,000 only, then ABC ltd will be liable.

Promoters also play a crucial role in the working and incorporation of a company. They select the managing body of the corporation, prepare all the necessary legal and formal documents, find first directors and advertise the prospectus.

What is a prospectus under Company Law

A prospectus is a formal document given out by a company, when such a company wants to sell its securities or bonds to the public, containing all the necessary details about the sale, including the company’s financial position, the number of shares offered, types of securities being offered, etc. Section 2(70) of the Companies Act, 2013 defines prospectus as any document described or issued as prospectus and includes RHP or shelf hearing prospectus referred to in Section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.

A prospectus shall be issued by or on behalf of a company only when it has been delivered to the registrar for registration. A prospectus is to be issued to the public within 90 days from the date of delivery to the registrar and no shall prospectus shall be valid if it is issued after the expiration of such period.

Section 23 of the Companies Act, 2013 provides that a public company may issue securities to the public through a prospectus.

Application forms

Section 33 of the Companies Act, 2013 states that no application for the purchase of any securities can be issued unless such form is accompanied by a suitable prospectus. 

This rule has two exceptions:

1. When an application is issued to invite a person to enter into an underwriting agreement concerning such securities
2. When an application is issued about securities that are not offered to the public.

Public issue

Any public company can issue securities to the public by complying with the provisions mentioned in Part I of Chapter III of the Companies Act, 2013. A public issue can be either in the form of the initial public offer (IPO) or follow on public offering (FPO). With an IPO, an unlisted public company can either make a fresh issue of securities or offer its existing securities for sale for the first time to the public while an FPO allows an already listed company to make a fresh issue of securities to the public. Both IPO and FPO are governed by SEBI, and the corresponding laws and regulations.

Contents of prospectus

As per Section 26 of the Companies Act, 2013, and Rule 3 of Companies (prospectus and allotment of securities) Rules, 2014 a prospectus must be signed and dated and have the following details:

1. Name and address of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other person as may be prescribed,
2. Dates of the opening and closing of the issue,
3. A statement by the Board of Directors of separate bank account,
4. Details about underwriting of the issue,
5. Consent of the directors, auditors, banker to the issue, expert’s opinion, if any, and of any other person as may be prescribed,
6. The authority of the issue and the details of the resolution passed thereafter,
7. Procedure and time schedule for allotment and issue of securities,
8. Capital structure of the company in the prescribed manner,
9. Main objects of the public offer, terms of the present issue and such other particulars as may be prescribed,
10. Main objects and present business of the company and its location, schedule of implementation of the project,
11. Particulars relating to:

• Management perception of risk factors specific to the projects,
• Gestation period of the project,
• Extent of progress made in the project,
• Deadlines for completion of the project and,
• Any litigation or legal action pending or taken by a Government Department of a statutory body during the last past five years immediately preceding the year of the issue of prospectus against the promoter of the company,

1. Minimum subscription, amount payable by way of premium, issues of shares otherwise than on cash,
2. Details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed, and
3. Disclosures in such manner as may be prescribed about sources of promoter’s contribution.

If any prospectus is issued without the mention of any of the above-mentioned content, then the company and every person who is a party to the issue of prospectus shall be punishable with imprisonment for a term which may extend to 3 years or with a fine not less than INR 50,000 which may extend to INR 3 lakhs, or with both.

Procedure for changing the terms of the prospectus

Any change or variation in the terms and objects of the prospectus shall be done only passing of a special resolution through postal ballot and the notice of such resolution should have the following details:

1. Particulars of the terms of the contract to be varied,
2. Particulars of the proposed variation,
3. Reasons or justification for such variation,
4. Effect of the proposed variation in the financial statement or position of the company,
5. Major risk factors pertaining to the new objects.

Secondly, an advertisement of the notice for getting the resolution passed for varying the terms shall be published in PAS-1 form simultaneously with dispatch of postal ballot notices to shareholders.

Deemed prospectus

When a company offers any security to the public for sale, including shares and debentures, then any document through which such sale is made shall be deemed to be a prospectus under Section 25 of the Company Act, 2013.

A deemed prospectus shall be subject to the same liabilities and obligation as a prospectus defined under Section 2(70) of the Act. In Iridium India Telecom ltd vs Motorola Incorporated & ors, it was held that as the nature of the document was that of a deemed prospectus while issuing it, the promoter was required to make a true and full disclosure of all the relevant facts.

Shelf prospectus

According to Section 31 of the Companies Act, 2013 a shelf prospectus is a document issued by the securities and exchange board of India specified companies that issue securities more than once over a period of time without issuing further prospectus. Financial institutions like banks, insurance companies tend to engage in fundraising activities at a very frequent rate, to reduce the process of registering the prospectus again and again the concept of shelf prospectus was introduced, thus when a self prospectus is issued then the issuer is not required to issue a separate prospectus of any kind for each offering. The shelf prospectus must include the validity period of the prospectus which shall not exceed one year. This period commences from the opening date of the first offer.

If in between from the time when the shelf prospectus was issued and when the fundraising was required, the company experiences any significant or any material change, which is required to be informed to the investor, then the same should be done through information memorandum.

Information memorandum

As per Section 31(2) of the Company Act, 2013 a company filing a shelf prospectus shall be required to file an information memorandum. Information memorandum contains all the relevant changes that have taken place in the company, including the financial changes, from the time of the first offer of a security or previous offer of securities. Before issuing the subsequent offer of securities under the shelf prospectus, the information memorandum is to be filed with the registrar within 3 months as given under Rule 4CCA of section 60A(3) of the Companies (Central Government’s) General Rules and Forms, 1956.

Where a company or any other person receives application along with advance payments for the subscription of security before the changes were made in the information memorandum, then such changes must be communicated to the applicant. If the applicant thereafter, wishes to withdraw their application, the company shall return all the money received within 15 days.

Remedies for misrepresentation in a prospectus

An investor determines the financial position, liabilities and the current market position of a company through its prospectus, thus to ensure the interest of the investor, no material facts should be misrepresented or concealed. However reasonable puffing up of prospectus does not attract any liability. For instance, an advertisement claiming that their product will make your teeth whiter than white, then it would not amount to misrepresentation, as no reasonable person would believe such an advertisement. A statement is said to be misrepresented if it satisfies the following:

1. Untrue statement,
2. Intends to produce the wrong statement,
3. Conceals material facts,
4. Omits material facts.

An investor, investing based on the misrepresented prospectus has a right to claim damages or rescind the contract.

Damages for deceit

A victim of a misleading statement is entitled to receive damages if they have suffered monetary loss as a direct consequence of the misleading prospectus. Section 447 of the Companies Act provides that any person or company that is found to be guilty of fraud or deceit shall be liable to fine. The amount of fine shall not be less than the amount involved in fraud but may exceed till three times the fraud amount involved. If it is a case of contributory negligence or if the victim contributed towards its loss in any manner, then the court can reduce the damages to be awarded accordingly.

Rescission for misrepresentation

If there is a misrepresentation of a material fact or an omission of such fact in the prospectus, the contract can be rescinded or cancelled by the aggrieved party. While rescinding the contract, the parties can not rescind a part of the contract, the whole of the agreement is to be rescinded. However, the right to rescind is lost in the following circumstances:

By affirmation

The shareholder loses his right to rescind if he had the full knowledge of the misrepresentation made in the prospectus and yet upheld the contract. When the shareholder does any of the following, knowingly that the prospectus was misrepresented, he loses his right to rescind:

1. Attempts to sell his shares,
2. Executes a transfer,
3. Pays call money,
4. Receives dividend,
5. Attends and votes at the general meeting.

By unreasonable delay

Unreasonable delay or lapse of time can be another reason for bar to rescission. A shareholder, if he wants to cancel his contract, must do it within a reasonable time, he does not have unlimited time to rescind the contract. If a prompt decision is not taken up by the shareholder, he cannot be relieved from his obligation to pay for his shares. 

By commencement of winding up

Once the company has started the process of winding up, the shareholders can’t claim damages or rescindment of contract on the ground of misrepresentation in the prospectus. In Shiromani Sugar Mills Ltd v Debi Prasad, the court held that the right of rescission is lost on commencement of the winding up of the company and as the shareholder had not taken any active steps to avoid the contract during the working of the company neither they gave any indication of their intention to avoid the contract at any time, he has no right to rescind. But where a shareholder has started active proceedings to be relieved of his shares, the passage of winding up during pendency would not prevent his relief.

When statement deemed to be untrue

Any prospectus issued in contravention of Section 26 of the Companies Act is deemed to be untrue. The company would be punishable with a fine ranging between INR 50,000 and INR 3,00,00 and all the people who are a party to the issue of such prospectus may be liable to imprisonment for a term not exceeding three years.

Criminal liability

Section 34 of the Companies Act, 2013 imposes criminal liability on every person authorised to issue a prospectus for excluding or including any material facts which are likely to mislead the shareholders or investors. In DLF ltd v SEBI, the court declared that the defendants were to be held liable as there was concealment of material facts in their prospectus. As this was done to mislead and induce the investors to buy the shares of DLF, it is to be considered fraud. A person shall not be held liable if he proves the omission was immaterial or that he had reasonable grounds to believe that the statement issued was true. In Derry vs Peek, the court did not find the defendants liable as the statement made by them in the prospectus was made by them in the honest belief that it was true.

Acceptance of deposits under Company law 

Deposits include the money received against subscription to any securities including the share application money. Section 73 of the Company Act, 2013 provides that after the commencement of this Act no deposit shall be invited, accepted or renewed from the public in contravention to the provisions provided in this Act.

Who is a promoter under Company law?

Section 2(69) of the Companies Act, 2013 provides that promoter means a person who has been named as such in the prospectus or is identified by the company, has control over the affairs of the company, directly or indirectly and in accordance with whose advice, directions or instructions the Board of Director of the company is accustomed to act. Thus a promoter is a person who discovers the business opportunity and takes the required steps in the formation of a company. He is the one who undertakes the task of reaching the stage of incorporating the company. The status of the promoter is generally terminated when the board of directors has been formed and they start governing the company. They handover the control of the company to its directors, essentially post incorporation of the company, it is post this step that the promoter’s fiduciary and common law duties cease, and he is subject to more extensive duties in dealing with the company.

Duties and liabilities of a promoter

A promoter gives the practical shape to the idea of a company and renders a very useful service in the formation of a company. A promoter may be an individual, firm or company that originates the scheme, prepares executes and registers memorandum of association and articles of association. He finds the first directors of the company and enters into preliminary contracts. In Kelner v Baxter, the court held that contracts entered by promoters on behalf of the company cannot be ratified after the formation of the company, as the company was not in existence when the contracts were executed.

The promoters are in a fiduciary relationship with the company and they should not be making in any secret profit at the expense of the company. For instance, buying property at a lower price and then selling it to the company at a higher rate after incorporation of the company.

Normally promoters become directors of the company after incorporation of the company. However, whether or not a promoter becomes director, he is still fiduciary liable to the company with respect to the pre-incorporation contracts entered into and profits incurred.

In Erlanger v New Somrero Phosphate Co, the court laid down that if a promoter does not disclose his interest in the contract with the company, it is a breach of duty of the promoter and the contract can be rescinded by the company and the amount to be repaid to the company with interest. In Leeds and Hanley theatres of Varieties ltd damages were awarded for breach of promoter’s duty whereas in Cape Brenton co. it was held that if a promoter had acquired property before he became a promoter and if the company has affirmed the contract then no remedy is available for breach of promoters’ fiduciary duties.

Conclusion

Every public company issuing shares either through an IPO or FPO has to file a prospectus which a formal document containing all the material statements about a company required by the investors before acquiring shares in the company. All prospectus, including shelf prospectus and deemed prospectus, must be true to the knowledge of the company and all those responsible for issuing of the prospectus, as any omission or concealment of material facts, attract liability. In circumstances of fraud and misrepresentation, the aggravated party has the right to damages, compensation and to rescind the contract.

As the promoter plays a significant role in the incorporation of the company and other legal formalities, he has a fiduciary relationship with the company and can be held liable for breach of his duties.

References

1. 1. The Companies Act, 2013
   2. Iridium India Telecom ltd vs Motorola Incorporated & ors, 2004 (1) BOM 479

• Shiromani Sugar Mills Ltd v Debi Prasad, AIR 1950 All 508

• DLF ltd v SEBI, (SAT Order in Appeal No. 331 of 2014)

• Derry v Peek, (1889) LR 14 AC 337

• Erlanger v New Somrero Phosphate Co, (1878) 3 App Cas 1218

• Leeds and Hanley theatres of Varieties ltd, (1902) 2 ch 809 

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This article is written by Shivangi Tiwari, a second-year student pursuing B.A. LL.B. from Hidayatullah National Law University, Raipur. This is an exhaustive article dealing with Trade Union Act, 1926. 

Introduction

Before the emergence of industrialization on a massive scale, there were personal contracts between the workers and employers. Therefore, no requirement for the evolution of any machinery governing the relationship between workers and employers arose until then. But after the establishment of modern factory system this relationship lost its significance due to large scale industrialization which enticed employers to reduce the cost of production in order to withstand the cut-throat competition in the market and maximize their profit by using technologically more sophisticated means of production which in turn resulted in the rise of a new class of workers who were completely dependant on the wages for their survival which changed the existing employer and employee relationship in which the employees were exploited by their employers. The conflict of interest between workers and employers and the distress of workers resulted in the growth of various trade unions.

A trade union is an organized group of workers who strive to help the workers in the issues relating to the fairness of pay, good working environment, hours of work and other benefits that they should be entitled to instead of their labour. They act as a link between the management and workers. In spite of being newly originated institutions, they have turned into a powerful force because of their direct influence on the social and economic lives of the workers. To control and manage the working of these trade unions different legislations regulating the same required. In India Trade Unions Act of 1926 is a principal Act for controlling and managing the working of trade unions. The present article aims at explaining and bringing forth various aspects of the Act.

History of Trade Unionism in India

In India trade unions have developed into an important platform for putting up the demands of the workers. They have also turned into one of the most influential pressure groups, which is an aggregate seeking to influence the government in framing legislation in favour of workers without aspiring to become part of the government. As an organized institution, trade unionism took its concrete shape after the end of World War 1. The trade unions in India are essentially the product of modern large scale industrialization and did not grow out of any existing institutions in society. The need for an organized trade union was first realized in 1875 by various philanthropists and social workers like Shri Sorabji Shapaji Bengali and Shri N.M. Lokhandey whose constant efforts resulted in the formation of trade unions like The Printers Union of Calcutta (1905), the Bombay Postal Union (1907). 

The setting up of textile and mill industries at the beginning of the 19th century in the presidency towns of Bombay, Madras, and Calcutta gave impetus to the formation of industrial workforce association in India. The Bombay Mill-Hands Association, founded by N.M. Lokhande in 1890 is the first labour association of India. The following years saw the rise and growth of several other labour associations and unions in India like the Madras Labour Union which is the first properly registered trade-union founded by B.P. Wadia in the year 1918, in the year 1920 the country saw the growth of the Ahmedabad Textile Labourer’s Association in Gujarat which turned into a union under the guidance of Mahatma Gandhi and is considered to be one of the strongest unions in the country of that time because of the unique method of arbitration and conciliation it had devised to settle the grievances of the workers with the employers. Since the union followed the ideals of truth and nonviolence laid down by Mahatma Gandhi it was able to secure justice to the workers in a peaceful manner without harming the harmony in the society. In the same year, the first trade union federation All India Trade Union Congress (AITUC) saw the light of the day, it was formed after the observations made by the International Labour Organization which highlighted the influence of politics on trade unions and associations and how the same is detrimental for any economy to prosper.

The importance of the formation of an organized trade union was realized by nationalist leaders like Mahatma Gandhi who to improve the employer and worker relationship gave the concept of trusteeship which envisaged the cooperation of the workers and employers. According to the concept, the people who are financially sound should hold the property not only to make such use of the property which will be beneficial for themselves but should make such use the property which is for the welfare of the workers who are financially not well placed in the society and each worker should think of himself as being a trustee of other workers and strive to safeguard the interest of the other workers.

Many commissions also emphasized the formation of trade unions in India for eg. The Royal Commission on labour or Whitley commission on labour which was set up in the year 1929-30 recommended that the problems created by modern industrialization in India are similar to the problems it created elsewhere in the world and the only solution left is the formation of strong trade unions to alleviate the labours from their miserable condition and exploitation.

Development of Trade Union Law in India

Labour legislation in India has a key impact on the development of industrial relations. The establishment of social justice has been the principle of all the labour legislation in India. The establishment of the International Labour Organization to uplift the condition of labour all over the world gave further impetus to the need for well-framed labour legislation in the country. Several other internal factors like the Swaraj movement of 1921-24, the royal commission on labour also paved the way for various labour laws and also encouraged the framers of the constitution to incorporate such laws in the constitution which will benefit the labourers. Under the constitution, labour is the subject of the concurrent list and both centre and state can make laws related to the subject. The different legislation on labour in the country are as follows:

• Apprentices Act, 1961: The object of the Act was the promotion of new manpower at skills and improvement and refinement of old skills through practical and theoretical training.
• Contract Labour (Regulation and Abolition) Act, 1970: The object of the Act was the regulation of employment of contract labour along with its abolition in certain circumstances.
• Employees’ provident funds and misc. Provision Act, 1952: The Act regulated the payment of wages to the employees and also guaranteed them social security.
• Factories Act, 1948: The Act aimed at ensuring the health of the workers who were engaged in certain specified employments.
• Minimum wages Act, 1948: The Act aimed at fixing minimum rates of wages in certain employments.
• Trade Union Act, 1926: The Act provided for registration of trade unions and defined the laws relating to registered trade unions.

Indian Trade Union (Amendment) Act, 1947

The labours, especially the ones who work in the unorganized sectors lack the capacity to bargain and this becomes a major reason for their exploitation. The Right of collective bargaining is provided only to those trade unions which are registered but in India, there are legislations regarding the recognition of trade unions but there is no single legislation on registration of trade unions. Realizing the need of having central legislation for registration of trade unions, the parliament passed the Indian Trade Union (Amendment) Act in the year 1947. The said Act sought to introduce Chapter III-A into the Trade Union Act, 1926, which enumerated the conditions required for mandatory recognition of any trade union. however, this Act was never brought to force Therefore, the mandatory recognition of trade unions is not present under any law in force in India.

Registration of Trade Unions

The Trade Union Act of 1926 was passed in the year 1926 but it came into effect in the year 1927. The Act contains the provisions related to registration, regulation, benefits, and protection for trade unions. Section 3 to Section 14 of Chapter 2 of the Act deals with the registration of trade unions in the territory of India.

Section 3: Appointment of Registrars

Section 3 of the Act empowers the appropriate government to appoint a person as the registrar of a trade union. The appropriate government can also appoint as many additional and deputy registrars in a trade union as it deems fit for carrying on the purposes of the Act.

Section 4: Mode of Registration

Section 4 of the Act provides for the mode of registration of the trade union. According to the Section, any seven or more than seven members of a trade union may by application apply for the registration of the trade union subject to the following two conditions:

• At Least 7 members should be employed in the establishment on the date of the making of the application.
• At Least 10% or a hundred members whichever is less, are employed in the establishment should be a part of it on the date of making the application.

Section 6: Provisions to be contained in the rules of a Trade Union

Section 6 of the Act enlists the provisions which should be contained in the rules of trade union and it provides that no trade union shall be recognized unless it has established an executive committee in accordance with the provisions of the Act and its rules specify the following matters namely:

• Name of the trade union;
• The object of the establishment of the trade union;
• Purposes for which the funds with the union shall be directed;
• A list specifying the members of the union shall be maintained. The list shall be inspected by office bearers and members of the trade union;
• The inclusion of ordinary members who shall be the ones actually engaged or employed in an industry with which the trade union is connected;
• The conditions which entitle the members for any benefit assured by the rules and also the conditions under which any fine or forfeiture may be imposed on the members;
• The procedure by which the rules can be amended, varied or rescinded;
• The manner within which the members of the manager and also the alternative workplace bearers of the labour union shall be elective  and removed;
• The safe custody of the funds of the labour union, an annual audit, in such manner, as may be prescribed, of the accounts thereof, and adequate facilities for the inspection of the account books by the workplace bearers and members of the labour union, and;
• The manner within which the labour union could also be dissolved.

Section 7: Power to call for further particulars and require alteration of the name

Section 7 of the Act furnishes upon the registrar power to call for information in order to satisfy himself that any application made by the trade union is in compliance with the Section 5 and 6 of the Act. in matters where the discrepancy is found the registrar reserves the right to reject the application unless such information is provided by the union.

This Section also confers power to the registrar to direct the trade union to alter its name or change the name if the registrar finds the name of such union to be identical to the name of any other trade union or if it finds its name to so nearly resemble the name of any existing trade union which may be likely to deceive the public or members of either of the trade union.

Section 8: Registration

According to Section 8 of the Act, if the registrar has fully satisfied himself that a union has complied with all the necessary provisions of the Act, he may register such union by recording all its particulars in a manner specified by the Act. 

Section 9: Certificate of Registration

According to Section 9 of the Act, the registrar shall issue a registration certificate to any trade union which has been registered under the provision of Section 8 of the Act and such certificate shall act as conclusive proof of registration of the trade union.

Section 9A: Minimum requirement related to the membership of a Trade Union

Section 9A of the Act lays down the minimum number of members required to be present in any union which has been duly registered, the Sections mandates that a trade union which has been registered must at all times should continue to have not less than 10% or one hundred of the workmen, whichever is less, subject to a minimum of seven, engaged or utilized in an institution or trade with that it’s connected, as its members.

Section 10: Cancellation of Registration

The registrar, according to Section 10 of the Act has the power to withdraw or cancel the registration certificate of any union in any of the following conditions:

• On an application made by the trade union seeking to be verified in such manner as may be prescribed;
• If the registrar is satisfied with the fact that the trade union has obtained the certificate by means of fraud or deceit;
• If the trade union has ceased to exist;
• If the trade union has wilfully and after submitting a notice to the Registrar, has contravened any provision of the Act or has been continuing with any rule which is in contravention with the provisions of the Act;
• If any union has rescinded any rule provided under Section 6 of the Act.

Section 11: Appeals

According to Section 11 of the Act, any union which is aggrieved by a refusal to register or withdrawal of registration made by the registrar can file an appeal:

• In any High Court, if the head office of the trade union is located in any of the presidency towns;
• In any labour court or industrial tribunal, if the trade union is located in such a place over which the labour court or the trade union has jurisdiction;
• If the head office of the trade union is situated in any other location, an appeal can be filed in any court which is not inferior to the Court of an additional or assistant choose of a principal Civil Court of original jurisdiction.

Section 12: Registered office

Section 12 of the Act lays down that all communications and notices to any trade union must be addressed to its registered office. If a trade union changes the address of its registered office, it must inform the same to the registrar within the period of fourteen days in writing and the registrar shall record the changed address in the register mentioned under Section 8 of the Act.

Section 13: Incorporation of Registered Trade Union

Section 13 of the Act states that every trade union which is registered according to the provisions of the Act, shall:

• Be corporate by the name under which it is registered.  
• have perpetual succession and a common seal.
• Power to contract and hold and acquire any movable and immovable property.
• By the said name can sue and be sued.

Rights and Liabilities of Registered Trade Unions

Section 15 to Section 28 elucidates the rights which a registered trade union has and also the liabilities which can be imposed against it.

Section 15: Objects on which general funds may be spent

Section 15 of the Act lays down the activities only on which a registered trade union can spend its funds. These activities include:

• Salaries to be given to the office-bearers.
• The cost incurred for the administration of the trade union.
• Compensation to the workers due to any loss arising out of any trade dispute.
• Expenses incurred in the welfare activities of the workers.
• Benefits conferred to the workers in case of unemployment, disability, or death.
• The cost incurred in bringing or defending any legal suit.
• Publishing materials with the aim of spreading awareness amongst the workers.
• Education of the workers or their dependents.
• Making provisions for medical treatment of the workers.
• Taking insurance policies for the welfare of the workers.

The Section also provides that the reason of non-contribution to the said fund and also a contribution to the fund can not be made as a criterion for admission into the union.

Section 16: Constitution of a Separate Fund for Political purposes

Section 16 provides that a trade union, in order to promote the civic and political interests of its members can constitute a separate fund from the contributions made separately for the said purposes. No member of the union can be compelled to contribute to the fund. 

Section 17: Criminal conspiracy in Trade Disputes

Section 17 of the Act states that no member of a trade union can be held liable for criminal conspiracy mentioned under subSection 2 of Section 120B regarding any agreement made between the members of the union in order to promote lawful interests of the trade union.

Section 18: Immunity from civil suits in certain cases

Section 18 of the Act immunes the members of trade union from civil or tortious liabilities arising out of any act done in furtherance or contemplation of any trade disputes. 

For example. in general, a person is subject to tortious liability for inducing any person to breach a contract. But, the trade unions and its members are immune from such liabilities provided such inducement is in contemplation or furtherance of any trade disputes. Further, the inducement should be awful and should not involve any aspect of any violence, threat or any other illegal activity.

Section 19: Enforceability of agreement

According to Section 25, any agreement in restraint of trade is void. But under Section 19 of the Trade Unions Act, 1926 any agreement between the members of a registered trade union in restraint of trade activities is neither void nor voidable. However such right is available only with the registered trade unions as the unregistered trade unions have to follow the general contract law.

Section 20: Right to inspect the books of Trade Union

According to Section 20 of the Act, the account books and the list of the members of any registered trade union can be subjected to inspection by the members of the trade union at such times as may be provided under the rules of the trade union.

Section 21: Rights of minors to membership of Trade Union

Section 21 provides that a person who is above 15 years of age can be  a member of any trade union and if he becomes a member he can enjoy all the rights conferred upon the members of the trade union subject to the conditions laid down by the trade union of which he wants to be a part of.

Section 21-A: Disqualifications of office-bearers of Trade Union

Section 21A of the Act lays down the conditions the fulfilment of which disqualifies a person from being a member of the trade union. The conditions laid down in the Act are as follows:

• If the member has not attained the age of majority
• If he has been convicted by any of the courts in India for moral turpitude and has been sentenced to imprisonment unless a period of five years has elapsed since his release. 

Section 22: Proportion of office-bearers to be connected with the industry

Section 22 of the Act mandates that not less than half of the members of the trade union should be employed in the industry or work with which the trade union is connected. For example trade union is made for the welfare of the agricultural labourers then, as per this Section half of the members of such a trade union should be employed in agricultural activities. 

Section 23: Change of name

Section 23 states that any registered union is free to change its name provided it does so with the consent of not less than 2/3rd of its members and subject to the fulfilment of the conditions laid down in Section 25 of the Act.

Section 24: Amalgamation of Trade Unions

Section 24 lays down that two or more trade unions can join together and form one trade union with or without dissolution or division of the fund. Such amalgamation can take place only when voting by half of the members of each trade union has been effectuated and that sixty per cent of the casted votes should be in favour of the proposal.

Section 25: Notice of change of name or amalgamation

Section 25 of the Act provides that: 

• A notice in writing of every change of name and of every amalgamation which is duly signed by the Secretary and by seven members of the Trade Union changing its name, and, in the case of an amalgamation, by the Secretary and by seven members of each and every Trade Union which is a party thereto, should be sent to the Registrar.
• If the Registrar feels that the proposed name is identical with the name of any other existing Trade Union or, it so nearly resembles such name as it is likely to deceive the public or the members of either Trade Union, the Registrar may refuse to register the change of name.
• If the Registrar of the State in which the head office of the amalgamated Trade Union is situated is satisfied that the provisions of this Act have complied with the amalgamation shall be given effect from the date of such registration.

Section 27: Dissolution

Section 27 of the Act talks about the dissolution of a firm as follows:

• If a registered trade union has been dissolved, a notice of such dissolution which must be signed by seven members and by the Secretary of the Trade Union should be served to the registrar within 14 days of such dissolution and if the registrar is satisfied that the dissolution has been effected in accordance with the rules laid down by the trade union may register the dissolution.
• Where a union has been dissolved but its rules do not lay down the way in which the fund is to be distributed after its dissolution, the registrar may distribute the funds in any prescribed manner.

Section 28 : Returns

Section 28 provides that each trade union should send the returns to the registrar annually on or before such a day as may be prescribed by the registrar. The return includes:

• General statement 
• Audit report
• All the receipts and expenditure incurred by the trade union
• Assets and liabilities of the firm on the 31st day of December

Sub-Section 2 of the Section provides that along with the general statement a copy of the rules of the trade union corrected up to the date of dispatch thereof and a statement indicating all the changes made by the union in the year to which the statement is referred to be sent to the registrar.

Whenever any registered trade union alters its rules, such alterations should be conveyed to the registrar in a period of not less than 15 days from making such alterations.

Regulations

Section 29 to Section 30 of Chapter 4 of the Act lays down the regulations which shall be imposed on the trade union.

Section 29: Power to make regulations

Section 29 of the Act confers the right on the appropriate government to make provisions in order to ensure that the provisions of the Act are fairly executed. Such regulations may provide for any or all of the matters, which are as follows:

• The manner in which a trade union or its rules shall be registered;
• The manner in which the registration of a trade union has to be transferred which has changed its head office;
• The manner of appointment and qualification of the person who shall audit the accounts of the registered trade union; 
• Circumstances under which the documents kept by the registrar shall be allowed to be inspected and also the fees that shall be levied in lieu of the inspection so made.

Section 30: Publication of Regulations

Section 30 states that:

• The power of making regulations conferred to the government is subject to the condition that such regulation has been made after the previous publication.; 
• The date from which the regulation shall be given effect shall be specified in accordance with clause (3) of Section 23 of the General Clauses Act, 1897, and the date should not be less than three months from the date on which the draft of the proposed regulations was published for general information;
• The regulations which are made must be specified in the official gazette of India and it shall have the effect of an enacted law.

Penalties and Procedure

Section 31 to Section 33 of the Trade Union Act lays down the penalties and the procedure of its application upon a trade union which is subject to such penalty.

Section 31: Failure to submit returns

Section 31 states that:

• If any trade union was required to send any notice, statement or any document to the registrar under the Act and if the rule did not prescribe a particular person in the union to provide such information then in case of default each member of the executive shall be imposed with the fine extendible to five rupees. In case of continuing default, the fine may be extended to five rupees a week.
• If any person willfully makes or causes to be made any false entry or omission in the general statement required under Section 28 of the Act shall be punishable with fine extendible to 500 rupees.

Section 32: Supplying false information regarding Trade Unions

Article 32 states, the following:

• Any person who in order to deceive a member of any trade union or any other person who purports to be the part of the trade union, 
• Gives a copy of the document with the pretext of it containing the rules of a trade union. 
• Which he knows or has reason to believe that it is not a correct copy of such rules and alteration and,
• Any person with the like intent give the copy of any document purporting it to be a copy of the rules of a registered trade union which in reality is an unregistered union,
• Shall be imposed with fine which may extend to two hundred rupees.

Section 33 : Cognizance of offences

Section 33 contains the provisions with respect to the cognizance of offence. It says that no court which is inferior to presidency magistrate or magistrate of the first class shall try an offence under the Act. courts can take cognizance of the offences under the Act only in the following cases:

• When the complaint has been made with the previous sanction of the registrar
• When a person has been accused under Section 32 of the Act, he shall be tried within six months of the commission of the alleged offence.

Collective Bargaining and Trade Disputes

When an organized body negotiates with the employer and fixes the terms of employment by means of bargaining is known as Collective Bargaining. The essential element of Collective Bargaining is that it is between interested parties and not from outside parties.

International labour organization in its manual in the year 1960 defined the meaning of collective bargaining as:

“Negotiations about working conditions and terms of employment between an employer, a group of employees or one or more employers organization on the other, with a view to reaching an agreement.” the terms of agreement are used to ascertain the rights and obligations by which each party is bound towards one another during the course of employment.

Section 8 of the Industrial Relations Act 1990 define trade dispute, according to the Act, industrial dispute refers to any dispute which arises between the employers and the workers and it is usually in connection with any one of the following:

• employment or non-employment, 
• the terms or conditions of the employment,
• Something which affects the employment of any person.

Essential conditions for collective bargaining

• Favourable political and social climate: all the collective bargaining which took place in the past bears the testimony to the fact that favourable political and social climate is the prerequisite of collective bargaining. The reason for the same is quite obvious as almost all the trade unions in India subscribe to one or the other political view and therefore, trade unions usually favour the employees not on the basis of the merit of the issues they raise but on the basis of their political considerations.
• Trade union: in any democratic country like India which recognizes the right to speech as a fundamental right, the right to form a trade union is a direct consequence of it and so all the employers should recognize the trade unions and its representative.
• Problem-solving attitude: it means that both the parties while negotiating a bringing up their relative concerns should adopt a problem-solving attitude and should aim at amicably solving the problem without trying to put the opposite party into a loss.
• Continuous dialogue: the dialogue between the employer and the workers may sometimes end up without any fruitful negotiation or there may arise a bargaining impasse, in such a case the free flow of dialogue between the employer and employee should not be stopped and sometimes keeping aside the bone of contention helps bring up a better solution.

Purposes of collective bargaining

• To provide an opportunity for the workers to voice their complaints and grievances regarding the working conditions.
• To pave the way for the employer and workers to reach an amicable solution peacefully without having any ill will towards one another.
• To sort out all the disputes and conflicts between the employer and worker.
• To prevent any dispute which is likely to take place in the future by mutually agreeing on the contract.
• To foster a peaceful and stable relationship between the workers and the organization.

Position in India

In India, collective bargaining remained limited in its application and has been restricted by different labour legislations in India. Different labour laws made different provisions with respect to the working conditions of the workers. Some of the labour legislation in India are as follows:

• The Factories Act, 1948 made provisions for the betterment of the workers in respect of their health, safety, welfare and other aspects while the workers are employed in factory work. However, all the provisions of the Act were not applicable in all the factories, for example, the provision for restroom will be applicable only if there are 150 or more workers. 
• Employees Provident and Miscellaneous Provisions Act, Maternity Benefit Act and Payment of Gratuity Act.
• Industrial Disputes Act, 1947, lays down the procedures by which the settlement of industrial disputes has to be done. Its procedural aspects are applicable to all enterprises for the settlement of industrial disputes.

On a closer view of the labour laws in India indicate that mostly the workers who are employed in the organized sectors of the economy are protected under the various labour legislations. According to the Fifth Economic Census of 1999, it was revealed that more than 97 per cent of the enterprises employ less than ten workers, and most of these employ less than five workers. This clearly shows that labour laws apply to less than 3 per cent of enterprises.

Further, the acceleration of in formalization of the workforce with the onset of liberalization has changed the formal sector also in terms of shifting the jobs from formal to the informal sector and along with it in formalization of jobs. Today, in the formal sector, a number of formal workers are about 33.7 million and informal workers about 28.9 million (2004-05). Increase in the employment (in whatever amount) in the formal sector has largely been informal in nature. Which in turn has been reflected on the trade bargaining?

Agreements for collective bargaining

In India, Following types of agreements are prevalent for collective bargaining:

• Bipartite agreement: These agreements usually result into voluntary negotiations between the employer and employees and are usually binding per se.
• Settlements: Settlements usually arise out of the conciliation process and they are usually tripartite in nature as they involve three parties which are employer, employee and conciliation officer.
• Consent awards: When the parties reach an agreement while the dispute between them is pending before the adjudicatory body. Such agreements are incorporated in authority’s award and are binding on the parties under the dispute.

Conclusion 

Trade Union Act of 1926 is welfare legislation that has been enacted to protect the workers in the organized and unorganized sector from inhuman treatment and protection of their human rights. As such the legislation contains the provisions for registration, regulation, benefits, and protection for trade unions. Thereby, benefitting the workers. 

Trade unions are important organs for the democratic development of any country as it puts up the needs and demands of the workers by collective bargaining. Collective bargaining is an important aspect of the employer-employee relationship. However, collective bargaining is not provided to all the trade unions but is only provided to those trade unions which are recognized. Therefore, the demand for mandatory recognition of trade union which has not been provided under the Trade Union Act 1926 has been raised time and again by the workers. Today, the growth of media has resulted in the empowerment of trade unions and they have turned into influential pressure groups not only in industrial sectors but also in agricultural and other allied sectors.

References

• B.P. Guha: Wage Movement in Indian Industries: As Reflected in Collective Bargaining Agreements.
• Bare Act: Trade Unions Act, 1926 along with Central Trade Unions Regulations, 1938. – Universal Law Publishing
• Justice P.S. Narayana: The Trade Unions Act, 1926
• https://indiankanoon.org/doc/1903729/
• https://indiankanoon.org/doc/1897847/
• http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/India-Trade-Unions-and-Collective-Bargaining.pdf
• https://study.com/academy/lesson/what-is-collective-bargaining-definition-process-quiz.html

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This article is written by M.S.Sri Sai Kamalini, a  fourth year student currently pursuing BA.LLB (Hons) in School of law, SASTRA.This is an exhaustive article which deals with the various contempts of the lawful authority of public servants.     

Introduction

Public servants in India ensure the smooth functioning of all aspects of the government. They are responsible for various procedures that help in the investigation and court proceedings. Contempt of acts done in their lawful authority leads to disorder and chaos in the process.  The definition for public servants is mentioned under Section 21 of IPC. As we all know justice delayed is justice denied, thus hindering the process leads to a great disadvantage to the public and public servants. The article explores the various offences and punishments of those offences that are considered as contempt.

Offences Relating to Contempt of the Lawful Authority of Public Servants

Chapter X  of the Indian Penal Code (IPC) exclusively talks about the offences relating to contempt of lawful authority. The main offences are:

• Prevention of service of summons.
• Absconding from a place in order to escape from proceedings.
• Non-attendance and nonappearance. 
• Omission to produce relevant documents .
• Producing false information.
• Refusal to sign and take an oath.
• Obstructing the sale of property or illegal purchase.
• Threatening the public servant who is responsible.

Offences Relating to Avoidance or Prevention of Summons:

Section 172 of the IPC provides the punishment if the person absconds intentionally from a place in order to avoid being served with the summons. The punishment is usually simple imprisonment which may extend up to one month or fine which may extend up to five hundred rupees.Section173 of the IPC speaks about the prevention of summons intentionally. There are various acts that are considered as an offence under this section:

• Removing the fixing summons. 
• Preventing the affixing of lawful summons.
• Preventing the lawful making of any proclamation.

The punishment is for preventing the summons intentionally is usually simple imprisonment which may extend up to one month and fine which may extend up to five hundred rupees. There is also another situation provided in this two-section, if the summons, notice or order is to attend in person or by agent or it is in regards to the production of documents, the person who avoids or prevents such summons will be punished with simple imprisonment of six months or with fine which may extend up to one thousand rupees.

Offences Relating to Non-appearance in Response to a Proclamation

Section 174 of the IPC is concerned with offences relating to nonappearance in response to a proclamation. Section 174 A inserted by the 2005 amendment is a very important improvement under this chapter as it prevents the nonappearance in the response of proclamation. Section 174 A deals with nonappearance in response to proclamation provided under Subsection 1 of Section 82 of the Code of criminal procedure. Section 8282 of the criminal procedure code deals with the proclamation for person absconding. If the court has all reasons to believe that the person has absconded or is concealing himself so that the warrant cannot be executed then the court can publish a written proclamation asking him to appear within thirty days. The punishment provided under section 174A is imprisonment which may extend up to seven years and also fine. Since the punishment is hard people fear and appear to the proceedings on time.

The Delhi High Court held in the case of  Deepak Saha v State, proceeding under section 174 A of the IPC could be only started if the person is declared as a proclaimed offender and section 174 A of the IPC cannot be added by the investigating officer before declaring the person to be proclaimed offender.

Offences Relating to Production of Documents

Production of proper documents is very essential in every procedure. Documentary evidence holds a lot of value in the investigation. If the documents are not provided properly the procedure and investigation will become tedious. Section 175 of the IPC deals with the intentional omission of production of documents to public servants and Section 176 deals with the intentional omission to give notice or information. Section 177 of the IPC deals with the furnishing of false information. The various ingredients of this section according to the case of  Bishan Dass v State of Punjab and another: 

• The person must be legally bound to produce information on a particular subject to a public servant.
• He must furnish that information as true information which he knows to be false.

Offences Relating to Statements on Oath

Section 178 of the IPC deals with refusal of oath or affirmation when necessary and the punishment under this section is simple imprisonment which may extend up to six months and a fine of rupees thousand. Section 179 and 180 deal with the refusal to answer the questions by a public servant and refusal to sign statements provided by them respectively.

The punishment for not answering the question properly is simple imprisonment for a term which may extend up to six months or fine of thousand rupees. The punishment provided under Section 180is simple imprisonment which may extend up to three months and a fine of rupees five hundred. Section 191 of IPC is concerned with providing false evidence against public justice whereas Section 181 of IPC deals with providing false evidence to the public servant. 

False Information Causing Wrongful use of Power by Public

Section 211 of the IPC deals with false charges of offenses that are made with the intention to injure another person. Giving false charges is a very heinous offence that affects everyone involved in the process of providing justice. 

Section 182 of IPC is an invaluable section under this chapter. This section deals with providing false information to the public servants in order to cause injury to the other person by using the lawful authority of public servants. For example, if a person informs a magistrate that a police officer did not do his work properly even though it’s false. If the magistrate believing the complaint takes action on police officer then it would amount to an offence under Section 182. 

The ingredients of Section 182 are:

• The information provided to the public servant must be false.
• The information is provided to a public servant to do not to do anything if the true state of facts respecting which such information is given was known by him.
• The information is provided to misuse the powers of the public servants in order to annoy the other person. For example, if a person provides false information to the police that his neighbor has illegal weapons in order to misuse the powers of police and to annoy the neighbor by searching his place.

The main necessity to be convicted under this section is that the person complaining must know it is a piece of false information, if the person has all reasons to believe it is a piece of true information then they cannot be convicted under this section. The same is provided in the case of  Santosh Bakshi vs State of Punjab and others. Section 183 to 185 of the Indian Penal Code deals with offences relating to the sale of property effected through the legal process. The main offences are:

• Resistance to the taking of property by lawful authority.
• Obstructing the sale of the property.
• Illegal purchase or bid for property offered.

The punishment provided in Section 183 of the IPC for resistance to the taking of property is imprisonment for six months or fine of thousand rupees or both. The punishment for obstructing the sale of the property is imprisonment of a term of one month or fine of five hundred rupees. Section 185 of the IPC provides punishment for illegal purchase or bid for property offered, the punishment is imprisonment for a month or fine which may extend up to two hundred rupees.

Offences Relating to Disobeying or Non-enforcing Order of Public Servant

According to Section 186 of the IPC, if a person voluntarily obstructs any public servant who is discharging his public functions, it would be considered as an offence and the person can be punished with imprisonment of either term which may extend up to three months or fine of rupees five hundred or both. Whenever there is a need to assist the public servant and if a person intentionally omits it, then he can be punished under Section 187 with simple imprisonment which may extend to one month or fine which may extend up to two years. Section 188 of the act deals with disobedience to order that is duly promulgated by the lawful authority. The main ingredients under Section 188 are:

• There should be a valid order or promulgation.
• The person must be aware of the presence of such promulgation or order.
• The disobedience must be voluntary.
• The disobedience causes or tends to cause obstruction or annoyance.
• The disobedience causes or tends to cause danger to life, health or safety.
• It tends to cause a riot or an affray.

If the disobedience causes obstruction or annoyance then the person can be punished with simple imprisonment which may extend up to a term of one month or fine which may extend up to two hundred rupees. If it causes danger to life healthy or safety then the person can be punished with imprisonment of either term which may extend up to six months or fine that may extend up to a thousand rupees. The Supreme Court said that the Maharashtra police can initiate criminal action under Section 188 of the IPC for sale, stocking, and transportation of Gutka as the disobedience to the order affects life and health.”Section 188 of the IPC does not only cover breach of law and order, the disobedience of which is punishable. Section 188 is attracted even in cases where the act complained of causes or tends to cause danger to human life, health or safety as well,” the court said.

Section 189 of IPC provides protection to the public servants against any threat from the public. The threat of injury can be for two reasons, it can be used to induce the public servant to do any act that is unlawful or it can be used to restrict the servant from doing his duty. The person who is providing with such a threat can be punished with imprisonment for a term which may extend up to two years or with fine or both. Section 190 gives protection to the public and it enables them to get help from the public servants. If any person holds out any threat of injury to the person who makes the legal application and prevents them from getting help from lawful authorities then the person can be punished under section 190 with imprisonment which may extend up to a year or with fine or both.

Proposals for Reform

There is a need for amendments in various aspects of this chapter so that it would be useful for public servants to perform their duty. There are various ideas of reforms which are as follows:

• The punishments must be added on in various sections, instead of increasing the terms of imprisonment the fine amount can be increased which would make these sections more effective.
• The term punishment and the fine amount must be increased to the offences relating to avoidance or prevention of summons, as it is the first step in the process of investigation and if it gets delayed the entire process would be affected.
• Disobedience of order or promulgation provided by the public servants must be considered seriously as it affects the process and it is a heavy threat to the safety and public order.
• Giving false information to the public servants is a very grievous issue as it wastes the time of public servants and it also provides unnecessary tension to the public. Thus fine amounts to these offences must be increased in order to prevent such offences in the future.

Conclusion

The public should realize that the public servants are there for their protection and should always aid in the process of investigation. They should always try to cooperate with the public servants always. The contempt of the lawful authority of public servants must be prevented for the smooth functioning of various parts of the judicial process. Thus the Sections under chapter X could be more effective if necessary amendments are brought in.

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.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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This article has been written by Saurab Verma of 2nd year pursuing B.A. LL.B from Dr. Ram Manohar Lohiya National Law University, Lucknow.

Introduction

Coins are basically the most used form of currency which are used in the daily transactions  and they are transferred from one person to another very frequently.But have you ever thought about what if these small denominations are counterfeit or fake and to what extent they can impact the whole market and what to do even if you spot the fake coins, what are the measures and precautions every person should take in his/her daily transactions.Unlike the coins, the cases of government stamps are less because now their use have become less but have you ever thought about what if the counterfeit of government stamp papers are used matters related to land or property.So in this article, I have covered the area about how the counterfeit coins are made, how they are circulated in the market, what are the consequences of liquidation of the counterfeit coins and stamps, what are the laws governing and regulating these types of activities.In this article, I have also discussed about the position of several laws and what are the flaws in the governing laws and how in several circumstances they have been interpreted.

Coins 

Indian Coin is defined as the metal stamped and issued by the Government of India in order to be used as money under Section 230 of Indian Penal Code,1860.Coins in India are issued by the Reserve Bank of India(RBI) which is entitled to receive  the supply of coins from Government of India.There are various mints like mints in Mumbai,Kolkata,Hyderabad which not only mint coins but also make coin blanks (round metal disks which are ready to be stuck down as a coin) which are incorporated  as units under Security Printing and Minting Corporation of India Limited(SPMCL).Unlike the currency notes, printed by the RBI, the coins in India are minted under The Coinage Act, 2011.

Counterfeiting of Coins 

Counterfeiting of coins is an offence as incorporated under Section 231 of Indian Penal Code,1860 in which a person commits the offence intending to practice deception or knowing it to be likely that deception will happen or even if he is a part of the process of counterfeiting coins will be entitled for the imprisonment which will depend upon the circumstances and facts of the case and it can extend upto imprisonment for seven years and will also be liable for fine.But the problem is that even if it is a punishable offence its impact is more harmful because these counterfeit coins and currencies will lead to inflation in the market because excess liquidity will be there in the market and  RBI can regulate only the accounted money and therefore will impact the economy of our country.Also, counterfeiting is done so secretly that it is hard to find the fake coins and these coins are tremendous in amount and minted so frequently by the mint companies that it is difficult to identify and check each and every coin.Another big problem is that the ownership of these coins in the market changes very quickly and therefore to find the counterfeiter is again a difficult task and the probability of punishing an innocent person is very high. If we see recently, the counterfeit agencies are currently active in Gujarat, Mumbai , Delhi, Saharanpur in Uttar Pradesh and Murshidabad in Bengal. Recently, in May 2019 , a racket printing the fake coins and currency was captured in Delhi- NCR region primarily in the industrial belt near Faridabad and also police captured some toll booths of the national highways where the printing of Rs.5  and Rs.10 denominations were done.

Making or Selling Counterfeiting Coin

How they are made?

The casting of fake or counterfeit coins is very easy at its lowest level. One of the cheapest and the easiest way is to simply pouring the liquid metal into a caste mold of the authentic coin. these metals are easily available in the market and the producers manage to pour the metal which is good enough to give the exact same colour of the original coin. There is another category of coins on which counterfeiting is frequently done known as Struck- Counterfeit coins.These coins are made for some  unrecognizable counterfeit coins.There process are the same as the process followed in making the original coins as followed by the mint companies.These coins are basically made by the Spark Erosion method in which electromagnetic sparks are used to erode the metal.However, this method is expensive but these types of counterfeit coins are made in the same way.

How are these Coins  liquidate in our market ? 

The liquidation of these fake coins is easy because it can start from the very lower level because they can be made individually and also the instruments that are needed in making these coins are sold by the mint companies  form which they get in return the great profits. 

However, making or selling the instruments for fake coins is an offence under Section 233 of IPC in which  the imprisonment upto three years can be given.Also, another way of liquidating these coins is by importing .In 2017, there was the biggest amount of Rs. 50 crores in the form of fake coins were imported in India by the famous gang of Upkar Luthra and Sweekar Luthra.

Possession of Instrument or Material for Counterfeiting Coin 

Section 235 of IPC states about the extent upto ten years of imprisonment whoever is in  possession of any instrument or material used for making the counterfeit coins. But if we look practically, this provision is very difficult to implement because again the chances of punishing the innocent are high and any person can be struck in this process.It was therefore held in the case of Shahid Sultan Khan vs State of Maharashtra where the police raided the Kaniz Apartment in Mumbra  found the denominations of Rs.5 notes and coins of Rs.1,Rs.2,Rs.5 and the instrument which were used for making those coins but not in theiractive state but the appellant was arrested for keeping possession of the instruments and materials used for counterfeiting and was convicted by the trial court but the High Court reversed the decision and said held that mere possession of the materials or instruments  for making the fake coins is not enough to be as evidence that counterfeiting is done under Section 232 and Section 235 of the IPC but it has to fulfill the requirement of Section 28 of IPC which says that intention to deception is necessary or  mens rea plays the important role and the appellant was held not  liable.

Delivery of Counterfeit Coin 

The delivery of the fake coins are done along with mostly the delivery of antique or rare coins through auction.There are some auctioning companies like Todywalla Auctions etc. which are known to be the biggest antique coins selling company in India which are basically trusted but some other fake companies are also there which sell their coins through fake dealers and to attract the purchaser, they use online mode of delivery like there was the fake ebay dealer captured for selling the fake antique coin who showed the original coin online but shipped the fake coin.Also, it is easy to sell the counterfeit coins online because to check the authenticity of the company is less than the offline sale and also it is easy for the producers to escape from the liability because it is easy to remove the data online than in offline sales. Also, the delivery of the normal coins which we use in the market, most people do not pay attention to the coins unlike the  notes, therefore, it is easily transferable in the market from one person to another.However, the person whoever is having the counterfeit coin and delivers the same to another while knowing that it is a fake coin is liable for the imprisonment which can extend upto 5 years and he will also liable for the fine.

Criminal Acts of Mint Employees

The most frequent act which is done by the mint employees is the selling of the instruments and materials to the other companies for printing the fake coins and notes by which they earn great profits.This activity becomes more frequent when RBI instructs them to make more number of coins as needed as per the market because then it is difficult to check the bulk amount .However, it has been stated in Section 244 of IPC states about the punishment of imprisonment upto seven years to the mint employees if they omits to do what they are legally bound to do with the intention of causing the tempering with the coin but  are prevented under Section 245 which states that the employees are not liable if coining instruments are taken from them unlawfully.

Alteration of Coins 

Alteration of coins are basically done to produce a passable counterfeit  coins so that a common genuine coins so that it appears to be a rare genuine coin.It is done also for advertising as on ancient coins advertising logos and slogans are written.So, it is often illegal to alter the coins but laws are different in different countries and basically it depends upon the nature of alteration and intention of the person making the alteration.Coins in India are minted under The Coinage Act, 2011.According to the Act, no person shall use the metal whether stamped or unstamped intending to use for making the money.

No person can destroy the shape,design,change colour, cut the coin otherwise he will be liable for bearing the loss for cutting or destroying the coin and the loss will be calculated according to the face value of the coin. 

Government Stamps 

Counterfeiting the government stamps

Section 255 of IPC states about counterfeiting the government stamps and imposes the imprisonment of life or it can be extended upto seven years depending upon the facts and circumstances of the case.Unlike the coins, the cases of fake government stamps are less because now the use of the stamps are less as compared to earlier times.But,our focus should be on the stamp papers regarding the land , property etc. because recently in August 2019, there were 2 stamp vendors who were arrested for making fake land documents in Hyderabad.However, various sections are there in IPC which have restricted the sell or purchase of counterfeit government stamps like Section 258 which restricts the sell or purchase of fake stamps  to which the imprisonment upto seven years is given and also the provision related to the possession of instrument or material used for making the counterfeit stamps is incorporated under Section 259 of IPC.

Proposals for Reform 

Out of all the denominations of the counterfeit coins, 10 Rs coin is the most counterfeited especially in Delhi and they are mostly made in Haryana. When they  first came, it was very easy for the producers to produce the fake ten rupees coins because their structure and pattern were less complicated as compared to the coins of other denominations.Therefore, now the RBI has issued some guidelines about a ten rupee coin, it has made legally tender both the types of coins one with the ten rupee symbol printed and one without the symbol to prevent counterfeiting.Also, the commemorative coins (coins on which the images are printed) were also made legal and said that they can be easily used in the transactions.RBI also said to the banks to accept Rs.10 coins in transactions and exchange them at all their branches.Also, there should be strict governance towards the working and procedure followed in the mint  companies because they are basically the source of counterfeiting the coins and notes.It is also the responsibility of the consumer to check every single coin of even the smallest denomination which are used in the transactions . Also, more strict laws to be there, the punishment should not just include the imprisonment and fine but also the license of the vendors should also be cancelled depending upon the facts and circumstances of the case.

References

1. https://economictimes.indiatimes.com/news/politics-and-nation/how-a-gang-pumped-rs-50-crore-fake-coins-into-india/meet-the-luthra-brothers/slideshow/59487341.cms
2. https://timesofindia.indiatimes.com/city/hyderabad/stamp-vendors-found-making-fake-land-documents-2-held/articleshow/70527190.cms
3. https://www.ndtv.com/business/rs-10-coins-fake-or-not-as-rbi-clears-the-air-10-things-that-you-should-know-budget-1811761
4. https://blog.providentmetals.com/fake-coins-how-to-tell-a-counterfeit-from-an-original.htm#.Xj8-gzb
5. https://timesofindia.indiatimes.com/city/chandigarh/factory-minting-fake-coins-sealed-in-ncr/articleshow/69426112.cms
6. ttps://timesofindia.indiatimes.com/business/india-business/rbi-says-all-coins-are-legal-tender/articleshow/69981553.cms

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This article is written by Asgar Ali, pursuing a Diploma in Industrial and Labour Laws from LawSikho.com. Here he discusses “Who is Empowered to Commence Investigation for Violations of Standing Orders?”.

Introduction

Standing Order in any organisation can be defined as a written procedure in standard form as established by employer involving his employees, a trade union with a purpose to bring uniformity in working conditions of workers as per the legislative provision, duly approved by the appropriate government.

Standing Order Act came into effect on 23 April 1946 with the title “The Industrial Employment (Standing Orders) Act, 1946. This act obliges the employer to define and issue uniform working conditions of employment in his Industrial establishment in case of one hundred people or more than a hundred workers are employed on any day of the previous year. 

A Model Standing order is always helpful in avoiding certain Industrial disputes and discriminations as this act promote equal opportunities and conditions to the workers. In a Model Standing Orders of an organisation, the following matters can be prescribed:

1. Classifications of workers i.e. permanent, probationers, apprentices, temporary or badlis etc.
2. Conditions of recruitment, staffing of workers, shift working, information of leaves and holidays, attendance, late coming, short leaves, the procedure of applying leaves to authorities etc.
3. Requirement to enter and exit from certain gates, liability to get searched at the security gate. 
4. Certain Rights and Liabilities of Employer as well as workers, trade unions
5. Inquiry, Investigations, disciplinary actions i.e. to issue charge sheet against the violator.
6. Suspension or dismissal for misconduct, for the act or any omission which constitutes misconduct.
7. Termination, superannuation, separation from the company and the notice thereof to be given by employer and workmen
8. Any other matter as prescribed by the appropriate government, law lords ( i.e. in Vishakha Judgement, Honourable Supreme Court ordered employers to constitute an ICC ( Internal complaint committee)  for redressal of complaints relating to sexual harassment against women at work)employer, workmen or trade union in that organisation. 

The contents of any Standing Order once after it is finally certified under the Act, required to be exhibited by the establishment at its prominent places in English and in a language understood by the majority of workers working in that establishment on proper notice boards. The Area where standing order to be displayed shall be such locations where the majority of workers are gathered for their routine job executions i.e. Main gate of organisation, Notice boards nearby attendance punching area, Canteen etc. Such display may be shop areas also where workers perform their daily work activities.

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Objectives of Standing Orders in any Organisation: 

1. To enforce uniform working conditions in all organization so that workers’ working rights can be maintained.
2. To communicate the working conditions of an organisation to the common worker in his own language for his awareness about certain Dos and Don’ts related to his conditions of employment.
3. To STOP the employer to change work conditions at his choice or with prejudice ignoring workers’ rights at the workplace once a Standing Order is duly certified by the appropriate government.
4. To minimise frictions between management and workers and hence to avoid certain industrial disputes.

Violation of Standing Order 

Violation means an action of disrupting applicable rules. In general terms, the violation of Standing order in any organisation is understood “causing misconduct”.  There are several types of misconducts i.e. late coming, abusing, quarrelling, theft, sexual remarks over female co-worker etc. 

In compliance matter of any Certified or Model standing order, the violation can be on the part of employees and on the part of the employer also. 

Procedure of investigation within an organisation: 

Within an organization, there is a set procedure of investigation in case any misconduct is caused by any workman. Also, there is a set procedure of defining “Misconduct” and dealing with that misconduct, process of Inquiry/investigation, authority to commence investigation, process of investigation, summoning to respondent/witness/plaintiff, recording daily order sheet, commencing hearing process as per rules and as per natural justice, collecting evidences and decision taken or penalty imposed i.e. censure, written apology from aggrieved, withholding next promotion/next increment, demotion or recovery of loss from salary of wrongdoer employee etc. All these clauses are mentioned step by step in a Model or certified standing order of an organisation. 

Officer/authority empowered to investigation within the organisation:  

Within an organization, in case of violation is caused by any workman, then power to perform Inquiry or investigation against him is given to following:

• Inquiry Officer: An Inquiry officer may be any that person who has been appointed to perform an inquiry of misconduct caused by an accused employee and presents relevant matters, facts and evidence before the Management of that organisation. An Inquiry officer may be one, more than one or in place of inquiry officer, there may be an Inquiry Committee keeping in view the gravity of the misconduct. 

Rule of bias must be borne in mind of the employer at the time of appointment of an Inquiry Officer or committee thereof. The principle that No one can be a judge in his own case is also known as the rule of bias. In essence, it implies that any interested party shall not play a role in decision making. 

Hence, the common rule is that an Inquiry Officer should not be a witness in the proceedings; otherwise, it shall be a corollary of Rule of bias. 

There are three kinds of bias which are considered as important:

• Personal Bias: One may be personally interested in the outcome of the case. If one is required to act as the complainant as well as the decision making authority, it is understood that the outcome is likely to be biased
• Pecuniary bias: Any person who has a monetary interest in an issue should not deal with the case. 
• Bias of subject matter: One who has certain strong notions/ views about certain subjects might not be suitable for deciding issues relating to that subject. For example, one having strong male prejudiced views may not be suitable for dealing with issues relating to harassment of women employee and he cannot be suitable as an appointed inquiry officer against women harassment cases. 
• Management: Management is the apex body of an organisation which covers organisation’s Occupier/ Managing Director or any person authorised on behalf of Occupier/Managing Director to whom the powers of decision making has been delegated. Management of an organisation presents and authorises their HODs/ Directors / Works In charges to head Certain Committees within that organisation and declares them competent authority/ presiding officer within the internal context of their organisation.
• Committees: Every such committee which has been constituted for bringing the harmony, justice and discipline in an organisation for working people, as well as employer and which fulfils applicable legal requirements behind its constitution can be termed as a committee. In the context of Standing Order Act, There are various types of committees i.e. Works Committee, ICC, (Internal Complaint Committee – intended to prevent, hear, investigate and decide sexual harassment cases against women workers. It is important to mention that Presiding Officer of ICC shall be a lady employee who is working on the senior level in the organisation), Discipline committee etc. which are empowered to perform an investigation of any misbehaviour or violation caused by workmen. 
• Trade Union: Trade union of workers is also empowered to investigate certain matters as per standing orders because trade unions play active roles in works committee, Safety Committee, Disciplinary Committee, Internal Complaint Committee etc. In every relevant condition, the communication and participation of president / general secretary of the company are obligatory as workers’ representative. 

Officer/authority empowered to investigation outside the organisation:  

On the other hand, if the violation is caused by an employer by non-fulfilment of laid down procedure of certified / model standing order then following authorities are empowered to commence investigation against the employer of that organisation:

• Industrial Tribunal/ National Tribunal: In case, the matter is of National Importance, the National / Industrial Tribunal is empowered to investigate, hear and decide the cases related to violation matters caused by an employer in payment of wages, gratuity, bonus, overtime payments as per rules, violation of shift work timings, shift durations, holidays, and leaves as per certified standing orders. Industrial Tribunal is also empowered to hear the matters related to violation caused by the employer in the classification of grades as laid down in certified standing order under the Act.  

• Labour courts: Labour court can investigate, hear and decide the matters related to application, change in standing orders, interpretation of Standing Order, any order enforced by employer contrary to the legal rights of workers, any order of employer to whom workers are not agreed, matters related to lockout of organisation caused by employer and strikes caused by labour.  Labour court can also investigate the matter of wrongful dismissal/ wrongful discharge of any worker/ dismissal without giving him one month’s notice or salary in lieu of notice period and holds the power to decide the case by reinstating the employment of such aggrieved worker with payment of all applicable compensations from the account of the employer. 

• Certifying Officer/Appellate Authority: Certifying officer(Joint Labour Commissioner /Assistant labour Commissioner)of territorial area where the organisation is located, receives the draft standing order from employer and forwards its copies to concerned trade union/ workmen of that organisation demanding their objection duly reduced in writing, if any within a stipulated time period (say 15 days). He also holds the power to investigate in case any objection is received to him related to draft standing orders submitted by the employer. As prescribed by Appropriate Government in compliances of applicable labour statutes, all certifying officers and Appellate authorities hold the power of Civil court for the purpose of – Receiving and collecting pieces of evidence related to the case, administering oaths, enforcing the attendance of concerned witnesses and compelling the discovery or production of things. 

Legal Consequences (Penalty over Employer) for violation of Standing order Act:  

1. Section 13(1) presents that any employer who gets failed to submit a draft standing order as required by Section 3 , or who amends or modify his standing orders other than in proportion to Section 10, he shall be liable to be punished by a fine which may be extended up to rupees Five Thousands (INR 5,000/- ) and in situation of a regular offence, he shall be liable to be punished with further fine up to rupees two hundred (INR 200/-) for each day after the first failure from which that offence was continued. 

2. Section 13(2) presents that any employer who performs any act contravening to the standing order which is finally certified under this Act for his business establishment, then he shall be punishable with fine which may be extended up to Rupees One Hundred ( INR 100/-) and in the case of repeat offence, he shall be punishable with a further fine which may be extended up to Rupees Twenty Five (INR 25/-) for every day after the first failure from which that offence was continued.
3. It is obligatory for an employer to display Standing orders at the entrance of the establishment/ prominent place where the majority of workmen get accumulated i.e. time office/punching machines/ gate entry etc. failing to do so shall be understood as a contravention of Section 13(2) of Act.  

Moralities of Investigation or Inquiry: 

In an Investigation or Inquiry, there must be a fair investigation and rules of Natural Justice must be obeyed. The Audi ‘Alteram  partem’ the other side too is the core part which must be complied by presiding officer of investigation Committee. 

Audi Alteram Patem which is basically a protection against an uninformed administrative action comprises within itself a number of rights. This rule implies that the accused person has the following rights (in case any Inquiry or investigation against him/her ): 

(a) To know what the charges have been framed against him/her and what is/are the basis

(b) He/ She can inspect documents and present his/her consent or objection related thereto 

(c) He/ She hold the authority to know the evidence/source of evidence 

(d) He/ She can cross-examine the witnesses and lead evidence

The Examination/ cross-examination of Complainant, respondent and Witness(es) and Fact-Finding, daily Sheet progress, Constitution and decision of the committee, all relevant process must be transparent and documented within the prescribed format as per procedures as most important as per “Rule of Laws”. As a Whole, Justice must be done with seen to be done during every investigation or inquiry.

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This article is written by Hema Modi, a second year student of Pravin Gandhi College of Law, Mumbai. It provides an overview of the Key Managerial Personnel according to the Companies Act, 2013. It contains the procedure of appointment and remuneration to the KMPs.

Introduction

Indian Companies Act, 1956 was replaced by Indian Companies Act, 2013 which is considered to be the landmark legislation with several new ideas with the intention of raising accountability in the corporate sector and increasing the level of professionalism. One of the new concepts is Key Managerial Personnel(KMP) which had been under legal scrutiny since its inception.

According to Section 2(51) of the Companies Act, 2013, Key Managerial Personnel in a company are-

1. Chief executive officer or the managing director;
2. Company secretary;
3. Chief financial officer;
4. Whole-time director;
5. Other officers as may be prescribed.

These refer to a group of people who are in charge of managing the operations of a company. They are responsible for planning, directing and controlling the functioning of a company. They are the first point of contact between the company and its stakeholders.

Managing director or whole-time director or manager

The Section 2(54) of the Companies Act, 2013 defines managing director as a director who is responsible for substantial powers of the management of the company and its affairs and is appointed by an agreement or a resolution passed in its general meeting. 

Whole-time director of a company is defined under Section 2(94) of the Act which means a director in whole-time employment of the company.

Manager, as defined under Section 2(53) of the said Act, is any individual who works under the control and direction of the Board of Directors and is entrusted with the management of the whole of the affairs of the company.

Which companies are obligated to appoint KMP?

According to Section 203(1), it is very much clear that following companies are mandated to appoint a whole-time KMP when read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

1. Every listed company.
2. Public companies having paid-up share capital of 10 crore rupees or more.
3. Companies having paid-up share capital of 5 crore rupees or more are mandated to have a Company Secretary.

Procedure of appointment

• The appointment of key managerial personnel is prescribed under Section 203 of the Act. Every member of managerial personnel is appointed through a resolution adopted by the Board with terms and conditions of appointment and remuneration.
• A member of managerial personnel can hold the position in one company at a given time. However, a member of managerial personnel of a company can be a member of managerial personnel of its subsidiary company.
• In case of vacancy, the Board has the responsibility of filling up within six months from the date of such vacancy.
• If the company or its Board tries to violate the provision of appointment of managerial personnel, then the company has to suffer from penalty. The company shall be punishable with fine of rupees one lakh which may extend up to rupees five lakh. Every director and other key managerial personnel shall also be punishable with a fine of Rs. 50,000. If the contravention is continuing, then they would be charged with Rs. 1,000 per day after the first offense.

Disqualifications

The Act provides that the role of chairman and managing director or chairman and chief executive officer should not be assigned to one person.

However, there is an exception to the above provision. In certain cases, the provision will not apply:

• The company carries a single business.
• Articles of the company contain a provision for appointments of the same person.
• If the company carries out more than one business and has appointed one or more CEOs for each of the business.

Manager

Section 2(53) of the Companies Act, 2013 defines manager as an individual who is under the control and superintendence of Board of Directors and is responsible for managing the whole or substantial amounts of business of the company. 

A manager is appointed by the Board of Directors at a meeting which shall be subject to resolution to be passed at the next general meeting of the company. The resolution consists of terms and conditions for the appointment and remuneration to be paid to the manager which has to be initially approved by the Board of Directors.

Any act done by the manager before the approval of the Board of directors and passing of resolution shall be deemed to be invalid.

According to section 196(3) of the Act, there are certain qualifications required to be eligible for the appointment of a manager. They are:

• Should not be less than 21 and greater than 70 years of age.
• Should not be insolvent or adjudged as insolvent.
• Should not be convicted of any offence having punishment which is greater than six months.
• Should not have suspended payment to his creditors.

Secretary

A company secretary or secretary under section 2(24) of the Act whose function is to report the Board about the compliance of the provisions of the Act and other rules in relation to this Act. It also ensures that whether or not the company is complying with the secretarial standards.

The Central Government under Clause (c) of Section 205 has prescribed the role of company secretary in a company. he/she has to ensure the following things:

• To facilitate the meetings of the Board members and the general meeting and maintain the minutes of the meeting.
• To assist the Board members in the conduct of the affairs of the company.
• To perform duties as prescribed by the Board of Directors.
• To represent company before different Tribunals, regulators and other authorities.

Officer who is in default

According to Section 2(60) of the Act, an ‘officer who is in default’ is defined as an officer who shall be liable for any penalty or punishment by way of imprisonment or fine. The officers may include:

• Key managerial personnel,
• Whole-time director, 
• Any person who is responsible for maintenance, filing or distributing records or accounts.
• Any director who is aware of the activities taking place is in contravention of the law or the provisions and yet indulges in or participates in it.

Importance of an officer who is in default

• He/she must ensure that the officers are acting in the best interest of the company.
• He/she performs the duty in good faith.
• He/she makes the key officials of the company more responsible.

Appointment

Officer who is in default is appointed by his/her consent to work under such designation and the board of directors has to pass resolution in order to appoint him/her as the ‘officer in default’.

Officer

Any director, manager, key managerial personnel or any person who works under the direction and guidance of Board of Directors is an officer under Section 2(59) of the Companies Act, 2013.

Managerial remuneration

The managerial remuneration is the money paid to managerial personnel to incentivize them to work more for the company and for its best interests. These incentives are important to drive the workforce to perform their tasks diligently and in good faith.

Remuneration to managerial personnel

Section 197 of the Companies Act, 2013 provides for the remuneration to be given to the managerial personnel. According to the law, managerial personnel is entitled to eleven percent of the net profit of that company. However, this figure of eleven percent can be changed with the approval of the Board. The net profit shall be calculated according to Section 198 of the Act.

The remuneration payable to directors who are neither managing directors nor whole-time directors shall be decided by the Board which shall not exceed

• 1% for managing director or whole-time directors.
• 3% in any other case.

Remuneration by a company having no profit inadequate profit

If, in any financial year, a company has no profit or the profit is inadequate, the company shall not pay its managerial personnel i.e., manager, whole time director or managing director any remuneration except in accordance to the approval of the Central Government.

Remuneration drawn in excess of prescribed limit.

If any managerial personnel draws or receives excess of remuneration as prescribed either directly or indirectly without prior approval of the Central Government, then he/she shall return or refund the amount or hold it in trust of the company.

Recovery of managerial remuneration

Unfortunately, in any case, if a company is required to restate its financial statements due to fraud or any violation of the law, then the company shall recover remuneration from any managerial personnel. The managerial personnel must be in the term for which financial statements are asked for.

Central government or company to fix remuneration limit

Section 200 of the Act, in respect of cases where company has no profit or inadequate profit, the Central Government or Company may fix the remuneration within the limits specified under the Act. They shall look into:

1. The financial condition of the company.
2. Remuneration or commission drawn by an individual in other capacity apart from managerial personnel capacity.
3. Professional qualification and experience of an individual.

Compensation for the loss of office

Section 202 of the Act provides for the loss of office of the key managerial personnel. It is a reproduction of Section 318 of the Companies Act, 1956.

The company can make payment by way of compensation for loss of office or consideration for retirement from office to a managing or whole time director or manager but not to any other director.

However, no payment shall be made in the following cases:

• If the director resigns from the office due to reconstruction of the company or its merger with any other corporate body.
• If the office of the director is vacated under sub-section (1) of Section 167.
• If the company is winding up on the orders of Tribunal or voluntarily and the winding up was due to the negligence of the director.
• If the director is guilty of fraud or misrepresentation or breach of trust or gross negligence or gross mismanagement of the conduct of the company or any subsidiary company.
• If the director has instigated or was involved in bringing out the termination of his/her office. 

Other provisions regarding key managerial personnel

1. A key managerial personnel is eligible for authentication of a document or proceeding or signing of contracts on behalf of the company.
2. A person is not eligible to be a director of a company if his/her relative is a member of key managerial personnel.
3. A company is required to maintain a register of the names of KMP’s appointed along with the details of securities held by them.
4. A return and change in KMP have to be notified to the Registrar of Companies within 30 days of its reappointment.
5. The KMPs have the right to be heard in Audit Committee meeting but shall have no right to vote.
6. Key managerial personnel is prohibited from making forward dealings and insider tradings in securities of the company.
7. Every key managerial personnel shall have to provide the details relating to his concern or interests of the company within 30 days of his appointment or relinquishment.
8. The remuneration policy of the Key managerial personnel is to be recommended by the Remuneration and Nomination Committee of the company.

Conclusion

Key managerial personnel holds a key place in the company and helps in facilitating the smooth functioning of business. The new Act of company law i.e., the Companies Act, 2013 has tried to provide for a section which includes the KMPs and their appointment process. The new amendment act of 2017 has also tried to liberalize the provision of managerial remuneration. The necessity of approval of central government is no longer in effect which has reduced the burden of company in abiding by it because of which there was much delay in further transactions of the company.

References

• https://www.icsi.edu/media/portals/0/APPOINTMENT%20AND%20REMUNERATION.pdf
• https://taxguru.in/company-law/key-managerial-personnel-companies-act-2013.html

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.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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