This article is written by Sachi Ashok Bhiwgade from Hidayatullah National Law University, Raipur. This article covers the basic differences and the essentials of novation, rescission and alteration of a contract under the Indian Contract Act, 1872.

Introduction

A contract to be legally enforceable should be valid. Section 10 of the Indian Contract Act, 1872 provides the essential conditions that are to be complied with for a valid contract. They are:

• Free consent; 
• Competency of the parties;
• Lawful consideration and lawful object;
• Not declared to be void under the law.

In case, a contract is entered into by the parties under coercion, threat, fraud, undue influence, etc such a contract will be invalid. Also, the object of contract should not be inconsistent with any other law.

The word ‘novation’ literally means to replace with a new contract and the same obligations are performed by different parties. Under novation, the liabilities under the existing contract are extinguished. The doctrine of novations is recognized under Section 62 of the Indian Contract Act, 1872. Every contract can be novated and novation can be effective only when there is a new contract and not a new agreement. Hence, mere agreement to substitute the existing contract will not be binding unless it has been accepted and executed mutually by all the parties. A new contractual obligation arises when parties novate a contract. 

What is novation of Contract?

Novation of contract means creating a new contract while the old one is terminated and need not be performed. It is an act substituting a new obligation or party in a contract for the old one. Further, the newly substituted agreement should be valid, enforceable, have consideration and should be by the mutual consent of the parties. Basically, it should fulfil the requirements of a valid contract.

When a contract is novated, the original contract ceases to exist and the parties have to follow the new contract. Section 62 of the Indian Contract Act states that “if the parties to the contract agree to substitute a new contract for it or to rescind it or alter it, the original contract need not to be performed.”

Essentials of Section 62 of the Indian Contract Act

• Consensus ad idem between the parties to a contract.
• There should be a previous contract entered into between the parties.
• Substitution, recession or alteration of a contract giving rise to a valid new contract.
• Termination of the original contract.

The basic requirement of Section 62 was discussed by the Supreme Court in the case of Lata Construction & Ors v. Dr. Rameshchandra Ramniklal Shah, novation requires a complete substitution of a new contract in place of the old one and only in that condition the original contract does not have to be performed. The new substituted contract should rescind or completely alter the terms of the original contract. In Ramdayal v. Maji Devdiji, the court observed that novation takes place by introducing new terms in the contract or by introducing new parties. A contract of novation requires a party to agree to extinguish or discharge his obligation or debt. Unless this has been accomplished there can be no novation. Therefore the test is to know whether the parties intended to enter into a new contract between them or not.

For novation to take effect, modification to the contract must go to the root of the original contract and change its essential character as held by the Calcutta High Court in the case of Juggilal Kamlapat v. NV Internationale.

Examples:

1. In a partnership firm, the liabilities of an old firm are taken over by the new firm.
2. A lease agreement, where the tenant gives the lease to another party and makes him responsible for the obligations and responsibility arising from the lease agreement. 
3. John owes 2 lakh rupees to Ram under a contract, Ram owes David 2 lakh rupees. Ram asked John to pay 2 lakh rupees to David in his place, but David does not agree and neither gives her consent to the agreement. Therefore, Ram still owes David 2 lakh hence, there is no new contract to enter.

Kinds of Novation of Contract

Novation is of two kinds: 

• Where the obligation under a contract is replaced with a new one, and
• Where a party is replaced by another party.

Change in terms of the contract

The parties to a contract have the freedom to enter into a contract and alter its terms by mutual consent. When both the parties mutually agree to change the term of the contract which they have previously entered into, then the new agreement becomes binding on them. However, in case there is a clause in the contract stating that the terms of the contract can be altered by one party (unilaterally) such changes in the terms will be considered as valid. Hence, a party cannot by unilateral term impose conditions which were not a part of the original contract. 

In the case of RS Amarnath Mehra v. Union of India, the court observed that calling of fresh rates at a lower price will not amount to a new contract. If a contract consists of a number of terms and conditions then it does not mean that each term or condition is a separate contract. 

Similarly, in the case of Ramji Dayawala & Sons (P) Ltd v. Invest Import, the Apex Court held that a contract having a number of parts should have been assented by the contracting parties in the same manner and in the same sense, that is, it should have consensus ad idem. 

Change in the parties to the contract

Under a novation agreement, it is possible that the terms of the contract provide for the replacement of one party to the contract by another party. This creates an obligation for one party in place of another party. Under this kind of contract, the new party assumes all the obligations under that contract and the party who has assigned his obligations to another party under such a contract will not be held liable for any future damages. 

For instance: if A and B are parties to a contract, and A agrees to replace C in B’s place, then the existing contract between A & B will cease to exist. 

In the case of Godan Namboothiripad v. Kerala Financial Corporation, the respondent (Kerala Financial Corporation) sanctioned loan to one Gopinath for purchasing a transport vehicle which was to be paid in instalments. He defaulted in making the payments and as a result of that, the respondent seized the vehicle. After that, the appellants executed an equitable mortgage confirmed to repay the balance amount. The court held that it was a novation of contract because the appellants took the liability to pay the dues and the original debtor (Gopinath Menon) ceased to be the debtor.

Difference between novation and assignment

The difference between novation and assignment is minimal but important and is discussed in the table below:

Novation of contract in an illegal agreement

The Court in Ratanlal son of Pannalalji v. Firm Mangilal Mathuralal observed that “if there is a direct connection between a fresh contract after novation and the earlier illegal contract or the earlier collateral contract, the novated contract would still continue to be illegal or immoral and the Court would refuse to enforce the same”.

When is it ‘No Novation’?

When the requisite conditions of novation are not satisfied then it will be considered as no novation. The Kerala High Court held in the case of Godan Namboothiripad v. Kerala Financial, that the essential features of a novation are the replacement or relinquishment of a right under the original contract by a new one and when these essential features are missing then, there will be no novation.

A unilateral act of one party

As discussed already, a party cannot on its own change the terms of the contract unilaterally. The Supreme Court in the case of Citi Bank N A v. Standard Chartered Bank held that novation, recission, and alteration under Section 62 requires that both the parties should agree to substitute, rescind or alter the existing contract with a new one. Such substitution, rescission or alteration has to be done bilaterally. In the case of Polymat India P. Ltd. & Anr vs National Insurance Co. Ltd. & Ors, it was held that the terms of a contract cannot be varied without the mutual agreement of the parties.

Intention of parties

All the parties to the contract have to agree to the new terms of the substituted contract. A novation contract will be ineffective when there is an absence of intention between the parties to alter, rescind or substitute a contract. In T.S. Duraiswami Aiyar And Ors. vs Krishnier, the court observed that substitution of one contract with another clearly depends upon the intention of the parties. Similar observation was made in the case of Calcutta Insurance, Madras vs Thirumalai Animal And Ors. and National Insurance Co. Ltd. v. Thirumalai Ammal And Ors. 

Rescission of Contract

To rescind means to cancel or revoke. Rescission under contract law means a party to the contract can cancel or terminate the contract. In this, the parties legally terminate a contract by mutual consent. Under Section 62, a party is allowed to rescind a contract but such rescission should only be in bilateral terms. 

In the case of Union of India v. Kishorilal Gupta and Bros, the Calcutta High Court held that a contract under Section 62 of the Indian Contract Act can be rescinded only after there has been a breach.

Difference between Rescission and Novation

Alteration in terms of a Contract 

Alteration in terms of contract happens when the parties enter into a contract and one of the parties wants to modify or change certain terms of the contract with the assent of the parties. Hence, once the parties sign the contract they cannot alter its term except in the case where all parties by the mutual consent agree to the alteration. For instance, change in the date or place of delivery in a contract of sale of goods between parties. 

The Apex Court in the case of United India Insurance Co Ltd v. MKJ Cooperation held that material alterations in a contract can only be done by mutual consent of the parties. 

In V Kameshwararao & Ors v. M Hemalathammarao, the court observed that a material alteration is one that varies the rights and liabilities of the parties ascertained by the deed or varies the legal effect of the instrument originally expressed.

Difference between Novation and Alteration

The basic difference between novation and alteration can be studied under the following table: 

Contents of novation agreement

A novation agreement may contain the following:

• Definitions;
• Name of the parties;
• Recitals;
• Representations;
• Rights of the third party;
• Obligations of all the parties;
• Effects of novation agreement;
• Fees, costs, expenses;
• Jurisdiction and the law governing the parties;
• Counterparts.

Conclusion

As already seen in this article novation happens when there is a change in the terms of the contract or when parties to the contract change. It is also necessary that all the parties have consented to the changes and have not acted upon the contract unilaterally. The new agreement should contain the requisites of a valid contract. 

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This article is written by J.Suparna Rao, from Ramaiah Institute of Legal Studies. This article discusses the concept of Auction Sale under the Sale of Goods Act, 1930. 

Introduction

There are two main terms involved i.e. Auction Sales, Goods. Let us first clearly understand the two terms.

Auction is nothing but selling of goods or property in a public sale where prospective buyers gather in a particular area to buy the goods or property. Auction sales involve the auctioneer and bidder who bids higher than the other to buy the property or goods. 

Goods mean anything of value which can be sold. So we further will see the two terms in accordance with the Sales Goods Act, 1930. 

History Of Auction Sales

The process or the tradition of the auction is as old as 500 B.C. It can significantly be remarked in Greece where the women were auctioned for marriage. Women were not allowed to marry if they did not pass this step of the procedure. As the highest bid was found equal or higher than the reserved price women were sold to that buyer. if the marriage did not persist or if the marriage dissolves the bidder was allowed to take back all the money paid. 

As the new economic policy, 1990 was introduced in India it brought many changes in the economy of the country as well as there was a tremendous growth of technology which opened the doors for many other goods to be auctioned like computers, mobile phones, printer machines etc. 

Sale of goods act, 1930

The Sale of Goods Act was brought into existence on 1st July 1930. Earlier this act was part of Indian Contract Act,1972 but in 1930 it was separated and was named ‘Sale of Goods Act,1930’ There are basically two types of property- movable property and immovable property. Sale of Goods Act, 1930 specifically deals with movable properties only. There is a separate law governing immovable property which is ‘The Transfer of Property Act, 1882’.

What all does the word “Goods” include in ‘The Sales of Goods Act’? 

The word goods include the following things as movable property –  

1. Growing Crops (which The Transfer of Property Act excludes)- Growing crops are the crops which are planted in bulk in the farms or in fields by the farmers. 
2. Standing Timber- The timber trees in which the timber can be cut off and sold.
3. Grass- The thin, green, dense plant which covers most areas of the earth.
4. Old currency- It is considered as movable property as it cannot be used to buy goods, it is treated as an antique item.
5. Water- The water in its natural form in sea, rivers, water streams etc.
6. Gas- Gas is considered as movable property as it expands freely to anywhere and everywhere.
7. Electricity- The electricity power generated to run the day to day usage of it in various sectors and parts of human life is considered as movable property. 
8. Trademark- Unique symbol or sign used to signify a particular brand, company.
9. Patent – It can be described as a license issued by the Government.
10. Copyright- It is a legal right of an individual which is given to protect the unique piece of artwork. 
11. Share of the Company- After allotment of the share of the company it is treated as the movable property.
12. Goodwill of the Company- A company’s reputation or image in the market is an added asset to the company which is also included under a movable property.
13. Stock- Stock of company which can be divided into shares are considered as movable property.

What are all excluded from the word “Goods” under the Sale of Goods Act?

1. Immovable property 
2. Actionable claim 
3. Money / Currency  

Classification of Goods 

Goods can be classified into ‘Existing Goods’ which are the goods existing at the time of contract of sale. Existing goods are further divided into three categories which are specific goods, unascertained goods and ascertained goods. Specific goods are the goods which cannot be replaced, unascertained goods are the goods which are in bulk and which cannot be specifically identified at the time of Contract of Sale, whereas ascertained goods are the goods which are easily separated from the bulk at the time of Contract of Sale. 

The other category of goods is ‘Future Goods’. These are the goods which are yet to be produced or manufactured. The seller manufacture certain goods like jewellery on the order of the buyer, such goods are known as future goods. The last category of the goods is ‘Contingent Goods’. These are the types of goods which may or may not be produced subject to certain conditions. The seller may deliver the goods if the conditions are fulfilled and if the condition is not fulfilled the seller may not deliver the goods.  

Statutory Provisions of Auction Sales under Sale of Goods Act, 1930 

The statutory provisions pertaining to auction sale are found in Sale of Goods Act, 1930. Section 64 of the Act provides rules regarding the auction sale. The rules are explained below.

1. When the goods are in lots and they are put up for auction sale, each of the categories or a lot of goods will be subjected to separate contract of sale.
2. The sale of goods in the auction is said to be complete only when the auctioneer declares it to be completed by fall of the hammer or any other usual method or by announcing. Until then the bidder can anytime drawback his bid. 
3. The seller at the auction can reserve his right to bid and he has to expressly reserve such right. He can appoint a person to bid on his behalf. 
4. If the seller does not expressly notify his right to bid, he cannot bid at the auction nor can he appoint anyone on his behalf to bid at the auction. Also the auctioneer should not accept and entertain such bids. Any sale which is done in contradiction to this rule is unlawful and will be declared as fraudulent by the buyer. 
5. The reserve price once declared the auctioneer cannot sell the subjected goods in price below the reserve price. 
6. In any case, if the seller or his agent purposely and knowingly pretend to bid to raise the price of the goods then such sale is voidable at the option of the buyer
7. The property in the auction cannot be sold on credit and as per the wish of the auctioneer. 

Essentials of Valid Sale or Contract Of Sale

1. All essential elements of a valid contract are to be fulfilled. The essential elements of contract consist of offer and acceptance, intention to create a legal relationship, lawful consideration, the capacity of parties to contract, free consent, lawful object, certainty and the possibility of performance, legal formalities, should not be expressly declared void. 
2. When a contract of sale is concerned there must be two parties that is the buyer who is a potential buyer and is interested in buying the property in the auction and the seller who is ready to sell the property and ready to transfer its ownership to the other. 
3. The movable property should be there for sale. As this Act deals only with a movable property only.
4. There must be an agreement created between the buyer and the seller for the transfer of the ownership of the property from the buyer to a seller. 
5. Section 2(10) of the Sale of Goods Act says that there must be some consideration for the sale of the goods. 

CASE LAWS

• COFFEE BOARD V. FAMOUS COFFEE AND TEA WORKS 

In this case under the Madras High court, the seller expressly declared that he can accept any bid be it the highest bid or the lowest bid whichever he likes or whichever he believes to be a fair price to the property. This will be completely his decision and he is not bound by the highest bid. He is also not bound to give any reasons for his decision and his decision shall be final and conclusive. 

• MCMANUS V. FORTESCUE 

In this case, the auctioneer mistakenly sold the said property below the reserved price which was stated in a catalogue for each lot because of which the seller refused to sign the memorandum of sale. The court relieved the auctioneer as it was done mistakenly. 

• BOMBAY SALT AND CHEMICAL V. JOHNSON & ORS. 

In this case, it was held that the highest bidder can claim his rights over the property in the auction sale only when the auction sale is accepted by the seller and has been approved by the seller and also the sale deed is executed in his favour. Until then the highest bidder has no rights over the property. 

• BARRY V. DAVIS 

In this case, it was stated that if there exists no reserve price for the property that has to be sold or to be put in the auction then the property should be sold to the genuine highest bidder. There are also certain exceptions to this such as unlawful selling of goods, seller not authorised to sell, the buyer has no right to buy or the buyer does not have enough money to buy the property. 

• PAYNE V. CAVE 

In this case, Mr Cave was the buyer and he made the highest bid for a good at the auction. Later Mr Cave decided to not to buy the property and withdrew his bid before the auctioneer put down the hammer. It was held that as the Mr. Cave has withdrawn his bid before the auction was completed and he had all the rights to withdraw his bid anytime before the auction is declared to be complete. He is not liable to purchase the goods. 

• HARRIS V. NICKERSON 

In this case, an advertisement was given in the newspaper that certain items are to be sold and would be auctioned on a particular place for three days. The plaintiff wanted to buy certain goods but the goods were withdrawn. The plaintiff sued the defendant for the loss of time and travel expenses. The court held that advertisement for auction does not amount to offer and therefore the advertiser can withdraw goods anytime prior to the auction. 

ILLUSTRATIONS 

1. A being the auctioneer in the auction sale. A accepted the highest bid by B. A declared that the auction is complete. Later B decides not to buy the property at Auction sale to which he agreed to buy. B cannot deny buying the property and he will have to pay the consideration to A. 
2. A held the auction of a House. B made the highest Bid. But before the hammer was slammed down by the auctioneer the seller decides to withdraw the property. B cannot enforce the selling of the property to him. 
3. A was the auctioneer in the auction sale. A sold the property at the price below the reserve price to B. The seller denied selling his property. B cannot claim the property from the seller. 

Conclusion

The auction sale is covered under Section 64 of ‘The Sales of Goods Act, 1930’. The Sales of Goods Act specifically deals with a movable property only. Auction sale can be defined as a public sale in which various prospective buyers are invited to a particular area where the auction is to be conducted. There are two main parties involved one is the auctioneer who conducts the auction of a property and the other is the buyer who will bid the highest than any other buyer in the auction.

The auction is complete only when the hammer is dropped down or in a customary manner, the auction is declared to be complete. The ownership of the property thus passes from the owner to the highest bidder on the fall of the hammer. The seller himself cannot bid and he also cannot appoint anyone to bid on his behalf.

The auctioneer can be the seller or his agent. Auctioneer should always be an authorised person and should act in the benefit of the seller with a bonafide intention. The bidder can revoke his bid anytime before the completion of the auction. A bid can be said to an offer and to which acceptance is completed only when the sale deed has been executed in the name of the highest bidder.  

References

1. “http://indiankanoon.org/doc/547058/
2. https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-1930/auction-sale/ 
3. https://www.legalcrystal.com/cases/search/name:sale-of-goods-act-1930-section-64-auction-sale 
4. https://www.lawteacher.net/free-law-essays/contract-law/the-sale-of-goods-act-1930-contract-law-essay.php

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This article has been written by Deyasini Chakrabarti from KIIT Law of School, Odisha. This article talks mostly about two basic concepts of sale and agreement to sell, various statutory provisions that are related to it and also about their difference.

Introduction 

The basis of Indian society is a contract. The very foundation of Indian society was based on the Social Contract Theory. Thus, contracts are the roots of the law which deals with business, transactions of the Indian economy as well as the society. The mother law being the Indian Contract Act 1872, we had derived the Sale of Goods Act 1930. Thus it helps to enhance, encourage and promote business transactions where the seller transfers or agrees to transfer the title in the goods to the buyer for consideration.

Statutory Provision that draws the difference between  Sale & Agreement To Sell

One of the foundation concepts in the Sale of Goods Act 1930, is the sale and an agreement to sell. Section 4 of the Sale of Goods Act 1930 specifically deals with sale and agreement to sell. It explicitly manages and deals with sale and agreement to sell. 

It expresses that: 

• Firstly, an agreement to sell products is an agreement whereby the merchant moves or consents to move the property in merchandise to the purchaser at a cost. There might be an agreement of offer between one section proprietor and another. 
• Secondly, an agreement to sell might be total or restrictive. 
• Thirdly, where under an agreement to sell the property in the merchandise is moved from the seller to the buyer, the agreement is known as a sale, yet where the exchange of the property in the products is to happen at a future time or subject to some condition from that point to be satisfied, the agreement is called an agreement to sell. 
• Lastly, an agreement to sell turns into a sale when the time slips by or the conditions are satisfied depending upon which the property in the merchandise is to be moved.

Essentials of Contract of Sale

The essential of the contract of sale are as follows:

1.     There ought to be at least two parties.
2.     The basis of the contract ought to be products. 
3.     Price.
4.     Transfer of Property in Goods.
5.     Absolute or Conditional.
6.     All other essential constituents of a valid contract.

Sale: Concept And Definition

Section 4(1) defines sale as a contract whereby, the seller transfers or agrees to transfer the property in goods to the buyer for a price. Thus, it happens in the present. Such an event of sale is fixed, conditional and binding upon both the parties. A contract of sale is made by an idea to purchase or sell merchandise at a cost and the affirmation of such an offer.

The agreement may oblige the speedy movement of the product or prompt instalment of the cost or both, or for the transport or instalment by portions, or that the transport or instalment or both will be delayed. It is further being subjected to the arrangements of any law until further notice in power, a contract of sale might be made or recorded in writing or by word of mouth, or partly in writing or partly orally or can be implied from the conduct of the parties. Thus the process of forming a contract of sale had been explained in section 5 of the concerned Act.

The existing goods mostly from the subject of the contract of sale. However,  the goods could also be owned or possessed by the seller or future goods.

Agreement to Sell 

An agreement to sell can be defined as the transfer of property in goods that is to take place in future time or the transfer might take place depending on the fulfilment of certain conditions.  The same had been defined in section 4(3). An agreement to sell also becomes a sale when the given time elapses or the conditions that are needed for the transfer to happen gets fulfilled. Thus, an agreement to sell establishes the terms and conditions of the offer of a property by the seller to the buyer.

These terms and conditions incorporate the sum at which it is to be sold and the future date of payment. The concept of contingent contract as per section 31 of the Indian Contract Act 1872, can also be brought into it. Thus an agreement to sell is a contract, to do or not to do something if some event collateral to such contract, does or does not happen.

All the terms and conditions remembered for the understanding of sale must be done all together by both the parties and obeyed all through the deal procedure until the time the sale deed is made or completed. Thus, an agreement to sell is a basic document on which the sale deed is drafted. In other words, agreement to sell can be called a confirmation of the future event which may take place depending on the fulfilment of the terms and conditions placed forth in the present.

Difference Between Sale And Agreement To Sell

As already described above, the sale takes place immediately, while an agreement to sell takes place in the future depending upon the fulfilment of certain terms and conditions. Thus at the time of the sale, an actual transfer takes place whereas at the time of the agreement to sell future transfer takes place. Risks are transferred immediately in sale whereas in the agreement of sale risks are attached to the seller till the goods are being transferred in the future. The sale is an executed contract whereas agreement to sell is an executory contract.

As per section 6(1) the sale deed mostly comprises of the existing goods owned or possessed by the seller or future goods. Whereas in the agreement to sell, the seller indicates to impact a present offer of future merchandise, thus it entirely depends upon the contingency of the event which may or may not happen.

However, section 8 of the said act, deals with the goods perishing before the sale but after the agreement to sell, thus this section again highlights the goods which damage or perishes without any fault of the seller or the buyer. Thus this also happens to be an instance of an agreement to sell.

Further, section 9 deals with the ascertainment of the price of the goods. Hence, when a sale is made, immediately a transfer takes place, and therefore the price is certain and fixed, whereas in specific conditions the price is determined, depending upon the circumstances of a certain particular case, thus an agreement to sell is completed but the sale is not.

Therefore the price of the goods itself falls and thereby the risk being attached to the seller, he suffers the loss. However, if the goods or a part thereof is delivered and appropriated by the buyer, the buyer is bound to pay a reasonable price to the seller. Thus it could be concluded that one is an instant action while other is a future action.

In the sale and agreement to sell the condition and warranty as being defined under section 12 of the act which also plays an important role. Section 12(2), defines the condition as a stipulation essential to the main purpose of the contract. While section 12 (3) defines warranty as stipulation collateral to the main purpose of the contract and a breach of it may give rise to claim for damages but not to right to reject the goods and to treat the contract as denied.

Thus the term “condition” could be related more to the immediate sale, whereas the term “warranty” could be more associated with the agreement to sell. Subsequently, we also find that section 13 of the said act is also inclined towards the agreement to sell as it states that when a condition could be treated as a warranty.

When an immediate sale happens, all the rights which are attached to the goods to the seller are impliedly transferred immediately to the buyer, whereas, in the agreement to sell, this is not the case. In certain cases the sale also happens as per the descriptions hence it is applicable to both to sale and agreement to sell as per section 15 of the Sale of Goods Act, 1930.

Chart Showing The Differences Between Sale And Agreement To Sell

Case Analysis

In the case of Cehave N.V. v. Bremer Handelsgesellschaft mbH; the Hansa Nord ( 1976) Q.B.44, the facts stated that a written contract to sell fruit pellets contained the express stipulation, “ shipment to be made in good condition.” In fact, some of the pellets were not in good condition when shipped. However, they were, on arrival, still fit to be used for the purpose the buyer intended and although they were worth less than they should have been, they could have been re-sold at a reduced cost.

The question of law which arose:

1. Firstly was whether there is a breach of the condition?
2. Secondly, whether the buyer is entitled to repudiate the contract and reject the goods?

Thus it was held in this case there was no breach of condition and the buyer was not entitled to repudiate the contract and to reject the goods. But the buyer is entitled to the damages.

The reasoning behind the judgment was the seller was not in breach of the implied conditions as to the fitness and merchantable quality. The express stipulation in the contract was not a condition and the seller’s breach of it had not been serious enough to go to the root of the contract. Therefore the buyer is entitled only to the damages.

Similarly in the case of Rowland v. Divall (1923) 2 K.B. 500., the facts stated that Rowland bought a motor vehicle from Divall and used it for four months. Divall had no title to the car, and consequently, Rowland had to surrender it to the true owner. Rowland sued to recover the total purchase price that he had paid to Divall.

Thus the main question of law,

1. Firstly was whether there was a breach of the condition? 
2. Secondly, whether the buyer is entitled to recover the total purchase price.

However, it was held in this case that there is a breach of the implied condition as to the title on which the sale and agreement to sell were based. Therefore the buyer is entitled to recover the purchase price in full, notwithstanding that he had used the car for four months. The rationale behind the judgment was the consideration on the part of the seller had totally failed as there was a breach of condition.

Thus, the use of the car that he had, was no part of the consideration, that he had contracted for, which was the property in and lawful possession of the car, whereas what he got was an unlawful possession which exposed him to the risk of an action at the suit of the true owner.

Conclusion

Sale and Agreement to sell, as effectively expressed, appears to be under a similar nonexclusive name yet at the same time it is to be treated under various classifications. Along these lines so as to set up a deal there must be an understanding communicated or inferred relating to the idea of items and satisfaction of the condition would result in going off the title in the very products contracted to be sold. These two ideas of offer and consent to deal is itself a powerful idea.

It doesn’t limit itself to the Indian Contract Act 1872 and Sale of Goods Act, 1930, just, however, it additionally extends to Transfer of Property Act 1882 and Motor Vehicles Act 1988 also. Anyway so as to comprise a substantial agreement to sell under this Act, there must be consistent and persuading proof regarding understanding between the able competent parties, the cost for the products and the passing of the properties of the products. Consequently without the genuine exchange of possession in the merchandise, by the seller to the buyer, there can be no deal by any stretch of the imagination.

Reference

1. http://comtax.up.nic.in/Miscellaneous%20Act/the-sale-of-goods-act-1930.pdf,
2. https://keydifferences.com/difference-between-sale-and-agreement-to-sell.html.

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The article is written by Sneha Mahawar, a student of Ramaiah Institute of Legal Studies. The article discusses the concept of Investor Education and Protection Fund and how it is created under Company Law.

What is a company?

To understand legally, a company is an entity having legal personality, and thus is able to own property and to sue and be sued in its own name. It has no definite meaning in legal sense. In a general sense it is a team, a group of people who work together professionally for achieving a particular objective. Section 2(20) of the Companies Act, 2013, defines the term ‘Company’.

What is IEPF?

Investor Education and Protection Fund or IEPF was initially a fund set up under the Section 205C of the Companies Act, 1956. Now it is set up under Section 125 of the Companies Act, 2013. 

It is a fund set up to pool in all the dividends of the Asset Management Companies, matured deposits, share application interests or money, debentures, interests, etc. that are unclaimed for seven years. All the money collected from these sources has to be transferred to IEPF. Investors, who are trying to seek a refund for their unclaimed rewards can now do so from the Investor Protection and Education Fund (IEPF). The fund has been set up under the guidance of SEBI and the Ministry of Corporate Affairs India (MCA).

Why was IEPF introduced?

IEPF concept was introduced initially with the idea of using the investor’s money for their benefits such as investor’s education, investor’s awareness programme. Later in 2016, the government made it mandatory the transfer of underlying shares on which dividends had not been claimed for the last seven consecutive years. This gave rise to ambiguities with respect to the process of transferring the same to the government and certain other confusions among all the stakeholders. Therefore, this was amended by the MCA several times including the recent amendment, dated 14th August, 2019 through which the process has been simplified.

Section 125 of the Companies Act, 2013

This Act states that:

Sub-section(1), the central government of India shall make a fund called the Investor Education and Protection Fund. (Here, the word ‘fund’ means IEPF)

Sub-section(2)

(a) The Central Government by way of grants for being utilised for the purposes of the fund (IEPF) provides a certain amount by the law which should be credited to the IEPF;

(b) There are various institutions and government bodies which provide donations to credit the IEPF;

(c) According to Sub-section(5) of section 124 of the Companies Act,2013 the fund ie, the IEPF shall be credited by the amount of money kept in the unpaid or unclaimed dividend account of that company;

(d) According to Sub-section(5) of section 205A of the Companies Act, 1956 the fund which is the IEPF shall be added by the amount of money in the general revenue account of the central government;

(e) According to section 205C of the Companies Act, 1956 section 205C is the Act which governed IEPF in 1956 until 2013 when new Act came into existence) the fund should be added by the amount in the IEPF; 

f) The fund should be credited by the interest or other income received out of the investments which is the amount of money invested by number of individuals in a particular company;

g) Under sub-section (4) of section 38 of the Companies Act, 2013; the fund should be credited by the amount received; 

(h) The money received by the companies through application for allotment of any securities, the fund should be credited by that amount;

(i) The fund should be credited by companies having matured deposits other than banking companies;

(j) The fund should be credited by companies having matured debentures;

(k) IEPF should be added by the interest earned or incurred by the money received by the companies through application for allotment of securities, matured deposits and matured debentures;

(l) IEPF shall be added by sale proceeds of shares on issue of bonus shares, merger and consolidation for consecutive seven or more; and

(m) IEPF shall be added by recovered preference shares which are unpaid or unclaimed for seven or more than consecutive seven years or more; and(n) The fund should be credited by such other amounts as may be prescribed.

The clauses (h) to (j) shall only form the part of IEPF if such amount remains unclaimed and unpaid for seven consecutive years from the due date.

Sub-section(3) 

1. The IEPF money shall be used for the the dividend which is unclaimed, the deposits and debentures which have matured and the application money which is due for refund;
2. The IEPF money shall be used for a person who invests in a company. This fund id for that individual’s education, awareness and protection;
3. The IEPF money is used for distribution of it among people who hold a company’s shares, debentures,etc and have suffered losses and court has ordered to pay them damages;
4. The IEPF money shall be used for reimbursement of legal expenses for company members and debenture holders; and
5. The fund can be used for any other purpose if such rules are prescribed.

Sub-section(5), states that the chief executive officer of the fund is appointed by the central government and IEPF also consists of a chairperson and maximum of seven members.

Sub-section(6), states that the conducting of meetings and appointing various authorities shall be in compliance with the rules.

Sub-section(7), states that the offices, and other required resources such as employees, officers will be provided by the Central Government as per the rules.

Sub-section(8), provides that separate accounts shall be maintained after consulting Comptroller and Auditor-General of India.

Sub-section(9), provides that the authorities shall be using the fund for the the dividend which is unclaimed, the deposits and debentures which have matured and the application money which is due for refund. This fund id for that individual’s education, awareness and protection;The fund is used for distribution of it among people who hold a company’s shares, debentures,etc and have suffered losses and court has ordered to pay them damages; The IEPF money shall be used for reimbursement of legal expenses for company members and debenture holders.

Sub-section(10) states that the fund shall be audited by specified authorities at regular intervals as prescribed and be submitted to the Central Government on an annual basis.

Sub-section(11) states that the specified authorities shall prepare annual reports of each financial year providing with full account of the activities taking place and forward a copy of it to the Central Government.

How is IEPF created under company law?

Step 1: Dividend Declaration (AGM)

A dividend is declared by the company in the Annual General Meeting (AGM). Post the declaration of dividend in the AJM the company is required to file e-FormIEPF-2 along with a statement or information of unclaimed and unpaid dividend within 60 days of the AGM. These statements are to be separately filed for each of the previous seven financial years.

Step 2: Dividend payment to shareholders

The dividend declared by the company has to be transferred to the separate dividend bank account of the company within 5 days of AGM and then the dividend needs to be remitted or paid to the shareholders within 30 days from the date of the AJM. At this point, the company needs to file e-FormIEPF-7 in order to report that the dividend that has been directly remitted to PNB account of the IEPF authority on the shares which have already been transferred to IEPF in compliance of rule6 sub rule12 of the IEPF authority rules 2016. It means the payment of the dividend on those shares which the company has already transferred to the IEPF in the previous financial years.

Step 3: Transfer to unpaid dividend account

Further, the dividend remained unpaid and unclaimed is required to be transferred to a separate unpaid dividend account within 7 days. The date on which the unclaimed dividend is transferred would become the base date for calculating the due date or cut-off date for transferring the unclaimed dividend and underlying shares to IEPF in future.

Step 4: Due date

This step deals with due date calculation for transferring to IEPF. The company to calculate 7 years from the date when the company has transferred the unclaimed dividend to unpaid dividend account as explained in step 3. The date we get after adding 7 years would be the due date or cut-off date for transferring unclaimed dividend and underlying shares. This is in compliance with section 124 of the Companies Act, 2103 read with rule 6 of IEPF authority rules 2016 as amended. The company shall inform the latest available address of the concerned shareholder regarding transfer of shares at least 3 months before that due date of transfer of shares. The company is also required to simultaneously publish a notice in a leading newspaper in English and regional language having wide circulation informing the concerned shareholders to claim unpaid dividend failing which the unclaimed dividend and underlying shares would be transferred to IEPF. The notice also notifies about the availability of the details of such shares along with the folio number or DP ID, client ID are available on the company’s website, mentioning the website address.

Step 5: Transfer of unclaimed dividend and underlying shares to IEPF

The transfer needs to be made within 30 days thereof. There are slightly different processes for transferring unclaimed dividend and underlying shares.

For unclaimed dividend, the company needs to file e-FormIEPF-1 on MCA portal along with uploading and confirming the excel sheets containing the list of shareholders whose dividend is to be transferred. The e-FormIEPF-1 to contain the amount of unclaimed dividend in the unpaid dividend account as on that due date then from the pay miscellaneous section on MCA portal that dividend is required to be remitted to the IEPF authority PNB account.

For underlying shares, firstly the corporation is required to be executed by both the depositories NSDL and CDSL for transferring the underlying shares as on the due date to the IPF authority D-mat account as per the documents shared by the company. Then afterwards, e-FormIPF-4 is required to be uploaded on MCA portal and the excel sheets detailing the list of shareholders whose shares have been transferred to be uploaded and confirmed on IEPF portal.

Step 6: Financial year-end 

Lastly, at the end of the financial year the company is required to report the shares being eligible for transfers but has not been transferred to IEPF due to any specific order of court or tribunal or statutory authority or due to the shares be pledged or hypothecated restraining such transfer of shares and payment of dividend. This report is to be made in e-FormIEPF-3.

Objectives of IEPF

• To educate the investors about how the market operates.
• Making investors educated enough so that they can analyse and make informed decisions.
• To educate investors about the dynamism of the markets.
• Making investors realise their rights and various laws about investing.
• Promoting research and surveys to spread knowledge among investors.

Changes in IEPF provisions by recent amendments

• A new concept of e-Form IEPF-1 has been introduced for reporting dividends already transferred but reporting not made till notification of IEPF authorities.
• e-Form IEPF-2 is required to be filed to for updating nodal officer details till September 4 for the first time and thereafter within 7 days of any change in nodal officer along with the board resolution.
• e-Form IEPF-5 is the form through which the shareholders can claim refund of their shares and dividend of IPF authority with the help of nodal authorities.

Conclusion 

Hence, Investor Education and Protection Fund (IEPF) is a fund set up to accumulate all kinds of dividends, matured deposits, share applications, debentures and interest which are unclaimed for seven years to benefit the investors for their education and awareness. Initially only clause(3) and clause(11) of section 125 of the Companies Act, 2013 was notified but with due course of time, all its clauses were notified by the government.

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This article is written by Arijit Mishra, from KIIT School of Law, Odisha. This article talks about the State Recognition. A new State can enjoy its rights, privileges, and obligations when it will be recognized as a state.

Introduction

A new state is born out from an existing State or an old State which disappeared and comes with a new name or by splitting an existing State into two States. If a new state enjoys certain rights, privileges and obligations then it must get recognition as a state, which is very essential. However, there are some minimum criteria required before a State is considered to be a State. A State must get the De Jure (when a state is legally recognized) recognition for considering a State as a sovereign State. Political thought plays an important role in this decision whether to grant recognition or not. For recognition as a State, it must enter into relations with the other existing States. The elements, theories, and processes are reflected in this article.

Recognition of a State

Under International Law, recognition of a State can be defined as:

A state acknowledgment or acceptance as an international personality by the existing State of the international community. The declaration to fulfill certain essential conditions of Statehood as required by International Law.

Essentials of Recognition of a State

• Population;
• Territory;
• Government;
• Sovereignty;
• Control should tend towards permanency.

If these conditions are fulfilled, then the State can be recognized.

Kelson’s view on the recognition of states

For a state to be recognized the following conditions must be fulfilled-

• Must be politically organised.
• Have control over definite territory.
• Must be permanent.
• Must be independent.

Process of Recognition

• State is not only an institution with international legal standing but they are the primary subjects of International Law and possess the greatest range of rights and obligations.
• Mixture of fact and law and the establishment of particular factual conditions and compliance with relevant rules are the process of creating new States.
• States are not bound to recognise new claimants of Statehood and make it a positive duty to recognize a State.
• Recognition is mainly a matter of intention. 

Israel-Palestine Dispute

In this dispute, India did not recognize Israel till 1999 and also South Africa till 1991 due to racism. Even though India got military support from Israel, still it didn’t recognise Israel. Where both the countries had all the parameters under Montevideo Convention.

But Palestine got limited recognition by countries because they had large number of Zewish population.

China-Taiwan Dispute

In this dispute, 15 countries recognised Taiwan as a state all over the world. Taiwan was officially known as the Republic of China and is recognised by 19 member states of the UN. Other countries have business relations with Taiwan but they don’t recognise it as a state. Taiwan unofficially maintains diplomatic relations with 57 other members of the UN.

Political Recognition of State

• Political act in recognition is used to support or to reject a state or a government which is new in an international community. 
• Mixture of fact and law and the establishment of particular factual conditions and compliance with relevant rules are the process of creating new States.
• Criteria of Statehood is laid down in the Montevideo Convention, which provides that State must have a permanent population, a defined territory and a government and the capacity to conduct International relations.
• Recognition of State is a political act based on interest and assessment made by States individually, but legal arguments are important. 

Montevideo Convention

To consider a State as an international person, State should adhere to following qualifications-

• Permanent Population;
• Definite Territory;
• Government;
• Capacity to enter into relations with other States.

Theories of Recognition

There are two theories of recognition-

• Constructive Theory,
• Declarative Theory.

Constructive Theory of Recognition

• This theory is coined by Hegel and Oppemheim.
• According to this theory, the State is considered as an international person. This theory views that after the recognition a State gets its status of an International person and becomes a subject to International Law.
• This doesn’t mean that State doesn’t exist unless recognised, but in this theory State gets the exclusive rights and obligations and becomes a subject to International Law after its recognition by other existing States.

Criticism

This theory is criticized by many of the jurists, few of them are-

• That except the State which is recognised by other existing States, rights, duties, and obligations of Statehood community under International Law is not applicable to this theory.
• It also comes into confusion when a new State is recognised by some of the existing States and not recognised by other States.

Oppenheim’s View on Recognition of State

• A State is and will only be an international person if recognised as extraordinary. There is no agreement that countries have to give recognition to a State, there is no obligation on the countries, obligation lies under international law who will give recognition to a new State.
• Existing countries recognised a country as a member of the international community and believe that the State meets the requirements of international law outside the country.

Declarative Theory of Recognition

• Declarative Theory is coined by Hall Wagner and Fisher.
• This was developed in the 20th Century to address shortcomings of constitutive theory.
• Before the recognition of the State, a new State has the right to defend its integrity and independence under International Law.
• This theory is laid down under Article 3 of Montevideo Conference of 1933
• Followers of this theory consider this process of recognition as merely a formal existence of Statehood by other States

Criticism

This theory has also been criticized. It is criticized on the grounds that this theory cannot be applicable for recognition of the State.

When the essential characteristics are fulfilled by a State then it comes into existence. If international rights and obligations are exercised by the State then declarative theory applies. But when the State gets the legal rights of recognition then constructive theory applies.

Modes of Recognition

Recognition of a new State

Recognition specifies the willingness of recognizing State. Existing State is a member of the International Community who will deal with a new State.Under International law it allows the recognized State to exercise the rights and duties of the State. Recognition of the Government automatically involved in recognition of a new State.

Recognition of a new government

Through the medium of the government a State participates in the benefits of International Law largely. To recognise the government, recognising the State is important.

Objective Test

• Is there any opposition or not?
• Whether the new government has effective territory?

Subjective Test

• Whether fulfilled the International Obligations?

Recognition of belligerency

Belligerency exists when a portion of the States territory and population is under the de facto control of the people who are fighting against the government to establish a separate State or to overthrow the existing government.

A civil war may turn into a real war if the rebels are in possession of a substantial part of territory.

Recognition of belligerency was granted during most of the civil wars of the 19th Century, such as the American civil war and war during the Independence of the Twentieth Century. 

Forms of Recognition

De Facto Recognition

• De Facto Recognition is mostly granted to governments.
• It is a temporary recognition of a State, this can be conditional or without any condition.
• This mode of recognition is granted when a new State holds a sufficient territory or control over a particular territory, but the other existing State consider that when they don’t have enough stability or any other unsettlement issues. So we can take it as a test of control for newly formed States.
• The UK first recognized Soviet Government as de-facto recognition in 1921 and later recognised as de-jure in 1924.

De Jure Recognition

• De Jure Recognition is given to a new State when a new State fulfills all the essential characteristics of a State.
• De Jure recognition can directly be granted to a State who has or has not granted de-facto recognition.
• Newborn States grant the permanent status as a sovereign State through de-jure mode of recognition.

Difference between De Facto and De Jure Recognition

Express Recognition

• When an existing State identifies a new State expressly by official declaration or notification, then it is considered to be a expressed form of recognition.
• Express recognition can be expressed through formal means such as sending or publishing declaration or statement to the opposite party. 
• It can also be expressed through personal messages from the head of State or from the minister of foreign affairs.

Implied Recognition

• When an existing State identifies a new State through any implied act then it is considered as implied recognition. There is no formal statement or declaration issued. 
• The recognition through implied means may vary from case to case. The actions required for implied recognition must be ambiguous and there shouldn’t be any doubt in the intention of the State who recognises a new State. 

Conditional Recognition

• Some conditions are attached to the recognition of the State to obtain status as a sovereign State. The conditions attached may vary from State to State such as religious freedoms, the rule of law, democracy, human rights etc.
• The recognition of any State which is already associated with the essential conditions are needed to be fulfilled for the status of sovereign State, but when any additional condition is attached then it is Conditional Recognition.
• Jurists criticise conditional recognition. It was criticized on the ground that recognition is a legal procedure and nothing additional condition can be attached unless the conditions are recognised by law.

Withdrawal of Recognition

Withdrawal of De Facto Recognition

• Under International Law, when a State having De Facto recognition but fails to obtain or fulfill the essential conditions then the recognition can be withdrawn.
• The recognition can be withdrawn through declaration or through communicating with the authorities of the recognised State. It can also be withdrawn by issuing a public Statement.

Withdrawal of De Jure Recognition

• Withdrawal of De Jure recognition is a debatable topic under International Law. Withdrawal of this recognition comes under as an exception.
• This recognition can be withdrawn when a State loses the essentials elements or other circumstances.

Conclusion

The recognition of the State is an essential procedure, so that the State can enjoy the rights and privileges as an independent community under International law. The recognition be it De Facto and De Jure, both provides rights, privileges and obligations.

When a state gets De Facto recognition, its right, privileges and obligations are less but when De Jure is recognised by the State it gets absolute rights, liabilities and privileges. The recognition of the State has some political influence on the International Platform.

There are many situations where powerful States create difficulties in recognition of a newly formed State. This can be withdrawn when any State does not fulfill the conditions for being a sovereign State. De Jure and De Facto recognition may vary from case to case. De Jure recognition can be given directly to the State, there is no necessity of De Facto recognition even if De Facto is considered as the primary step to achieve De Jure recognition. 

References

1. https://www.legalbites.in/recognition-State-implication-modes-necessity/
2. http://www.preservearticles.com/political-science/what-are-the-important-elements-of-the-State/12783
3. https://studybix.com/State-recognition/
4. https://www.lawteacher.net/free-law-essays/international-law/recognition-important-issues-in-international-law.php
5. https://www.jus.uio.no/english/services/library/treaties/01/1-02/rights-duties-states.xml

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This article is written by Utkarsh Tiwari.

Introduction 

The child is the first seed of our society, however each child has its own mental growth depending upon the environment he lived in, kind of care he received, treatment met out etc. The Juvenile Laws must conform to such principles and work in best interest of the child and take a reformative approach in case of Juvenile Delinquency, so as to provide basic needs, social integration, protection etc. 

However the Juvenile Justice (Care and Protection) Act, 2015 doesn’t necessarily do so, as it consists of opaque Age determination system, and has introduced a unique but unknown system of Judicial Waiver. Through the Judicial Waiver, it gives a fair opportunity of considering a child as criminal between age group of 16-18 years keeping his reformation at bay. Such a system fall miserably in purview of practical provisions provided under the Criminal Procedure Code wherein specifically it is provided, that the Chief Judicial Magistrate should provide with rehabilitation, treatment, training of youthful offenders. 

Indian criminal justice system and judicial waiver system 

Criminal Justice System under CrPC, 1973

Section 27 of CrPC

Section 27 strictly speaks of jurisdiction in the case of Juveniles, wherein if a Juvenile (a person who appears or is brought before the Court is under the age of sixteen years), may be tried by Chief Judicial Magistrate, or by any specially empowered Court. The section further considerate of the age and psyche of Juvenile offender conforms with restorative justice, by providing with the following:

1. Treatment, 
2. Training, 
3. Rehabilitation of youthful offenders.

Position before the amendment

The Juvenile Justice Act, 1986 and that Amendment Act, 2000 were complete Act with regard to offenders below 16 years if male, and under 18 years if female. Such offenders have been termed as “Delinquent Juveniles” under the Act. These Act had sweepingly overriding effect on other enactments of the State Legislatures or Parliament dealing with proceedings against delinquent juveniles on any criminal charge. A delinquent juvenile can now only be proceeded against under this Act, even if may be a case of murder or of rape. He cannot be sentenced to death or imprisonment of life. Ordinary law shall not apply to him even if he ceases to be a Juvenile during the course of inquiry, and he shall still be continued to be treated as juvenile under Section 3 of the Act, 1986. 

Under Section 5 of the Act, 1986, a juvenile Court is to be established by the State to exclusively act and proceed under the Act completely disregarding the provisions of the Code. Juvenile Court shall have exclusive power to conduct proceedings against juvenile notwithstanding any other law.

However, Court of Session and the High Courts have been conferred appellate and revisional jurisdiction respectively under Section 7(3) of the Act, 1986.

Where no Juvenile Courts has been constituted for any area, the powers of the Juvenile Court shall be exercised in that area only by (a) The District Magistrate; or (b) the sub- Divisional Magistrate; or (c) any Metropolitan Magistrate or the Judicial Magistrate of the first class. 

Under Section 18 of the Act, 1986, a delinquent juvenile has to be released on bail, even if he has committed a heinous crime. If not so released, he is to be kept in safe custody/place as provided for under the Act.

Section 39 of the Act, 1986, lays down procedure for enquiries, appeals and revisions. Such procedure shall be followed as may be prescribed and subject thereto follow the procedure laid down for trials in summons case under the Criminal Procedure Code, 1973.

Where a minor along with other was being tried for murder by a Sessions Court, the High Court intervened, separated the trial of the minor from the rest, released him on bail and directed his case to be sent to the Juvenile Court of the area. 

Section 318 of CrPC 

This Section is intended to provide for procedure where the accused does not understand proceedings. The reasons may be that the accused is deaf and dumb and cannot be made to understand the proceedings or from ignorance of the language of the country and the want of interpreter, is unable to understand or make himself understood. When the accused is deaf and dumb, the Court may proceed with inquiry and trial, but it should first enquire into the antecedents of the accused and should also make an endeavour to find out as to how his friends and close relatives are accustomed to communicate with him in ordinary affairs and record its conclusion, if necessary by taking evidence.

In one of the cases it was held by the Court that where the accused being deaf and dumb cannot be made to understand the proceedings against him, and it becomes impossible to say that he knew the nature of the act committed or that he acted with dishonest intention therein, he must be acquitted or discharged.

Trial of Summons Cases under Section 251-259 of CrPC

Section 104 of the Juvenile Justice (Care and Protection) Act, 2015 expressly mentions in its Saving clause that the Board or Committee constituted under the Act, shall follow the procedure under the Criminal Procedure Code, 1973, with reference to trial or inquiry, the procedure of trial or inquiry followed under Summons cases under Section 251 to 259 of the Code.

Plea for Juvenility- The Code under Section 251 mentions that the substance of accusation to be stated. It is hereby held under this section that the date of cognizance of the offence is alone the crucial date.

If the date of cognizance is made the crucial date, whether the plea of being a Juvenile, can save the accused Juvenile from the court proceedings or not, as it happened under Darga Ram v. State of Rajasthan and in the case of Kulai Ibrahim v. State of Coimbatore the court held that the juvenile has the right to raise the question of juvenility at any point of time during the trial under proviso of section 9 of Juvenile Justice Act, 2015.

Judicial Waiver System under Juvenile Justice (Care and Protection) Act, 2015

Clause 16

This clause provides that Board shall follow the procedure, for trial in summons case under the Code of Criminal Procedure, 1973, to the satisfaction of the Board on preliminary inquiry that the matter should be disposed off by the Board. 

The Judicial Waiver system finds its foundation under this clause and further takes a big leap in Clause 21 of the Act; wherein the principles of restorative justice, rehabilitation, training, child friendly process are thrown away by the very instrumentality of this section. 

The orchestration of taking the inquiry as per trial procedure in summons case in the Criminal Procedure Code, 1973, in heinous offences makes the legislative intent clear that the principles enshrined and followed under the previous Act of 2000, which were in parlance to the Supreme Court judgments, are no more sacrosanct under this Act of 2015. 

In Salil Bali v. Union of India & anr, the Supreme Court rejected the plea that the Juvenile Justice Act, 2000 should be amended that the so much so, that juveniles accused of heinous offences like rape and murder should be tried as an adult. The Supreme Court hailed the principles under Indian Constitution and the Act, 2000 and rejected the plea and even went on to suggest that several International Instruments also recognizes the child rights like Beijing Rules, Riyadh Guidelines that allows separate criminal justice systems for the juveniles.

Clause 21 

1. Age Factor- This clause provides that when a child in conflict with the law attains the age of twenty-one years and is yet to complete the term of his stay, the Children´s Court then shall provide for a follow up by the probation officer or the District Child Protection Unit or a social worker or by itself. 
2. Follow up- The purpose of the follow up is to evaluate if the child has undergone reformative changes and if the child can be a contributing member of the society. 
3. Basis of evaluation- The evaluation shall be based on the progress records of the child under sub-clause(4) of clause 20 of this Act, along with evaluation of relevant experts. After the completion of the evaluation, the Children’s Court may:

1. decide to release the child on such conditions as it deems fit;
2. appointment of a monitoring authority for the remainder of the prescribed term of stay;
3. decide that the child shall complete the remainder of his term in an adult jail. 

Excessive Power to Board- Clause 21 of this Act gives excessive power to the Board with respect to the decision making that the juvenile has reformed or not, or can be or cannot be the contributing member of the society. 

No Relevant Touchstone- There are no relevant touchstones which can actually decide that the reformation has taken place into the Juvenile or not, even if there is no reformation, still the Board cannot make arbitrary decisions as to sending the Juvenile to the adult jail, and make the whole reformation a forgetful story.

Justice Failure- The Act of 2015 must run in consonance to the Criminal Justice System as discussed above under Section 27 of the Criminal Procedure Code, 1973, and those of Constitutional Provisions namely Article 14, Article 15, Article 20 and Article 21 of the Indian Constitution. 

The Section gravely violates Article 20, wherein the entire adolescence, teenage of the juvenile goes into the case disposal, and is incriminated with offence and the charge, but system fails him again if the Board with no touchstones of their decisions to send the juvenile at the attainment of 21 years of age to an adult jail, and make him the hardened criminal.  

Critical analysis of judicial waiver system 

Unconstitutional JJ Act, 2015- The Act, 2015 being regressive and punitive in nature violates the constitutional principles and rights of the child offenders. Article 14 – Right to equality, Article 15- Right against discrimination, Article 20- Preventive Detention, Article 21- Right to life, these strong pillars of the Indian Constitution are the touchstones that decides the constitutionality of the enactment. Since, the Act, 2015 is in violation to all these Articles, giving no right to be heard to the accused juvenile, and arbitrarily sending him to the adult jail under Clause 21 of the Juvenile Justice (Care and Protection) Act, 2015. Clauses 2(33), 2(45), 2(54), 7, 16, 19(3) and 20, 21 of the proposed legislation seeking to bring major changes in juvenile justice system are in contravention of these constitutional provisions.

In Dr. Subramaniam Swamy & Ors vs, Raju & Other (2014) case also, the Supreme Court had observed that there was a considerable body of world opinion that all persons under 18 ought to be treated as juveniles and separate treatment ought to be meted out to them so far as offences committed by such persons were concerned. The avowed object was to make the youthful offenders as contributing members of the society.

Non conformity to CrPC- In its Saving clause under clause 104 of the Juvenile Justice Act, 2015, although the wide powers are conferred to Board with respect to trial, preliminary enquiry etc. to be followed as per Trial under Summons case, but the reformatory theory approved and confirmed through Section 27 of the CrPC, is not talked of in the Amendment Act, 2015, and thus more power to the CrPC which was desirable was not met out. 

Child rights like Beijing Rules, Riyadh Guidelines that allows separate criminal justice systems for the juveniles, could also have been expected.

Conclusion 

Therefore, the research questions have their answers at their behest, where one of the reasoning given by the Government was of data released by NCRB(National Crime Records Bureau) showing upsurge of heinous crimes like rape, murder etc. by the children in the age group of 16-18 years; was faulty because it was based on the FIRs filed against the child offenders, and not based on convictions. Moreover the international conventions that such as UNCRP are kept at bay in this Act, 2015 by defining the “Heinous crime”, “serious offences”, “petty offences”, which is not permissible under the UNCRP Articles. 

The Act, 2015 neither strengthens the Criminal Procedural laws nor proves its constitutionality under Indian Constitution through the instrumentality of Indian Criminal Justice System. 

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This article has been written by Neha Mallik, from the Vivekananda Institute of Professional Studies, New Delhi. This article highlights the important terms in the definition clause of the Sale of Goods Act, 1930.

Introduction

The sale or purchase of goods is the most recurring transaction in almost every kind of business. Every now and then, businessmen get involved in the sale & purchase of goods and enter into the contract of sale. These contracts are governed by the Sale of Goods Act,1930.  It is important for every individual, be it a legal professional or a common man who deals in the transaction of sales on a regular basis, to have an understanding of the important terms in the Sale of Goods Act,1930. In this article, we will discuss some common yet important terms in the Sale of Goods Act,1930. Give a quick reading to this article to have comprehension about the terms related sale of goods.

Important Terms: Sale of Goods Act, 1930

Buyer and Seller

• Buyer [Section 2(1)]

The definition of the ‘buyer’ is stated under Section 2(1) of the Act. It defines Buyer as a person who either buys or agrees to buy certain commodities. In the contract of sale, the Buyer is one of the parties to the contract.

• Seller [Section 2(13)]

On the contrary, the Act defines ‘seller’ as a person who either sells or agrees to sell particular commodities under Section 2(13). The Seller becomes the other party to the contract. The existence of both the parties i.e. the Buyer and the Seller must be there to enter into a contract of sale. 

The conjoint reading of the above two sections give us a conclusion that to be recognized as a Buyer or Seller under the Act, it is not necessary to actually transfer the goods. Even if you agree or promise to buy or sell the goods you would be considered and identified as a Buyer or Seller as per the Act.

Goods [Section 2(7)]

The dictionary meaning of the term goods is merchandise or possession. The term “Goods” is one of the crucial clauses in the Contract of Sale. 

According to Section 2(7) of the Act, “goods” include-

• Any movable property except actionable claims and money;
• Stock and shares;
• The growing crops, standing timber, grass;
• The things that are attached or forming part of the land which is agreed to be severed from the land before the sale. It has been held in the  State of Maharashtra v. Champalal Kishanlal Mohta that things which are attached to land are the subject matter of the contract of sale if they are severed before the sale. 

For eg: A resort was offering stay along with food at a consolidated charge. If customers do not take food, the rebate on food is not allowed as the supply of food does not come under the definition of “goods” as per the Act. 

It is concluded from the above definition that the Act deals with the sale of goods i.e. movable property only. On the other hand sale of immovable property is governed by the Transfer of Property Act,1882. It is noted that the actionable claims and money are excluded from the ambit of the definition. Actionable claims are the claim or debt for which legal action can be taken and can be enforced. For eg: recovery of refund is an actionable claim and is not included in the purview of the above definition. Further, the goods can be classified under several categories. Let’s see below.

Types of goods

The classification of goods in terms of business law can be quite ticklish to understand. Section 6 of the Act describes the types of goods. The goods are classified into existing goods, future goods, and contingent goods. Let’s study all three briefly. 

Existing Goods 

If the goods are physically present at the time of contract and are in the legal possession or owned by the seller during the formulation of the contract of sale is referred to as existing goods. The existing goods are further classified into:

• Specific Goods [Section 2(14)]: Referring to Section 2(14) of the Act, the goods that are specifically identified and agreed upon to be transferred at the time of the formation of the contract are called specific goods. 

Illustration- ‘A’ wants to sell his HP Laptop of a particular model number and advertises the same. ‘B’ agrees to purchase the laptop. Both entered into the contract of sale. Here the laptop is a specific good.

• Ascertained Goods: The Act does not define the ascertained goods but is conferred by judicial interpretation. The goods are said to be ascertained wherein some or whole part of goods is identified and set aside for the purpose of the contract. Such goods are specifically earmarked for sale.

• Unascertained Goods: The goods that have not been specifically identified to be sold are known as unascertained goods. For example, from 1000 quintals of wheat, the seller agreed to sell 500 quintals. Here the goods are not specified. The seller has the liberty to choose from the bulk. 

Future Goods [Section 2(6)]

The goods which are not in existence and to be manufactured or produced or acquired by the seller after entering into the contract of sales are considered as future goods. It must be noted that there can only be an agreement to sell contracts as there can be no actual sale in respect of future goods. This is defined under Section 2(6) of the Sale of Goods Act. 

Illustration – Amit is a manufacturer of chairs. Shyam ordered Amit to manufacture 200 units of chairs of specific design and they made an agreement for the same. This is the sale with respect to future goods. 

In the case of Union of India v. K.G. Khosla & Co. Ltd, goods were manufactured according to the specification mentioned in the contract. Therefore, the goods are “future goods” within the meaning of Section 2(6) of the Act. 

Contingent Goods [Section 6(2)]

According to Section 6(2), the sale of certain goods which depend upon happening or non-happening of certain events is termed as contingent goods. For instance, ‘A’ has agreed to sell ‘B’ certain goods at a particular date if the former receives the goods from the manufacturer before the said date. This agreement is based on contingencies, hence such goods are called contingent goods.

Delivery [Section 2(2)]

By delivery of goods we mean, the voluntary transfer of the possession of goods from one person to the other. The transfer of possession is the end result of the whole delivery process. It is not necessary that the person to whom the goods are delivered is a buyer, he can be any other person authorized by the buyer. The definition of the term delivery is defined under Section 2(2) of the Act. 

Kinds of Delivery

There are different forms of delivery of goods according to the Sale of Goods Act, 1930:

Actual Delivery 

Actual delivery takes place when the goods are physically handed over to the buyer or any person authorized by him. Say for example A, the seller of furniture handed over the ordered furniture to B, the case is of actual delivery of the goods. 

Constructive Delivery 

In the case of constructive delivery, the transfer of goods can be done without a change in the possession or custody of goods. Acknowledgment and attornment can be called constructive delivery. 

Constructive delivery can be effected in the following ways:

• Wherein the seller agrees to hold the sold goods as a bailee.
• Wherein the buyer who is in the actual possession of goods as a bailee of the seller holds the goods as his own after the sale.
• Where a third party like transporter or agent, agrees to hold the goods for the buyer. 

Symbolic Delivery 

Symbolic delivery is made wherein the goods are heavy and bulky and it is difficult to hand over the goods to the buyer physically. In this situation, the delivery is made by indicating or giving a symbol that the goods are under the possession of the buyer. For example, the delivery of the keys of the warehouse where the goods are kept is considered to be the symbolic delivery. A document like a bill of lading must be given to the buyer to make him entitled to hold the delivered goods. 

The document of the Title to Goods [Section 2(4)]

As per Section 2(4), we can confer that the Document of the title to goods includes a bill of lading, dock-warrant, warehouse keeper’s certificate, railway receipt, multimodal transport document, warrant or order for the delivery of goods. It also includes any other documents that are used in the usual course of business proving the possession or control of goods or which proves the authority of the possessor to transfer or receive the goods. The document is a very imperative document for taking any legal action without which one cannot proceed with the proceeding in the court.

Fault [Section 2(5)]

Any wrongful act or default committed is considered as “fault” under Section 2(5) of the Sale of Goods Act, 1930. 

Mercantile Agent [Section 2(9)]

As per the definition given under Section 2(9) of the Act, Mercantile Agent is a person who is having the authority in the customary course of business either to sell or consign the goods under the given contract. The Agent is authorized to act on behalf of the buyer or seller. An agent can also raise money on the security of the goods if authorized. The example includes agents, auctioneers, brokers, dealers, etc. 

Price [Section 2(10)]

According to Section 2(10) of the Act, The consideration for the sale of goods is called price. Price is the money that is paid or promised to be paid by the buyer or any person authorized by the buyer to the seller. Below  are the different modes by which price can be determined: 

• Parties mutually decide the price of the goods in the contract of sale. In Aluminium Industries Ltd. v. Minerals and Metals Trading, it is observed that the price prevailing on the date of delivery will be the price to be paid by the buyer. Subsequently, the seller issued a delivery note for the goods but without any valid reason delayed the delivery. The seller demanded an increased price which occurred due to delayed delivery. It was held that the seller was at fault thus he could not compel the buyer to pay an increased price. 
• It may be left to be fixed in the future.
• It may be determined in the course of dealing between the parties.

Property [Section 2(11)]

According to Section 2(11) of the Act, property generally means title or the ownership rights of the goods. In the process of a sale, there is a transfer of ownership or we can say the transfer of property from one party to the other. 

Quality of Goods [Section 2(12)]

Section 2(12) of the said Act gives the definition of “quality of goods”. The quality includes the state or condition in which the goods are expected or promised to be delivered. It is one of the important clauses to be included in the Contract of Sale. If the quality of the delivered goods has not complied with the contract then it is considered to be the breach of the Contract. 

Insolvent [Section 2(8)]

A person who ceases to pay his debts in the normal course of business, or is unable to pay even his due debts in the eyes of law is declared as insolvent. Section 2(8) states the definition of the term “insolvent”. The law gives certain rights and duties to an insolvent person. 

Conclusion

Through the course of the whole article, I have tried to throw light on the important terms of the definition clause of the Sale of Goods Act, 1930. The above discussion would surely help to make you understand the simple yet important terms in the Act. To conclude, it can be observed certain terms in this article lays down a paramount structure that is necessary to be incorporated in the contract of sale like a buyer, seller, mode of delivery, quality of goods, etc.  

Reference

1. Sale of Goods Act, 1930
2. https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-1930/definitions-of-important-terms/
3. https://indiacode.nic.in/handle/123456789/2390?view_type=browse&sam_handle=123456789/1362
4. https://edurev.in/studytube/Introduction–Types-of-Goods-The-Sale-of-Goods-Act/c4eb32cb-14ac-415d-8338-ecf6af888dd8_t
5. https://indiankanoon.org/doc/1935273/
6. https://indiankanoon.org/doc/541801/

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This article is written by Uma Shankar Mishra, pursuing a Certificate Course in Intellectual Property Law from Lawsikho.com. Here he discusses “Five NCLT decisions you must know about”.

NCLT which was established under the Companies Act to adjudicate disputes and Matters related to Companies Act, 2013. However, with the merger of Competition Appellate Tribunal (COMPAT) and Enactment of IBC, the NCLT manages the affairs related to Companies Act, 2013, IBC,2016 and Competition Act,2002. Some of the landmark Judgements Of IBC are as follows:

1) Innoventive Industries Vs ICICI Bank

Facts

Innoventive Industries filed an application before the Mumbai Bench of the National Company Law Tribunal (“NCLT”) for the insolvency resolution procedure to be initiated as Innoventive was found to be a default under the IBC. The main argument of Innoventive was that no debt was legally due as all Innovative obligations and remedies for compliance actions were temporarily suspended for 2 years pursuant to notifications issued under the 1958 Maharashtra Relief Undertaking (“Maharashtra Act”) 

Main Contentions

1. Whether the appeal could be continued as it was lodged by Innoventive’s former directors after the appointment of an insolvency lawyer to manage the company? 
2. Whether the IBC and the Maharashtra Act really had any repugnance? 
3. Whether the non-obstante clause contained in IBC section 238 would prevail over the non-obstante clause contained in section 4 of the Maharashtra Act?

NCLT Judgment

On 17 January 2017, the NCLT held that, in view of the non-discriminatory clause contained in Section 238 of the IBC, 2016, the Maharashtra Relief Undertaking (Special Provisions  Act ) would prevail over the non-obstante in Maharashtra Relief Undertaking (Special Provisions Act), 1958 (“Maharashtra Act”). As Maharashtra Relief Undertaking (Special Provisions Act), 1958 (“Maharashtra Act”) is a state act whereas IBC is a Central Act and Central law prevails over State Law. 

Judgment of NCLAT 

Upheld decision Of  NCLT

Judgment of Supreme Court 

The SC held that Once an insolvency Professional is appointed to run the company, an appeal on behalf of the company can not be made by the former directors who are no longer in management. The appeal was therefore not sustainable in the present case. Nonetheless, on this point alone, the Supreme Court did not tend to dismiss the appeal. Since this was the very first case to be transferred under the IBC, the judges found it appropriate to pass a thorough judgment so that all courts and tribunals could be informed about  of a paradigm shift in insolvency law in India.

The Supreme Court discussed in detail different case laws and constitutional principles in order to test whether there is any repugnance between the IBC and the Maharashtra Act and pointed forth (among others) the following proposals:

1. The difference must be clear and direct and must be of such a kind as to put the two Acts or sections thereof into an overt confrontation with each other, entering a condition where the two acts or parts thereof are in dispute with each other. It occurs when two laws, when presented to the same evidence, produce different legal outcomes.
2. While there may be no direct conflict, the legislation of the State may be inoperative because the Parliamentary law is intended to be a complete, exhaustive or exclusive code and superior to state Code.

2) Swiss Ribbons vs Union Of India 

Several petitions were filed assailing the constitutional validity of various provisions of the Insolvency and Bankruptcy Code, 2016 (Code). While dismissing these petitions, the Hon’ble Supreme Court made several important findings and rulings as under. The Hon’ble Supreme Court decided on the difference between Operational and Financial Creditor and Held that a) Some FCs are investors that are covered, while most OCs are unsecured. 

1. The essence of loan agreements with FCs varies from contracts for the supply of goods or services with OCs. 
2. Generally speaking, FCs lend money on a term loan or working capital that helps the CD to either set up and/or run its business. On the other side, OC contracts are linked to the delivery of goods and services in the business operation. 
3. For a fact, large sums of money are included for financial transactions. Operational arrangements include responsibilities that are generally lower in amount. 
4. OCs can be many in the running of a business as opposed to FCs that provide finance for the establishment or operation of a business. 
5. FCs with defined repayment periods and defaults enable them to completely recover a loan whereas OC contracts have no such stipulations. 
6. Dispute resolution of FCs and OCs is distinct. OC contracts can and do have private arbitration provisions to resolve disputes, whereas no such provision can be included in loan contracts. 
7. Operating debts appear to be persistent in nature, and the scope for real conflicts in the case of operating debts is much greater than in the case of financial debts. 
8. Products shipped or services provided by OCs may be deficient or products may not have been distributed at all.
   On the other side, financial loans to banks and financial institutions are well known and it is easy to verify defaults made.
9. FCS has been interested in determining the feasibility of the CD from the very beginning. Thus, FCs should indulge in reforming the loan as well as reorganizing the company of the CD when there is financial stress, which is not and can not be achieved by OCs.
10. There is a clever distinction between the FCs and OCs that has a direct relationship to the artefacts the Code seeks to achieve. 
11. Classification of FCs and OCs is not unfair, subjective or in violation of Article

3)Binani Industries Vs Bank of Baroda, National Company Law Tribunal, Kolkata Bench, Kolkata

Facts

CIRP process was Initiated against Binani Industries by Committee Of Creditors Due to default of Dues.

The meeting was held on 14 March 2018 with 99.43 per cent of the Committee of Creditors (COC) accepting Rajputana Properties Private Limited’s Resolution Strategy.

Nonetheless, a dissent note was registered by 10.53 per cent of the COC who were forced to vote in support of the “Resolution Program.” They said they had not been treated fairly relative to other financial investors who were the corporate debtor’s corporate guarantors. The RP submitted a request for approval of the Resolution Plan in Binani Cement Limited pursuant to Sections 30 and 31 of IBC r/w Regulation 39 of the Insolvency and Bankruptcy Board of India Rules, 2016.

Click Above

The Resolution Plan of Rajputana Properties Pvt. Ltd. envisaged that the Financial Creditors such as, ‘Edelweiss Asset Restructuring Company Limited’, ‘IDBI Bank Limited’, ‘Bank of Baroda’, ‘Canara Bank’, ‘Bank of India’, State Bank of India’ would be given 100% of the verified claim whereas lesser percentage was proposed for the claims of other Financial creditors such as Export-Import Bank of India (72.59%) and State Bank of India-Hong Kong (10%). The resolution plan was held to be discriminatory by some of the lenders and they filed an application to NCLT for not Considering it and file revised plans.

Issues

Whether  RP exceeded his power in Appointing Other Professionals and Outsourcing Works?

Whether Non Considering of revised offer from Ultratech is Violative of Provisions Under IBC?

Judgement 

1. Whether  RP exceeded his power in Appointing Other Professionals and Outsourcing Works?

The Tribunal observed that costs incurred by RP in engaging people was exorbitant and directed costs should be reasonable.

2. Whether Non-Considering of revised offer from Ultratech is Violative of Provisions Under IBC?

Yes, It is violative as the CoC decided to negotiate with only the H1 bidder which is against the basic provisions Of code aimed at maximising value. The Coc went ahead with Approval of plan submitted by Rajputana Properties which is Unjust and Arbitrary, Company which was not an H1 bidder was as Disqualified from the Bidding Process. which is not valid due to the following:

1. Negotiation only With H1 Bidder Not the test Of the code. RP should Act independent Of CoC, his resolution Plan should Be fair across all Categories Of Creditors.
2. RP and CoC should aim at Maximisation of Value, Receipt  of Email not a Criteria For rejection
3. He is duty bound To place all plans that satisfy requirements Of Sec. 30(2)
4. Any plan/bid submission till CIR process is not concluded to be taken to its logical conclusion.

3. Whether the Resolution Plan is Discriminative Against Unsecured Financial Creditors?

NCLT observed that there has been Discrimination In Consideration of Claims of Financial Creditors in the Resolution Plan and the Resolution Plan Accordingly Needed Modifications

4. Whether RP has Ignored Claims Of Operational Creditors?

The NCLT observed That a Reduction In Amounts Payable to Operational Creditors Is Acceptable However Such Reduction Should Be Acceptable To all Class of Creditors Since the Plan Contained settlements At Various class Of Creditors Differently the NCLT observed that Resolution Plan Contravenes Some Provisions Of the Code as such Regulation is not in line with the Objectives Of Code.

4) Tata Sons Vs Cyrus Mistry Case

Facts

Due To disagreements and difference Of Opinion between Tata Trusts (Largest Shareholder of Tata Sons) and Cyrus Mistry(Then Chairman of Tata Sons) Cyrus was removed From his Position Of Chairman on Charges of gross Mismanagement  Of Company

NCLT Judgement

NCLT Mumbai sets aside the two investment firms of the Mistry family’s complaint on the question of viability, stating that they did not meet the criteria for filing a case of alleged exploitation of minority shareholders under the Companies Act, 2013— 10 per cent stake in a business.

NCLT Mumbai denies Mistry’s petitions opposing his dismissal as chairman of Tata Sons as well as Ratan Tata’s and the company’s board’s charges of systemic abuse. In his claims of mismanagement in Tata group companies, the court said it saw little substance. NCLT Mumbai also refuses petitions requesting a waiver from the two investment firms on the grounds that they have at least 10% share of a filing their case of oppression and mismanagement against Tata sons by SP  Group.

NCLAT Judgement

Mistry’s investment firms are pursuing the NCLAT, appealing the NCLT order that dismissed their demands for maintenance. They also challenged their plea for a waiver to be rejected.  On Sept. 21, 2017, NCLAT allowed petitions from the two investment firms requesting a waiver in filing case of injustice and mismanagement against Tata Sons but rejected Mistry’s other petition on sustainability claiming the firms did not.  On Dec. 18, 2019: NCLAT reinstated Cyrus Mistry as Tata Sons Ltd’s executive chairman, but postponed its execution for four weeks to give Tata Group time to appeal.

SC Judgement – awaited

5) Mack Soft Tech Pvt. Limited&Anr. Vs  Quinn Logistics India Pvt. Limited

Issue

Whether Financial Creditor Can Claim Its Dues & File Action Under IBC For in Case Of No Supporting Documents or Over Limitation Period?

Judgement

Limitation Act, 1963 is not valid for claiming amount under IBC but Application Under Sec-7 is Time –Barred For 3 Years. But in this case, the cause of action is continuing, therefore, application Under Sec-7 Is Admissable.

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 Mohit Garg, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here he discusses “Information Utility under the Insolvency and Bankruptcy Code”.

Introduction

Insolvency and Bankruptcy Code, 2016, was enacted with the objective of reorganization and resolution in a time-bound manner. The biggest challenge during insolvency proceedings is to gather and consolidate information on the financial transactions of the lender.

In the resolution process, it has been realized that the major roadblock is the lack of information to establish the facts as to what are the assets, who are the claimants and what contracts are in the force.

The Information Utility under IBC is aimed at bridging that gap. The information utility provides information on the financial transactions of the lender in one place, accessible to all.

The importance of information utility can only be understood after having the fair idea of the Insolvency and Bankruptcy Code.

Meaning of Insolvency and liquidation

Insolvency is a rehabilitation mechanism triggered by the inability to repay the debts. The government, lenders and prospective investors work together to revive a company. Once the insolvency process is successfully completed, the company can function normally.

Liquidation is the process or mechanism adopted or used when there is no hope of revival of a company. It results in the distribution of the assets to the creditors. Once the liquidation process is successfully completed a company ceases to exist and is known as winding up of a company.

What is the Insolvency and Bankruptcy Code, 2016?

Insolvency and Bankruptcy Code, 2016 (IBC) is a law which aims at consolidating the existing framework by making one single law for insolvency and bankruptcy. It received the assent of the President on 28th May 2016.

It aims at providing a quick and economically viable solution for resolving insolvencies. It tries to protect the interests of small investors. It makes the process of doing business easier and less cumbersome.

The Code repealed the Presidency Towns Insolvency Act, 1909, and Provincial Insolvency Act, 1920. It amended the Indian Partnership Act, 1932, the Companies Act, 2013, the SARFAESI Act, 2002. The Code also does not allow the Civil Courts to interfere with the application pending before the adjudicating authority.

Need for Insolvency and Bankruptcy Code, 2016

Before the IBC, there were multiple laws overlapping with each other concerned with the insolvency of the individuals and companies in India. The major drawback of the existing laws was that they did not provide effective and timely aid in recovery or restructuring. Consequently, the undue strain was being caused on to the Indian credit system.

Considering the drawbacks of the existing system, the government enacted the IBC. It provides comprehensive insolvency legislation for companies, partnerships, and individuals. It also allows the creditors to assess and make collectively a plan for the revival or speedy liquidation.

The Code provides an institutional framework, having regulators, insolvency professionals, information utilities and adjudicatory mechanisms to provide a time-bound insolvency resolution process and liquidation.

Key Features

The following are the key features of the Insolvency and Bankruptcy Code 2016:

Separate Insolvency Resolution 

The Code provides for separate insolvency resolving procedures for companies, partnerships, and individuals. The maximum time limit for completion of the insolvency resolution process for companies is 180 days, which may be extended by 90 days, provided the majority of the creditors agree. The limit for start-ups, small companies and other companies that are having assets less than of ₹ 1 crore, the resolution process is to be completed within 90 days from the date of request which may be extended by 45 days.

By way of 2019 Amendment, the mandatory upper time limit has been increased to 330 days that includes the time spent in the legal process to complete the resolution process.

Establishment of a Board

The insolvency and Bankruptcy Board of India is established under the Code to regulate the entities registered and to supervise the insolvency proceedings. Chapter 1 Part IV of the Code deals with the establishment, constitution, power, etc. of the board. Section 196 of the Code lays down the functions of the board. The board performs various functions like facilitating the registration of insolvency professional agencies, insolvency professions, and information utilities. 

Insolvency professionals

The Code provides for insolvency professionals who manage the insolvency process. The Code makes registration and enrolment mandatory to act as an insolvency professional. The professional manages the assets, runs the debtor’s business during the moratorium period and helps in reaching a revival plan.

Adjudicatory authority

The Code proposes NCLT to oversee and adjudicate corporate insolvency and liquidation. Appeals from NCLT lies to National Company Law Appellate Tribunal and thereafter to the Supreme Court. DRT is the adjudicatory authority for individuals and partnerships. The appeal from DRT lies to Debt Recovery Appellate Tribunal and thereafter to the Supreme Court.

Establishment of Information Utilities

The information utility is created to collect, authenticate and disseminate the financial information of the debtors with the help of a centralized electronic database. It is a database of consolidated and authenticated financial information related to the assets, loans, etcetera of the debtor. The information is stored on the digital platform making possible to access it from anywhere and at any time. The information available is authenticated and can be used during the Insolvency Proceedings.

Information Utility (IU)

Information Utility is a professional organization, registered under section 210 of IBC 2016, as per the set eligibility criteria to provide authenticated information of debts and defaults of debtors. 

Stakeholders in Insolvency Resolution Process like the resolution professional and creditors have access to enable them to make the proper decision based on the information. Information important for time-bound resolution is made available.

Categories of Information available through IU

The Information Utilities provide the following categories of information:

1. Records of liabilities of a solvent entity.
2. Records and evidence of the instances of default.
3. Details of all the assets pledged against the secured credit contracts.
4. Data related to the balance sheet and cash flow of the entity.

The information by the IU is stored in a universally acceptable format. To provide only the authentic information, the information received from various personas is authenticated by all the concerned parties.

Who can submit the Information and How?

Section 215(2) provides that the financial information and information relating to assets in respect of which any security interest has been created shall be submitted by the financial creditor. It is the duty and not the discretion to submit such information. Financial creditors can be understood as the person to whom a financial debt is owed. E.g. Banks that provide loans to the company.

Section 215(3) provides that the operational creditor can also submit financial information to the information utility. An operational creditor can be understood as the supplier of the goods and services to the firm or company in question.

The information to IU may also be submitted by the insolvency professional, by virtue of Regulation 38(1), with respect to any insolvency, resolution, liquidation or bankruptcy proceedings.

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Procedure to submit information

Under Regulation 20 of IBBI (Information Utilities) Regulations 2017, the information is required to be submitted in Form C. The received information is forwarded for authentication. The information is assigned a unique identified by the NeSL and notifies the user about the same. The user is required to authenticate or may disagree within the prescribed time period. The submitter of the information is notifying about the status of the authentication. The person who authorizes the information is required to affix his digital signatures or the Aadhar based e-sign, then the identity of the authenticator is verified by the NeSL.

Rules Governing the Utilities

Rules and Laws governing the information utilities are laid down in IBC 2016 and IBBI (Information Utilities) Regulations 2017. Insolvency and Bankruptcy Board of India supervise the registration, cancellation, and etcetera of these entities.

National e-Governance Service Limited (NeSL) and the Information Utility

NeSL is an incorporate Union Government Company with the authorized paid-up capital of ₹ 30 Crores. it is owned by leading public financial institutions. It was incorporated to augment the information infrastructure in India. It offers digital services and optimizes governance services. It is the first and the only Information Utility to date. 

Challenges

Getting information from the financial creditors, operational creditors and corporate debtors might be a challenge as there may be resistance in sharing the information. Getting the verification and authentication of information is also another major challenger.

The information is stored in a digital database that exposes it to data theft and piracy. Well-equipped and up to date security system is must to secure the tampering of such insensitive data.

Conclusion

The creation of the information utility is a step towards the information-rich environment. The information is easily accessible at any time from anywhere. Empowering the creditors and lenders to make informed choices and providing all the essential information for an insolvency resolution procedure. The central server is located in India and hence shall be subject to Indian rules and regulations. It provides all the financial information at the disposal of everyone.

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 Neethi Pillai, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here she discusses “Legal issues in Franchising”.

Introduction

Have you built up an interesting and valuable invention and wish to boost your profits from it? Do you have an alluring business framework to sell products or render services? Does your organization have a reputed brand or exceptional trademark? 

On the off chance that you can answer any of the above inquiries in the affirmative, at that point, franchising is the system you can receive to gain overall popularity (and huge amounts of cash obviously!). 

The idea of franchising has been existent for a few centuries now. franchising has its forerunners in feudalism and licenses conceded by rulers in the medieval times. The guild framework that was presented in the London in the twelfth century is one model. While franchising as an idea, has still not formed into an industry in India, it is a developing marvel of business association and services or sales distribution world over, particularly in the United States and United Kingdom.

This paper inspects the importance of franchising and furthermore dissects the different legal issues concerning to franchising of business in India.

What does Franchising Mean?

The Indian law does not set out a definition for franchising. Be that as it may, put simply, franchising is a strategy for distributing services or products. The Blacks Law Dictionary states that franchising means a license from the proprietor of a trademark or tradename allowing another to sell an item or service under that name and/or mark.

In a Franchise Agreement, there is a minimum of two parties involved:

1. The Franchisor and
2. The Franchisee.

The Franchisor is the proprietor of the trademark or the trade name and licenses such mark or name (or other related Intellectual Property) and the system of business, while the Franchisee pays royalty for using the Franchisor’s business system and such Intellectual Property.

Features of Franchising

Considering the definition of franchising offered by the International Franchising Association, the British Franchise Association and the Federal Trade Commission of the United States, the features of franchising can be listed as below: 

(a) A franchising arrangement is a relationship formed out of a Contract;

(b) The franchisor ought to have built up a business framework or arrangement, which is related to a brand name;

(c) The franchisee makes a significant introductory capital investment and ordinarily possesses the business activity;

(d) The franchisor ordinarily prepares the franchisee to guarantee that it is outfitted to adequately consent to the business framework;

(e) Once the franchisee’s business begins, the franchisor persistently underpins the franchisee in specific parts of the business activity;

(f) The franchisor likewise routinely oversees the franchisee’s business tasks so as to secure the franchisor’s altruism and brand name;

(g) Consideration is paid to the franchisor by the franchisee for the rights licensed and the services rendered.

Types of Franchising

The purpose of a franchising contract is to promote a business format or a product. The development of Franchise started as a method for distribution of products. Product franchising includes the franchisee focusing on one producer’s item, and in this manner securing the producer’s personality to some extent. Typical instances are Automobile businesses, gas service stations etc. Be that as it may, the 1950’s saw the beginning of another type of franchising, Business Format franchising, wherein the franchisee needs to follow exact rules and operational measures on product advancement and marketing. Examples include eateries, convenience stores, and individual and business services.

It would better serve the purpose of this article to consider the following kinds of Franchising and thereby understand Franchising in a better manner.

Invention Licensing Agreement

This sort of understanding is normal in cases when an individual has made an innovation and tries to multiply his profits by patenting the creation and exploiting it on a public platform. Such an understanding spotlights on the licensing of patent and rights of its marketing and the manufacturing and promoting of the new invention. 

Trademark Licensing Agreement

For building brand value, the proprietor of a trademark can issue a license to someone else to utilize the trademark on such goods which are related with that specific trademark. This kind of an understanding might be for the assembling, planning, promoting, introduction, and sale of merchandise and would, for the most part, contain arrangements to save the standard of nature of the products and the goodwill and notoriety of the brand. 

Character Merchandising Agreement

In such an understanding, the name of a renowned entertainment or sports character or presumably a graphical or fictional character is licensed to be utilized on specific items. This sort of understanding would essentially focus on arrangements to protect the notoriety and/or copyright related to such characters. 

Dealer/Marketing Agreements

These are the most widely recognized franchising understanding whereas a rule the sellers or wholesalers receive a specific business framework or format of the franchisor. For the most part, these understandings are entered into with of vendors with automobile organizations, (with Hyundai and/or Maruti), food and consumer goods, (like McDonalds or Barista), gas stations and service stations, (like Hindustan Petroleum) et al.

Legal Issues with Franchising

While the idea of franchising appears to be intriguing and basic, there are a few issues that must be managed before starting a sound franchising game plan. In spite of the fact that there is no particular law relating to franchising in India, franchising as business addresses different business laws and industry explicit laws inside the nation. 

It is essential to see how these various laws can influence a franchising business in India and what the issues are that could emerge thereunder.

Validity of franchising Agreements

Essentially, every Franchising arrangement is a relationship formed out of a Contract, which attracts the provisions of the Indian Contract Act, 1872. Under the Act, a “Contract” is an agreement enforceable at law and requires certain conditions to be fulfilled to be valid:

1. an offer and an acceptance of the offer;
2. lawful consideration;
3. lawful object;
4. free consent of both parties;
5. capacity to enter into agreements.

Each franchising agreement, therefore, would need to essentially meet the above five criteria so as to be legitimately enforceable. For instance, if the franchising understanding is executed for appropriating arms and weapons in India, such an understanding may not be for a legitimate object and consequently invalid. 

While the Contract Act doesn’t stipulate that an agreement must be recorded in writing, it is prudent to have a formal and written franchising consent to decisively set out the rights and commitments of the franchisor and the franchisee. This would help with settling any future gridlocks and questions. 

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Another issue that could emerge is of rivaling the franchisor’s business during the term of the franchising relationship. In the landmark judgment of Gujarat Bottling Co. Ltd. and others v. Coca Cola Co. and, others, the Coca Cola Co. had forced a limitation on Gujarat Bottling Co. Ltd from getting into an agreement with any other beverage company during the term of their agreement. 

When the case came up before the Supreme Court as being in restraint of trade under Section 27 of the Contract Act, the Court held as follows:

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

Agency relationship

While typically franchisors and franchisees plan to create an independent contractor relationship, sometimes, contingent on the idea of the agreement, the relationship between them could be viewed as an Agency. For instance, if the franchisee is given the position to enter into contracts with outsiders in the interest of the franchisor, the relationship could be said to be an Agency. Another instance could be of a distributor’s contract, where a distributer enters into contracts with a few retailers to advertise and distribute the products to final end-clients. In cases where the Franchising agreement creating an Agency, the Franchisor would be held liable for the acts of the Franchisee, conducted during the ordinary course of business.

Therefore, it becomes necessary to explicitly state the relationship between the Franchisor and Franchisee, under an Agreement.

Intellectual Property Rights

All franchising understandings include the exchange of some type of intellectual property, an invention or a patent for the creation of a design, a trademark or trade name (example- Bata shoes) or a business format, know-hows, trade secrets, (example- Mcdonalds or Barista espresso) or copyright. Since intellectual property licenses lie at the center of a franchise, the laws relating to licensing of IPR establish the heart and ARTERIES of franchise laws. A comprehension of issues that could ARISE in this field is essential for any franchising business.

Consumer Protection

Objections and legal action by customers is a potential issue that both gatherings must remember. Such claims are normal in the United States and can emerge in the Indian setting. 

Under the Consumer Protection Act, 1986, a Consumer can lodge a grievance with the consume forums for restrictive or unfair trade practices embraced by a merchant or for any deficiency /defects in the services or products offered by the dealer or if the products being offered is hazardous to life or don’t meet the specific requirements of the law. In a franchise, the franchiser and the franchisee could be held liable for any defect in the products or services provided by the franchisee. 

Provisions to limit liabilities arising out of such probabilities ought to be appropriately reported in the Franchise Agreement.

Tort

A Tort is a civil wrong, the remedy for which is an action for unliquidated damages. Tortuous liability may arise out of a Franchise Agreement in the following cases:

1. Vicarious Liability: in a principal-agent relationship between the Franchisor and the Franchisee, any tort committed by the Franchisee during the course of business, can bind the Franchisor and cause him to be liable for the same, but not when the Franchisee willfully acts outside the authority granted to him by the Franchisor and would entitle the Franchisor to recover damages from the Franchisee.
2. Negligence: a breach of duty by the Franchisor and/or the Franchisee due to any act or omission. In a franchising contract, any breach of duty by the Franchisor or the Franchising which causes nay damage or loss to the other party or a third party is a good ground for civil litigation.

Conclusion

Despite the fact that the business and business laws in India can ensure and administer a franchise plan, there is a developing need to improve this administrative and lawful structure. In 1999, a firm advance was taken towards solidifying the franchising business in India, by setting up the Franchising Association of India (“FAI”), through the endeavors of the Indo-American Chamber of Commerce. FAI speaks to the interests of franchisors, franchisees, merchants, specialists and other interested people and bodies. 

Following the economic liberalisation of 1991, many foreign businesses with solid brand names have built up their presence in India through franchising. In the hospitality and service businesses, this has been the favored technique for beginning operations in India. Worldwide businesses that work through franchises include Kentucky Fried Chicken, Domino’s Pizza, Thank God it’s Friday (TGIF) for food, Hertz, Avis and Budget for vehicle rental; Radisson, Best Western and Quality Inns for inns. Pizza Hut has opened its few outlets and McDonald’s has been open for business since 1996. So also, Indian organizations with solid brand acknowledgement are likewise utilizing the franchising course to grow business volumes. MRF for car tires, NIIT for Computer training and Apollo Hospitals for medicinal services are a few models. In 2000, the franchise business in India was evaluated at US$ 2 billion, with a development pace of about 40% per annum. A few measurements express that franchising represents about 4% of India’s Gross Domestic Product! With the influx of globalization and progression having hit the Indian markets, franchising is by all accounts a charming and alluring choice, for domestic businesses and also for the foreign undertakings.

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 Legal issues in Franchising appeared first on iPleaders.

This article is written by Pearl Narang, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here she discusses “Three Important Contracts used in the Film Industry”.

Introduction

From its conception on paper to its exhibition on the multiplex screen, film production is an elaborate process. The process involves a lot of people. Each person is hired to perform a specific task. Therefore, to avoid risk and confusion, it is important that each person is clear about what is expected from him/her. This is why a contract is needed. A contract that clearly defines who owns what, who has rights, to whom the rights will be licensed to, in what way the profits will be distributed etc. 

Contracts in the Film Industry

Film industry functions on a number of agreements:-

1. Film Production Agreements

These agreements are executed during the production phase of the motion picture. Film production agreements are of two kinds: 

(i) Acquisition Agreements

These agreements are executed to acquire artists and other people for the production of the movie. They can be agreements to acquire,

1. Actors
2. Directors
3. Performing Artists
4. Line Choreographers
5. Art Directors
6. Costume Designers
7. Recording Artists 

(ii) Licensing Agreements

These kind of agreements are for licensing the rights to other parties to display movies. These include granting the following licenses, 

1. Movie Licenses
2. Characters Licenses
3. Music Licences 
4. Images Licences
5. License to Merchandise 
6. License to Remake 

2. Intellectual Agreements

These agreements are executed to either acquire or license the Intellectual Property Rights related to the movie. These include, 

1. Acquiring Intellectual Property Rights to Scripts
2. Licensing the Intellectual Property Rights to Distributors

3. Distribution Agreements

These agreements are executed during the post production phase. These include,

1. Film Distribution
2. Foreign Distribution
3. Film Distribution on TV
4. Film Distribution on the Internet
5. Exhibition Agreement in Cinema 

Production Agreement

A Production Agreement is a type of Service Agreement. In this agreement, a producer enters into a contract with his/her client to produce a media project. The media project can be a motion picture, video, documentary etc. 

Executed Between: The agreement can be executed between,

1. An individual and a company, or
2. Two companies.

Terms of the Agreement: These can include specifications such as,

1. What kind of movie will be produced, and
2. What kind of camera will be used for shooting, and
3. Time period of the Shoot, and 
4. Payment methods. 

Example: “A”, a movie producer enters into a contract with with “B” a client to produce a full length motion picture. 

The agreement will contain the following clauses:  

DESCRIPTION OF THE PROJECT:  This clause describes the project. The project can be described as a full length motion picture, a documentary, a video etc. 

Sample Clause: The project is a full length motion picture, titled “The Court”. It is an inspiring story of a lawyer and a lawsuit that changed the course of her life. 

SPECIFICATIONS: It states the specifications like,

1. The camera with which movie is shot, and 
2. The format in which the movie will be produced. 

Sample Clause: The project will be shot with RED One Camera will be produced in color in Blue Ray DVD Format. 

TIME PERIOD: It states the time period within which the project should be completed. 

Sample Clause: The on-location shooting shall be completed within 40 days and will require travel to Goa and Mumbai. 

BUDGET: It states the total budget of the movie production. 

Sample Clause: The total budget of the project is 25 Lakh Rupees excluding Producer’s compensation. Producer shall have full authority to apportioning the budget. 

COMPENSATION: It details the compensation to be paid to the producer and also how the producer will receive his compensation. 

Sample Clause: The producer will be paid 10 lakh rupees in accordance with Schedule A. 

Schedule A

Actor Contract

Acquiring actors is the most important part of the movie production process. When an actor is hired, he/she signs a contract for formalizing the terms. 

Executed Between: The contract is executed between,

1. The actor and the producer, or
2. The actor and the production company. 

Terms of the Agreement: The agreement contains the following terms, such as, 

1. The schedules of the shoot, 
2. No. of working days,
3. No. of hours the actor has to put in a day, 
4. Term of the agreement, 
5. What all is required from the actor, 
6. How the actor will be paid, 
7. Whether the contract is exclusive or not. 

Example: “Z”, an actor is hired to work in a full length motion picture by a production house, “Pixalate”. 

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The agreement will contain the following clauses: 

EMPLOYMENT TERM: It states how long the shooting will take place.  

Sample Clause: “Z” shall be employed for a term of 6 months from the date of the Agreement. 

WORK HOURS AND DAYS: It states how many days the actor will work and how many hours will he be required to put in. 

Sample Clause: “Z” will have to work for 6 days, from Monday to Saturday. Sundays will be non-working days. The working day will start from 9:00 am and will end till 7:00 pm. 

COMPENSATION: The contract will state the actor’s compensation. There are a number of ways of compensating actors. These can be:

1. Flat-Rate for the Job;
2. Pay per-hour;
3. Per-Scene; or 
4. Percentage of Profits.

Sample Clause: “Z” will get paid 1000 Rupees per-hour for the job. 

EXCLUSIVITY: It states whether the actor is hired exclusively or he can accept other employment during the term of the agreement. 

Sample Clause: “Z” is hired on an exclusive basis. He cannot accept any employment during the term of the contract.

SAMPLE AGREEMENT 

CONTRACT FOR ACQUIRING ACTOR

Actor’s Name:                                                                    Name of the Production House

Address:                                                                               Address of the Production House

Effective Date: _______________________

Actor,

By Signing this Contract For Acquiring Actor that you will take the part of [Name of the Film]. This is the working title of the movie and the final name of the film may change at later stages. As you know, this is a high budget production. If there is anything about this letter that you do not understand or you wish us to clarify, please do not hesitate to contact us.

1. You agree to be available to work during the filming period (“the Shoot”) from _________ to  ____________ .   
2. You agree to travel to the following locations for the Shoot _______________________________________________.
3. You agree to give over any rights you may have in the finished film to name of production company or producer. This will allow us to distribute the film in any and every way we can.
4. You will be paid 1000 Rupees per hour. The fee is payable within 28 days after the performance was given.
5. We will aim to ensure that working days are not longer than 10 hours.
6. We will do our best to ensure your health, safety and welfare during the Shoot.
7. We will coordinate with your agent about your travel arrangements, to and from the Shoot and either provide transport or pay travel expenses which we need to agree in advance.
8. We will provide you with a DVD of the finished film within 3 months of the completion of all post production.

Actor’s Signature                                                         Signature of the Authorised Person

Distribution Agreement

After the shooting is complete, the next step in the film production process is promotion and marketing. To promote and market the movie, a distribution agreement is executed.

Executed Between: The owner of rights in a movie i.e. the producer and the person who will be granted the rights i.e. the distributor, for marketing.

Terms of the Agreement: The agreement will contain the following clauses,

1. Rights granted to the Distributor, 
2. Licensed Territory,
3. Distributor Fee, 
4. Discretion of the Distributor. 

Example: “Pixalate”, a production house has retained the services of “Chillis Entertainment.inc”, a distributor, for marketing and production of their movie “The Court”.

The agreement will contain the following clauses: 

GRANTED RIGHTS: This clause states all the rights that will be granted to the distributor. It also states whether the right is exclusive or not. These rights can be,

1. Theatrical Rights
2. Non-Theatrical Rights
3. Video Rights
4. CVD Rights
5. DVD Rights
6. Pay Television Rights
7. Web Streaming Rights

Sample Clause: “Pixalate” will grant the exclusive rights to “Chillis Entertainment”. These rights include, 

1. Web Streaming Rights on Netflix, Amazon Prime, and 
2. Theatrical Rights, and 
3. Exhibition Rights, and 
4. DVD Rights. 

LICENSED TERRITORY: It states the territory of licence, whether the license is limited to certain a certain country.

Sample Clause: “Chillis Entertainment” shall have a worldwide license to the movie.

DISTRIBUTOR FEE: The clause states how much the distributor will be paid for the services. 

Sample Clause: The Distribution Fee shall be an amount equal to: 

1. 35% with respect to all forms of Web Streaming rights on Netflix and Amazon Prime;
2. 25% with respect to all forms of theatrical rights; 
3. 35% with respect to all forms of exhibition rights;
4. 35% with respect to  DVD rights.

DISTRIBUTION AND MARKETING: It states the discretion of the distributor in marketing the movie.

Sample Clause: Distributor shall have complete discretion and control as to the time, manner and terms of distribution, exhibition, licensing, exploitation, advertising and marketing of the movie, which includes without limitation any decision to make the movie available for video-on-demand exhibition day and date with the theatrical release of the movie; provided, however, that Distributor shall consult with Production House with respect to the marketing strategy for the initial theatrical release of the movie, it being understood and agreed that Distributor’s decisions shall be controlling with respect to all such matters.

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 Three Important Contracts used in the Film Industry appeared first on iPleaders.

This article is written by Laura Visser, Legal counsel at VodafoneZiggo, Amsterdam, Netherlands. 

Working abroad is a dream of many for obvious reasons. The expat life comes with a myriad of benefits you will treasure for the rest of your life. 

If you are ever able to call a European country your new home, you can consider yourself someone who’s fortune’s favourite. With a quality of life so high that the international top 10 of “best countries to live in” almost seems like a European top 10, it is no wonder that Europe is a popular destination for expats. 

Lawyers are no exception. They, too, would not think twice if they get the opportunity to live and work in a European country, at least for a while. For lawyers, however, the expat life seems harder to obtain than for people with other professions. At least that is what people assume at first. Brexit did not make things easier. England used to be a rather stress-free entrance to Europe for Indian lawyers, thanks to a similar legal system. However, with Brexit, the English recognition of your academic certifications is likely to keep you within England and deny you the same ease of movement within Europe as before.

Living in other European countries is not impossible, however. On the contrary, it might even be easier than you assumed. If you are able to check all the administrative boxes as well as learn lots about the local culture and the local language, your European employability rate rises through the roof. Why? Because there is a high demand for Indian lawyers in Europe due to the increased capital market activities in India. 

Everything you need to know before you take the leap and become a lawyer in Europe:

So, basically, once you are in, you are in. Though, how to get in? I would love to give you a one size fits all solution for all European countries, but I cannot. Even experts have difficulties in doing this, so please bear with me. Each country sets its own standards for practicing law as a foreigner. In countries like Germany, the rules even differ widely from state to state. On top of that ‘practicing’ can mean various things for which different rules apply.  Here, I will focus only on the mainstream rules within Europe. This also means that I will not take the biggest stranger in our midst into consideration. That stranger is Great Britain. 

How do get a visa in Europe as an Indian?

There is always the visa struggle to overcome when you desire to work abroad long term. In any case, you clearly need a visa in order to get permission to work in a foreign country. No European country offers an exception to that rule. European countries in particular solely encourage economic migrants to apply for immigration if they have skills that are not sufficiently available in that country. Law is seldom on that list, but you never know. These lists enlarge on a regular basis due to the buoyant job market in Europe. It is worth checking them to be rather safe than sorry. If you can apply for a highly skilled migrant visa, you seldom need a separate work permit on top of it. 

If you cannot apply for one, you will need to get permission to work in the country. Usually, the employer takes care of it in the form of sponsorship. The sponsorship comes with conditions. Often applicants need to hold a Bachelor’s or Master’s Degree with a minimum of five years’ work experience in a related field.

Which titles do they use for which legal profession?

Your job choice and career goals abroad depend on what you want: Do you want to give legal advice, hold yourself out as an attorney, represent others in court or prepare advocate or non-advocate documents on another’s behalf? Do you want to consult on Indian law, local law or both? Now that there are differences between Indian law qualifications and European law qualifications, it is wise to decide beforehand what you want to do before you apply for jobs or study programs. 

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It is a common myth that legal titles are protected in Europe. They are not, which is also the root of all confusion concerning legal careers in Europe. Even though there are no protected terminologies for legal professions, the legal jurisdiction determines the conditions under which someone is allowed to practice law in that country. The used terminologies for those regulated jobs are, of course, in their native language. Therefore, the meaning of the words ‘jurist’, ‘lawyer’ or ‘attorney’ varies greatly in different places. This makes it difficult to categorize English legal titles in order to generalize multiple legal professions within Europe. I will do so anyways based on the most common distinctions used so that you will not get confused reading this article. Just be aware that these are not official European titles. Once you deep dive into the possibilities of the country of your choice, do yourself a favor: know what local legal titles in that language actually mean and how experts generally translate these titles into English equivalents to avoid applying for a job you are prohibited to practice.

The most common jurisdiction system in Europe is kind of civil law jurisdiction. Aside from extraordinary law professions such as notary law or tax law, most civil law jurisdictions distinguish lawyers between those that are allowed to do court appearances and those who are not. 

In Europe, a ‘jurist’ is someone who busies himself with law topics. In common parlance,  jurists would mean someone who has gone through an accredited law school, of course. How else would you prove your knowledge, right? Oddly enough, no one is obliged to have any official papers to call himself or herself a jurist in Europe. It is completely okay to provide legal action plans or tailored legal advice for an individual’s unique situation, under the guise of being a jurist without papers. This applies as long as the same jurist does not officially represent clients. That is contrary to common law countries such as the UK where non-lawyers practicing law can only support lawyers, as the so-called ‘paralegals’. 

Jurists who are licensed to do court appearances would have gone to an accredited law school, completed the requisite practical training and received admission as a member of their respective bar association. Falsely pretending to be an attorney is strictly forbidden in every European country. Commonly used descriptions for such lawyers are ‘advocates’ or ‘attorneys’. Hereafter, I will use the term ‘advocate’ for the someone admitted to the bar. For all other legal designations like legal counsel, general counsel, legal executive, legal adviser and even paralegal, I will use the term ‘jurist’. For something applicable to both advocates and jurists, I will use the term ‘lawyer’. 

Do European countries have the Bachelor-Master system for law degrees?

Another important thing to know before heading into the direction of your favorite European country is the type of legal education system that county has implemented. This is important even if you already have finished your legal education in India. 

Even though the rules for acquiring local law diplomas differ for each country, you can roughly split them into two camps: Team Bologna and Team Classic. Thanks to the Bologna process, European higher education got standardized to the so-called “3-5-8” or “4-5-8”. You commence with the study of a three-year undergraduate degree or the bachelor’s degree, followed up with a one-year postgraduate degree or the master’s degree and then a three-year doctorate or legal apprenticeship. After finishing the postgraduate degree in law, you obtain the LL.M. or Masters of Law degree. From then on, you are a qualified jurist. In order to become an attorney you need to do some extra years of education, an apprenticeship or both. 

As you may have realized, the Bologna process is similar to the common law system. Comparing the value of diplomas became possible since the introduction of an equal academic system. This is not a coincidence. The idea behind introducing the Bologna process is in fact to ease the recognition of other European diplomas so that moving between countries and working in another European country as a European citizen will be easier. The pleasant side effect of this development is that “Bologna counties” were able to put up or loosen up the procedures to get foreign diplomas recognized, as well. This means that the recognition of an Indian academic diploma is achievable in countries that adopted the Bachelor-Master structure. European countries that have adopted the Bachelor-Master structure for legal diplomas partly or fully are Finland, the Netherlands, Bosnia & Herzegovina, Denmark, Sweden, Norway, Cyprus, Italy, Switzerland and Spain.

There are many European countries, still, that have not implemented the Bachelor-Master structure for legal studies. They firmly stick to their classic system assuming that their system is of better quality. In those countries, it is impossible to get your Indian law diplomas or accreditations recognized. The only option you have there is to go back to University and redo all of it from start to finish. Germany is one of those countries.  

Can I practice law without officially being an advocate in a European country?

By far the easiest way to practice law as an Indian lawyer in Europe is to advise on Indian law as a jurist. The demand for lawyers practicing Indian law has grown steadily in countries where companies are increasingly interested in India as a business location. In the meantime, Indian companies strive for collaborations with European companies. Understand that Indian regulations prohibit foreign firms from having an office in India or advising on Indian law. That is when Indian lawyers come into play. They fill the gap. On one hand, they can cooperate with the Indian bar and Indian law firms. On the other hand, they can advise a European law firm on Indian law. Having great knowledge of the local laws and practices on top of it would make you a fascinating candidate. And if you manage to speak their language, then it’s a perfect match. For as long as you are not claiming to be an advocate, practicing law should be no problem without passing local qualifying exams or equivalence exams. Nonetheless, it is always worth reassessing if your European country of choice is an exception to that rule.

While practicing law in Europe as a jurist without a diploma is possible, not getting your foreign academic diplomas recognized while you can, would be silly. In Europe the legal job market is extremely competitive. On top of that, job opportunities drop tremendously without the recognition of your academic diploma, no matter how impressive your persuasion skills are. This would be too much of a sacrifice now that the recognition of your diploma is often nothing more than just a formal application. Rarely, it requires a simple equivalency exam. 

The only reason why you would not get your diploma recognized is that you cannot. As mentioned before, in countries like Germany it is impossible to receive acknowledgement for your Indian law diplomas. Because of this, it is best to choose a country where you are able to get your foreign academic law diploma recognized. In that rare situation where you have no choice but apply for work in a European country that cannot recognize your diplomas, it is wise to gain extra knowledge via self-study about the local laws. If you manage to show off your great value as is, you may be able to beat the pronounced competition in the European legal job market. 

What can I do to work as an Indian advocate in a European country?

When you did all the work to become an advocate in India, you probably want to stay an advocate abroad. In addition, having a dual qualification is better for several reasons. Understandably, a dual qualification increases our chances of getting a job as a lawyer. It also pays much better. When you are permitted to not only advice, but also represent clients in, let’s say, Indian- European business deals, you are worth a million.  If, as an Indian advocate, you desire to practice local laws in a local jurisdiction in Europe, the country regulations will generally require you to take a local qualifying exam. In the worst-case scenario, you have to do the local legal education completely from start to finish. Conversely, modern European countries are willing to recognize your title as an advocate. Again, some countries are much stricter than other countries depending on their need of legal expats and their academic law system. 

What jobs can I look out for as an Indian lawyer in Europe?

Now that you got the diplomas, the knowledge and the confidence to show them what you are worth, it’s time to start working. Your best shot is applying for a legal position at a big law firm or a consulting firm with an India desk. Think of the Ernst & Youngs or Deloittes in this world with subsidiaries all over Europe. Another option would be working for a local boutique firm that specializes in the Indian trading business. Working in in-house roles is a little more difficult. Companies that are heavily involved in the Indian market often already have Indian subsidiaries with local Indian counsels. Companies which do not have a presence in India hire law firms with an India desk that guarantee their jurist’s expertise. Although this makes it harder to become an Indian oriented jurist in a European company, it is worth trying. Legal freelancing is almost certainly out of the picture due to visa issues. Therefore, it’s best to start writing applications. Before you do so, I encourage you to learn about the do’s and don’ts of applying for a job in the country of your choice due to cultural differences within Europe. For example, while in some countries, posting a picture of yourself on the CV is expected, it is frowned upon in other countries.

What type of country to choose and what type of country to avoid when becoming an Indian lawyer abroad?

Germany

It may come as a surprise, but Germany is a country to avoid as a lawyer. Officially, you can work as a jurist, but Germans are famous for loving fancy titles. Only very rare exceptions can make it in the legal world without the titles, especially within law. Now that you cannot get your law diplomas recognized anywhere in Germany, you have to earn a local law degree in Germany to make you a successful qualified jurist or advocate. This means that you must take two state exams and go through a long curriculum of at least six years that includes a two-year internship (called Referendarzeit). The first state examination covers nine semesters of study. Only when you have completed the second state examination, you can be an advocate. Also note that you only get two shots to pass either state examination. Two strikes and you’re out. Forever. Therefore, it is very common to prepare with extensive private preparatory courses or tutorship that cost tens of thousands of euros. Chances of passing either state exam without additional training is guaranteed close to zero. Grades will determine future employment chances to a great extent. During the internship, students must take additional classes on top of the regular work. The government regulates the wages paid during the internship, which means they are not that great either. 

Becoming a qualified jurist or lawyer in Germany is a massive gamble, as you can see. I would never recommend anyone to take this dangerous route. Which is unfortunate considering that the trade between India and Germany is snowballing like crazy. This brings me back to what I said about having outstanding networking skills that you can use to connect with specialized firms directly. If you have a job offer from a German company, then you can apply for a working visa or residency permit and start working as a jurist. 

Finland

Finland might not be the first country you would have thought of going to. Yet, Finland is a very progressive country like all Scandinavian countries despite what you might have heard. Or probably not have heard as yet. Finland is the only European country that implemented the Bologna process as is, which makes this country a great example of the most mainstream, standardized system. It is a dream of any EU commissioner. This means that Finland allows anyone to practice law. And with the low population rate, they are happy to have you. Individuals who obtained their LL.M. title can get licensed by the Finnish Bar Association. These lawyers are called “asianajaja”. In addition, those jurists must also experience a four year apprenticeship and pass the bar exam to become an advocate.

If you have completed a qualification abroad, you can get recognition for all qualifications, including those as an advocate. You may need a decision on the recognition of your qualification, after an assessment of the competence and skills that your foreign qualification provides. If you wish to work in Finland as an advocate, you specifically need a decision on recognition of your qualification made by Finnish National Agency for Education or another competent authority. Significant language barriers aside, Finland is a great choice for legal expats.

Netherlands

The Netherlands is not only known for being a so-called trading country, but is also home to many international companies. Compared to other European countries it should be pretty easy to find job opportunities as an Indian. The Netherlands is so much in love with expats, that they even get a 30% tax benefit as opposed to the Dutch themselves. Employers will still require you to be fluent in English and preferably Dutch, even though most Dutch people speak English well. Yet, the Dutch will forgive your lack of language skills if you can compensate with superior professional competency.  Remember, advocates do not have a monopoly on giving legal advice. Anyone can. Even legal representation is not the sole competence of an advocate. Someone with a recognized LL.M degree is allowed to represent a client under certain conditions. Because of this, a substantial number of law centers and law clinics have popped up, which resulted in a drop of the costs for legal advice. 

Related to legal education, almost the same applies as it does to Finland: Getting recognition for all your qualifications abroad is possible.  If you are not an advocate yet, but you want to become one in the Netherlands, the education is as follows: after finishing the Bachelor-Master programs, you need to undertake an apprenticeship in law. An apprenticeship consists of working in a law office as an advocate, but under the supervision of an advocate. In addition, university-like courses during the first nine months of the apprenticeship are mandatory, followed by an exam you have to pass. 

You can become an Indian lawyer in Europe if you put the effort into it

As you can see, it is possible to become some sort of lawyer in Europe. It just takes a lot of effort and some balls. As often, your research beforehand is key. Certainly, one article about this topic is not enough to cover all European countries. I am leaving some room for the unknown here. If you want me to deep dive into the possibilities of other European countries, just let me know. If you’re going to launch your own inquiry on this topic, I recommend that you look for countries that adopted the Bologna process. These countries are e.g. Bosnia & Herzegovina, Denmark, Sweden, Norway, Cyprus, Italy, Switzerland and Spain. If you need more information about these countries or any other European countries, please comment below and let us know.

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The post How to work in Europe as an Indian lawyer? appeared first on iPleaders.

This article is written by Rhea Bazaz.

Abstract

The purpose of this article is to trace the historical journey of surrogacy and analyze its progress and position in a country like India where it used to be a norm and a source of livelihood for some but is now banned commercially. The author has given a brief introduction about what surrogacy is along with its medical definition and has also mentioned how various religions look at it. While it has been mentioned in some religious texts, not all communities accept it wholeheartedly. The historical evolution of the surrogacy contract worldwide has also been discussed. The author has then gone on to talk about the phenomenon of fertility tourism in India along with its advantages and disadvantages.

The author then moved on to the various legislations and guidelines which have been passed in an attempt to regulate surrogacy, along with some landmark cases and judgments which were an attempt to bring about the welfare of the surrogate children and make surrogacy a part and parcel of Indian society. The current legislation has been analyzed in detail, with both the pros and cons being listed and in the conclusion, the author’s final opinions and suggestions have been given.

Introduction

Surrogacy is a process in which a woman agrees to carry a baby for somebody else like two homosexual people, single person or a couple who is unable to conceive. After the birth of the baby, the birth mother hands over custody and guardianship to the intended parent(s). The woman who carries a baby for another person is referred to as a surrogate or birth mother. The parent(s) of the baby born through surrogacy arrangement are called commissioning or intended parent(s).

Surrogacy has been classified into various kinds:

On the basis of Nature of Surrogacy Agreement

• Altruistic Surrogacy- The surrogate mother receives no financial consideration for her pregnancy or for handing over the baby to the intended parents except for the necessary medical expenses. This usually happens when the surrogate mother is a relative of the intended parents.
• Commercial surrogacy- The surrogate mother is paid apart from the necessary medical expenses. This usually happens when the surrogate mother is not related to the intended parents.

On the basis of Nature of Fertilization

• Traditional Surrogacy: The surrogate mother carries the child for the full term and delivers it for the couple through artificial insemination. The surrogate mother is the biological mother of the child.
• Gestational Surrogacy: In this, the eggs of the mother are fertilized by the father’s/donor’s sperm and then the embryo is placed into the uterus of the surrogate. In this case the biological mother will be the one whose eggs are used and the surrogate mother is the birth mother of the child.

Historical origin

Although Indian society has not always been open about the idea of surrogacy, it has been practiced even in ancient times. 

In the Mahabharata, Gandhari, the wife of Dhritarashtra, conceived but the pregnancy went on for nearly two years after which she delivered a semi-solid mass. Bhagwan Vyasa found 101 cells which were normal in the mass. These cells were put in a nutritious medium and grown in-vitro the entire term. Out of these, 100 developed into male children (Duryodhana, Duhshasana and other Kauravas) and one as a female child called Duhsheela. The story relating to the birth of Drishtadyumna and Draupadi also relates to the birth of a child outside the mother’s womb and without the occurrence of proper fertilization. King Draupada had a rivalry with Dronacharya and wanted a son strong enough to kill Drona. He was given medicine by a Rishi who collected his semen, processed it and then put it in a yajnakunda (offering) from which Dhrishtadyumna and Draupadi were born. During the seventh pregnancy of Lord Krishna’s mother, Devki, the embryo was transferred to the womb of Rohini, the first wife of Vasudeva to save him from being killed by Kansa. 

In Islam, there is the concept of Maqasid al- Sharī‘ah or purposes of the Law which are Hifz al- Dīn (Protection of Religion), Hifz al-Nafs (Protection of Life), Hifz al- Nasl (Protection of Progeny), Hifz al-Aql (Protection of Mind) and Hifz al- Māl (Protection of Wealth). This classification talks about the basic necessities of human beings which need protection, preservation and promotion. As Islam encourages reproduction, it supports treatment of infertility and includes care for pregnant women. It further entails preservation of lineage. Every child should know about and be related to both his parents. Hiring a ‘womb’ for procreation is a very new concept in Islamic jurisprudence and is not acceptable according to the ethics of Islam since surrogacy involves the use of a donor sperm, a foreign element in the woman’s womb which leads to mixing of lineage. According to Mufti Sheikh Ahmad Kutty, an Islamic scholar, the introduction of male sperm into the uterus of a woman he is not married to goes against the desires of Allah.

In a story in the Bible, Sarah the wife of Abraham was unable to have children. She made her handmaid, Hagar, have a child with Abraham by copulation. Here, Sarah got jealous and the surrogate mother refused to part with the identity of the child. As a result, both the surrogate mother and the child got ousted out of the house. Genesis 30 tells us the story of Rachel who told her husband Jacob to sleep with her maid Bilhahin in order to produce children and hence, build a family. Jacob subsequently goes on to have more children with his concubines and both his wives, Leah and Rachel. Out of 12 sons, 10 are jealous of Joseph, the ‘special’ son of Rachel and they conspire to sell him as a slave. 

As both the stories above point out, a typical and exclusive sexual relationship between a man and woman was God’s desire. Enlisting the help of a surrogate mother led to a breakdown of the families and a dysfunction in general. The general message was that not trusting God and taking things in one’s own hands could cause chaos. 

In 1975, Noel Keane, a lawyer brokered the first ever legal surrogacy contract in history. Here, the surrogate mother did not receive any compensation as per the agreement. After this, Keane established his own infertility centre which arranged many surrogate pregnancies in the United States. In 1978, Louise Brown was the first human to be born via in vitro fertilization. Four years later, her younger sister, Natalie Brown, was also conceived by IVF and became the world’s fortieth child to be conceived in this way. In May 1999, Natalie was the first human born after conception by IVF to give birth without IVF. Only a few months after the birth of Louise Brown, Dr. Subhas Mukhopadhyay produced the world’s second test tube baby ‘Durga’ in India. However, he was stopped from working further on in vitro fertilization and was transferred to another area. He was also not allowed to go to Tokyo to present a paper. Due to frustration and poor health, Mukhopadhyay committed suicide on June 19, 1981.

On August 16, 1986, going by the scientific records, ‘Harsha’ became the first human test-tube-baby of India. T.C. Anand Kumar, Director of Institute for Research in Reproduction (IRR) of Indian Council of Medical Research (ICMR) was credited for this achievement. In 1997, when he went to Kolkata to attend a Science Congress, all the research documents of Mukhopadhyay were handed over to him. After scrutinizing those documents and having discussions with Durga’s parents, he became certain that Mukhopadhyay was responsible for the creation of the first human test-tube-baby in India. By T.E. Anand Kumar’s efforts, Mukhopadhyay was credited as the architect of the first Indian test tube baby in a document related to the subject of artificial intercourse in ICMR. 

In 1980, the first surrogacy agreement including compensation was made between a surrogate and the intended parents. Elizabeth Kane (a pseudonym) received $10,000 to carry athe baby for the couple. In spite of having completed her family and having placed a child for adoption, Kane was unprepared for the challenges she faced after the delivery and emotions attached to the whole process. She regretted her decision to become a surrogate and wrote about it in a book called Birth Mother.

Fertility tourism in India

Commercial surrogacy was legalized in India in 2002. There is a clinic at Kaival Hospital in Anand which used to put infertile couples in touch with the local women, took care of the women during the pregnancy and even offered counseling after the delivery. The women used to carry children for couples coming from countries like the US, Taiwan and Britain. This phenomenon was called ‘wombs for rent’. India became a major hub for commercial surrogacy for international parents due to the availability of a large labour pool and excellent medical facility at relatively low costs. 

Dr Patel’s centre was believed to be unique as it offered a one-stop service. While other clinics requested the couple to bring in their own surrogate, in Anand the couple just provided the egg and sperm and the clinic chose the surrogate from a waiting list of tested and ready surrogates. A rotating group of surrogate mothers used to live together in a home rented by the clinic and supervised by a former surrogate mother. They would be occupied with English or Computer classes or would receive their husbands and children as visitors during the day. The surrogate mothers and the parents signed a contract in which the couple promised to cover all medical expenses in addition to the woman’s payment, and it was stated that the surrogate mother would hand over the baby after birth.

The couples flew to Anand for the in-vitro fertilization and again for the birth. Most couples ended up paying the clinic less than $US10000 for the entire procedure, including fertilization, the fee to the mother and medical expenses. Counseling used to be a major part of the process. The women would be told to think of the pregnancy as ‘somebody’s child coming to stay at their place for nine months’. According to Dr. Patel, while none of the mothers had a difficult pregnancy or any medical complication, the clinic is diligent in its medical investigations and does not take any risks. 

However, this practice was criticized on many grounds. Critics believed that the surrogates were often exploited as they were made to go through the struggles of pregnancy for very less money. An argument against this criticism was that this practice benefited both the parties- it gave one party the chance to have their own child and the other to earn a sum of money which they might not have been able to earn otherwise. From a liberal point of view, it could be argued that it highlighted the woman’s right to autonomy over her body which also included informed consent to volunteer her body for any activity or cause whether it was physical labor, sexual services, organ or tissue donation, or commercial surrogacy.

On the other hand, in a low-income country like India, where these women mostly came from poor families and were not completely aware about their rights, it was rational to argue that their consent came from a sense of desperation and helplessness Due to their financial and educational backwardness, this consent could also lead to exploitation. In addition to low compensation, there were also the physiological side-effects of pregnancy like migraines and back pain, diabetes, high blood pressure, or permanently impaired fertility and death in extreme cases. There was also a risk of the surrogate getting emotionally attached to the child. Postpartum concerns included scarring and body pain from cesarean sections, as well as postpartum depression. Additionally, there was also a chance of disapproval from their communities and rejection by their husbands. These types of risks were seldom discussed when the consent of the surrogate was obtained so it was debatable whether the consent was informed or not. 

Economically, one common argument against medical tourism was that the traveler spent his or her money in a foreign country instead of their home jurisdiction. Their expenditure included both medical and travel expenses. This was a very large amount, resulting in loss of income for the home country. Also, for a nation like India, the potential financial benefits arising out of this lucrative industry were tremendous. However, while it is the Indian citizens who funded medical resources and infrastructure, it was the foreign clientele that reaped the rewards. This was one of the most common criticisms of medical tourism: that those who pay taxes within the nation should be the ones to benefit from the efforts of doctors whose education and infrastructural support were taxpayer-subsidized.

Keeping in mind the criticism mentioned above, the government of India decided to ban commercial surrogacy in the year 2013.

Legislations

The Law Commission of India submitted the 228th report on surrogacy in India and made the following observations, based on which the Indian Council of Medical Research (ICMR) framed its guidelines in the year 2005 and drafted Assisted Reproductive Technologies (ART) Bill in 2008: 

• The Bill mandated that a foreigner or foreign couple not residing in India or a non-resident Indian individual or couple, seeking surrogacy in India to appoint a local guardian who would be legally mandated to take care of the surrogate during and after pregnancy till delivery of the child to the foreigner or foreign couple or the local guardian. The commissioning parents or parent were legally bound to accept the custody of the child irrespective of any abnormality that the child may have, and the refusal to do so was deemed an offence. A surrogate mother was to relinquish all parental rights over the child. The birth certificate in respect of a baby born through surrogacy was to bear the name(s) of genetic parents/parent of the baby.
• The child born through surrogacy was to be presumed as the legitimate child of the couple or the single person, as the case may be. If the commissioning couple separated or got divorced after going for surrogacy but before the birth of the child, then also the child was to be considered the legitimate child of the couple.
• The Bill did not allow the couple or individual to utilize the service of more than one surrogate at any given time. 
• According to Section 10 of the Indian Contract Act, all agreements are contracts, if they are made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void. Therefore, if the surrogacy agreement satisfied these conditions, it was an enforceable contract. Thereafter, under section 9, Code of Civil Procedure, it could be the subject of a civil suit in a civil court for adjudication of all disputes related to the surrogacy agreement and for a declaration/injunction as to the relief prayed for.
• It was mandated that one of the intended parents should be a donor as well, since it would help in developing a bond of love and affection with the child due to the existence of a biological relationship. It was also thought that the chances of child-abuse and neglect, often observed in cases of adoptions, would be reduced. In case the intended parent was single, he or she was supposed to be a donor to be able to have a surrogate child. Otherwise, adoption was the method used to get the child if the biological (natural) parents and adoptive parents were different.

The Assisted Reproductive Technology Bill, 2013 is still pending before the Parliament and is yet to be passed. This Bill bans only allows the exchange of money for medical expenses of the mother child and no other compensation. This means that only altruistic surrogacy will be allowed and commercial surrogacy will be banned- including sale and purchase of human embryo and gametes. It also provides for the establishment of a National Surrogacy Board at the central level and State Surrogacy Boards in the states and union territories in order to regulate surrogacy in India by providing guidelines for the same. 

Although this Bill is still pending, the Parliament passed the Surrogacy (Regulation) Bill in 2018 which has the following features:

• Commercial surrogacy is banned and altruistic surrogacy is allowed for Indian married couples who are infertile.
• The surrogate mother and the couple must be close relatives. However, the Bill does not define who the ‘close relative’ may be.
• A National Surrogacy Board and State Surrogacy Boards at the national and state levels must be set up in order to regulate the practice of surrogacy.
• The surrogate mother and the couple need eligibility certificates from the appropriate authority in order to proceed.
• The Bill only allows Indian couples to conceive through surrogacy. Foreigners, Non-Resident Indians, Overseas Citizens of India, single people, homosexuals, live-in couples and married couples who already have a child are not allowed to avail of surrogacy except if they have a child who is physically or mentally challenged or is suffering from a life-threatening disease.
• For altruistic surrogacy, the age of the woman must be 23-50 years and the age of the man must be 26-55 years. The couple should be married for at least five years.
• The surrogate mother should be aged between 25-35 years and can act as a surrogate mother only once.
• Any order concerning the parentage and custody of the child to be born through surrogacy is to be passed by a Court of the Magistrate of the First Class.
• All surrogacy clinics shall be registered under this Act after the Appropriate Authority is satisfied that such clinics can provide facilities and maintain equipment and standards including physical infrastructure and diagnostic facilities as may be prescribed in the rules and regulations. These clinics shall maintain all records for the next 25 years. 
• The Board shall constituted by the Minister in-charge of the Ministry of Health and Family Welfare who shall be the Chairperson, Secretary to the Government of India in- charge of the Department dealing with the surrogacy matter who shall be the Vice-Chairperson and three female Members of Parliament, out of whom two shall be elected by the House of the People and one by the Council of State as Members.
• There shall be a provision of a gestation period of ten months from the date of coming into force of this act to protect the wellbeing of already existing surrogate mothers.
• The couple shall not abandon the surrogate child under any condition.

Relevant case laws

There was a complicated case in the year 2008 in which a Japanese couple, Mr. and Mrs. Yamada, had found entered into a surrogacy agreement with a woman in Gujarat. There were some marital problems between the couple. After the birth of the child, she was moved to a hospital in Jaipur, where she was cared for including being breastfed by a woman. Mr. Yamada had to return to Japan due to the expiration his visa and after the divorce was finalized, Mrs. Yamada had abandoned the infant. An NGO called Satya had filed a habeas corpus writ in the Supreme Court and had submitted that there were no laws governing surrogacy in India and a lot of irregularities were being committed in the name of surrogacy. A money-making racket was being operated. The Court directed that the petition be looked into by Commission for Protection of Child Rights as there was no public interest to make it maintainable as public interest litigation. Subsequently, a passport was issued to the child so she could join her father in Japan.

In another case, there was a German couple, Mr. and Mrs. Balaz, who had come to India for the purpose of conceiving via surrogacy. They entered into a surrogacy agreement with a woman from Gujarat. However, the body of Mrs. Balaz was not in a condition to even produce ova. So the process of fertilization was brought about with the sperm from Mr. Balaz and donation of ova by an anonymous woman. When the surrogate mother gave birth to twin boys, there was a question regarding their nationality. Here, the court held that since the wife had neither donated the ova nor carried the embryo inside her body, she was not the biological mother.

On the other hand, the surrogate mother had carried the embryo inside her for 9 months and nurtured the babies through the umbilical cord; she was considered the biological mother. Keeping in mind the right to privacy of the egg donor, there was no discussion regarding her identity or her right over the child and it was held that merely donating ova did not make her the biological mother. Since both the surrogate and egg donor were Indians, the twins were also conferred Indian nationality. Mr. Balaz was shown to be the father in the birth certificates of the twins and since the surrogate was an Indian national, the twins were entitled to get Indian citizenship under Section 3(1)(c)(ii) of the Citizenship Act, 1955.

In one case, the issue was provision of maternity leave for female lecturers under the Maharashtra Civil Services (Leave) Rules, 1981. The petitioner had given birth to a baby boy through surrogacy and after the birth, applied for maternity leave. However, the Joint Director of Higher Education, Nagpur had communicated that this leave is not available in case of birth via surrogacy. The petitioner challenged this in court. The petitioner cited a Government Resolution dated 28.07.1995, which talks about granting maternity leave to the adoptive mother in the same manner as is available to a natural mother. The court said that maternity leave is provided to ensure a healthy and relaxing environment for both mother and child. It is a social justice provision for women.

This provision is there to ensure that there is sufficient time for mother and child to bond. It is said that being a mother is one of the most rewarding jobs on the earth and also one of the most challenging. A commissioning mother would have the same rights and duties towards the child as the natural mother. A woman cannot be discriminated against on the grounds that she has given birth to a child through surrogacy. Though the petitioner had not given birth to the child, it was in her custody after birth and a newborn baby cannot be left with people other than the mother during the initial, most formative years. A mother would also include a commissioning mother or a mother securing a child through surrogacy. Any other interpretation would go against the objective of providing maternity leave to a mother. 

In one case, an American couple had travelled to India for the purpose of surrogacy. They had already purchased 8 embryos which were in the custody of the hospital in Pawai after completing all the necessary requirements. However, after the embryos were brought and kept at the hospital, they came to know that they are now barred from entering a surrogacy agreement in India due to a change in policy. They requested the court to allow them to take back the embryos to any other country where the surrogacy is allowed. They were then informed that the same cannot be permitted as export of embryos has also been prohibited. The court directed the petitioners to file their application before the Director General of Foreign Trade (Export Cell) through their counsel and the authority was directed to make a decision within 3 weeks of receiving the application. 

In another case, it was held that those foreigners who had already started the surrogacy process when the ban on commercial surrogacy was announced were permitted to continue the process, provided they had completed all the necessary formalities. The Government of India is supposed to fix the stages up to which the ban is to apply. 

The Supreme Court also reiterated that a woman who has given birth via surrogacy is entitled to maternity leave and this case also talked about granting paternity leave of 15 days to the father of the surrogate child.

Analysis of the current scenario

As discussed above, the Surrogacy (Regulation) Bill, which outlawed surrogacy, was finally passed in 2018. The Bill was criticized heavily by many experts although it was passed with good intentions. The merits and demerits of the Bill are:

Merits

• By imposing a ban on egg donation and sale of embryos, this will help in curbing child trafficking and other unlawful practices.
• In commercial surrogacy, many poor women are exploited and are made to go through with the pregnancy at very low rates. In such cases, since the woman lacks awareness and finances, she is not fully aware of what she is being made to do and the consent obtained is not with complete knowledge.
• In this industry, it is often the middlemen who execute the surrogacy agreements and take a large amount of money paid by the parents, and only about 25% of the sum goes to the surrogate mother. This Bill is needed in places in places like Gujarat, where ‘baby farms’ exist, i.e. underprivileged women are collected and distributed as surrogates to potential parents.
• By including the provision that the intending couple should be married for at least five years, it is ensured that there is no marital discord and the couple is in a position to provide a stable home to the surrogate child and there shall be no custody battles for the child later on.
• By barring live-in couples from going through commercial surrogacy, the Bill ensures that only those couples who have a stable, long-term relationship and can provide a secure and permanent home to the child are allowed to go through with surrogacy.
• Those women who volunteer to become surrogate mothers often face ridicule and social boycott from the other members of their village or community. By passing this will, that ridicule can be avoided.
• This Bill promotes adoption. There are many children in orphanages that need homes and they can only be adopted till the age of 15 so adoption can be an option for those couples who already have children and those who are past the age limit set by this Bill.

Demerits

• Although this Bill promotes adoption as an option, the process involved in adopting a child is time-consuming and tedious. There is still a stigma attached to adoption in Indian society and families often prefer to adopt boys so they can get an heir. The whole process of adoption needs to be streamlined and simplified if it is to be promoted amongst the people. 
• The Bill ignores the right a woman has over her body. If a woman has consented to allow her body to be used in this process after knowing all the facts and risks and is being paid adequately for it, then there is no need for any legislature to decide how she should use her body. In European countries like Netherlands, sex work is legally recognized. Sex workers also have constitutional rights which are enforced strongly, unlike in India. Similarly, surrogacy laws should be framed in such a way that woman fully consents to the agreement and there is no chance for her to be cheated. There were a lot of women who were dependent on this practice as a source of income. Putting a complete ban on this practice has led to a loss in earning opportunity for them.
• Egg donations and purchase and sale of embryos have been banned in order to curb child trafficking and nab the illegal surrogacy racket. However, a complete ban will not fix the situation. Policies need to be framed and laws need to be implemented in such a way that the issue is resolved without banning the entire industry.
• The demand for surrogacy is not going to disappear suddenly because of the ban and the Bill will only lead to the creation of a black market that might increase the chances of exploitation of surrogate mothers and they will not have any platforms to approach for legal recourse in case of a breach of contract. Wherever there is a lacuna in the demand and supply for any product and there is a ban on that product, illegal markets emerge and they tend to thrive due to high prices. The practice of illegal organ trade is one such example. In spite of restricting donations of organs to only close relatives and other altruistic donors, India is still one of the biggest organ markets, especially for kidneys. The government should ensure that the surrogates are properly informed about the medical and economic impacts of surrogacy. It should also be ensured that all surrogacy contracts mandatorily talk about the medical care and nourishment of the surrogates not only during the pregnancy but also during the post-partum period. The decision to rent or sell one’s vagina or womb should be that of the owner only and nobody else, not even the government, should get to govern the woman’s own body. If the government cares so much about protecting women from exploitation, it should try its best to eliminate the circumstances which force a woman to rent out her womb.
• The biggest question that needs to be answered is how non-payment for surrogacy would prevent exploitation. Defining exploitation from the point of view of money is a narrow way of looking at the social reality. There is no guarantee that the altruistic surrogate mother will not be coerced to bear the child. One advantage of allowing commercial surrogacy is that once the surrogate mother is paid all her dues and the baby is delivered to the parents, they can keep her out of their lives for good. There will never be any question of bonding between the child and its birth mother since they will hardly get any time together. However, this Bill insists on altruistic surrogacy only through close relatives which will ensure that the child and its birth mother will remain in close proximity all their lives. This will create a complicated situation full of emotional and ethical dilemmas. Thus, it is better if there is a certain amount of detachment in such procedures. Moreover, there is no guarantee that there will be no exploitation of a poor woman by the rich commissioning parents in the altruistic surrogacy. Also, receiving a form of payment would help the surrogate mother in developing a psychological detachment from the foetus and would give her more incentive to part with the child after birth. It is also impossible for any official authority to track ‘gifts’ being exchanged between the parties in the name of paying ‘compensation’. 
• One of the most controversial points of this Bill is that it bars homosexual couples from going through with surrogacy. Since the concept of gay marriage is still alien to Indian society even after decriminalizing sexual conduct between homosexuals, surrogacy was the only opportunity for them to raise children of their own. But by adding this provision of banning homosexuals, the government clearly shows its bias against the LGBT community and this proves that Indian society is yet to accept anything apart from heterosexual relationships. This provision is the last straw which shows that homosexuals still do not have any rights to be accepted, get married or to start a family, along with the risk of persecution.
• Critics feel that this Bill seeks to discriminate on the basis of marital status, age, sexual orientation and nationality. A rational nexus should exist between the objective of passing a law and the actions allowed as a result of such discrimination. There appears to be no rational nexus between preventing a specific class of couple from entering a surrogacy agreement and prevention of exploitation of women. Since the nexus is deemed unreasonable, the constitutional validity of such a provision is questionable. Right to Life under Article 21 of the Constitution includes the right to reproduction and parenthood and also the right to privacy. The government cannot interfere with how people decide to reproduce and infertility should not be made a condition necessary for surrogacy. Moreover, qualifications like being married for five years are arbitrary. The question is why a limit of five years has been decided and why not four or six. This arbitrariness goes against the principles of article 21 which is against making arbitrary laws.
• The Bill denies the right of surrogacy to couples in a live-in relationship. Although the female partner has the same rights of maintenance as the wife does and there can be a presumption of marriage if the couple has been living together for a very long period of time. The reasoning provided is that in case the couple separates, there will be no stability for the child. But the same can be said for married couples as there is a possibility of divorce. On similar grounds, it can be said that once the mother dies, the child should be taken away since both parents are required to provide a nurturing environment but one father is never deemed to be not enough for a child. Similarly, non-genetic, single people and those living together should be trusted to look after the child. After all, the fact that they are willing to contribute the time and money to go through this whole process shows that they are determined to become parents and do as good a job as they can.

Conclusion

From being mentioned in the ancient texts to becoming an accepted practice and a source of income for a country to being regulated with stringent guidelines, the practice of surrogacy has gone through many changes which reflect the position of society at that point of time. This was a practice which was very common during the ancient times yet misused as we can see in the example of Kunti who got a boon which was very inappropriate for her age. Between the years 2002 to 2018, India had become a hub for commercial surrogacy and this practice was unregulated since there was no legislation governing surrogacy. However, commercial surrogacy was banned in 2018 and a lot of regulations were put in place. However, instead of banning an idea totally, regulations should be made so that the idea doesn’t become exploitative or doesn’t get misused. A woman should be saved from exploitation but she should be the final decision-maker as far as her body is concerned.

If we look at how abortions were carried out before they were made legal, we would realize that there is always a loophole in each and every law which can be exploited and would render the purpose of that particular legislation useless. Instead of making surrogacy exclusive for infertile married couples, the State should ensure that everybody gets the chance to procreate and those who help them in doing so get their due, financially or otherwise. A country’s laws reflect the attitude of its people and every nation should aim to move forward with the times, instead of going back in time by making regressive laws. The practice of surrogacy has been marred by a lot of controversy and the issue of what should be allowed morally. The current legislation, while well-meaning, shows a myopic view of what is better for women and an ugly bias towards homosexual and live in relations. It does not reflect the current times and is full of arbitrary rules which need to be done away with.

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This article is written by Sanjiv Rathi, pursuing a Certificate Course in National Company Law Tribunal (NCLT) Litigation from Lawsikho.com. Here he discusses “What are Corporate Debt Restructuring (CDR) Schemes and do these require the approval of NCLT?”.

What is CDR Schemes/Mechanism?

Corporate Debt Restructuring (“CDR”) is typically a voluntary framework, under which financial institutions and banks restructure the debt of companies facing financial difficulties due to various factors, in order to provide support at the right time for such businesses.

CDR is a process employed by companies facing cash crunch or financial distress in order to avoid default risk. It can be done with: 

1. Reducing interest rates on mortgage loans or extending the length of payment. 
2. It may also include an equity swap arrangement where creditors of the company may agree to cancel some or all of the debt in return for the company’s equity. It may also require a “haircut” where the corporation may compromise with the Financial Creditor to write off some interest or capital part.

The objects of the CDR mechanism as stated by the Reserve Bank of India, the country’s central bank, are-

“To ensure a timely and transparent mechanism for the restructuring of corporate debts of viable entities facing problems, for the benefit of all concerned.”

“To aim at preserving viable corporates that are affected by certain internal and external factors”.

“To minimize the losses to creditors and other stakeholders through an orderly and co-ordinated restructuring programme”.
The intention behind the mechanism is to revive such firms and also to protect the interests of the lending institutions and other stakeholders. The CDR mechanism is available from more than one lending institution to companies that enjoy the credit facilities. The mechanism allows these institutions to restructure the debt for the benefit of all in a prompt and transparent manner. Debt restructuring can be a mutually beneficial situation for both, as the corporation escapes bankruptcy and the borrowers typically receive more than they would have gained in an IBC bankruptcy proceeding. See link https://economictimes.indiatimes.com/wealth/plan/what-is-debt-restructuring-of-a-company/articleshow/70100980.cms

The CDR system was framed almost 18 years ago, to restructure corporate debt outside the purview of debt recovery tribunals (DRT) and the then Board for Industrial and Financial Reconstruction (BIFR). It is a three-tiered structure, consisting of the CDR Standing Forum followed by the CDR Empowered Group and then the CDR Cell The CDR Standing Committee was responsible for setting all debt restructuring rules and regulations, while the CDR cell was responsible for scrutinizing both borrowers ‘ and lenders ‘ restructuring plans. The CDR Empowered Group took the final decision to approve the restructuring package. Under the rules of the CDR group, the resolution plan should be accepted by at least 75% of creditors by the amount of outstanding financial debt. 

Do CDR Schemes need NCLT Approval?

The formal procedure for restructuring as stated above encompasses within its scope scheme of reconstruction, takeover, mergers, demergers, transfer of undertakings and restructuring of debts as provided Sections 230 and 231 of the Companies Act 2013.

The structured restructuring process set out above includes, as provided for in Sections 230 and 231 of the Companies Act 2013, the scope of rehabilitation, acquisition, mergers, demergers, transfers of undertakings and debt restructuring. Section 230 of the Companies Act, 2013 authorizes NCLT to make an order on the application of the corporation or creditor/member, or in the case at issue. Many CDR schemes are carried out by Compromise or Arrangement of Capital Therefore it is important to understand the meaning of Compromise & Arrangement.

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Compromise is a term that usually suggests the presence of a rights dispute. A compromise scheme may be drawn up when a corporation has a disagreement with a member or a class of members, a borrower or a class of creditors. Nonetheless, where there is no disagreement but there is a need to adjudicate the member’s or a class of members ‘ rights or liabilities, the organization may resort to the arrangement. A settlement can be made in the preparation or some possibility of a conflict, while compromise is usually found at the close of a dispute. Thus, Arrangement and compromise may take place for, the purpose of amalgamation or reconstruction /merger/demerger of companies, or may involve the reduction of share capital as the need be. Here is the link https://taxguru.in/company-law/analysis-section-230-companies-act-2013.html

CDR Schemes – The Current Scenario:

Recently, the Reserve Bank of India has abolished multiple loan restructuring schemes that are prevalent among banks in order to restructure defaulted loans, and has made the resolution of defaults subject to the Insolvency and Bankruptcy Code (IBC) the key mechanism for dealing with defaulters. See link https://economictimes.indiatimes.com/news/economy/policy/rbi-withdraws-cdr-sdr-s4a-jlf-schemes-to-restructure-defaulted-loans/articleshow/62891543.cms

The Adjudicating Authority, in this case, is also NCLT under the IBC. The resolution process under IBC is well defined with specific timelines. The IBC enables initiation of Corporate Insolvency Resolution Process (CIRP), immediately after the first default has occurred. The Committee of creditors needs to act in the best interest of all the stakeholders of the corporate debtor.

With growing litigation over insolvency cases, banks are increasingly opting for loan settlement deals under IBC Section 12A from defaulting companies. Under IBC section 12 A, borrowers are given the option of accepting these offers from defaulting promoters. 

CDR Scheme in Practice:

Recently, lenders of Jaiprakash Power Ventures led by ICICI Bank restructured their debt by converting much of it into equity and convertible instruments and subsequently approached the National Company Law Tribunal (NCLT) to withdraw their application for bankruptcy proceedings.

Therefore, the Jaiprakash Associates group’s outstanding debt has fallen from more than Rs 12,000 crore, after the restructuring, to less than Rs 6,000 crore. The consortium of banks and financial institutions has agreed to convert Rs 3,800 crore of debt into convertible preferential stock, with a maturity period of 29 years and a coupon rate of 0.01 per cent, the remaining Rs 5,800 crore debt on the financial statement of the company will have an interest rate of 9.50 per cent.  Therefore, after the restructuring, the annual interest cost burden of the company would decrease significantly from nearly Rs 1,500 crore to less than Rs 600 crore, i.e. more than 50%, resulting in an annual interest cost-benefit of almost Rs 1,000 crore in interest cost alone enabling the Company to improve its Cash flows and subsequently the bottom line. Here is the link https://economictimes.indiatimes.com/industry/energy/power/jaiprakash-power-ventures-to-exit-insolvency-process/articleshow/73237112.cms
Due to long delays in the NCLT process, now many Lenders are more interested to settle dues outside the NCLT framework. Very Recently on 30th December 2019 Power Generation Company, Rattan India Power Ltd. has announced a one-time settlement (OTS) arrangement to clear its debts with its lenders. This is the first effective scheme to be closed under the newly promulgated RBI’s Prudential Framework for Resolving Stressed Assets and the largest compromise settlement outside the NCLT framework in terms of size. Here is the link https://newsd.in/rattanindia-power-resolves-debt-via-one-time-settlement

CDR- Current MSME Focus

RBI has permitted a one-time restructuring of current MSME loans, which have defaulted but are not non-performing as of January 1, 2019, in a huge step. Such debt restructuring would still not result in a downgrade in the asset category. To qualify for the debt restructuring scheme, the exposure mix together with the bank’s total facilities must no longer exceed Rs. 25 crore to a borrower. The restructuring of the loan must also be carried out by way of 31 March 2020. After the budget announcement by Finance Minister Nirmala Sitharaman, the government has asked the Reserve Bank of India (RBI) to extend the debt restructuring scheme beyond the deadline of March 31, 2020, the RBI extended the scheme to December 31, 2020. This would help MSMEs tide over problems following demonetisation and implementation of GST due to a lack of work capital. Ms. Sitharaman had said in her budget speech that more than five lakh MSMEs have benefited from the debt restructuring that RBI has allowed in the past year.

Revival Focus of CDR Schemes 

Debt-ridden firms would find it hard to get back on the road to recovery, even if they are trying to fix finances. That’s because companies that go through the corporate debt restructuring or CDR process, have been prohibited from applying for contracts proposed by some government agencies in few states. It is important to realise that Companies going for CDR are not bankrupt, and need handholding from all the stakeholders to succeed.

Future of CDR Schemes

There is a lot of talk about “Pre-Packs” on CDR. A pre-packaged restructuring plan is a pre-planned insolvency process in which a corporation arranges to sell its assets to a bidder before filing for insolvency, promotes the sale and NCLT are approached by creditors and shareholders with a pre-negotiated, pre-approved corporate reorganization plan called the “pre-packaged.” This kind of corporate rescue and reorganization plan reduces significantly the time taken in lengthy court proceedings apart from the substantial costs for companies that are already in financial distress. One of Pre-pack’s most significant benefit is that it is debtor-focused and not creditor-focused, as is typically the case under the IBC. The purpose of the pre-pack procedure is to save the company, its financial and intellectual property assets, and to ensure operational continuity while at the same time moving towards getting the business out of the financial slump and reclassifying it as a performing asset. Here is the link http://www.alpha-partners.org/2019/12/18/pre-packs-save-financially-distressed_17/

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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So today is the day! We are finally announcing the winner of our Blog Writing Competition of 4th week of January 2020 (From 20th January 2020 To 26th January 2020) 

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

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This article has been written by Chandan Kumar Pradhan from KIIT School of Law, Odisha. This article talks about the rights of an unpaid seller against the goods under the Sale of Goods Act, 1930.

Introduction

As per Section 2(f) of the Indian Contract Act, the seller must transfer the goods sold, and the buyer must pay the required amount in return, under the contract of sale by them. This is known as Reciprocal Promise. In other words, any set of promises made which forms the consideration or part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal promises.

Three important rights of an unpaid seller against the goods

• Right of lien
• Right of stoppage of products in transit
• Right of resale

Rights of lien (Section 47)

“Lien” is the right to keep possession of products and refuse to give purchaser until the fee is paid by the purchaser. An unpaid seller, in possession of products, is entitled to work out his lien on the products within the following instances:

1. In which the goods were sold without any requirement as to credit score.
2. Where the goods were sold on credit however the term of credit has expired.
3. In which the buyer will become insolvent even though the period of credit began to expire.

In the case of the purchaser’s insolvency, the lien exists even though goods were offered on credit and the duration of credit has not expired till the time. When the products are offered on credit, the presumption is that the customer shall preserve his credit suitable.

If before payment the buyer turns insolvent, the seller is entitled to exceed his rights and hold the products as security for the charge.

The unpaid seller’s lien is a possessory lien, the lien may be exercised so long as the seller stays in ownership of the products. He may exercise his rights of lien but he is holding the ownership of the goods as agent for the customer [Section 47(2)].

Any property in the transfer of files, identify that the products which are not affecting these rights, supplied goods should stay inside the real possession of the seller. In truth, when a belonging has passed to the consumer then the most effective maintenance of products is technically known as “lien”.

In which the belonging goods have not exceeded the customer possession and the same remains with the seller, then it will be very difficult to maintain that the seller has a lien towards his own goods.

The seller’s lien when an asset has not exceeded the purchaser is called as a right of withholding shipping. For that reason, Section 46(2) states in which the belonging goods have not handed over to the customer, the unpaid seller has a right to withhold the transfer. 

The seller may additionally incur from storing the products inside the exercise of his lien for the charge. This right of lien extends to the entire product on his own despite the fact that the part price for the one’s items has already been made. In other phrases, the consumer is not entitled to claim delivery of a part of the products.

In addition, wherein an unpaid seller has made component shipping of the goods, he may also exercise his rights of lien on the rest, except such element shipping has been made under such instances as to reveal an agreement to waive the lien (Section 48). 

Also, the lien can be exercised even though the seller has received a ‘decree’ for the rate of the products.[Section 49(2)].

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When is lien lost?

As already discovered, lien relies upon physical ownership of products. As soon as the possession is misplaced, the lien is also misplaced. The unpaid dealer of goods loses his lien thereon inside the following instances:

1. When he provides the products to a carrier or other bailee for the motive of transmission to the customer without reserving the rights of possession of the products.
2. When the buyer lawfully obtains ownership of the goods.
3. When the seller expressly or impliedly waives his rights of lien. An implied waiver takes place while the seller offers a fresh time period of credit or allows the customer to just accept an invoice of trade payable at a particular date to a sub-sale which the purchaser may additionally have made.

Accordingly, when a refrigerator after being bought, will be delivered to the purchaser and if it no longer functions well, the buyer takes it again to the seller for repairs, here we can say that the seller could not exercise his lien over the fridge.

Rights of Stoppage of Goods in Transit

The right of stoppage in transit method is the right of stopping the transit of the goods even if they may be with a carrier for the cause of transmission to the buyer; resuming the ownership of the customer and retaining possession until they made the payment of the good.

Hence, this right is an extension of the right of lien because it entitles the seller to regain ownership even if the seller has parted with the possession of the products.

When can this right be exercised? (Section 50)

An unpaid seller can exercise this right in the simplest way when:

• The purchaser becomes insolvent

The buyer is said to be bankrupt when he has denied paying his debts inside the normal route of business, or if he cannot pay his money then it will be due. [Section 2(8)]

• The property has exceeded the buyer

If assets have not surpassed the buyer then this right is called the “right of withholding shipping”.[Section 46(2)]

• The products are within the route of transit

This means that goods should be neither with the seller nor with the buyer nor with their agent. The product has to be within the custody of a carrier as an intermediary. At that time, the carrier needs not to be either a seller’s agent or customer’s agent. Because, if he is the seller’s agent then the products are still in the arms of seller in the eye of regulation and consequently there may be no transit, and if he is the customer’s agent, the consumer gets transport in the attention of law and hence query of stoppage does now not rise up.

Duration of transit (Section 51)

Since the right of stoppage in transit can be exercised simply as long as the goods are inside the route of transit, it becomes important for the seller to recognize the transit route where it starts and where it comes to the destination. When the transit involves a stop, the right of stoppage can’t be exercised.

Items are deemed to be in course of transit from the time when they’re added to a service or other bailee for the motive of transmission to the buyer till the purchaser or his agent takes transport of them.

Thus, the transit continues as long as the products aren’t delivered to the customer or his agent, irrespective of whether or not they should be mandatory at the destination with the service expecting transmission or are in real transit.

When the transit is deemed to be at near the destination, then the seller can’t exercise his right of stoppage in the following instances:

1. When the customer or his agent takes shipping after the products have reached the destination.
2. When the buyer or his agent obtain delivery of the goods before their arrival at the appointed destination.
3. While the products have arrived at their destination and the seller acknowledges to the consumer or his agent that he holds the products on his behalf.
4. When the products have arrived at their destination then the customer in preference to shipping requests the seller to hold the products to some further destination then the seller agrees to take them to the new destination.
5. When the service wrongfully refuses to supply the goods to the consumer’s agent.
6. When some part of shipping of the goods has been made to the customer with the intention of handing over the whole of the products, transit can be at a quit for the rest of the products.

How is the right stoppage exercised? (Section 52)

The unpaid seller may additionally exercise his right of stoppage in transit both:

1. Through taking real possession of the goods.
2. By means of giving a declaration to the seller in whose possession the products are.

Such words can be given to the person in real ownership of the goods. Within the latter case, the word must accept well in advance to permit the superior to talk together with his agent or servant in time, for transport to the customer.

If with the addition of a mistake he offers the products to the purchaser, he may be responsible for the conversion. The fees of redelivered are to be tolerated by the seller.

Difference between the right of lien and right of stoppage in Transit?

The principal points of difference among these rights of an unpaid seller are as follows:

1. The seller’s lien attaches when the purchaser is in default, whether or not he is solvent or bankrupt. The right of stoppage in transit arises best while the customer is bankrupt.
2. Lien is to be held only when the goods are in actual possession of the seller at the same time as the right of stoppage is available, when the seller has half part with his own and the products are within the custody of an independent service.
3. The right of lien comes as soon as the seller has possession over the products to the carrier for the motive of transmission to the purchaser.

On the other hand, the right of stoppage in transit starts after the seller has introduced the goods to a carrier for the purposes of transmission to the buyer and maintains until the customer has acquired the ownership. The right of lien includes preserving the possession of the goods when the right of stoppage includes regaining ownership of the goods.

Right of resale

The right of resale is a completely valuable right given to an unpaid seller. Within the absence of this right, the unpaid seller’s other rights in opposition to the goods, specifically, “lien” and “stoppage” in transit could no longer have been used due to the fact, this rights only entitle the unpaid dealer to keep the products until paid with the aid of the buyer.

If the customer maintains to stay in default, should the predicted price maintained in order to retain the goods indefinitely, especially while the products are perishable?

Largely, this cannot be the aim of the regulation. Section 54, therefore, offers to the unpaid supplier a confined right to resell the goods inside the following lines:

1. In which the goods are of a perishable nature.
2. In which this type of right is expressly reserved inside the settlement in case the buyer needs to make default.
3. In which the seller has given a promise to the buyer of his purpose to resell and the customer does not pay the price within an affordable time.

If on a resale there is a loss to the seller, he can get better from the defaulting customer. However, if there is a surplus at the resale, the seller can preserve it with him because the customer cannot be allowed to take advantage of his personal identity. But, no word of resale [as required in 3 above] is given to the customer, the right of the seller to assert loss and maintain a surplus, if any, is reversed.

In different words, if the unpaid seller fails to present the observation of resale to the buyer, he can not recover the loss from the customer. For this reason, it’ll be visible that giving of observing to the purchaser, when so required that very necessary to make him responsible for the breach of settlement.

It’s so due to the fact this kind of observation gives an opportunity to the purchaser that pays the charge and has the products.

It is vital that the absence of observation when so required affects the rights of the unpaid supplier himself best as mentioned above and it does not have an effect on the name of the following customer who gathers an excellent title to the goods.

Section 54(3) particularly announces- “Where an unpaid seller has exercised his right of lien or stoppage in transit in transit resells the products, the customer acquires a terrific identify thereto as in opposition to the unique purchaser, however, that no note of the resale has been given to the original customer”.

Conclusion

Any set of promises made to form the consideration or part of the consideration for each other are called reciprocal promises and every contract of sale of goods consists of reciprocal promises. The seller’s remedy, in this case, is a suit for damages rather than an action for the full price of the goods.

References

• http://www.shareyouressays.com/english-essays/three-important-rights-of-unpaid-seller-against-the-goods/92211
• https://mercantilelaws.blogspot.com/2012/05/rights-of-unpaid-seller.html

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This article is written by Antra Shourya from the Faculty of Law, University of Delhi. This article explains the obligations and rights enjoyed by third parties in a treaty and it further discusses how international treaties create objective regimes.

Introduction

International law is more dynamic today than ever, and one of the most important sources of international law is treaties. Treaties play a significant role in international law, they create the bases of all international diplomacy. We often hear that how a particular move by a particular country is a violation of an international treaty or convention hence a violation of the international law. International law is a codified law and has been developed by many international treaties, some of which were pursued and brokered by the International Law Commission, which was established by the United Nations General Assembly (UNGA) in 1947 to develop and codify the international law. The International Law Commission’s continuous efforts and diplomacy led to the adoption of the Vienna Convention on Law Treaties (VCLT) on 23rd May 1969. The Vienna Convention came into force on 27th January 1980. India is not a signatory member of the convention but nevertheless is guided by it. Vienna convention on the law of treaties recognizes the importance of treaties as a source of international law, which makes it important to understand what is the scope and dynamics of a treaty, who can be parties to a treaty and who cannot be.

General principles of a treaty

Article 1 of Vienna Convention on Law of Treaties, says that the convention applies to treaties between states and treaties between international organizations The convention defines a treaty as “an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation.” Further Article 2 of the convention defines “Third State” as State not a party to the treaty. According to the definitions laid down by the Vienna Convention, a “treaty” means an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or two or more related instruments and whatever it’s a particular designation. The word ‘treaty’ covers all forms of international agreements in writing between the states. The convention also covers other subjects of international law such as international organizations, Article 3 covers agreements between states as between themselves and under international agreements to which other subjects of international law are also a party. The general principles of international law with regard to treaties and conventions is that they create rights and obligations to states parties to them through ratification, accession, acceptance or approval, but there are exceptions to rule and sometimes third states also have obligations and rights under a treaty.

Article 34 of the Vienna Convention on Law of Treaties 

Pacta terries nec nocent prount, is a Latin maxim meaning that agreements neither impose obligations nor confer rights on the third state. A treaty primarily binds the parties to it, the principle behind it being that the rights and obligations should only be imposed on the parties who have consented to the rules or conditions. No state is bound by a rule of law unless it has expressly or impliedly assented to it. Article 34 of the Vienna Convention states that “A treaty does not create either obligations or rights for a third State without its consent.” According to the principle laid down in article 34, a treaty is a non-existent piece for third States, a res inter alios acta meaning “a thing done between others does not harm or benefit others” so a treaty can create neither obligations nor rights for third States, which also brings out the contractual nature of treaties.

Obligations and Rights of Third States

Obligations of Third States

The principle of Pacta Tertis Nec Nocent Nec Crosent i.e a treaty cannot create rights or obligations for a third party without its consent is expressed in  Article 35 of Vienna convention that states that “An obligation arises for a third State from the provision of treaty if the parties to the treaty intend the provision to be means of establishing the obligation and the third State expressly accepts that obligation in writing.” 

The two important elements of this article are:

• Firstly, the third parties are consenting to a specific provision of the treaty and not the entire treaty;
• Secondly, the consent has to be expressed in writing. This means that for a State to be bound by an obligation under a treaty to which it is not a party, it must consent to that obligation orally or in writing. 

Sometimes, such an expressed consent directed towards the parties to the treaty leads to the conclusion of a separate agreement between them. Article 35 makes it clear that the third party.

cannot be part of a treaty without their consent. This principle comes from the basic principle of international law of sovereignty, equality and non-interference. Article 34 of the Vienna Convention on Law of Treaties is not drafted in absolute terms. Article 35 of VCLT is based on the principle of consent that a treaty can rise to rights and obligations for a third state but only when the third state has consented to it. According to Article 35, the obligation is created on the third states in two situations namely, first when the parties to the treaties want to establish an obligation for a state not a party to the treaty, and second when the third parties themselves agree to be bound by a treaty.

Exceptions to Obligations of Third States

The general rule of the obligation laid down in Article 35 of VCLT does not apply in certain cases. Article 75 of the UN charter states that an obligation for a third State arises from a provision in a treaty only with its consent would not apply to the case of an aggressor state. Another important exception to the rule expressed in Article 35, that a third State must accept in writing the obligation sought to be imposed upon it by the treaty is contained in Article 2 paragraph 6, of the United Nations Charter which provides that the Organisation shall ensure that states which are not members of the United Nations act in accordance with the principles of UN Charter insofar as may be necessary for the maintenance of international peace and security. This obligation of the third States was confirmed in Namibia case where International Court of Justice held: “As to non- member States, although not bound by Article 24 and 25 of the Charter, they have been called upon in para 2 and para 5 of the resolution 1976 (1970) to give assistance in the action which has been taken by the United Nations with regard to Namibia. 

Rights of Third States 

The rule laid down in Article 36  of VCLT is that “A right arises for a third State from a provision of a treaty if the parties to the treaty intend the provision to accord that right either to the third State, or to a group of States to which it belongs, or to all States, and the third State assents thereto. Its assent shall be presumed so long as the contrary is not indicated unless the treaty otherwise provides.” It further states that a State or an international organization exercising a right in accordance with the above-mentioned provision shall comply with the conditions for its exercise provided for in the treaty or established in conformity with the treaty. The conditions that need to fulfilled to give rights to third parties under a treaty are: firstly that the treaty intends to give rights to the third states, and secondly, the third states consent to the rights give, thirdly, the consent of the third states shall be taken for granted unless it expresses otherwise, and lastly, if the treaty demand that the third state should express it’s approval in a particular way, the consent would only be effective when it is expressed in that particular way. The assent may be presumed on certain aspects, if the treaty doesn’t exclusively talk about these aspects, provided there is no evidence to the contrary.

Revocation or Modification of Obligations or Rights 

The revocation or modification of obligations or rights arising from third states from the provisions of a treaty is covered by Article 37 of the VCLT. Article 37 draws a distinction between obligations and rights. As regard to obligations, the rule is that the obligation may be revoked or modified only with the consent of the parties to the treaty and the third state. As regard to revocation or modification of rights, the rule is that a right which arises for third states may not be revoked or modified by the parties if it is established that the right was intended not to be revocable or subject to modification without the consent of the third state.

International Customary Law as an exception

Article 38 of the VCLT says that “Nothing in Article 34 to 37 precludes a rule set forth in a treaty from becoming binding upon a third party as a customary rule of international law, recognised as such”, which means rules in a treaty which are customary laws may become binding on the third States. Rules and principles laid down in treaty, that has been concluded between two parties, may become generally acceptable by third states and become binding on them by the way of custom. The Hague Conventions on the rules of land warfare were held by the International Military Tribunal at Nuremberg to enunciate rules which had become generally binding rules of customary law. A treaty might contain rules which are customary rules at the time of their formulation in the treaty. Such rules bind the third States, in their status of customary norms of international law and not as conventional norms. Being customary norms, these impose customary obligations on the states. The International court of justice in North Sea Continental Shelf case of 1969 held that for rules of a treaty to become international customary law, that provision of the treaty has to fulfill three conditions:
1. The norm should have the character of becoming a general rule, i.e it should have a universal character.
2. It can pass into the general corpus of international law.
3. It should be accepted by opinio juris i.e. accepted as a general practice and an accepted law. 

Treaties and Objective regimes

What are objective regimes?

There are certain treaties that establish freedom of navigation in international rivers and in maritime waterways; treaties that provide for neutralization or demilitarisation of particular territories or the Antarctic Treaty. These treaties come under a special category of so-called “objective regimes. In many cases where rights of third parties have been derived from a treaty such as in case of establishment of international canals such as the Panama Canal and in Wimbledon case, demilitarisation of certain areas, for example, Aland Island Case or the various peace treaties are also classical cases of objective regimes. The issue of the legal status of so-called objective regimes is related to the issue of the effects of treaties on the third State. Often these issues are viewed together without any doctrinal separation as seen in many cases objective regimes are created by treaties. McNair dwells on this issue in-depth in his Law of Treaties.

Do treaties create objective regimes?

Lord McNair in his book, The Law of Treaties, separate these issue of objective regimes and treaties effects on third states. He analyzed the effect of treaties on third parties within the scope of operation of treaties, as an exception from the general rule pacta tertiis nee nocent nee prosunt, whilst the theoretical and practical problems relating to objective regimes and their effect erga omnes i.e towards all, on a certain type of treaties. But even McNair, who strictly separated the two regimes, observed that the possibility of a theoretical and practical overlap between them, as illustrated by the Free Zones Case. Another writer, however, Arechaga, in his important article “Treaty Stipulations in Favour of Third States”, did not draw any doctrinal distinction between treaties which are in favor of third states and treaties which purport to set up objective regimes. McNair further in his book the Law of Treaties describes types of treaties that create objective regimes, dispositive treaties, and constitutive treaties. 

Dispositive Treaties

Dispositive treaties are those treaties that deal with the management of territories and inherent rights within a territory. An example of a dispositive treaty would be the mandate giving power to South Africa to govern over Namibia. A dispositive character is the nature of the rights that they establish. The treaties of this category create or transfer or recognize the existence of certain permanent rights, which acquire or retain an existence and validity independent of treaties that created or transferred them. This category of treaties generates a type of rights for individuals that are different from the rights acquired under the other general type of treaty. These rights are not in their origin necessarily rights in rem but are like them due to the fact that they are characterized by an objective existence that enables them to survive even when the treaty which generated them became extinct.

Constitutive Treaties 

Constitutive treaties are those treaties which establish a specific regime for the specific geographical area or create a new entity like a state or an international organization. According to Mc Nair, the type of treaty entered into by only certain groups of states, which create an international organization which is endowed with an objective international personality valid erga omnes and effective not only vis-a-vis the states which establishes it but all other states would appear to belong to the category of constitutive or semi legislative treaties. These treaties have a public law character and embody the decisions of a power group of states acting or assuming to act in the public interest. McNair gave examples of the United Nations or of the League of Nations. International political-economic organizations like the European Union, North Atlantic Treaty Organization( NATO), also have characteristics of a constructive treaty.

Vienna Convention on Law of Treaties 1969 and Objective regimes

The Vienna convention leaves objective regimes as the ICL felt that the provisions under Article 36 and 38 provide satisfactory mechanisms to explain the legal nature of objective regimes, in a particular alleged automatic objective effect of certain types of treaties. Situations, where objective regimes are created by treaties, are very limited under the Vienna treaty on the Law of Treaties. Article 36 covers situations, like in the case of, the regimes of Turkish Straits or of the Kiel Canal that exemplify a general category of treaties providing for an establishment of land or maritime territory utilization by third states and may be said to create automatic legal effects in relation to third states (effective without any express agreement). These regimes are mostly aimed at the establishment of rights and are accompanied by the exercise of certain obligations by third states as a condition for exercising these rights.

Case Studies

Free Zone Case

In 1932, the Permanent Court of International Justice (PCIJ) gave the judgment of conflict between Switzerland and France over a territorial dispute. In Free Zone Case, Switzerland, a third party, enjoyed since 1815 the benefit of a free customs zone in Upper Savoy and Gex district of France in accordance with a stipulation made in her favor by certain multipartite treaties to which France was a party. Switzerland, though not a party, accepted those benefits. According to Article 435 of the Treaty of Versailles free zone were inconsistent with rules of treaty and France and Switzerland had to come to an agreement with regard to the free zones. France wanted to abolish the free zones. The matter was to be settled in the court of PCIJ. The court did not abolish the free zones and held that Switzerland was not a party to the Treaty of Versailles hence it can’t be bound by the same. The creation of the free zone form part of an agreement to which France was party to with other states, which was in favor of Switzerland. The agreement made a stipulation in favor of Switzerland. It was held that she could not be deprived of that right without her consent.

Panama Canal Case

Hay-Pauncefote Treaty 1901

The treaties governing the Panama Canal give third states the right of usage of the canal under the condition of conforming to rules governing the Canal, taking this interpretation of the treaties, we can say in case of Panama canal Article 36 para 1 and para 2 of VCLT are applicable. The Hay-Pauncefote Treaty was concluded between the United States of America and the United Kingdom, it was clear in the treaty that both the countries were unwilling to give or provide any rights to the third states. Although the treaty didn’t have any adherence provision it did state that the canal shall remain open and free to all vessels observing the rules laid down by the treaty. The Panama Treaty signed between the United States and Panama in 1977 established a framework for the operation of the canal until 31 December 1999.

Panama Treaty 1977

The Panama Treaty of 1977 abrogated the 1901 Treaty, and gave Panama Sovereignty over the canal, and also gave the United States the right to manage, operate, maintain, improve, protect and defend the canal until the year 2000. The second treaty was the Treaty concerning the Permanent Neutrality and Operation of the Panama Canal. Article 1 of the treaty declared that “the Canal, as an international waterway, shall be permanently neutral in accordance with the regime established in this Treaty. The treaty required all the vessels to adhere to the rules and regulations laid down by the treaty, further after 2000, the treaty gave the republic of Panama exclusive rights over the operation of the canal. Article 7 of the treaty proposes that the United States and Panama “shall jointly sponsor a resolution in the organization of American States opening to accession by all States of the world the Protocol to this Treaty whereby all the signatories will adhere to the objectives of this treaty, agreeing to respect the regime of neutrality set forth herein.” This Protocol is open to accession by an international community to recognize as widely as possible neutrality of the Canal. It may be observed that there were no reactions from third states as to the neutrality treaty and the Protocol.

Treaties like the Panama Treaty and Suez Canal Treaty try to establish a legal framework where rights can be given to third states as regards to the use of the canal but the United States in relation to the legal status of the Panama Canal denied rights to the third parties. Neither the character (procedural and substantive) nor the scope of these rights for third states nor the locus standi in the event of their breach is precisely defined. It may even be that these entitlements for third states are not rights but benefits only, and such an interpretation would further limit the possibility of any claims from thirds States in relation to the breach of a condition of the use of, or denial of, access to the canals in question.

Wimbledon Case

Facts of the case 

The Wimbledon Case was regarding the legal status of the Kiel Canal. The Kiel canal passes through Germany and links the Baltic and North Seas. The legal status of the canal was settled in 1919 by the Treaty of Versailles (Article 380-386) which made the canal open to all parties to the treaty. Article380 made canal free and open to vessels of commerce and of the war of all nations at peace with Germany and on terms of entire equality. During the 1920 Polish – Russian war an English ship, authorized by French shippers, was banned from accessing the Kiel canal by the Government of Germany, the ship was carrying munitions for the Polish Government. The German Government took the ground that if it allowed the passage of said ship it would be a breach of Germany’s neutrality in the war. A case was brought against Germany by all the states party to the Treaty of Versailles.

Court’s Decision

The Permanent Court of International Justice held in this case that Germany was bound by Article 380 of Treaty of Versailles, it was obliged by the virtue of Article 380 to allow passage of all vessels until their passage is a violation of this article. Since Russia was not a party to the Treaty of Versailles, the court rejected Germany’s grounds of neutrality in the war. The court also said that Germany could take the legal ground of neutrality in war for not performing its obligations as a neutral state and that Russia and Germany were bound by general customary law on neutrality further the court said that the passage of warships and war materials, through canals did not compromise the neutrality of the states which had territorial sovereignty or jurisdiction over them.

Legal Status of Kiel Canal

On the question of the legal status of the Kiel Canal, the court established it as a “new regime” under the Treaty of Versailles, which was to be applied objectively for international navigation. But the Court did not define the nature of passage through the Kiel canal for third parties whether it is a right or a benefit. Making it a right would give third states a locus standi before international courts and tribunals. In conclusion, it may be said that the Court has admitted the existence of a certain “objective and permanent” regime of the Kiel Canal based on a treaty, without a strict definition, as to the nature of rights (if any) deriving from this regime for third states.

Conclusion

• The Vienna Convention on Law of treaties 1969 lays down important provisions in regard to the position of third States in a treaty. The basic principle laid down in the VCLT is that the treaties are only applicable to the third states when they have consented to it. The Convention upheld the general principle of sovereignty of the states and gives rights or obligations to states only when they have consented to it.
• Treaties establishing objective regimes and are erga omnes like treaties establishing freedom of navigation in international rivers and maritime waterways are applicable to third parties if they have consented to certain provisions of the treaty it is not necessary that they consent to the whole treaty.
• Rights can only be conferred to the third states when there is an intention for the same; sometimes rights confer on their own, or rights may be conferred with a duty to exercise a certain obligation.
• There are exceptions to the rules of an obligation under Article 35 of VCLT like the obligations imposed by the United Nations Charter for international peace and stability.
• A treaty creates rights or obligations for a third state under two situations namely, firstly when the states parties to the treaties intended to create such rights or obligations, and secondly the third consent to such rights or obligations. Rights of the third states can only be revoked or modified only when the treaty specifies that the rights given were revocable, and the third parties have consented to it. 
• Third parties have to adhere to the provisions or obligations of a treaty if the provisions of the treaties are customary international law.

Reference

1. https://treaties.un.org/doc/publication/unts/volume%201155/volume-1155-i-18232-english.pdf
2. https://treaties.un.org/doc/publication/ctc/uncharter.pdf
3. https://www.loc.gov/law/help/us-treaties/bevans/b-gb-ust000012-0258.pdf
4. https://2001-2009.state.gov/p/wha/rlnks/11936.htm
5. https://loveman.sdsu.edu/docs/1888ConstantinopleConventionon.pdf
6. https://pustakahpi.kemlu.go.id/app/Opinio%20Juris%20Vol%201%20Jan-Maret%202010_39_48.pdf
7. Third States and Law of Treaties, Malgosia Fitzmaurice https://www.mpil.de/files/pdf1/mpunyb_fitzmaurice_6.pdf
8. International Law, Second edition, Gurpid Singh

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This article is written by Gareema Ahuja, Team LawSikho.

It takes the Earth approximately 365.242189 days – or 365 days, 5 hours, 48 minutes, and 45 seconds – to circle once around the Sun!

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This article is written by Sangeet Kumar Khamari from KIIT School Of Law, Odisha. This article talks about the history and functions of different International Economic Organisations.

Introduction

International organisation

An International organisation is also called an intergovernmental organisation. It is an organisation which is established by a treaty or any other instrument of government by International law and possessing its own international legal policy, such as the United Nations, the WHO, NATO etc.

Meaning of economic organisation

Economic organisation is an act of coordinating the factors of production like land, labour and capital. These organisations perform a very important role in the modern era where production happens on a large scale. The person who leads these types of organisations is called an entrepreneur. The entrepreneur can also be called the captain of the industry. The economic development of these organisations is made possible because of their entrepreneurs. The entrepreneur is also known as the head or the organiser of the organisation.

Types of economic organisation

Sole Proprietorship

The sole proprietorship is one of the oldest forms of business organisations. It is also called a one-man business but is still common in market trade. As the scale of production has increased after the industrial revolution, a narrow scale business still continues to be an important element of the present economic organisation. The risk of production is taken by a single person. These are generally carried on a small scale.

Partnership

It is a type of business which is carried out by two or more people. Sometimes a small business may extend that it goes beyond the control of a single man. For further development more capital may be necessary, since one man cannot provide all of it so the man would take a partner to reduce his burden. Sometimes the one-man business grows into a partnership, but there may also be partnership right from the beginning in case of some firm. A partnership is based on confidence and mutual trust.

The joint-stock company

The joint-stock company is an important form of business organisation. It is an association of shareholders who subscribe to its capitals and which is divided into many numbers of shares. The shares are generally small in value. Thus a great feature of the Joint-stock company is that people would provide the capital in varying amounts and receive shares in the profits in proportion to the amount of money they have invested.

The capital of a joint-stock company is divided into a number of small shares. There are 3 types of share:

1. Preference shares
2. Ordinary shares
3. Deferred shares

Preference shareholders mostly get a fixed rate of dividend and they are paid in full before the ordinary shareholders. The preference shareholders must be paid fully from the capital of the company before others are paid when the company is in loss and may be ruined. Ordinary shareholders get their dividends only after all other claims of the company are made. Deferred shares are usually headed by the promoters. After paying to the shareholders whatever is left of the total profits, they get that; this is the way how promoters get their share of the profits.

Co-operative organisation

It has become an important form of the business organization since the last century. Cooperation has taken many forms. There are consumer’s cooperative, producer’s cooperative, marketing societies and many more. In a consumer’s cooperative society, members cooperate as consumers. They buy goods at wholesale price and sell them at the usual retail prices. The profits of the society are distributed in the form of a dividend on profits. In a producer’s cooperative society some people who are generally workers combine to produce stock and share the profits among themselves. This is the most successful among other forms of cooperation in many countries.

History of WTO (World Trade Organisation)

The World Trade Organisation came into power on 1 January 1995 and has its headquarters in Geneva. In this organisation, there are more than 15 nations who work as a member. The Ministerial Conference which is held every two years makes the extreme decision of the WTO. In December 2011, the Ministerial Conference was expecting to accept Russia as a new member in WTO. The WTO was introduced by the General Agreement on Tariffs and Trade (GATT), which was concluded in 1947. Back then the first idea was to start out a world trade organisation, but that didn’t materialise. In that GATT circumstances, there were eight rounds of trade free talk. Initially, their topics were the reduction of tariffs and the phasing out of quotas, but later other trade barriers were tackled too.

History of IMF and World Bank

The actual Bretton Woods Conference took place in the year 1994, in the month of July after that IMF and World Bank were set up on 27 December 1945. After World War II, about 730 delegates from all the 44 allied nations gathered to determine how to regulate the International Monetary Fund in Mount Washington Hotel which was in Bretton Woods, New Hampshire.

The parties were sure that the approaches embraced to fight the Great Depression during the ’30s and mid ’40s-high currency, cash depreciations, prejudicial exchanging alliances brought about a risky global condition.

History of TRIPS

The TRIPS Agreement is Annex 1C of the Marrakesh Agreement establishing the WTO came into power on 1 January 1995. The TRIPS is a fundamental piece of the WTO Agreement and is binding on each member of the WTO, from the date the WTO agreement becomes effective for that country. TRIPS agreement came about in recognition of the fact that widely differing standards of security and implementation of intellectual property rights, and the non-appearance of a multilateral structure of guideline, rules and discipline to manage the worldwide exchange counterfeit products had become a genuine weight in global exchange relations. This understanding tends to the appropriateness of fundamental GATT standard and people of existing property convention and agreement; the supply of effective enforcement measure, multilateral dispute settlement, and transitional arrangement.

History of GATT

In October 1947, 23 nations at the Palais des Nations in Geneva signed the General Agreement on Tariffs and Trade (GATT). This contract contains tariff permits that are agreed to the basic mutual trade discussion and a collection of rules appropriate to restrict these permits from being exhausted by restrictive trade measures. The first meeting was held in Geneva, Switzerland and included 23 nations; the main objective during this opening conference was on tariffs. The members built up tax permits contacting over the US $ 10 billion of exchange far and wide.

The second series of the meeting started in April 1949 and was held in Annecy, France. Again taxes were the essential point. Thirteen nations were present at the subsequent meeting and they completed an extra 5000 expense licenses decreasing taxes. In September 1950, the third series of GATT meeting happened in Torquay, England. This time, 38 nations were included and around 9000 tariff permits were passed.

Japan got associated with the GATT in 1956 at the fourth meeting alongside 25 different nations. The gathering was in Geneva, Switzerland, and again the committee diminished overall taxes, this time by the US $ 2.5 billion.

Functions and Structure of WTO

Functions

The WTO’s primary objective is to help trade flow smoothly and freely, it does this by:

• Administrating trade agreement.
• Acting as a forum for trade discussions.
• Setting exchange debates.
• Investigating national exchange arrangements.
• Building the exchange limit of creating economies. 
• Helping out other International associations or organizations.

Structure

The WTO has 164 members, depicting 98% of world exchange. A sum of 22 nations is exchanging participation. The whole enrollment settles on the choice. This is commonly agreed. A majority vote is additionally conceivable however it has never been utilized in the WTO and was remarkable under the WTO’s forerunner, the GATT. The WTO’s understanding has been endorsed in all members parliaments.

Functions of IMF and World Bank

The IMF’s rule

International Monetary cooperation is being advanced by the IMF and it likewise gives strategies guidance and limit improvement backing to assist the nations with building and keeping up solid economies. It additionally makes advances and causes nations to structure approach projects to tackle equalization of instalments issues when adequate financing on reasonable terms can’t be utilised to meet net universal instalments. The loans of IMF are short and medium-term and basically established by the pool of portion commitments that its individuals give. The staff of IMF are principally business analysts with full involvement with macro-economic and money related approaches.

The World Bank’s rule

The World Bank advances future economic development and destitution decrease by giving specialized and backing to help nations change certain divisions or apply uncommon ventures like-building schools and health centres, giving water and power, battling malady, and ensuring the earth.

World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance. World Bank staff are often specialists on particular issues, sectors, or techniques.

Functions of TRIPS

Article 7 and Article 8 of the TRIPS’ Agreement provides specific recognition for policy goals that are fundamental to International intellectual property protection. They admit the board’s public interest agenda behind the TRIPS’ Agreement. While Article 7 and Article 8 have adopted the power at a policy level through the Doha Ministerial Declaration and the Declaration on TRIPS and public health, their use within the World Intellectual Property Organisation (WIPO) development agenda and the Anti- Counterfeiting Trade Agreement (ACTA) has resulted in both.

An improved status within the expanded policy arena and an improved legal significance were clear in discussions on enforcement. By exceeding treaty and forum boundaries, these provisions not only influence explanatory practice, but they also encourage a convergence of policy objectives that promotes greater bonds within the International system and link intellectual system and link intellectual property with other areas of socio-economic importance.

Functions of GATT

GATT being the General Agreement on Trade and Tariffs has many functions and objectives to achieve. The functions have their own significance and measures as well.

• The primary function of GATT is to provide equal opportunities to all the countries in terms of trade in the International market. Thus the concept of the most favoured nation was also included in it so that trading could be carried on the rule of non-separation and correspondence.
• Secondly, its function is to increase the effective demand for real income growth goods.
• Thirdly, to minimise the tariffs and other restrictions on trade. Various tariff measures had been taken by GATT. It had encouraged negotiations for reduction of the tariff. Therefore the partaking nations consented to cut tax on thousands of mechanical products. Thus it provided reciprocal and mutually advantageous outcome. Various non-tariff measures were also included in order to promote international trade.
• Fourthly, its function is to provide a peaceful solution to disputes relating to the International trade. Thus the contracting parties resolved disputes by holding talks on bilateral basis and failure in which the dispute would be referred to the panel of an independent expert, thus it also ensured a better living standard and lastly to strengthen and clarify rules for agricultural trade.

Conclusion

International organizations have already been stated as intergovernmental organisations that help us in encouraging the development and improvement of the economy. One man business and a business which is being carried out by two or more people that is a partnership both start with the same objective of economic prosperity and development. Joint stock companies and cooperative organisations also play an important role in it.

WHO, IMF and World Bank being the basic institutions under International Economic Organisations also contribute largely to maintain a balance between rich and poor. TRIPS and GATT provide specific recognition for policy goals that are fundamental for the development of Intellectual Property Rights. The primary function of GATT is to provide equal opportunities in terms of trade in the International market.

However, with everything taken into account, the following establishment namely, IMF, WTO, World Bank, TRIPS and GATT are trying their level best to meet the required demand of the society. The main objective is to bring the development and developing nations at par and to provide equal opportunities to all of them.

Reference

• https://hubpages.com/education/Meaning-and-Types-of-Economic-Organization
• https://www.imf.org/en/About/Factsheets/Sheets/2016/07/27/15/31/IMF-World-Bank
• https://www.researchgate.net/publication/255728228_Articles_7_and_8_of_the_TRIPS_  Agreement_A_Force_for_Convergence_within_the_International_IP_System
• https://www.researchgate.net/publication/228165780_The_Objectives_and_Principles_   of_the_TRIPs_Agreement
• https://www.legalbites.in/world-trade-organisation-structure-functions/
• https://treaties.un.org/doc/Publication/UNTS/Volume%201867/volume-1867-I-31874-English.pdf

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This article is written by Parth Sharma, pursuing a Certificate Course in Advanced Corporate Taxation from LawSikho.com. Here he discusses “Powers and Procedure for Income Tax Raids (Search and Investigation)”.

Introduction

Power and Procedure for Income Tax raid (Search and investigation) fall under the Indian Income Tax Act of 1961. The main aim of a raid is to curb black money which actually is unaccounted money on which tax is not paid, Black money does not necessarily refer to Money as in currency only it may involve Real estate, foreign currency, gold and jewellery, and other Movable or immovable property on which tax is avoided and funds earned illegally. Raids have been highly successful and getting the black money hoarded by people. It creates a fear in the minds of people and forces them to pay their taxes regularly. An important fact which we all must know that Tax has to be paid even when income is earned from illegal sources. So, there are only two things which is certain in human life Death and Taxes.

When we talk about Raid we all remember Ajay Devgan`s Movie Raid. Though that movie gives us a bit of insight on Tax raids we still have to go through this article to understand the basics of a Raid and the procedure and power thereof.

Difference between Survey and Search and Seizure

There are major differences between the two regarding the scope of power that the authorised officers have. Under the survey, only the places deemed to be places of business or profession can be entered. In search, any premises including residential premises can be entered. Only books of accounts can be impounded in a survey while all kinds of articles can be seized in a search. Statements are recorded in both; however, the only search consists of a statement under oath having wide legal implications and increased risk in case of dishonesty. There is no power of personal search in the survey while it does vest in the officers in case of a search operation. Thus, the survey can be considered an initial operation while search and seizure bring more focussed once a reason to believe has been developed through a survey.

Search and Seizure

It is a constitutionally valid process which happened under the following circumstances:

1. Reliable information about Tax evasion by any source or tips provided by Citizens.
2. Inputs received by Government departments.
3. Information received regarding disproportionate spending or investing without showing matching income for the same.
4. Illegal investment in real estate or Unexplained transactions regarding shares or cash credits.
5. Inputs received from Assessment of tax records. For example, a sudden increase in income earned or sudden decrease in income but increase in expenditure.

Who has the power to conduct the raids

In accordance with Section 132(1) of the Income Tax act 1961. The Principal Director General or The Director General or The Principal Director or Director or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner May authorize an Additional Director or Additional Commissioner or Joint Director or Joint Commissioner or Assistant Director or Deputy Director or Assistant Commissioner or Deputy Commissioner or Income-tax Officer to conduct a tax raid. The authorizing officer will do the authorized tax if he has a “reason to believe” that A taxpayer has failed to comply with any summons or notices sent to him by the Income Tax Department or He has with him money and secondly, such money represents either wholly or partly income or property which has not been disclosed and on which tax is avoided.

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Power of authorities during a Raid

Enter and search any building, place etc where they have a reason to suspect that things representing undisclosed income are kept for example Currency, Gold or Silver, Property papers or books of account

1. They may even break open any locks if keys are not available
2. They may carry personal search of a person who they suspect of having undisclosed items.
3. They may seize the items if they believe it to be undisclosed
4. May make notes or inventory of things found, may mark thing for identification and even take copies of books of account or any other document  

Properties that can be seized during a raid

1. Documents regarding property or any transfer or buying of assets
2. Undisclosed Cash, valuables like gold silver etc
3. Storage devices which may have evidence or undisclosed assets 
4. Books of accounts or business diaries.

Assets which cannot be seized during a raid

1. Disclosed Cash and Assets
2. Cash/Asset Duly explained or shown in books of account
3. Stock in Trade of business
4. Jewellery with tax return

Right of a person during Income tax raid

1. Ladies to be searched only by a lady privately 
2. A person may have 2 respectable and independent persons of his choice from the locality as his witness.
3. A lady has the right to go after being searched if according to customs.
4. Children may be allowed to go to school after the bag check.
5. A medical practitioner may be called in case of emergency.
6.  To have meals at a normal time
7. To inspect seals before and during the reopening
8. To have a copy of Punchnama
9. To have a copy of statement give used against him
10. To inspect the books or account

Duties of a person during a raid

1. To allow complete and unhindered access in the premises business or residential during the raid being conducted.
2.  Hand over all the important documents like Books of Accounts, Property documents etc.
3. To help officers investigate by explaining the ownership or help identify the documents.
4. To identify everyone, present on the premises and their relationship must be established in front of the officers. IT officials must not be manipulated by impersonation. If he cheats or plays fraud by pretending to be some other person or knowingly substitutes one person for another, it is an offence punishable under section 416 of the Indian Penal Code.
5. There should be no entry of any authorised person in the premises during the ongoing raid the person being must make sure of this.
6. A Person or anyone close to him must not get rid of any article without knowledge or notice of the authorised officer. If any person does the above mentioned then he will be made liable under section 204 of Indian penal code and maybe be imprisoned or fined or both.
7. Must answer all questions honestly and to the best of his knowledge.
8.  If the person gives false statement while under oath or affirmation there can be punished with imprisonment or fine or both Under 181 sections of IPC
9. If knowingly false information is provided to the officers by the person investigated he can be made liable under Section 191 of IPC for giving false information.
10. Panchnamas, Inventories and other documents need to be signed.
11. Cooperate and maintain peace during the research and even do the same if follow up investigation is done.

Rights of a person after a raid

The Person under whose custody there are Any books of account or any other important document may make copies or take extracts but in the presence of authorised officers or any other person authorized by him. An aggrieved person has the option of filing a writ petition before the High Court which has jurisdiction to challenging the raid conducted it has reasons to believe or feels that the action of the department was unfair or unreasonable. He can also challenge the assessment and file an appeal before the Commissioner of Income Tax (Appeal).

Important cases related to income tax raid

We see judgements regarding search and seizure almost every day. There are hundreds of case and multiple raids throughout India on a weekly basis. Some important case laws that come from these judgements are as follows.

Trial by Media. Case name- Rajendran Chingaravlelu V. R.K.Mishra, Addl.CIT(2-10) 320 ITR1 (SC) (10)

The court, in this case, put an end to the practice followed by officers to inform the News and Media organisation even before the completion of raids. This great judgement brought an end the evil practice of trial by media and media are informed only after the full raid is completed so that the innocent do not suffer.

Non-Resident premise search. Case Name – Ram Kumar Dhanula v. UOI (2001) 252 ITR 205 (Rajasthan High court) 

The court made it clear that no matter if a person is a Non- Resident his premise can still be searched by the Income tax if they have reason to believe there are undisclosed income and assets.

Constitutional validity Case name – Pooran Mal v. DIT (1974) 93 ITR 505 (SC)

The Supreme Court helped that Section 132 of IT act and rule 112 of IT rules 1962 are not violative of Article 19 of the Indian constitution. This provides for reasonable restriction to article 19 of the constitution.

MP Sharma v Satish Chandra 1954 AIR 300

This held that search and seizure is a temporary interference with the right to hold article and premises. There are safeguards which make sure that this is not misused one of them being that permission is sought from the Highest officers of the department.

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