Govindaswamy v. State of Kerala (2016) : case analysis

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April 10, 2024

This article is written by Thejalakshmi Anil. This article deals with the case of Govindaswamy v. State of Kerala (2016) and provides a detailed analysis of the same. It includes a description of the facts, legal issues raised, arguments by the parties, and the judgement given by the court.

it has been published by Rachit Garg.

Table of Contents

Introduction

The case of Govindaswamy v. State of Kerala involved the gruesome rape, assault and murder of 23-year-old Soumya by the accused, Govindaswamy. This brutal crime sent shockwaves across the country. It brought into the spotlight the debate on the death penalty in 2016, as the accused in this case was awarded the death penalty by the Trial Court, which was later confirmed by the Kerala High Court. However, this was overturned by the Supreme Court of India, acquitting Govindaswamy of the charge of murder, but the charge of rape was upheld. Subsequently, the mother of the deceased filed a review petition, which the Apex Court dismissed on the grounds that there was no clinching evidence to prove the intent to murder by the accused.

This case, much like the infamous Nirbhaya case, incited widespread rage against Govindaswamy, who was attacked by mobs more than once during the course of his trial. When the accused was ordered to death by the Trial Court, the crowd erupted with jubilation, distributing sweets and garlanding the public prosecutor.

However, this case also raises concerns regarding the continuing arbitrariness of the death penalty. The crime was followed by popular bloodlust, with calls for his execution in Kerala, and almost the entire state embracing the verdict of the Trial Court. In Bachan Singh v State of Punjab (1980), the Supreme Court held that the death penalty was to be awarded only in the “rarest of the rare” cases. This effectively places a very onerous burden to be fulfilled before a death sentence is awarded. Here, the judges not only disagreed on whether the death penalty should be imposed but also fundamentally disagreed on the question of whether the accused had committed the offence.

This article seeks to look at these issues in greater depth, by looking at the facts of the case. This article tends to scrutinise the arguments of the parties, the relevant laws in dispute and the judgement given. Finally, a short discussion on the review petition, the disputed question of law therein and an analysis of this case is also dealt with.

Details of Govindaswamy v. State of Kerala (2016)

Name of the case

Govindaswamy v. State of Kerala

Equivalent citations

AIR 2016 SUPREME COURT 4299, AIR 2016 SC (CRIMINAL) 1342, (2016) 4 CURCRIR 8, (2017) 98 ALLCRIC 347

Type of the case

Criminal Appeal

Parties to the case

Appellant

Govindaswamy

Respondent

State of Kerala

Court

The Supreme Court of India

Bench

Justice U.U. Lalit, Justice Prafulla C. Pant, and Justice Ranjan Gogoi.

Author of the judgment

The judgment was authored by Justice Ranjan Gogoi on behalf of the other judges.

Date of the judgment

15 February 2016

Laws involved

Sections 375, 376, 302, 325, 394, 397, and 447 of the Indian Penal Code, 1860

Facts of Govindaswamy v. State of Kerala (2016)

The deceased was a woman of around 23 years of age, working in the city of Ernakulam in Kerala. On the 1st of February 2011, while travelling by train back to her home in Shornur for her engagement ceremony, she was attacked by the accused, a habitual offender who noticed that she was alone in the ladies’ compartment. The accused assaulted her by repeatedly banging her head against the compartment. She then fell off the train onto the tracks. The accused then proceeded to jump out of the train, moved the woman nearby, and raped her. He also ransacked her belongings.

This version of events was supported by the passengers travelling adjacent to the compartment in which Soumya was assaulted. A pastor who was travelling in the next compartment told the police that he had heard Soumya’s cries. However, he was dissuaded from pulling the alarm chain on the train by a middle-aged man standing at the door of the compartment, who claimed that the girl had escaped from her attacker by jumping out of the train. \Upon reaching the Shornur railway station, they brought to the attention of the guard of the train that they had heard the cries of the deceased from the ladies’ compartment. This led to a search for both the deceased and the accused. Soumya was found still alive but badly bloodied, injured, and largely unresponsive on the side of the railway track. Though she was rushed to the hospital, she unfortunately passed away a few days later. The accused was arrested within 48 hours, and the investigation wrapped up in 90 days. The Thrissur Fast Track Court awarded the death sentence nine months after the incident. This was confirmed by a division bench of the Kerala High Court, which observed that the incident shook the collective conscience of the community.

The medical evidence highlighted the cause of her death as the presence of multiple injuries. However, for the purpose of the case, the Supreme Court considered two to be especially relevant in accordance with the post-mortem report. The first was caused as a result of hitting the head of the victim against a flat, hard surface. The second was due to the fall from the train from a height of 5-8 feet. The cause of death was due to a combination of these two injuries, along with the supine position in which the deceased was kept by Govindaswamy for the purposes of the assault.

The accused was also apprehended shortly after the incident. It is interesting to note that he voluntarily confessed to the doctor conducting the examination that he had committed the crime.

Issues raised

The main legal issues raised in this case were:

Whether the accused can be held guilty for the relevant charges under the IPC?
Whether the second injury (the fall from the train) that ultimately led to the death of the victim (Soumya) can be attributed to the accused or not?
Whether the accused is liable for the murder of the deceased?

Arguments raised by the parties

Appellant’s Arguments

In the High Court, the counsel for the accused argued that the trial court had not appreciated the evidence and failed to consider the facts in its proper perspective.

The appellant raised the argument that there was an inordinate delay by the prosecution in registering the First Information Report (FIR). They contended that the railway authorities and local police had received information about the crime on the same day as the incident. However, the FIR was only registered at 3.30 AM the next day.

The accused has also argued that the sperm taken by police in assistance with the doctor was made use of for fabricating evidence against him. This was dismissed by the court as being incredulous.

Another argument raised by the accused was for a lesser alternative for the offence of murder other than the death penalty. It was argued that there was no premeditated attempt to murder by the accused and this had occurred in the spur of a moment.

In the Supreme Court, the appellant once again contested his conviction for murder and appealed against the death sentence imposed on him. Here, his argument was that there existed no clear evidence which would go on to show that the accused had pushed the deceased out of the train causing the second injury. The possibility that she herself had jumped out could not be ruled out. It was also argued that he did not have the knowledge that by keeping the deceased in the supine position for sexual assault.

Respondent’s arguments

According to the prosecution, the accused who was a habitual offender rushed into the compartment of the victim upon noting that she was alone. Subsequently, he proceeded to assault her due to which she was rendered dazed and immobile. Then, she was pushed by him from the running train to the track. Following this, the accused jumped out after her, dragged her to the side of the tracks, raped her and ransacked her belongings. The prosecution version was supported by two witnesses who heard her cries and also saw the accused jump out the train.

With respect to the argument raised by the accused regarding the delay for filing the FIR, the State relied on precedents like State Of Himachal Pradesh vs Shree Kant Shekari 13 September (2004) and State of Punjab v Ramdev Singh (2004) wherein it was held that a mere delay in lodging the FIR cannot be mechanically used to doubt and discard the case of the prosecution. In case, the prosecution is able to satisfactorily explain the cause of such delay, then it cannot be used as a reason to disbelieve the version of the prosecution.

Considering the lack of material particulars available such as the identities of the victim and accused, the extent of the crimes committed such as if deceased had been raped or not, or whether she had been pushed off the train or not, the Kerala High Court held that considering the circumstances which has been clearly explained by the prosecution, a mere delay of less than 4 hours is no delay at all. The court held that with evidence raised by the prosecution, they have been able to establish the circumstances cogently and evidently.

With regards to the punishment for murder, the prosecution argued for the highest sentence considering this case to be falling within the ambit of ‘rarest of the rare’ doctrine. The High Court concurred with this analysis.

With regards to the nature of the second injury was of special interest to both parties, the State argued that, due to the impaired mental reflexes of the deceased resulting from the first injury, she could not have made the decision to jump. According to the prosecution, the accused caused the fall of the deceased from the train which along with the first injury and its complications led to the death of the victim. Hence, it was argued that the accused should be held liable for murder.

Laws discussed in Govindaswamy v. State of Kerala (2016)

The accused in this instance was convicted under Section 376, Section 394 read with Section 397 IPC, Section 447 IPC, and Section 302 IPC. As mentioned earlier, due to the gruesome nature and gravity of the crime, the trial court had awarded the death penalty to Govindaswamy. This was also confirmed by the High Court. The appellant subsequently challenged it before the Supreme Court.

Before moving on to the specific judgment given in this case, it is also pertinent to look into specific Sections and their scope that have been raised in this case.

Section 375 r/w Section 376 of IPC

Section 375 deals with the offence of rape, which is defined as forcible sexual intercourse with a woman against her will. Under this Section, a man is said to commit rape if his actions fit within any of the seven clauses laid down under Section 375. This includes, but is not limited to, the penetration of the penis or any object or portion of the body of a man into any of the orifices of the woman, which includes the vagina, urethra, anus, or any other part of her body.

Section 376 of the IPC lays down the punishment for committing the offence of rape. According to this Section, the punishment for rape ranges from imprisonment for 10 years to life imprisonment, along with a fine imposed on the accused.

Section 376(2) lays down certain instances which would be considered as an aggravated form of rape, incurring higher punishment. This includes instances of rape committed by a police officer on a woman in his custody in the police station and rape of a pregnant woman, to name a few, covering 13 cases in total. In such instances, the punishment includes rigorous imprisonment of a term of 10 years, which may extend to life imprisonment, along with an imposition of fine.

Section 376 also addresses the rape committed against a woman who is under the age of 16. In these cases, the punishment is rigorous imprisonment for a term not less than twenty years which may extend to life imprisonment, and a fine payable to the victim.

Therefore, while Section 375 describes what constitutes the offence of rape, Section 376 lays down its punishment and specifies instances of what could be considered aggravated rape.

Section 300 r/w Section 302 of IPC

Section 300 of the IPC lists various circumstances that amount to murder and are punished under Section 302 IPC. These circumstances centralise around the intention of the accused.

The first clause is straightforward stating that an act constitutes murder if it is committed with the intention of causing death. According to the second clause, a person is liable for murder if they intend to cause an injury that the offender is aware is likely to cause death. The third clause covers instances where there exists an intention to cause an injury which in the ordinary cause of nature would be enough to cause the death of the victim. Therefore, what needs to be proved here is that the perpetrator intended an injury that would be sufficient to cause death ordinarily.

The Trial Court and the Kerala High Court in the Govindaswamy case found the acts of the accused falling within the ambit of Section 300(thirdly), holding him liable for murder.

In Basappa v.State (1958), the accused assaulted the deceased using a sharp weapon on the nape of his neck while he was standing on the rooftop of a building. To escape the accused, the victim jumped off the roof. Following this, the accused threw the body of the deceased onto a burning haystack. Here, there was some uncertainty as to what exactly caused the death of the victim due to the combination of injuries he suffered. However, the Court held that even though the circumstances in which the death occurred in all three situations were different, due to the interconnection between the actions, they may be taken as one consolidated act.

In Joginder Singh v. State of Punjab (1979), the accused was allegedly chasing the deceased with a dangerous weapon across a field. The deceased jumped into a well to escape from the accused but he drowned. Here, there was a lack of evidence to suggest that it was the accused who drove the deceased to jump. Due to the inconclusive evidence, the Court argued that the accused could not be held liable due to the absence of elements of intention or knowledge specified in the provision.

Additionally, since the court placed reliance on the evidence law principle of Res Gestae becomes relevant in this regard, this principle is further discussed in this article.

Section 6, Indian Evidence Act, 1872

Section 6 of the Indian Evidence Act, 1872 embodies the exception to the rule of hearsay and is usually referred to as the Principle of Res Gestae. Generally, hearsay evidence is inadmissible in the law of evidence. However, according to this doctrine, hearsay evidence may be admissible if it is a part of the same transaction. This includes facts that are so closely connected with the event in time and flow from it that they can be considered as a part of the same event. The spontaneity of the act is important in such cases.

In the case of Vasa Chandrasekhar Rao v. Ponna Satyanarayana (2000), it was held that the phone call made by the father of the accused to the deceased’s father was not admissible since it did not form part of the same transaction.

In Ratten v. R (1971), the victim had called the police for help, but before the operator could connect her to the police, the call got disconnected. Later, her dead body was recovered from the house where the call was made, and it was ascertained that the time of death and the time of the phone call were almost the same. Therefore, it was held that the call made to the police came under the purview of Section 6.

In Gentela Vijayavardhan Rao and Anr. v. State of Andhra Pradesh (1996), the long interval between the act of carnage and the recording by the magistrate of the statement was found to be inadmissible.

In Kapoor Singh Rana v. State of Delhi (2005), the accused had thrown acid on the face of the victim. When her mother arrived, she found her daughter crying as she entered, upon which the daughter stated that it was the accused who had thrown the acid on her face. The Court held that the statement of the mother constituted res gestae and was admissible.

Section 366 (1) of CrPC

Additionally, Section 366(1) of the Code of Criminal Procedure, 1973 (CrPC) becomes relevant. According to Section 366(1), a death sentence passed by the Court of Sessions must be submitted to the High Court. The death penalty will only be executed if it is confirmed by the High Court.

In Mohinder Singh v. State of Punjab (2013), it was held that in cases where the Sessions Court passes the death sentence, the case should be referred to the High Court. The High Court can only deal with these cases as a court of reference. In doing so, the High Court needs to independently examine the entirety of the evidence and come to its conclusion regarding the guilt or innocence of the accused. While considering such a case, the Court must dispose of the reference for confirmation by considering the proceedings in all its aspects and come to a conclusion independently based on the material on record, distinct from the views expressed by the Sessions Judge.

In State of Tamil Nadu v. Rajendran (1999), it was held that while considering a reference under Section 366, the High Court has to satisfy itself as to whether a case beyond reasonable doubt has been made out against the accused for imposition of the death penalty. Therefore, the Court should not only look at the conclusions of the Session Judge and the merits of the case but also examine the entire evidence on record.

Section 325 of IPC

Section 325 of the IPC lays down the punishment for voluntarily causing grievous hurt. Section 320 lists eight instances classified as ‘grievous’ in nature, including emasculation, injuries resulting in loss of eyesight or hearing, disfigurement of face and head, and fractures or dislocations of any bones or teeth, among other injuries. This is a cognizable offence punishable with imprisonment of a term extending to 7 years, along with an imposition of a fine.

Issue-wise judgment of Govindaswamy v. State of Kerala (2016)

As discussed earlier, the primary question was whether the accused could be held liable for the murder of the deceased. The court examined whether the nature of the injuries inflicted on Soumya could be considered sufficient in the ordinary course to cause death, or if any other clause under Section 302 could be made applicable. The judgment turned on whether the accused could be held responsible for the second injury. In this case, multiple injuries led to the death of the victim. In such cases, when multiple causes lead to a particular consequence, the issue of intervention becomes relevant. Intervention refers to a situation when another event or another act by a third person displaces the causal responsibility of the accused for the actus reus. When this happens, a break in the chain of causation occurs. The issue of whether there was such a break in causation became pertinent in the Govindaswamy case.

Whether the accused can be held guilty of the relevant charges under the IPC

The Court held that the accused is undoubtedly guilty with respect to the offence under Section 376. The conviction of the accused was confirmed by considering the postmortem report, DNA profile, and witness statements, which included those of the doctor conducting the postmortem and the Assistant Director, D.N.A. in the Forensic Science Laboratory, Trivandrum. The Court found that the existence of the DNA profile was decisive in confirming the liability of the accused. The offence of rape was committed on a barely conscious and bloodied Soumya and was termed as ‘necrophilic’ by the Kerala High Court. Due to the gruesome nature of the act and on account of the extreme injuries inflicted to satisfy the carnal urges of the accused, the Court upheld the life sentence which had been awarded by the Trial Court.

With respect to the crimes outlined under Section 394 alongside Section 397 of the IPC, dealing with the offences of voluntarily causing hurt in order to commit robbery and robbery with the attempt to cause murder or grievous hurt, the available evidence was sufficient to demonstrate the guilt of the defendant. Following the perpetration of the crime, the defendant took the deceased’s mobile phone and sold it. This phone eventually came into the possession of a witness, from whom law enforcement later confiscated it.

Whether the second injury (the fall from the train) that ultimately led to the death of the victim (Soumya) can be attributed to the accused or not?

The Court held that while the accused could be held liable for the first injury, since the possibility of the deceased herself jumping out of the train cannot be ruled out, the accused cannot be conclusively held to be liable for the second injury.

Whether the accused is liable for the offence under Section 302 of IPC, i.e., the murder of the deceased?

This issue pertained to the culpability of the accused under Section 302 and the appropriate punishment. The deceased in this case suffered from two injuries, which, coupled with being kept in the supine position during the sexual assault, led to her death. The first injury arose as a result of her head being repeatedly struck against the walls of the compartment. The second injury was due to the blunt force of falling from the running train onto the tracks.

As mentioned before, under Section 302, an intention to cause death or knowledge that the act is likely to cause death is required. Even though keeping the deceased in a supine position did have a bearing on her death, the intention of the accused in keeping the deceased in the said position was for the purpose of sexual assault. Moreover, the accused cannot be attributed with the knowledge that the said act may result in death, as such knowledge and information are typically imparted during the training of medical and paramedical staff. Therefore, the court held that the offence under Section 302 could not be made out against the accused. Instead, the Court held the appellant to be guilty under Section 325.

The court, thus, partially allowed the appeal filed by the accused in this instance. The convictions under Sections 376 (punishment for rape), 394 read with 397 (offences of voluntarily causing hurt in order to commit robbery and robbery with the attempt to cause murder or grievous hurt), and 447 (punishment for criminal trespass) and sentences imposed for the commission of the said offences were maintained. However, the conviction under Section 302 for murder was set aside and altered to one under Section 325, which lays down the punishment for voluntarily causing grievous hurt.

Review Petition

A review petition was filed by the mother of the victim and the State of Kerala in this case. This review petition was heard by a six-judge bench composed of then Chief Justice J.S. Khehar, Justices J. Chelameswar, Dipak Misra, Ranjan Gogoi, P.C. Pant, and U.U. Lalit. It was filed by the mother of the victim with assistance rendered by Justice Markandey Katju, who had previously expressed his criticism of the case on his Facebook page. In response, the Bench issued a notice requesting him to appear before the Court to address his reservations during the review petition filed by the State and the victim’s mother. The advocates arguing for the petitioners were Shri K.T.S. Tulsi, learned senior counsel, and Shri Mukul Rohatgi, learned Attorney General on behalf of the State of Kerala, Shri Ahmadi, and Shri Luthra, learned senior counsel appearing for the review petitioner.

While several arguments were advanced, the Court compartmentalised them into two categories: firstly, the decision of the Court has been faulted for its reliance on hearsay evidence, and secondly, whether this offence falls within the third and fourth clauses of Section 300 IPC.

Firstly, the Court placed reliance on the statements of two prosecution witnesses who had merely ‘heard and believed’ a middle-aged man. However, this middle-aged man was never brought to trial before a court. This constitutes ‘hearsay evidence’ which the petitioners argued should have been rejected summarily. Hearsay evidence is excluded on the ground that it is always desirable for the Court to examine the person whose statement is relied upon.

However, the Court used the evidence law principle of res gestae to justify the reliance on the testimony. The Court held that the statement made by the middle-aged man was contemporaneous and spontaneous and was not disputed subsequently. Additionally, this was also the version of the prosecution. Therefore, the Court held that the evidence of the two witnesses with respect to the middle-aged man was not discredited as it aligned with the prosecution’s version.

Secondly, the Court had to decide if the offence fell within the third and fourth clauses of Section 300. Justice Katju argued that the repeated banging of the victim’s head by Govindaswamy (causing the first injury) would fall within the ambit of clause three of Section 300. He contended that since the head is a pivotal part of the body which is highly sensitive, repeated hitting of her head would indeed cause death ordinarily. The prosecution also relied on the cases of Basappa and Joginder to support their argument.

The Court held that in Basappa, there was a clear intention to cause death or at least bodily injury so as to bring the offence under the third and fourth clauses of Section 300. However, in this case, since the role of the accused in causing the second injury is not free from doubt and the first injury in itself is not sufficient to cause death, this precedent could not be applied. The Court emphasised that for murder to fall within the ambit of the third instance in Section 300, the injury caused by the accused must be sufficient in itself to cause death in the ordinary course of nature. Since the postmortem report clearly said that the first injury was only sufficient to render Soumya dazed and insensitive, and would not be the exclusive cause of her death, the Court held that this provision could not be applied.

The petitioners also attempted to use the extra-judicial confession of the accused made to the doctor as a line of argumentation. The prosecution placed reliance on B.A. Umesh v. High Court of Karnataka (2011) and M.A. Antony v. State of Kerala (2009), where extra-judicial confession was accepted since it was made to a doctor and no evidence suggested that a policeman had been present. While this was accepted in the Trial Court and the High Court, it was rejected by the Apex Court. The Court held that such an extra-judicial confession does not inspire confidence in this instance.

Therefore, the Court dismissed the review petition and upheld the previous decision of the Apex Court in this case.

Analysis of Govindaswamy v. State of Kerala (2016)

In this case, the dispute was whether the accused committed the murder or the deceased or not. The Supreme Court by holding that since the possibility of whether Soumya jumped out or was pushed off could not be conclusively determined acquitted Govindaswamy of the charge. However, if the Court had given weightage to the principles of causation, this would no longer have been relevant in determining the liability of the accused for murder.

While arguing along the lines of principles of causation, the appellant might argue that the causal sequence, which began with him forcefully hitting the victim’s face against the walls of the train, was interrupted when the victim chose to jump out. However, a commonly accepted rule regarding victim intervention suggests that the causal sequence remains unbroken if the victim’s actions are in response to the accused’s actions and are within a foreseeable range. In this scenario, even if Soumya chose to leap from the train, it wouldn’t disrupt the causal link, given that the train was moving at a moderate speed, making her decision a conceivable measure for her protection. Therefore, her actions were within a foreseeable range, maintaining the causation chain.

This viewpoint is reinforced by international case laws where victims have jumped from moving vehicles or buildings to escape assaults by the accused. For instance, in R v. Roberts (1971), the victim jumped out of a moving vehicle to save herself from sexual assault. The Court held that the accused was responsible for the injuries caused to her by her decision to jump out of the car since it was due to his actions that she acted as she did.

In another case, Regina v. Paul Gowans and Barry Hillma (2003), the accused seriously injured the deceased, causing them to fall into a coma. While in the hospital, the victim’s wounds became infected as a result of which he passed away. The court held that the accused caused the death of the victim, as he would not have passed away without the initial attack by the defendant.

Hence, by overlooking this crucial aspect and placing its entire reliance on hearsay evidence, the Court erred in wrongly acquitting the defendant of liability for the offence of murder.

Conclusion

The Soumya rape case is indeed a chilling incident that created massive anguish among the people of the country. Soumya was alone on the train for a mere 10 minutes when Govindaswamy pounced on her. This case shows how, just by the fact of being a woman, females in India face a profound sense of insecurity and threat. This is further exemplified by the recent gang rape of a Spanish woman tourist in Jharkhand, which has highlighted the dangers faced by women in India. This case highlights one of India’s most rampant problems: the struggle to curb the rising sexual violence against women. Reports of such horrific sexual assaults on women have almost become commonplace in India, with around 31,316 rape cases recorded in 2022, representing a 20 percent increase from 2021. Considering the stigma associated with rape, the actual number is likely to be much higher.

What is even more horrifying is the fact that this tussle was heard by passengers who, even after hearing her distressed cries, did not come to the aid of Soumya. The Kerala High Court strongly criticised the insensitivity and selfishness of the passengers for failing to come to the rescue of the deceased. Moreover, the role played by the middle-aged man who dissuaded passengers from pulling the alarm train again highlights the selfishness of the community. Indeed, this also shows how the Indian Railways failed to secure the safety of the female passengers.

Frequently Asked Questions (FAQs)

What is a review of judgment?

According to Article 137 of the Indian Constitution, the Supreme Court has been conferred the power to review any of its orders of judgments. This power has to be read with the Supreme Court Rules framed by the Supreme Court under Article 145.

In criminal matters, the powers of review of the Supreme Court are laid down in Supreme Court Rules, 2013 in Part IV Order XLVII and are limited to examining if there is an error apparent on the face of the record. The procedure for filing a review in criminal law is provided under section 397 of the CrPC.

In civil cases, review is to be done in accordance with Section 114 of the Code of Civil Procedure, 1908. According to the rules of the Supreme Court, this must be filed within a month from the judgment or order of which the review is sought. Additionally, the same bench that delivered the judgment must review it.

How is the review of a judgment different from its appeal?

In an appeal, the higher court re-hears the case at hand, considering all aspects of the original trial to determine if any errors were made in the application of the law or legal principles. In criminal cases, the procedure for filing an appeal has been provided under Chapter 29 of the CrPC from Section 372 to 394. Whereas, in civil law, Sections 96–112 of the CPC covers appeal.

However, in a review, the court’s scope is narrower; it re-examines its own decision and focuses on rectifying apparent errors that would lead to grave injustice. Review is undertaken if there is discovery of new evidence. The process of a review petition is extremely rigorous due to the principle of stare decisis (stand by what is decided). The grounds for consideration in such a petition are the discovery of new and important evidence, an error that is apparent on the record, and other sufficient reasons.

What is hearsay evidence?

Hearsay evidence refers to the testimony or other evidence presented by a witness in the court about statements made by other individuals outside of the court. In simple terms, it is the evidence presented by one person about what they heard from another person, instead of witnessing it on their own. Under Section 60 of the Indian Evidence Act, hearsay evidence is prohibited except in certain limited circumstances.

What is Article 124(7)?

According to Article 124(7) of the Constitution of India, a person shall not plead or act in any court or before any authority in India if this person had previously held office as the Judge of the Supreme Court.

Was Article 124(7) attracted in this case?

In this case, Justice Katju had raised apprehensions about whether Article 124(7) could be made applicable. However, J. Katju did not appear as the counsel of the victim. Moreover, asking him to provide his opinion does not constitute an ‘act’, as according to the principle of statutory interpretation, this should be interpreted in line with the word ‘plead’. Therefore, this Article was not attracted to the Govindaswamy case.

References

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Healthcare’s vital role in addressing social determinants of health

By

Vanshika Kapoor

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April 9, 2024

0

This article has been written by Sarita Sah pursuing a Remote freelancing and profile building program from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Table of Contents

Introduction

For many years, the main agenda of the healthcare system was to treat disease after it became apparent. A more complex picture, however, is painted by our growing understanding of the Social Determinants of Health (SDOH), which shows that factors other than medical care have a major impact on both individual and community health outcomes.^[1] Social, cultural, and environmental factors are all included in SDOH and influence people’s places of birth, residence, education, employment, and recreation. These factors, which include social support networks, housing, education, and income, can have a significant impact on health risks, healthcare access, and general well-being.

Research constantly shows a strong correlation between SDOH and health outcomes. Poverty and low levels of education are associated with increased rates of chronic illnesses, shorter life spans, and increased susceptibility to health hazards. For example, children from low-income families are more likely to experience developmental delays, obesity, and mental health challenges. Additionally, individuals residing in unsafe neighbourhoods with limited access to healthy food and quality healthcare face increased risks for various health problems.

Social determinants of health

Economic factors

The most important and vital factor is income inequality, which has a significant impact on health outcomes. Individuals with lower incomes often face food insecurity, inadequate housing, and limited access to quality healthcare, contributing to higher rates of chronic diseases and poorer overall health. The other side is unemployment and underemployment, which lead to stress, financial insecurity, and limited access to health insurance, further exacerbating health disparities.

Educational factors

Education level significantly impacts health outcomes. Individuals with higher education levels tend to have better health literacy, healthier lifestyles, and access to preventive care, leading to better health outcomes. It has an indirect effect on economic factors and the lifestyle of an individual.

Unequal access to quality education across different socioeconomic groups contributes to health disparities. Children from disadvantaged backgrounds may lack access to healthy school meals, physical activity opportunities, and comprehensive health education, putting them at a disadvantage for future health.

Social and community

Moral values of individual and mental peace are very essential for good health. Today, living in a society with high crime rates and limited access to green spaces can lead to chronic stress, anxiety, and a fear of participating in outdoor activities, negatively impacting physical and mental health. To overcome the above-mentioned problem, a social support network is the only solution. Strong social support networks provide individuals with emotional support, resources, and a sense of belonging, contributing to better mental and physical health outcomes. Conversely, social isolation and a lack of support can increase vulnerability to health problems.

Interplay of social determinants and health

The statistical study from various healthcare journals and websites that have significant data shows the consequences and factors responsible for the health concerns. A few insights from some publications show concern, which includes social determinants.

A 2020 study published in Journal of American Medical Association found that individuals living in the lowest income quintile had a life expectancy 4.8 years shorter than those in the highest income quintile.
A 2021 study in the Journal of Public Health found that adults with less than a high school education were twice as likely to report poor health compared to those with a college degree.

In India, the healthcare system shows a complex picture. The public healthcare system here, offers subsidised care to a large population, but access and quality remain uneven, especially in rural areas. Private healthcare flourishes, catering to those who can afford it, widening the access gap. This scenario highlights the urgent need to address not just healthcare access but also the underlying factors that contribute to health disparities.

Identifying vulnerable populations

A confined section of the population all over the world is disproportionately affected by negative SDOH, including low-income individuals, racial and ethnic minorities, immigrants, and individuals with disabilities. The vicious cycle of poor health limits education and employment opportunities, perpetuates poverty and widens the health gap. Identifying these vulnerable populations is very important for targeting interventions and policy changes.

Crucial role of healthcare

Healthcare systems all over the world have a vital role to play in addressing SDOH. Here are some key strategies:

Integrating SDOH into healthcare practices: Screening patients for social risks during routine care allows for early identification of needs and connections to relevant community resources, such as food banks, housing assistance programmes, or mental health services.
Enhancing cultural competence: Culturally competent healthcare providers understand and respect the diverse needs, values, and beliefs of their patients, leading to better communication and trust and, ultimately, improved health outcomes.
Implementing community-based healthcare initiatives: Collaborating with community organisations to deliver healthcare services in accessible locations, such as schools or community centres, can improve access to care for underserved populations.

Policy and advocacy

Good policies always play a crucial role in addressing SDOH at a systemic level. Healthcare professionals and institutions together can advocate for policies that promote health equity, such as universal access to quality education, improved sanitation infrastructure, and social protection programmes. This systemic approach can create a more enabling environment for good health.

Universal access to quality education:

Education is a fundamental human right and a key determinant of health outcomes.
Good policies should ensure equitable access to quality education for all individuals, regardless of their socioeconomic status or geographic location.
Investing in education can break the cycle of poverty and improve health outcomes by providing individuals with the knowledge, skills, and resources they need to make healthy choices and navigate complex health systems.

Improved sanitation infrastructure:

Access to clean water and adequate sanitation is essential for preventing the spread of diseases and promoting good health.
Good policies should prioritise investments in improving sanitation infrastructure, particularly in underserved communities.
Ensuring access to safe water and sanitation can significantly reduce the burden of waterborne diseases and improve overall health outcomes.

Social protection programmes:

Social protection programmes play a vital role in reducing poverty and ensuring that individuals have access to basic necessities, such as food, housing, and healthcare.
Good policies should strengthen social protection systems and expand coverage to vulnerable populations.
Social protection programmes can help to reduce health disparities and promote social inclusion, ultimately leading to better health outcomes.

Advocacy and collaboration:

Healthcare professionals and institutions have a responsibility to advocate for policies that promote health equity.
They can work with policymakers, community organisations, and other stakeholders to raise awareness about the importance of addressing SDOH and to advocate for evidence-based policies.
Collaboration between healthcare professionals, policymakers, and communities is essential for developing and implementing effective policies that address the SDOH.

Monitoring and evaluation:

It is important to monitor and evaluate the impact of policies on health outcomes.
Regular monitoring and evaluation can help to identify policy gaps and areas for improvement.
By continuously monitoring and evaluating policies, policymakers can ensure that they are effective in improving the health and well-being of individuals and communities.

Challenges and opportunities

There are many challenges in implementing SDOH-focused interventions. Some challenges to focus on are:

Lack of awareness and data: Healthcare professionals often lack training in identifying and addressing SDOH. Comprehensive data on SDOH and its impact on health outcomes is scarce.
Fragmented healthcare system: Collaboration between different sectors and levels of government is often weak, hindering coordinated efforts.
Limited resources and funding: Integrating SDOH interventions requires additional resources, which can be scarce in resource-constrained settings.

Despite these challenges, opportunities do exist:

Government partnerships and funding: Collaborations between government and healthcare institutions can leverage resources and expertise for scaling up interventions.
Innovative financing models: Social impact bonds and pay-for-performance models can incentivize investments in SDOH interventions based on demonstrated outcomes.
Technology and data-driven solutions: Technology can facilitate screening, referrals, and data collection to monitor progress and inform policy decisions. Mobile health platforms and telemedicine can reach remote populations and overcome access barriers.

Conclusion

A very good quote by Dr. Mark Hyman – “What most people don’t realise is that food is not just calories: it’s information. It actually contains messages that communicate with every cell in the body.” It directly shows how we should proceed to work together for a better and healthier life. Now it’s time for our policymakers to work on it. SDOH, through healthcare, is a powerful strategy for achieving health equity. Though challenges exist, the potential benefits are vast. Prioritising SDOH, allocating resources, and fostering an environment that supports sustainable interventions call for coordinated action by stakeholders, legislators, and healthcare professionals. We may advance towards a future where everyone has the chance to realise their full potential in terms of health by adopting this all-encompassing approach.

References

Towards a greener future : demystifying principles of sustainability and climate action

By

Vanshika Kapoor

-

April 9, 2024

0

This article has been written by Vikram Anand pursuing a Diploma in Business English Communication for International Professionals and Remote Workers course from Skill Arbitrage.

This article has been edited and published by Shashwat Kaushik.

Introduction

Sustainability is at the forefront of the global agenda today. The growing focus on development is more out of need than out of academic interests. It is, in fact, transforming global dynamics. There is an international commitment and push to work on the ongoing and proposed initiatives in this domain. Hence, it is imperative that we understand the fundamentals of sustainability and the associated areas so we can appreciate and accept the forthcoming changes, as the world is set to evolve through green technology and cross-cultural exchange of thoughts and international policies.

The objective of this article is to acclimatise the reader to the background, contemporary developments and future trends at the global economic and geopolitical levels as the world endeavours to achieve a sustainable future. Heightened public awareness would lead to seamless acceptance of the sustainability culture that is about to reshape our civilization in the times ahead.

Understanding sustainability

Sustainability is a broad term that encompasses 3 pillars:

Environmental sustainability
Social sustainability
Economic sustainability

This history of sustainability goes back to 1969, when 33 African nations adopted a Declaration at the International Union for Conservation of Nature (IUCN). During that period, though African countries were experiencing economic development, they were also facing challenges like the depletion of their natural resources. This led to growing concerns among these nations. For the first time, the term ‘sustainable development’ was officially introduced to signify the co-relation between conservation of national resources and economic growth.

The next significant event in history with a heightened focus on ‘sustainability’ was the United Nations Conference on the Human Environment in Stockholm in 1972.

During the late 1960s and early 1970s, the international community realised that, along with progressive economic development and rapid population growth, the world had started experiencing resource scarcity, a rise in environmental pollution and industrial accidents.

To address these concerns at a global level, the United Nations convened an international conference in Stockholm in 1972, where representatives from 114 nations participated. During the conference, an actionable roadmap was formulated at the global level, starting with outlining 26 principles to ensure sustainable development. It further consolidated the concept of sustainability, catalysing global environmental reforms. It also led to the establishment of the United Nations Environment Programme (UNEP) and the formation of ministries and environmental agencies in the majority of countries around the world.
This was followed by the next historic development, the Brundtland Commission Report in 1987, titled “Our Common Future,” published under the leadership of the Chairman of the World Commission on Environment and Development (WCED), Gro Harlem Brundtland. The objective of the report was to investigate and propose solutions to strike a balance between economic and social development and environmental protection.

The report also presented a widely adopted definition of ‘Sustainable Development’ as: “A development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

This historic report led to a series of landmark events, like the Rio Earth Summit in 1992, which led to the adoption of Agenda 21, a global blueprint for sustainable development.

What followed next were important international conventions and sustainability events, such as:

The United Nations Framework Convention on Climate Change (UNFCCC): This was a groundbreaking convention to call for international cooperation on addressing climate change. This further led to theadoption of Kyoto Protocol in 1997, which came into force only in 2005.
The Convention on Biological Diversity was signed in 1992 to promote the conservation and sustainable use of biological diversity
World Summit on Sustainable Development (Johannesburg, 2002), whose objective was to set new targets for sustainable development
Establishing 8 Millennium Development Goals at Millennium Summit of the United Nations in 2000 to be achieved during the period from 2000-2015
Sustainable Development Goals (SDGs): In 2015, the UN adopted 17 ambitious SDGs to address global challenges by 2030. These goals cover a wider range of issues than the MDGs and emphasise the interconnectedness of social, economic, and environmental dimensions of sustainable development.
Yet another important landmark development under UNFCCC has been adoption of Paris Agreement in 2015.

As a consequence of the above developments, over the years, there has been a heightened focus on technological innovations in the domains of renewable energy, resource efficiency, and green technologies to accelerate progress towards sustainable development.

Understanding the concept of climate change

Climate change refers to the long-term changes in the patterns of global temperatures that have affected the Earth’s climate eco-system. The main contributors to climate change are greenhouse gases, viz., Carbon-di-oxide (CO2), Methane (CH4) and Nitrous Oxide (N2O). Typically, these cases trap the heat in the earth’s atmosphere. This natural phenomenon is called ‘The Greenhouse Effect.’ It is necessary to keep the planet warm and support life. However, human activities such as rampant burning of coal and fossil fuels have intensified this effect over the years, leading to a rise in overall temperature and causing global warming.

Historical context of climate change

When it comes to studying the history of climate change, we can divide the world into two eras: before and after the industrial revolution.

Before the Industrial revolutions of the 18^th Century, there were variations in the Earth’s climate because of natural causes such as Volcanic eruptions, alterations in solar radiation, etc. Climate change because of these factors was extremely slow process, spreading out over several centuries and even millennia.

However, the Industrial revolution of the 18^th & 19^th Centuries brought about major shifts in the economic as well as environmental landscapes of the world. The rapid industrialization led to widespread burning of coal and fossil fuels viz. oil and gas, for industrial use, transportation and energy generation. As a result, there was a significant release of gases such as CO2, Methane, nitrous oxide and others into the atmosphere, leading to an increasing greenhouse effect and a rise in global temperatures.

There have been severe consequences because of climate change. The glaciers have started melting, oceanic levels are rising; there have been increased incidences of floods, cyclones and hurricanes, leading to ecological imbalance.

Need for a solution

The first historical evidence of the greenhouse effect can be traced back to the 19^th century, when some of the then scientists such as John Tyndall and Svante Arrhenius, calculated the effect of CO2 emissions on the greenhouse effect and theorised the possibility of global warming. During the second half of the 20th century, scientists started presenting serious research on the environmental impact of increasing greenhouse gases due to the burning of coal and fossil fuels, leading to global warming. This started drawing global attention towards the detrimental effects of climate change, both in scientific as well as geopolitical circles.

Recognition and action towards climate change

The establishment of the Intergovernmental Panel on Climate Change (IPCC) in 1988 was a stepping stone towards global movement in this direction. It’s a UN body that prepares comprehensive assessment reports about the state of scientific, technical and socio-economic knowledge on climate change, its impacts and future risks, and options for reducing the rate at which climate change is taking place.

This was followed by the signing of an International environmental treaty called United Nations Framework Convention on Climate Change (UNFCCC) in 1992 at the Earth Summit in Rio de Janeiro, Brazil, to combat “dangerous human interference with the climate system.”

Later in 1997, the KYOTO Protocol was signed under the UNFCCC framework to set emission reduction targets for developed countries.

As we entered the 21^st century, the global community started getting more and more serious about the impact of climate change. One of the most landmark events has been the signing of the Paris Agreement in 2015, which involved 196 countries in undertaking ambitious efforts to combat climate change with enhanced support to assist developing countries.

The Carbon Footprint

In line with the concept of climate change, another term that has gained immense popularity since the early 2000s. It’s called ‘Carbon Footprint’. It is nothing but the total amount of greenhouse gases (GHGs) emitted by individuals, products, companies and organisations. It is measured in terms of Carbon dioxide equivalents (CO2e) as a benchmark of different gases’ potential factors for global warming.

Today, with the advancement of technology, there are various calculators, software, and processes available to calculate carbon footprints. Additionally, carbon footprint measurements have become part of corporate, national and international climate policies.

The future will see more stringent norms and targets for carbon footprint reduction in line with the goals of the Paris Agreement and other international events such as COP28 and other summits to curtail global warming. There will be advances in technologies with a greater focus on using renewable energy sources, EVs, energy efficient devices, and carbon capture and storage technologies.

Today, the planet demands international cooperation towards climate action policies to reduce carbon footprints, right from individual levels to government bodies, setting global standards, driving innovation, and adopting environmentally friendly practices in the pursuit of a sustainable future.

Understanding ‘net-zero’ and ‘decarbonization’

It is important to understand these key terminologies as integrated elements of sustainability. Let’s try to decode the concept of ‘net zero’.

In the previous part of the article, we understood that because of increased human activities, there are higher emissions of greenhouse gases (GHGs) such as Co2, Methane and Nitrous oxide (N2O). Hence, there is deliberate focus and dedicated global efforts to reduce the emission of these greenhouse gases and their removal from the earth’s atmosphere. Net zero is a term used for the ideal condition where the quantum of greenhouse gases released into the earth’s atmosphere is equal to the amount of GHGs removed. This is also called “carbon ‘neutrality’.

The process of reducing the emission of GHGs into the atmosphere is called “decarbonisation.” It also refers to the process of removing carbon from materials such as steel and cement.

There has been a sequence of events to emphasise the need for decarbonisation. Today, a majority of nations and organisations have shared their commitments and net-zero goals for the coming years.

Oil & gas, power and transportation are the biggest contributors of GHGs. These industries are fundamentally obliged to take the necessary steps to mitigate their emission effects. However, all industries must come together to achieve the ambitious net-zero targets for a more sustainable future.

Crucial role of energy sector

Considering the urgency of addressing the global agenda of climate change and building a sustainable future, the energy sector is poised to play a pivotal role. The transformation of this sector has not just become a necessity, but it also presents a huge opportunity to redefine the conventional patterns of energy production, distribution and consumption.

More than just the source of fuel supply, the energy sector happens to be the lifeblood of modern civilization that powers our homes and industries and is a direct contributor to a nation’s economy. However, its heavy overdependence on fossil fuels, primarily coal, oil and natural gas, makes it the largest contributor to greenhouse gases, climate change and its dire consequences. Additionally, the traditional energy sector is also the cause of geopolitical instability and power games on the global stage.

Therefore, the transition of the sector towards renewable energy sources would be the real catalyst to drive sustainability initiatives encompassing all 3 pillars, i.e., economic, environmental and social sustainability.

In contrast to conventional energy sources, renewable sources such as solar, wind, geothermal and hydropower offer cleaner alternatives, which can significantly reduce GHGs. We observe that there have been deliberate global efforts to make this shift possible with announcements of definite climate actions and sustainability goals by the participating nations. With these countries committing to net zero goals, the race towards harnessing renewable energy sources has become more competitive.

With stringent environmental regulations in effect after a series of global summits, maximising energy efficiency has become mandatory for two principal reasons:

To reduce emissions
To achieve the same degree of output with less energy consumption, thus reducing the overall carbon footprint.

Technological innovations are playing a major role in this transition process. Carbon Capture Utilisation and Storage (CCUS) that captures and utilises CO2 emissions, grid modernization, H2 energy and other smart technologies are paving the way for innovative solutions to reduce the dependence of economies on conventional sources.

The energy sector not only has an impact on the environment but also on the economy. In fact, it is considered an engine and key driver of the economic growth of a nation. With a shift towards renewable energy, there will be new markets and job opportunities. It could also empower remote communities, particularly in developing nations, thereby addressing the problem of social inequalities.

Thus, a balanced transition would lead to more resilient and diversified economies. It, however, calls for a supportive government policy addressing the economic and social impacts of transitioning away from conventional energy, with large corporations pledging their support through investments in green technologies and suitable infrastructure.

Decarbonization targets and international commitments

As covered in the previous sections, it is very crucial to set up decarbonisation targets to ensure that global warming is limited to 1.5 degrees compared to pre-industrial levels. These targets are set by specific countries and organisations to reduce their carbon emissions and are often expressed as a percentage reduction from baseline levels by a certain year, or as achieving net-zero emissions by a specific date.

International commitments

The turning point for international commitments has been the Paris Agreement of 2015. Under this agreement, there was not just heightened seriousness towards reducing carbon emissions, but concrete actions were formulated. Every participating country under the agreement was required to outline and communicate their climate actions and intended emission called Nationally Determined Contributions (NDCs), towards Net Zero.

The Paris Agreement has mandated the participating countries to update their NDCs every 5 years. As a result, many countries have updated their NDCs with ambitious decarbonisation targets. Countries such as France, Denmark, Japan, Korea, Canada and others have pledged to reach net zero by 2050. The majority of the Non state players, like businesses, investors, cities and regions, have risen to the occasion to set their decarbonisation targets to 50% emission reduction by 2030 and achieve net zero by 2050.

There have also been visionary initiatives such as the Climate Action Accelerator, whose mission is to set a trend in society by empowering the greatest number of organisations to halve their emissions by 2030 and contribute to reaching net-zero by 2050.

Another noteworthy initiative has been the formation of the Climate Ambition Alliance (CAA) at UNSG’s Climate Action Summit 2019 which includes 120 nations and several other private players that are responsible for 23% of current greenhouse-gas emissions worldwide and 53% of global GDP. Its purpose is to increase the ambition levels of the participating nations towards climate action.

Under the United Nations Framework Convention on Climate Change, a global campaign called ‘Race to Zero’ has been launched in line with the Climate Action Accelerator; to halve carbon emissions by 2030 and progressively move towards achieving the net zero targets by 2050! It is aimed at drawing support from businesses, cities, regions, and investors towards the common goals.

Despite these commitments and initiatives, there are still significant gaps between where we are currently with reference to the NDCs and the goals set up under the Paris Agreement. To close these gaps, it is important to increase ambitions, followed by accelerated actions.

There is also a greater need to augment the financial mechanisms, especially for developing nations, to comfortably adopt the mitigation measures for climate change. A noteworthy initiative in this direction is the establishment of the Global Climate Fund.

Thus, along with deliberate commitments, decarbonisation efforts would call for significant investments in renewable energy. Technological innovation in low carbon technologies such as carbon capture and storage, hydrogen fuel and enhanced battery storage would be paramount to achieving the net zero targets frozen during the Paris Agreement.

This cannot be achieved without global cooperation and shared efforts towards the common goal of a sustainable, net zero future.

Socio-economic benefits of sustainable energy

I am sure you must have fairly gauged by now that the shift towards sustainable energy will not just have an impact on the environment, but it will also find its way into the socio-economic spectrum. This drive is expected to have immense benefits to individuals, communities and nations at large.

Let’s dive deeper into the topic and cover the list of socio-economic benefits:

Economic growth and job creation

Renewable energy sectors like solar, wind, geothermal, etc. have the potential to create far more jobs than traditional energy sectors revolving around coal, oil and gas. Thus, in this process of job creation, there will be job opportunities in green infrastructure, manufacturing, the installation of facilities and also R&D.

Technological innovation

There will be an immense degree of technological innovation and advancements happening in the coming years as companies attempt to improve their operational efficiencies and reliability, followed by the energy transition process in an attempt to meet their net zero targets.

Improved public health

Fossil fuels, which have been the sources of traditional energy, were largely responsible for environmental pollution, which had a direct impact on ecological imbalance and the loss of public health. By virtue of sustainability programmes, there will be cleaner air and purer water, which will improve health and well-being and reduce health care costs, leading to a better quality of life.

Access to energy for all

Sustainability initiatives with decentralised systems like solar panels and microgrids can facilitate deeper penetration of energy into remote and unserved communities. This can be instrumental for socio-economic development, leading to better education and infrastructure. Through these energy expansion projects, local communities would also receive wider economic benefits by virtue of small business development and job creation.

Social equality

Traditional energy systems have been one of the factors responsible for social inequality and injustices due to concentration of opportunities for wealth creation among certain sections of society. As a consequence, certain sections of society have even been the victim of resource depletion and environmental pollution. With decentralised renewable energy systems, access of basic necessities such as electricity to remote communities can help uplift the lives of the underprivileged. Such sustainable energy projects can help establish social equality and justice across the lengths and breadths of modern society.

To conclude, the shift towards sustainable energy will not only be instrumental in safeguarding the environment, but it will also be an important driver for the next big socio-economic revolution. What remains to be seen is how each nation, which is a party to the Paris Agreement, would align its net zero goals with socio-economic development. Thus, by embracing this energy transition, the world is paving the way for a more equitable, prosperous and sustainable future.

Challenges towards transition to renewable energy

While the proposed sustainability and climate action agenda promises a cleaner environment and a better quality of life, the road ahead is not without bumps and challenges. Let’s look at some of the challenges spanning across technological, socio-economic and geopolitical domains. It is crucial to understand these challenges in order to develop effective strategies for overcoming them.

Technological challenges

Intermittency of renewable energy sources

The principal disadvantage of using renewable energy sources like solar and wind is their intermittent availability. Unlike fossil fuels, they are not available on demand and their availability is also subject to weather conditions. This poses a big challenge for grid reliability and stability.

Grid integration challenge

Transitioning to renewable energy calls for significant modifications to the existing grid network. The existing electrical grid needs to be upgraded to handle variable energy sources.

Battery storage limitation

Because of the intermittency and unreliability of renewable energy, battery technologies and energy storage systems need to be enhanced to improve their cost, capacity and life.

Economic challenges

High upfront initial cost

Setting up or transitioning to renewable energy demands high upfront investment for solar panels, wind turbines, etc. This is comparatively much higher than traditional fossil fuel-based energy systems. This initial high infrastructure cost is a significant deterrent for underprivileged communities and developing nations.

Project financing and investment: As the RoI on renewable energy projects is not immediate, securing investment and financing for these projects happens to be a challenge, especially in developing economies.

Social and political challenges

Social acceptance

Despite the benefits of transitioning to renewable energy, there is social scepticism and misinformation. Public concerns around reliability, affordability and environmental implications need to be addressed to make renewable energy a mainstream element of society.

Policy frameworks for green energy

Sustainability and climate action goals cannot be achieved without political will and the implementation of the necessary policies for green energy. Policy frameworks need to be established in ways to make regulatory processes for energy transition and green energy projects conducive and business friendly. Every nation with climate goals needs to push political reforms in this direction.

Co-operation at geopolitical level

Although every country needs to take independent actions to achieve its net zero goals, there also needs to be symbiotic functioning among participating nations (despite mutual differences) to supplement each other as per the UNFCCC guidelines in a proactive manner.

Although these challenges are significant, they are not insurmountable. We observe that there has been a ramping up of actions to achieve the 2030 agenda for sustainable development. As the energy transition to renewables forms an important part of this agenda, we observe that despite challenges, there has been a major push towards innovation, investment opportunities, policy changes and social acceptance. By strategically addressing the hurdles, it is possible to make fast track progress towards a cleaner, greener, healthier and more sustainable future!

Role of individuals, communities and governments to achieve sustainability goals

The journey towards a sustainable future cannot be left on the shoulders of big players such as industries, business houses and governments. It needs to be a collective endeavour involving individuals and communities at the grassroot level as well.

Each entity needs to play its role to make the sustainability efforts more fruitful for materialising the desired transition.

Role of individuals

Every individual can potentially play an important role in creating a sustainable world in the following ways:

Consumer choices

As consumers are the king in today’s economy, individuals can consciously choose to buy eco-friendly products produced through green technology. These consumer shifts can drive companies to adopt sustainable practices.

Lifestyle changes

Individuals can contribute to larger goals by making conscious lifestyle changes. This can include deliberately reducing waste, conserving energy, using EVs, and using public transport. They can monitor their carbon footprints using a Sustainability App like AWorld=> https://aworld.org/

Awareness and advocacy for sustainability

Raising awareness about environmental issues and advocating for the cause of sustainability and decarbonisation by virtue of conversations, forums, social media engagements, etc. is a powerful way to bring about change. Today’s youth can play an emphatic role in this endeavour. Aspiring entrepreneurs can work on start-up ideas to offer sustainability solutions. Thus, every drop counts!

Role of communities

Just like individuals, communities can have a wider impact on sustainability in the following ways:

Local projects

Communities can roll out local sustainability projects like tree plantation, waste reduction campaigns, small scale solar energy projects, etc. These initiatives would not just lead to environmental benefits, would also foster bonding among its members as people would come together for a common objective.

Knowledge sharing and spreading awareness

Organising knowledge sharing sessions in schools and colleges, launching social media drives, etc. can help spread awareness about the need for sustainability. It can become a precursor to a mass movement to bring about the much-needed change in the mindset of people to embrace a sustainable lifestyle.

Collaborating with local authorities

An educated community can lead to good governance at the local level by ensuring that the authorities give priority to sustainable development, such as promoting eco-friendly businesses, providing infrastructure support, responsible waste management practices, et al.

Role of governments

Policy regulations: Government bodies representing the interface between local and national/international communities need to act at the macro levels to implement sustainability reforms and climate action protocols through policy regulations in line with the UNFCCC, Paris Agreement, COP summits, etc. This can include measures such as targets for reducing emission levels, stringent environmental laws, offering incentives to businesses working in the renewable energy sector, etc.

Channelizing investments towards sustainability initiatives: The government can pour in or attract foreign direct investments in research and development, green infrastructure and the setting up of renewable energy installations. This will eventually help in the energy transition to achieve net zero ambition for the nation.

Seeking international co-operation: At times, a nation might not be self-sufficient in implementing the proposed programmes and initiatives towards sustainability. That’s where the government can seek support and invite other countries to share the technology and resources needed to achieve their net zero goals.

Exploring Public Private Partnerships: An ecosystem can be established wherein businesses, industries, communities, government and non-government entities can all collaborate together to develop innovative solutions and effective implementation of sustainability initiatives.

Let’s accept the fact that the path to sustainable future is not unilateral. It requires all stakeholders-from individuals to government, to work together in harmony through interconnected actions. The collective work that this generation put together can pave the way for a better and more sustainable future for the coming generations.

Technological innovations and future trends in the energy sector

There have been rapid technological advancements and improved systems in the renewable energy space. These advancements are not just accelerating the energy transition but also helping to develop the assurance that we are moving towards a sustainable future.

Let’s look at some of the technological innovations and emerging trends happening in this sector:

Improved efficiency in harnessing renewable energy sources

With improved technology of producing cost effective and efficient solar panels, the penetration and use of solar power are increasing rapidly. Likewise, innovations in wind turbine design have reduced the installation and maintenance costs and are helping to harness the wind power in an efficient manner. In addition, technology to harness other renewable sources of energy like hydrogen, biogas, geothermal and tidal power is also being developed to make them available on a commercial scale.

Enhanced energy storage solutions

Breakthroughs are happening in the area of efficient battery storage systems. This has led to mass production and social acceptance of Electric Vehicles (EVs). Apart from conventional batteries, other energy storage technologies, such as Pumped Hydro and Compressed Air Energy storage and thermal energy storage, are also on the rise. They would soon find large scale commercial application as these solutions are becoming more and more effective and efficient.

Smart grid energy management system and digitisation

Smart Grid Technology, with digitization using IOT (Internet of Things), is revolutionising the energy networks. The technology makes it possible to predict demand, optimise grid operations and seamlessly integrate with renewable energy, thereby ensuring a resilient and stable energy system. A decentralised energy system is being explored to see where energy can be produced at the point of its use with the help of roof top solar panels and micro grids. This can provide energy security to remote communities.

In addition, a block chain energy management system is being developed where consumers could buy and sell excess renewable energy, creating collaborative and efficient energy dynamics.

Carbon Capture Utilisation and Storage (CCUS) technology

One of the most effective technologies to facilitate decarbonisation efforts is CCUS. The purpose of this technology is to effectively capture and utilise high concentrations of CO2 emissions arising out of industrial activities, primarily due to fossil fuel usage. The captured CO2 is liquified and transported to areas where it can be stored in underground beds without any harmful impact on the environment. Thus, CCUS offers an effective mechanism to safely manage CO2 emissions, especially in those sectors and regions where complete decarbonisation would be difficult to achieve.

The above innovations and mitigation strategies are a few of the current trends happening in the energy sector to combat climate change. As these technologies continue to evolve, there will be further breakthroughs that will accelerate progress towards achieving sustainability goals.

Laws for environment protection in India

India, a country known for its rich biodiversity and diverse ecosystems, has taken significant steps towards protecting its environment through various laws and regulations. These laws aim to address environmental issues such as pollution, deforestation, and conservation of wildlife, among others. Here are some of the key laws related to environment protection in India:

The Environment (Protection) Act, 1986

This umbrella legislation provides a framework for the protection and improvement of the environment. It empowers the Central Government to take measures to prevent environmental degradation and regulate the handling of hazardous substances.

Key features and provisions of the Environment (Protection) Act, 1986:

Environmental planning and policy making: The Act mandates the preparation of environmental impact assessments for certain categories of projects, ensuring that potential adverse environmental impacts are identified and addressed before the project is approved. It also provides for the formulation of environmental policies and plans at the national and state levels to guide sustainable development.
Pollution control: The Act empowers the Central Government to set standards for the discharge of environmental pollutants, including air, water, and noise pollution, and to enforce these standards through various mechanisms, such as permits, inspections, and penalties. It also addresses issues such as hazardous waste management, biomedical waste management, and the regulation of industries that generate hazardous substances.
Conservation of natural resources: The Act recognises the importance of conserving natural resources for sustainable development. It provides for the protection of forests, wildlife, biodiversity, and coastal ecosystems. It also empowers the government to declare certain areas as ecologically sensitive zones or biosphere reserves to provide enhanced protection to critical ecosystems.
Public participation: The Act promotes public participation in environmental decision-making by providing for public hearings and consultations on matters related to environmental impact assessments and other environmental issues. It also recognises the role of non-governmental organisations (NGOs) in environmental protection and encourages their participation in various environmental initiatives.
Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCBs): The Act establishes the Central Pollution Control Board (CPCB) as the apex body responsible for coordinating and overseeing environmental protection efforts at the national level. It also establishes State Pollution Control Boards (SPCBs) in each state, which are responsible for implementing and enforcing environmental regulations at the state level.

The Water (Prevention and Control of Pollution) Act, 1974

This law aims to prevent and control water pollution by regulating the discharge of industrial effluents and sewage into water bodies. It establishes pollution control boards at both central and state levels.

Key provisions of the Act:

Pollution control boards:
- Establishes Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCBs) to enforce the provisions of the Act and monitor water quality.
Prohibition of water pollution:
- Prohibits the discharge of pollutants into water bodies without prior consent from the respective pollution control boards.
- Specifies industries that must obtain consent from the CPCB and those that must obtain consent from the SPCBs.
Effluent standards:
- Sets stringent effluent standards for various industries, ensuring that the discharged wastewater meets specific pollution limits.
Water cess:
- Imposes a cess on water consumed by industries and local bodies to generate funds for implementing pollution control measures.
Penalties and fines:
- Prescribes penalties, imprisonment, and fines for violations of the Act, including discharging pollutants without consent or exceeding effluent standards.
Powers of pollution control boards:
- Empowers pollution control boards to inspect industrial premises, take water samples for testing, issue closure orders, and prosecute offenders.

Challenges and the way forward:

Despite the progress made, India continues to face significant water pollution challenges, including sewage discharge, agricultural runoff, and industrial effluents.
Strengthening the enforcement of the Act, enhancing monitoring mechanisms, and promoting sustainable water management practices are essential.
Public engagement and community participation are crucial to ensuring the long-term success of water pollution control efforts.

The Air (Prevention and Control of Pollution) Act, 1981

Similar to the Water Act, this legislation aims to prevent and control air pollution by regulating the emission of pollutants from industries and vehicles. It empowers pollution control boards to enforce emission standards and take action against violators.

Key provisions of the Air Act:

Emission standards:
- The Act empowers the Central Pollution Control Board (CPCB) and state pollution control boards to set emission standards for various pollutants, including particulate matter, sulfur dioxide, nitrogen oxides, and others.
- Industries and vehicles are required to comply with these standards to minimize air pollution.
Pollution control zones:
- The Act allows the declaration of areas as “air pollution control areas” where specific measures are necessary to address severe air pollution problems.
- Within these zones, additional restrictions and regulations may be imposed on industries and vehicles to reduce emissions.
Consent and authorisation:
- Industries are required to obtain prior consent from the respective state pollution control board before establishing or operating any industrial unit that has the potential to cause air pollution.
- The consent process involves an assessment of the unit’s pollution control measures and compliance with emission standards.
Monitoring and reporting:
- Industries are obligated to regularly monitor their emissions and submit reports to the pollution control boards.
- The boards have the authority to inspect industries and collect samples for analysis to ensure compliance with the Act.
Penalties and action against violators:
- The Act provides for stringent penalties, including fines and imprisonment, for violations of emission standards and other provisions of the Act.
- Pollution control boards can take action against violators, such as issuing stop-work orders or even shutting down industrial units that persistently disregard the regulations.
Public participation:
- The Act recognises the importance of public participation in pollution control efforts.
- It provides mechanisms for public involvement, such as public hearings and the right to file complaints with the pollution control boards.

The Wildlife Protection Act, 1972

This act provides protection to wild animals, birds, and their habitats. It establishes national parks, sanctuaries, and other protected areas to conserve wildlife and regulate the hunting and trade of wildlife species.

The Forest Conservation Act, 1980

This law aims to conserve and protect forests by regulating the diversion of forest land for non-forest purposes. It requires prior approval from the central government for any such diversion, ensuring that ecological balance is maintained.

The Biological Diversity Act, 2002

This Act recognises the importance of biodiversity and aims to conserve, sustainably utilise, and equitably share the benefits arising from the use of biological resources. It establishes a National Biodiversity Authority to regulate access to and utilisation of biological resources.

These laws, along with other regulations and policies, form the legal framework for environment protection in India. However, effective implementation and enforcement of these laws are crucial to addressing environmental challenges and ensuring a sustainable future.

Conclusion

Climate change is the single most common concern for humanity today, as the future of our entire civilization depends on the realisation of sustainability goals. Although proactive steps have been taken so far, they are not enough. More needs to be done in a collective and collaborative manner. Individuals, communities and government agencies need to come together under a unified framework to create a sustainable future.

Global initiatives such as the Paris Agreement, COP summits, etc., in which the majority of nations are seen actively participating, are a clear indication of the urgency of climate change mitigation strategies. This has been followed by the projection of net zero targets by the majority of participating nations. There is no doubt about the geopolitical ambitions to achieve sustainable goals. However, challenges surface when the rubber meets the road. Technological innovations and transformations in public perception to embrace sustainability are helping to surmount those challenges.

Driving these strategies forward will not just help protect the environment but will also foster socio-economic benefits such as improvements in public health, increased job opportunities in the renewable energy sector and a better overall quality of life!

Thus, in essence, the journey towards a greener future is a collective endeavour—one that transcends the borders of individual, societal, cultural and national differences. This is a journey of hope and transformation for our civilisation towards a greener future. By embracing the principles of sustainability and proactive climate action, we are not just safeguarding our environment but also paving the way for a prosperous, equitable, and sustainable world for generations to come.

References

Section 8 of Arbitration and Conciliation Act, 1996

By

Rachit Garg

-

April 9, 2024

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This article is written by Simran Mohanty and further updated by Subhangee Biswas. The article discusses in detail Section 8 of Arbitration and Conciliation Act,1996, its nature, essentials, maintainability, applicability, and the amendment with respect to it, along with landmark judgements. This article is aimed to provide a thorough explanation and analysis of the Section with its related terms and aspects.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

The Preamble of The Arbitration and Conciliation Act, 1996 defines the Act as one which is consolidating and amending the laws relating to domestic arbitration in India. Mainly, the 1996 Act was an improvement over the previous laws related to arbitration. The purpose of the Act is to popularise the use of arbitration to resolve disputes. Since the courts are already overburdened with cases, arbitration provides an out of court settlement procedure which not only lessens such burden on courts, but also ensures a quicker and more cost effective means of remedy for the parties involved.

To utilise the method of arbitration in order to settle disputes, parties incorporate an arbitration clause in the agreement they enter into. That arbitration agreement would stipulate that if any dispute arises, the same shall be referred to and settled by using arbitration. If the parties incorporate an arbitration clause in their agreement, and yet they decide to approach the court for dispute settlement, the purpose of including the arbitration clause will be defeated.

Section 8 of Arbitration and Conciliation Act, 1996

Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Act’) deals with the power of the judicial authority to refer the parties to arbitration. The core of the provision is that if there is a valid arbitration agreement existing between the parties and a dispute arises which is a subject matter included in the said arbitration agreement, then the judicial authority before whom either of the parties has brought the case is obligated under Section 8 of the Arbitration and Conciliation Act, 1996 to direct the parties to resolve their dispute through arbitration. This Section minimises judicial intervention by making it mandatory for the Court to direct the parties to go for arbitration if they have included an arbitration clause in their agreement. To further increase the scope of arbitration, the 2015 Amendment to Section 8 of the said Act made it compulsory for the judicial authority to refer the parties to arbitration irrespective of any decree or court order or judgement of any court. This Section is based on Section 34 of the erstwhile Arbitration Act, 1940.

2015 amendment to Section 8 of Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 was enacted with an intention to provide for speedy disposal and effective resolution of disputes through alternate dispute resolution, mainly arbitration and conciliation. It would also help to reduce the burden on the courts. However, with time, there were many shortcomings and criticisms regarding the Act of 1996.

The Ministry of Law and Justice had requested the Law Commission to undertake a study on the proposed Amendment to the Act of 1996. For this, the Law Commission set up an expert committee, studied the proposed amendments and prepared suggestions. It submitted its report in August 2014 wherein it recommended certain changes to the then Arbitration Act of 1996.

To know more about The Law Commission Report on the Amendments to Arbitration and Conciliation, click here.

The President promulgated the Arbitration Ordinance in October 2015 giving effect to a few of these amendments suggested. Since an Ordinance was introduced to give effect to the amendments, confusion prevailed regarding the applicability of the amendments- whether the effect of them would be prospective or retrospective. But the Amendment Act provided an impetus to the growth of arbitration in India. The Amendment Act was in consonance with the Law Commission Report as well as the Ordinance.

The President gave assent to the Amendment Act on 31 December 2015. Accordingly, the Arbitration and Conciliation (Amendment) Act, 2015 came into force with effect from 23 October 2015. This Amendment restricted the time limit within which an application seeking grant of reference to arbitration could be filed.

Now let us compare some of the pre and post amendment provisions of the Act for a better understanding of the change desired and given effect to.

Prior to the amendment of 2015, the provision stated that “A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.”

Post amendment, the words ‘not later than when submitting’ were replaced by ‘not later than the due date of submitting’

The Delhi High Court in the case of Parasramka Holdings (P) Ltd. vs. Ambience (P) Ltd. & Anr. (2018) carefully analysed the difference between the pre-amended provision and the post amended provision and concluded that although the pre-amendment act did have a limit for the parties seeking arbitration, the prescribed time limit was not certain and it also led to a lot of confusion. After the 2015 amendment, a definite time limit was set within which the parties are required to apply for Section 8 of the Arbitration and Conciliation Act, 1996.

Sub-section (1) of Section 8 has been amended. The amended provision states that, “A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, …, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists”. Thus, irrespective of the existence of any judgement, decree or order of any court, the judicial authority shall refer the parties to arbitration except in the circumstance that there is no existence of an arbitration agreement.

Another provision has been added, which is sub-section (2) to Section 8. This provision allows that if the party applying for reference of the matter to arbitration, does not possess the original copy of the arbitration agreement but the other party has retained it, then the first party can apply to the court for a direction ordering the other party to produce the original arbitration agreement or a certified copy of it when the parties do not possess the original document.

The Arbitration and Conciliation (Amendment) Act, 2015 made it mandatory for the judicial authority to refer the parties to arbitration under Section 8. The Supreme Court in the case of Gujarat Composite Limited vs. A Infrastructure Limited (2023), observed that the amendment of Section 8 was done on the recommendation of the 246th Law Commission Report in which it was seen that according to the proposed amendment, the only situation when the judicial authority would not refer the parties to arbitration is when there does not exist any arbitration agreement or if there is one existing, the agreement is null and void.

The 2015 Amendment is a positive step in the direction of making arbitration in India a speedy, productive and cost-effective remedy. The new changes are intended to curb the practices that led to time wastage. The Amendment makes arbitration time bound by introducing Section 29A which sets a time limitation on the Arbitral Tribunal to decide upon a matter and pronounce an award.

The Amendment makes the arbitrator accountable for any delay in the arbitration proceedings, thus ensuring that the arbitrators do not take up too many cases that they would not be able to deliver and do justice to. This makes the declaration of independence and impartiality by the arbitrators more realistic and not just a mere formality under law.

Most importantly, extra care is taken to ensure that the Court interference is reduced to a greater extent. It reduces judicial intervention, especially in the matter of appointment of arbitrators, by adding sub-section (6-A) to Section 11. This Section ensures that the judicial intervention is only limited to the existence of an arbitration agreement, and it does not go into other issues like live claims, qualifications, conditions for exercise of power, validity of the agreement, etc. This not only reduces judicial intervention but also avoids unnecessary delays in the proceedings.

Nature of Section 8 of Arbitration and Conciliation Act, 1996

The language of Section 8 is held to be peremptory in nature, which means it cannot be appealed. Therefore, it becomes mandatory for the civil court to refer the parties to the arbitration. If there is any objection to the validity of the arbitration clause or arbitration agreement, then the same has to be challenged in the arbitration proceeding before the appropriate Arbitral Tribunal. The Court cannot decide even on the validity of the arbitration agreement. The issue of applicability of the arbitration agreement is also to be raised before the concerned Arbitral Tribunal which will be the forum to decide it. The Court ought not interfere in this. This was held by the Supreme Court in Hindustan Petroleum Corporation Ltd. vs. Pink City Midway Petroleums (2003). The Section restricts the judicial intervention in adjudication of dispute to such an extent that it leaves the judicial authority with no option but to refer the parties to the dispute to arbitration. It cannot decide on the matter, nor can it decide on the validity of the arbitration agreement. It is a mandatory provision and the Court cannot exercise any discretion in this regard.

In the case of Magma Leasing and Finance Limited and Anr. vs. Potluri Madhavilata and Anr, (2010), in para 23, the Supreme Court held that, Section 8 is in the form of a legislative command and with the fulfilling of the prerequisite conditions to the provision, the court must refer the parties to arbitration. No option is left to the court other than referring the parties to arbitration.

Even if the actual agreement is terminated, the arbitration clause survives. In the case of M/S Ford Credit Kotak Mahindra vs. M. Swaminathan (2005), it was stated that the arbitration clause is considered to be distinct and separate from the other clauses of the contract. Since it is separate, it survives even in the total breach of the other clauses. The party in default still can invoke the arbitration clause. It was also highlighted in this case that the parties have to move to the Arbitration forum to discuss even the matter of termination of the contract.

In another case of Ashok Thapar vs. Tarang Exports Pvt. Ltd. (2018), the purpose of the Act of 1996, was highlighted which is to minimise the burden on the Courts as well as to expedite the matters. It was stated that once the parties have intended to refer their dispute to an arbitrator by incorporating an arbitration clause in their main agreement, any dispute relating to the main agreement or relating to the subject matter of the agreement has to be referred to the arbitrator even if the arbitration agreement is mutually terminated by both the parties.

Essential ingredients of Section 8 of Arbitration and Conciliation Act, 1996

By the plain reading of the Section, the following essential ingredients can be deduced-

Existence of a valid arbitration agreement between the parties.
An action is brought before the judicial authority, the action being a subject matter of the arbitration.
Either of the parties or any person related to the dispute should invoke the arbitration clause or agreement before the date of submitting their first statement on the substance of the dispute before the judicial authority.
The application of the party to refer the dispute to arbitration should be accompanied with the original arbitration agreement, and if the original copy is unable to be produced by either of the parties, then its duly certified copy.

Valid arbitration agreement between parties

Section 7(1) of the Arbitration and Conciliation Act, 1996 defines an arbitration agreement as an agreement through which parties can resolve their dispute which has arisen or may arise, by way of arbitration.

Section 8 requires that there must be a valid arbitration agreement existing between the parties. For the existence of a valid arbitration agreement, the very basic requirement of any agreement, which is the presence of two parties, must be fulfilled. So, before understanding more about a valid arbitration agreement, let us first know the meaning of “party” as related to this concept.

Meaning of ‘Party’

Section 2(1)(h) of the Arbitration and Conciliation Act, 1996 defines the term “party” as a party to an arbitration agreement. It can be interpreted to include bodies of persons or incorporated persons like a company. For the purpose of Section 8, the party should be the disputing party or parties who have submitted their dispute for resolution before the judicial authority.

Now comes the question whether an ‘agent’ qualifies as a ‘party’ under Section 2(1)(h) of the Act. The Supreme Court answered this issue in the case of Benarsi Krishna Commit. & Ors. vs. Karmyogi Shelters P. Ltd (2012), wherein it was held that the term ‘party’ as defined in Section 2(1)(h) indicates a person who is a party to the arbitration agreement, such definition in no way includes an agent of the party to such agreement. The same opinion was reiterated by the Delhi High Court in the recent case of the Ministry of Health & Family Welfare and another vs. M/S Hosmac Projects Division of Hosmac India Pvt. Ltd (2023). Relying on the Benarsi case, it was held that the expression ‘party’ does not include an agent or a lawyer of such a party.

Moreover, in another recent case of Cox and Kings Limited vs. SAP India Private Limited (2022), the Supreme Court held that non-signatories to an arbitration agreement can also be bound by arbitration if there is mutual intention. ‘Non-signatories’ is the term used for ‘third parties’. It means a person or an entity who has not entered into the arbitration agreement formally but is involved in the dispute which is the subject matter of an arbitration. It has to be determined if the non-signatory intends to affect the legal relations with the signatory parties and if they are bound by the arbitration agreement. It comes solely to the consent to decide who the parties are.

Then, the Supreme Court proceeded to uphold the doctrine of ‘Group of Companies’. In short, let us understand this doctrine. The doctrine is used for companies which are related to each other for being a part of the same corporate group. Considering the fact that every company in a group has a separate legal personality, a contract formally entered into by one company would not be binding on the other member companies due to the limited liability principle. This doctrine of Group of Companies doctrine is used to bind a “non-signatory company” (a company which did not sign the agreement directly) within a group to an arbitration agreement which has been signed by some other member of the group. The doctrine does two tasks simultaneously, maintains the existence of corporate separateness of the group companies and determines the common intention of the parties to bind the non-signatory party to the arbitration agreement.

Regarding the determination of mutual intention, the Court held that the courts need to look into the corporate structure to conclude if both the signatory and non-signatory parties belong to the same group then it has to consider the commercial circumstances, the conduct of parties in order to decide the common intention. Moreover, the party who wants the joinder of a non-signatory, has to prove that all these factors have been fulfilled to the satisfaction of the court. If a non-signatory is actively involved in the performance of the contract and the conduct is also in harmony with the other members of the group, it is assumed that the non-signatory party is a ‘veritable party’ (actual party) to the contract which has the arbitration agreement included in it.

In the final conclusion of the judgement, it was held that the definition of ‘parties’ includes both the “signatory” and the “non-signatory” and the consent of the parties can be the basis to determine their consent to be bound by the arbitration agreement.

Essentials for the arbitration agreement

According to Section 7(2) of the Arbitration and Conciliation Act, 1996, an arbitration agreement can be in the following forms:
1. Included as an arbitration clause in the same agreement or;
2. Separately in the form of another agreement.
The arbitration agreement should be in writing [Section 7(3)]. In this regard, Section 7(4) provides the documents in which an arbitration agreement can be said to be contained:
1. Document which is signed by the parties,
2. Any exchange of letters, telegrams or telecommunication, or similar documents including those made through electronic means. Such exchange must provide for a record of the agreement,
3. An exchange of statements of claim and defence in which the existence of the arbitration agreement can not be denied by any party.
When there is a reference to a document containing an arbitration clause in a contract, such document will be regarded as an arbitration agreement only if the contract is in writing.

In the case of Garware Wall Ropes Ltd vs. Coastal Marine Construction and Engineering Ltd.(2019), the court iterated that to examine the prima facie validity of an arbitration agreement, the judicial authority needs to determine the following:

Whether the arbitration agreement is in writing?
Whether the arbitration agreement was contained in the exchange of letters, telecommunication, etc?
Whether the core contractual ingredients of the arbitration agreement are satisfied?
Also, determine the arbitrability of the subject matter, which will be discussed in the paragraph below.

Arbitrability of the subject matter of dispute

In simple terms, arbitrability means the ability of a dispute to be settled by arbitration. Similarly, non-arbitrable means disputes which can not be resolved through arbitration, which can be settled using a court process only, or rather, some other process but not arbitration. In arbitration law, a dispute must be arbitrable in order to be settled using arbitration. As per the requirements of Section 8, the subject matter of the dispute must be capable of being resolved using arbitration.

The Supreme Court of India in 2011 enlisted 6 categories of dispute which are not arbitrable in the case of Booze Allen & Hamilton Inc. vs. SBI Home Finance Ltd. and Ors.,(2011). The list is as follows:

Disputes related to criminal offence or fraud,
Matrimonial disputes,
Guardianship matters,
Insolvency and winding-up matters,
Testamentary matters, and
Eviction or tenancy matters.

In the same case, the Supreme Court also has mentioned three facets of non-arbitrability. These are as follows:

Whether the disputes can be resolved by adjudication and settlement by arbitration?
Whether the disputes are covered by the arbitration agreement? In other words, the disputes need to be mentioned in the arbitration agreement as the matters which are to be decided by arbitration.
Whether the parties have referred the disputes to arbitration? In other words, the disputes need to fall under the scope of the submission to the Arbitral Tribunal.

Post the 2015 amendment, the Hon’ble Supreme Court of India added another category of non-arbitrable subject-matter through the case of Shri Vimal Kishor Shah & Ors vs. Mr. Jayesh Dinesh Shah & Ors, (2016). The category being disputes arising out of a Trust Deed. The reason behind including this category in the non-arbitrable subject-matter list is that there is no arbitration agreement between them even though the trust deed includes an arbitration clause. This is because the execution of the trust deed is done by the testator and not the beneficiaries, so the beneficiaries are non-parties to the trust deed. Hence, there is no arbitration agreement.

The Supreme Court laid down the following test in the landmark case of Vidya Drolia vs Durga Trading Corporation, (2021), which helps in ascertaining the arbitrability of a subject matter-

Disputes which are related to actions in rem, and do not relate to rights in personam arising out of rights in rem;
Disputes that affect the third party rights; or have erga omnes (towards all) effect; or require centralised adjudication, and mutual adjudication would be inappropriate and unenforceable;
Disputes which are related to inalienable sovereign and public interest functions of the State; and
Disputes which are expressly or by necessary implication non-arbitrable as per mandatory statute”

To know more about the landmark case of Vidya Drolia vs. Durga Trading Corporation (2021), click here and here.

Again, in Gujarat Composite Limited vs. A Infrastructure Limited (2023), there was an original agreement between the parties. Then, they had entered into another additional agreement. The dispute arose from the additional agreement, but the arbitration clause was mentioned in the original agreement only. However, all the agreements were related to the same property.

The Supreme Court denied reference to arbitration because the establishment of a contractual relationship from the original agreement does not ipso facto lead to the availability of the arbitration clause for dispute arising from a different agreement (here, additional agreement).

In another case of Hero Electric Vehicles Private Limited vs. Lectro E-Mobility Private Limited (2021), the issue was whether Intellectual Property (IP) disputes could be resolved by arbitration.

The Delhi High Court, upholding the arbitrability of IPR disputes, stated that under Section 8, rights in personam are arbitrable in nature. It was stated that if there is a valid arbitration agreement existing then it is obvious that any dispute between the parties ought to be referred to arbitration, it is only when there is a clear “chalk and cheese” case of non-arbitrability that the court would not invoke the arbitration clause.

Maintainability of application for insolvency under Section 8 of Arbitration and Conciliation Act, 1996

Insolvency disputes cannot be resolved by arbitration under Indian law. Insolvency proceedings are in rem which means they involve the rights of a third party, which makes the subject matter of the dispute non-arbitrable.

Prior to the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) in India, the Apex Court in the case of Haryana Telecom Ltd. vs. Sterlite Industries (India) Ltd, (1999), held that the power to order the winding up of the enterprise of a commercially insolvent company is vested in the Companies Act, 1956. Moreover, it concluded that notwithstanding any agreement between the parties, an arbitrator has no power to order the company to wind up.

Recently, a landmark judgement was passed by the Supreme Court bench of 3 judges, namely- CJI SA Bobde, Justices AS Bopanna and Justice V. Ramasubramanian in the matter of Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund, (2021). This case has been dealt with in detail in the later portion.

The court had observed that during the pendency of proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, the Court has to first decide on the application under Section 7 of IBC. The IBC deals with the initiation of a corporate insolvency resolution process by a financial creditor. Now two cases may arise, first situation is that if the application under Section 7 is allowed, that is, if the adjudicating authority comes to the conclusion that the corporate debtor has in fact defaulted, then the insolvency proceeding is initiated which falls under the list of the non-arbitrable matters, the proceeding becomes in rem and outside the scope of arbitration, then any application for referring the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 would not be maintainable before the court.. The second situation is if the application under Section 7 does not succeed, that is, there is no default. Then the adjudicating authority need not decide the application under Section 8 and the parties can go for the alternate remedies available to them.

Maintainability of an application alleging fraud under Section 8 of Arbitration and Conciliation Act, 1996

In the case of Booz Allen, it was concluded that the matters related to criminal offences and fraud are not arbitrable.

In the case of A Ayyasamy vs. A Paramasivam & Ors., (2016), the question regarding the arbitrability of matters involving alleged fraud came up before the Supreme Court. The Court held that a mere allegation of fraud cannot be a ground to reject the application for reference to arbitration under Section 8. However, where the allegation is serious, then only the civil courts will have jurisdiction to adjudicate on it. In the above-mentioned case, the allegations were not that serious, hence the Supreme Court reversed the order of the lower courts and allowed the application for reference to arbitration.

Invoking arbitration clause

In simple terms, invoking an arbitration clause means to request that the parties follow the arbitration clause or agreement that they had agreed to and had incorporated in their main agreement. Invocation of arbitration clause under Section 8 would mean the act of either of the parties to submit the first statement on the substance of dispute. The first statement on the substance of the dispute works as an application bringing out the fact there is an arbitration agreement or arbitration clause existing and the party wishes to avail the remedy of arbitration to solve the dispute brought before the court.

Let us now understand what the term “First statement on the substance of dispute” means and what is the time limit for filing it.

First statement on the substance of dispute and the limitation with respect to it

Section 8 states that the party to arbitration only needs to imply to the judicial authority that there is a valid arbitration clause present before filing the first statement. This makes it compulsory for the judicial authority to refer the parties to arbitration. Section 8 also provides a time limit for the parties to invoke the arbitration clause. Within this mentioned time limit, the parties have to inform the judicial authority about the arbitration clause. The said limitation is described in the provision as “not later than the date of submitting his first statement on the substance of the dispute.”

For analysing the aforementioned expression, let’s break it into two parts-

‘first statement on the substance of dispute’
‘not later than the date of submitting’

First statement on the substance of dispute

The Supreme Court in Rashtriya Ispat Nigam Ltd. vs. Verma Transport Company, (2006), concluded that the ‘First statement’ with respect to Section 8 should be different from the expression ‘written statement’. The court also mentions that it is the duty of the judicial authority to examine whether the party has waived its right to invoke arbitration by filing the first statement.

Whereas the Delhi High Court in the case of Sharad P. Jagtiani vs. Edelweiss Securities Limited (2014) held that there is no specific manner in which a party has to file its first statement on the substance of the dispute under Section 8. In a suit, generally, the first statement on the substance of the dispute is the ‘written statement’ filed by the defendant. It is also the reply to the plaint and therefore, the written statement could be regarded as the first statement on the substance of the dispute. Thus, if the defendant in its written statement mentions the fact that there is an arbitration agreement existing between the parties which includes the subject matter of the suit, it will be in compliance with Section 8 and the defendant need not file anything separately. The Court then ought to refer the parties to arbitration.

Further, in the case of Greaves Cotton Ltd. vs. United Machinery and Appliances, (2018), the Apex Court held that an application seeking an extension of time for filing the written statement would not amount to the ‘ First statement of the substance of dispute’.

In MI2C Security Facilities Pvt. Ltd. vs. North Delhi Municipal Corporation , (2018), the Delhi High Court stated that if the party has filed its first statement without informing the judicial authority of the arbitration clause, then it would be presumed that the party has waived off its right to invoke the arbitration clause. In the mentioned case, the defendant had filed a short affidavit as a reply to the writ petition filed. The court held that since the affidavit filed was a reply, therefore it was the first statement.

In the case of G. Rajarajan vs. Aig Consumer Financial Services (2012), the Madras High Court has held that filing a petition under Order XXXVII Rule 3(5) of The Code of Civil Procedure, 1908 (Summary suit) for leave to defend does not mean filing of statement on the substance of the dispute as under Section 8 this Act.

To know more about Order XXXVII of CPC, 1908, click here.

In the case of Stellar Industries vs. International Combustion (India) Ltd. (2008), the Bombay High Court has held that the application for leave to defend cannot be called ‘first statement’. Moreover, the Bombay High Court in the case of The Companies Act vs. Mr. Keval Krishan Arora (2009) has held that ordinarily, the reply of the defendant to the summon for judgement would be the first statement on the substance of the dispute as provided under Section 8.

In the case of Drive India Enterprise Solutions Ltd. vs. Haier Telecom (India) Pvt. Ltd. (2018), the Bombay High Court has held that the expression “first statement on the substance of the dispute” refers to the submission of the party to the jurisdiction of the judicial authority by offering to defend the suit. Such a submission waives off the right of that party to invoke the arbitration clause as per Section 8 of the Act. Even an affidavit can be said to be the first statement unless the affidavit indicates that the defendant does not want the judicial authority to take up the issue and adjudicate upon his rights and liabilities but wants the domestic forum to decide that.

In Nemai Chandra Roy Karmakar vs. Sarada Construction (2023), the issue was whether an application under Section 8 filed along with a written statement can be considered to have been submitted before submission of the first statement on the substance of the dispute.

In this case, the petitioner was the owner of a property and the defendant was to develop a building there with a condition to complete it within a stipulated time. Due to non-performance, the petitioner cancelled the registered power of attorney. The defendant took possession of the property, and this led the petitioner to file a title suit. Then the defendant filed an appeal. Then again, the plaintiff filed a petition under Article 227.

The High Court directed to preserve the property under the possession of the defendant and held that no third party interest is to be created till the decision of the application of temporary injunction is pending. This led to the defendant to file an application under Sections 5 and 8 of the 1996 Act along with a written statement praying to refer the dispute to arbitration as per the terms of the development agreement. This application was allowed, and the dispute was referred to arbitration while putting a stay order to the title suit filed.

The petitioners have contended that the application under Section 8 should have been filed before submitting the first statement on the substance of the dispute, whereas the defendant had already participated in the proceeding by filing the written statement.

The Court held that the petitioner should have filed the application under Section 8 before the first statement, in order to waive his right to participate in arbitral proceedings. It was held that filing of an application under Section 8 with a written statement cannot lead to the presumption that the defendant has waived his right to refer the dispute for arbitration.

After going through the above-mentioned judicial precedents, it can be concluded that to constitute a statement as the first statement on the substance of the dispute, the judicial authority needs to examine the components of the statement so filed by the defendant and also the intention behind it. If the statement is of the nature that it is defending the parties against the plaint, then it would be the first statement. If there is no mention of an arbitration clause or agreement in the first statement, it is implied that the parties have submitted to the jurisdiction of the judicial authority, waiving of their right to arbitration.

Not later than the date of submitting

This expression is interpreted to mean that a time limit has been set within which the parties are supposed to invoke the concerned arbitration clause or agreement before the judicial authority. This must be done before the date of submitting the first statement. This concept can be well explained with the help of some case laws.

In the case of Anis Ahmad S/O Zahir Ahmad vs. Hongkong and Shanghai Banking (2005), it was stated that an application for referring a dispute to arbitration should be made no later than when submitting the first statement on the substance of the dispute.

In this case, there was no mention of the existence of any arbitration clause in the application for leave to defend. The defendant at a later stage filed an appeal that the arbitration agreement should be given effect to. The Delhi High Court held that in a suit under Order XXXVII of CPC, 1908 for leave to defend, the first submission of the defendant on the substance of the dispute takes place when an application for leave to defend is filed. If the defendant has not raised the issue of the existence of an arbitration agreement between the parties in that application, then the defendant cannot be allowed to bring up the plea of the existence of an arbitration agreement after there has been substantial progress in the suit.

The case of Krishan Radhu vs. The Emmar Mgf Construction Pvt. Ltd (2016) gives an insight into the interpretation of the phrase ‘not later than the date of submitting’ before and after the 2015 Amendment.

Three major changes, which were the result of the amendment, were highlighted in this case. One of the effects was that the amendment shortens the period by which the application under Section 8(1) is to be presented. Before the amendment, the phrase used was ‘not later than when submitting the first statement on the substance of the dispute’ whereas the amended provision uses the words ‘not later than the date of submitting the first statement on the substance of the dispute’.

The pre-amendment provision allows the party seeking reference to arbitration to apply for such reference even while submitting his reply or written statement. This is clear from the words “when submitting” as mentioned in the pre-amendment provision which can be held to imply that the application could be done simultaneously with the filing of the written statement. Hence, if the written statement was filed and the party was seeking reference to arbitration, simultaneously, the submission of the written statement could not be construed as a waiver of the right for reference.

Under the amended provision, the party has to invoke the arbitration clause and apply for reference by moving an application. However, the party is not required to file the written statement or any reply which presents the statement on the substance of the dispute. After the amendment, submission of a written statement or any such reply presenting such statement may be interpreted as a waiver of the right to seek reference to arbitration or as submission to or acquiescence of the jurisdiction of the court where action has been brought by the plaintiff.

There is a limitation period provided under the amended provision of Section 8 within which the application to invoke an arbitration agreement has to be presented and such limitation period is indicated by the phrase “not later than the date of submitting”.

In the matter of SSIPL Lifestyle Pvt. Ltd. vs. Vama Apparels (India) Pvt. Ltd (2020), the Delhi High Court decided on the issues related to the time limit for filing an application under Section 8. The court clarified that the ‘written statement which is required to be filed by the defendant party in accordance with the provisions of Order VIII Rule 1 of the CPC would be the first statement on the substance of the dispute. The court proceeded to state that the limitation period for filing of the written statement under Code of Civil Procedure for non-commercial suits would be 90 days and for commercial suits under the Commercial Courts Act, 2015 would be 120 days from the date of summons. In the above-mentioned case, the party had intimated the court about the arbitration clause after the expiry of 120 days. Hence, the court rejected the reference to arbitration.

Before this, the Supreme Court of India had stated in another case named M/s SCG Contracts India Pvt. Ltd. vs. K.S. Chamankar Infrastructure Pvt. Ltd. & Ors (2019) that the nature of the limitation period of 120 days in commercial suits is mandatory and not discretionary.

In conclusion, it can be safe to state that Section 8 provides a time limitation for the parties to file the first statement. As mentioned above, it is 90 days for civil original suits and 120 days for commercial suits. During this period of 90 and 120 days, the parties need to apply for arbitration before the court. In case the parties fail to do so, it will be considered that they have waived off their right to arbitration. The intention behind fixing the time limit is to avoid unnecessary delay in commencing the arbitral proceedings as the sole purpose of arbitration is to provide a speedy disposal of disputes.

Obligation of the judicial authority to refer the parties to arbitration

The words in Section 8(1)-“Judicial authority… notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid agreement exists.” indicates that if all the conditions precedent are fulfilled, it makes the judicial authority obligated to refer the parties to arbitration, and subsequently, the jurisdiction of the civil court in the action brought before it, comes to an end.

The same was iterated in the case of Agri Gold Exims Ltd. vs. Sri Lakshmi Knits & Wovens Ltd, (2007). The issue in this case was whether there was a dispute existing between the parties. The Supreme Court noticed that the arbitration agreement entered into by the parties was of a wide amplitude and included any sort of dispute that could arise. It was stated that Section 8 is peremptory in nature and where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration as per the terms of such arbitration agreement. Finally, the court held that there was an undisputed existence of an arbitration agreement and upheld the decision of the High Court of referring the dispute between the parties to arbitration.

As the words of Section 8(1) mention, there is an exception to the mandatory obligation of the court to refer to arbitration, which is when there is no prima facie existence of a valid arbitration agreement. If we think in simple terms, if there is no valid arbitration agreement, then the basis on which the reference is made vanishes. So then, the obligation of the court also loses its obligation. A valid arbitration agreement must be existing. Validity is important because an invalid arbitration agreement will be no less different than a non-existing one.

In the case of Gujarat Composite Ltd vs. A Infrastructure Ltd and ors, the Commercial Court and High Court had refused reference to arbitration due to the absence of an arbitration agreement related to the subject matter of the suit. In this case, the arbitration clause was in a different agreement and the dispute arose regarding a different tripartite agreement. Since there was no arbitration clause or agreement related to the tripartite agreement, the Supreme Court upheld the view of the Commercial Court and High Court and declined the prayer for reference to arbitration.

Sub-section (3) to Section 8 provides that the arbitration can commence or continue and the arbitral award can also be made even though an application under sub-section (1) is pending before such judicial authority. This gives authorization to carry on with the arbitration proceedings even when the matter is pending before the court, meaning thereby, that the arbitration proceedings and the court proceedings can exist and continue simultaneously.

In Punjab State Co-Operative Supply vs. Shiv Rice and General Mills and another (2000), the plaintiffs had prayed that the defendants be restrained from proceeding with the arbitration proceedings during the pendency of the suit. In this regard, the Punjab High Court held that the courts cannot restrain the defendants or the arbitrator to proceed with the arbitration proceedings. It further stated that Section 8(3) contemplates a situation where the matter is pending before the courts and still the arbitration may be commenced or continued and an arbitral award may be made. Hence, even if the concerned civil suit was pending in the civil court, the matter could be referred to arbitration and the arbitrator could proceed with the arbitration proceedings. Moreover, the aggrieved party has the remedy to challenge the award under Section 34 of the Act.

Requirement of original arbitration agreement or its certified copy

Section 8(2) mandates that the parties have to submit the original arbitration agreement along with the application under Section 8 in order to seek reference to arbitration.

But there can be a situation where the party applying does not have the original arbitration agreement. Maybe the other party withholds it.

To cover this situation, a proviso has been provided. The proviso mentions that in such a situation when the party applying for arbitration does not possess neither the original arbitration agreement nor its certified copy, and the other party has retained the agreement, it becomes the responsibility of the first party who is seeking arbitration to file a petition praying the court that the other party be ordered to produce the original agreement.

The Supreme Court in the case of N Radhakrishnan vs. M/S Maestro Engineers and Others (2009) has held that it is a mandatory requirement under Section 8(2) to file the original copy of the contractual agreement.

In the case of Magma Leasing and Finance Limited and Anr. vs. Potluri Madhavilata and Anr, (2010), the Supreme Court had emphasised the conditions which were to be satisfied for Section 8 to apply and one of the conditions mentioned was the submission of the original arbitration agreement or its duly certified copy.

The Supreme Court in Ananthesh Bhakta vs. Nayana S. Bhakta and ors (2016) has held that the interpretation of Section 8(2) has to be done in such a manner so as to mean that the court shall not consider any application filed under Section 8(1) by a party unless it is accompanied by the original arbitration agreement or its duly certified copy. However, the filing of the application without the original agreement or its certified copy will be accepted if, at a later stage of the proceedings, when the court examines the application, the original arbitration agreement is brought on record. In such a case, the application shall not be rejected.

The Karnataka High Court in Transvahan Technologies India vs. Sepson India Pvt. Ltd. (2018) stated that Section 8(2) uses the phrase “shall not be entertained”. It prohibits the entertainment of the application under Section 8(1) unless it is accompanied by the original arbitration agreement or its duly certified copy.

Again, the Patna High Court in Om Astha Construction Pvt. Ltd. vs. Axon Construction Pvt. Ltd. (2018) has held that Section 8(2) suggests that there is a restriction on entertaining an application under Section 8(1) unless such application is accompanied by an original arbitration agreement or its duly certified copy. However, there is no compulsion to produce only the original arbitration agreement, since the Section allows the production of a ‘duly certified copy’ to satisfy the requirement of Section 8(2).

Again in the case of Alstom T&D India Ltd. vs. M/S Texcel International Pvt. Ltd (2020), the issue came before the Madras High Court whether the requirement to file the original arbitration agreement or its duly certified copy along with the application under Section 8 is mandatory or directory. In this case, it was seen from the record that the appellant neither produced the original agreement containing the arbitration clause, nor its certified copy. It was stated that Section 8(1) mandates that the applicant seeking reference to the suit to arbitral proceedings has to file the original arbitration agreement and, in its absence or inability to produce the original, the certified copy of it.

Factors to be considered before entertaining an application under Section 8 of Arbitration and Conciliation Act, 1996

Section 8 also provides the conditions precedent to its entertainment, i.e., the conditions which need to be fulfilled before a reference is made under Section 8 of the Act of 1996. Sub-sections (1) and (2) to Section 8 enumerate these conditions which are required to be fulfilled in order to refer the parties to arbitration. On the fulfilment of such conditions, it is mandatory for the court to put a stay to the court proceedings and refer the parties to arbitration.

In the case of P. Anand Gajapathi Raju & Ors. vs. P.V.G. Raju (Died) & Ors (2000) Hon’ble Supreme Court of India has pointed out the following conditions to be fulfilled-

There must be an arbitration agreement or an arbitration clause between the parties;
One party to the arbitration agreement has to file a case against the other party before the judicial authority;
The subject matter of the case so filed and the subject matter of the arbitration agreement has to be the same;
The defendant or any other party related to the case has to move before the Court seeking a reference to arbitration before the submission of the first statement on the substance of the dispute.

The above conditions stand true for both the pre-2015 and post-2015 amended versions of the provision. These conditions which are to be considered before entertaining an application under Section 8 are elaborated below:

Applicability to civil dispute

Applicability of Section 8 to civil disputes means whether civil disputes can be resolved by arbitration. If, in a civil dispute, there is a valid arbitration agreement involved, will that be considered by the court? In that case, will the court abide by Section 8 and refer the parties to arbitration? Or is the application only limited to commercial agreements?

To understand whether Section 8 is applicable to civil disputes, we first need to know what is a civil dispute. Civil dispute, simply means, disputes where both the parties are individuals or one party is an individual and the other is an organisation. Civil disputes are regarding rights and liabilities of individuals, and usually one person seeks remedy from the opposite party. For example, intellectual property disputes, personal injury disputes, employment or labour disputes, matrimonial disputes, etc. are all kinds of civil disputes.

Commercial disputes, on the other hand, are related to commerce involving businesses or companies. For example, breach of contract, breach of trust, fraudulent transfers, and other such related disputes arising out of a commercial agreement can be termed as commercial disputes. It is very common to have arbitration clauses in commercial agreements, as it reduces the hassle of class action lawsuits. Hence, it is inherently accepted that Section 8 is applicable to commercial disputes.

Let us now see what the courts have to say in this regard.

For Section 8 to apply, there is no requirement that the dispute has to be a commercial dispute. The presence of an arbitration clause in the agreement is one of the pre-requisites for application of Section 8. The Supreme Court in the case of H. Srinivas Pai and Anr. vs. H.V. Pai (D) thr. L.Rs. and Ors., (2010), has criticised the observation of the High Court that the Arbitration and Conciliation Act, 1996 would not apply to ‘civil disputes’ but will only apply to ‘commercial disputes’ or ‘international commercial disputes’. The Supreme Court has cleared that the Act applies to domestic arbitrations besides international commercial arbitrations and conciliations and said that “the applicability of the Act does not depend upon the dispute being a commercial dispute and arbitrability depends upon the existence of an arbitration agreement, and it does not matter whether the dispute is a civil dispute or commercial dispute. There can be arbitration agreements in non-commercial civil disputes.”

The Court stated that the applicability depends upon the existence of an arbitration agreement rather than the kind of dispute, and that there can be arbitration agreements in non-commercial civil disputes as well.

Presence of an arbitration agreement

Presence of an arbitration agreement is also an essential condition under Section 8. According to Section 7 of the Arbitration and Conciliation Act, 1996, the phrase “arbitration agreement” refers to the agreement by which the parties to the agreement agree that certain disputes which have arisen or might arise between them in respect of a defined legal relationship (may or may not be contractual) will be submitted to arbitration.

The Supreme Court in the case of Smt. Kalpana Kothari vs. Smt. Sudha Yadav and Ors., (2002), stated the importance of presence of an arbitration agreement. It was held that, “As long as the arbitration clause exists, having recourse to Civil Court for adjudication of disputes envisaged to be resolved through arbitral process or getting any orders of the nature from Civil Court for appointment of Receiver or prohibitory orders without evincing any intention to have recourse to arbitration in terms of the agreement, may not arise.” In simple terms, the Supreme Court stated that in the presence of an arbitration agreement, there is no need to take recourse to the Civil Court to adjudicate on those disputes which are supposed to be resolved through arbitration.

The term “existence” of an arbitration agreement is connected to various factors like its validity and the arbitrability of the claims. Sometimes, there is an overlap between “existence” and “validity” of an arbitration agreement. In the case of Vidya Drolia, the court held that the arbitration agreement exists only when it is legal and valid. A void and unenforceable agreement is of no use and will not do any good. Existence of an arbitration agreement is meant to refer to an arbitration agreement that fulfils the statutory requirements of the Arbitration Act as well as the Indian Contract Act, 1872 and has to be enforceable in law.

Whether the validity of the arbitration clause can be disputed before the court

When there is an arbitration clause present, the court loses its jurisdiction over that dispute. The court cannot even examine the validity of the arbitration clause. The only option available is to refer the parties to arbitration.

This was one of the issues raised in the case of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003). The Supreme Court in this regard held that Section 8 has a mandatory language which specifically states that when an action is brought before any judicial authority, the action being the subject matter of an arbitration agreement, the judicial authorities have to refer the parties to arbitration. It becomes an obligation for the court. It cannot decide on the matter brought before it.

Subject matter same as that of the arbitration agreement

Section 8 commands that the subject matter of the dispute has to be the same subject matter as that of the arbitration agreement. This is also a prerequisite condition which needs to be satisfied for reference to arbitration. The Supreme Court in Sukanya Holdings (P) Ltd v. Jayesh H. Pandya, (2003), pointed at the language of Section 8 which mentions that “in a matter which is the subject matter of an arbitration agreement”. Thus, the suit should be in respect of the matter which the parties have agreed to refer to arbitration through the arbitration agreement and is also the subject matter coming within the ambit of the arbitration agreement.

In Gujarat Composite Limited vs. A Infrastructure Limited (2023), the Commercial Court stated that as per the requirements under Section 8, the matter could be referred to arbitration only if the matter is a part of the subject-matter of the agreement.

The Gujarat High Court stated that the tripartite agreement was between the parties and the bank, and it did not contain any arbitration clause. The tripartite agreement was an independent agreement for mortgage by deposition of title deeds.

The Supreme Court referred to the case of Sukanya Holdings and that it was stated therein that the subject-matter of the suit and the subject-matter of the arbitration agreement need to be correlated in order to fulfil the requirements under Section 8. Agreeing with the view of the Gujarat High Court that the phrase “in a matter which is the subject matter of an arbitration agreement” under Section 8 clarifies that the subject matter of the dispute should be amenable to an arbitration agreement, the Supreme Court upheld the view taken by the High Court.

Need of original arbitration agreement or its certified copy

An application under Section 8(1) requires the accompanying of the original arbitration agreement or the certified copy of it. Section 8(2) of the Arbitration and Conciliation Act, 1996, specifically mentions this requirement. The Section states that the application under Section 8(1) shall not be entertained unless the application is accompanied by the original agreement and in its absence, a duly certified copy of the original agreement.

The Supreme Court in Magma Leasing and Finance Limited and Anr. vs. Potluri Madhavilata and Anr, (2010), Para 22, provided that “An analysis of Section 8 would show … (e) That along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.”

Implied inclusion under Section 8 of Arbitration and Conciliation Act, 1996

Section 8 of the Arbitration and Conciliation Act, 1996 implies that when a party objects to the maintainability of a suit, it does not need to file an application under Section 8 separately to convince the Court regarding the non-maintainability of the suit, because the arbitration clause is considered binding between the parties.

The case of Madhu Sudan Sharma and ors vs. Omaxe Ltd.,(2023) explains this phenomenon. In the background of the case, due to certain objections mentioned under a certain MoU being unfulfilled, the respondent filed a civil suit against the appellants to recover the money paid along with interest. The appellant applied for leave to defend the suit and the court granted a conditional leave. Later it modified the same and ordered the appellant to furnish an alternate security as well. The appellants challenged the maintainability of the suit invoking Section 8 and arguing that since there was an arbitration clause provided in the MoU, the suit is not maintainable.

The Delhi High Court quoted Section 8 and opined that an application to refer the dispute to arbitration could not be submitted after the first statement on the substance of the dispute (the written statement). Hence, it is acceptable and well within the scope of the Act to submit an application under Section 8 with or before filing of the written statement. In this case, it was held by the Court that the appellant had raised the objection both in the application under Order XXXVII Rule 3(5) for grant of leave to defend the suit as well as in the written statement after it. Thus, it was wrongly held by the Commercial Court that the objection under Section 8 was raised beyond the limitation period.

Comparison between Section 89 CPC, 1908 and Section 8 of Arbitration and Conciliation Act, 1996

From the bare perusal of both the Sections, it may seem similar as both provide for alternate methods for dispute resolution. Section 89 of the Code of Civil Procedure, 1908, provides for settlement of disputes outside the Court. The Section promotes the usage of alternate dispute resolutions so as to lessen the burden on courts. The object is that an appropriate Alternative Dispute Resolution mechanism (ADR) is resorted to, for the resolution of the dispute at hand. The provision states that if it appears that there are elements of settlement existing and the parties are open to accept such settlement outside court, then the Court will formulate the terms of settlement, convey that to the parties for observation and then accordingly reformulate the terms for possible settlement and refer the dispute for alternate dispute resolutions. It recognizes four methods for settlement, namely:

Arbitration,
Conciliation,
Judicial settlement, which includes settlement through Lok Adalat, and
Mediation.

For both arbitration and conciliation, the Act of 1996 provisions apply.

Section 20(1) of the Legal Services Authority Act, 1987 shall apply regarding settlement through Lok Adalat. For other forms of judicial settlement, the court shall refer the matter to a suitable person or institution who will be regarded as a Lok Adalat and accordingly the provisions of the Legal Services Authority Act shall be applicable as if the matter was referred to a Lok Adalat. For mediation, the Court shall proceed with a compromise between the parties.

On the other hand, Section 8 of 1996 Act mandates that the judicial authority has to refer the parties to arbitration if there is any arbitration agreement between the parties and the subject matter of the dispute brought before the judicial authority is included in the scope of that arbitration agreement.

Similarity between Section 89 CPC and Section 8 of A&C Act

Both the Sections promote the usage of ADR Mechanisms for resolution of disputes. The purpose is to combine judicial and extrajudicial methods of dispute resolution to ensure speedy and efficient justice. This not only reduces the burden on the Courts but also minimises the cost to be borne by the parties to the dispute.

Differences between Section 89 CPC and Section 8 of A&C Act

Choice of ADR Mechanism– The most prominent difference is that the parties get to choose among the four different forms of alternative dispute resolution methods under Section 89 of CPC 1908 whereas under Section 8 of 1996 Act, the parties have to refer to arbitration only.
Existence of arbitration agreement– Section 89 presumes that there is no arbitration agreement existing and puts forward four alternative dispute mechanisms for the parties to choose from. Section 8 is itself based on the fact that there is an arbitration agreement existing and the subject matter of the dispute before the court is within the scope of the arbitration agreement, hence, that dispute is to be resolved by referring it to arbitration only. The court cannot interfere and neither can it give a choice. It becomes mandatory and the same is evident from the usage of ‘shall’ in the provision.
Consent– Under Section 89, both parties need to consent mutually for referring the dispute to any of the ADR mechanisms provided. Under Section 8, only one party needs to apply to refer the dispute to arbitration and the Court will be bound to refer due to the presence of an arbitration agreement.

Grounds for rejection of the application under Section 8 of Arbitration and Conciliation Act, 1996

As discussed above, there are certain condition precedents which are required to be satisfied. In case any of those conditions are unfulfilled, an application under Section 8 does not stand. In addition to this, there are grounds, subject to which, a judicial authority can reject an application under the said section. The grounds are as follows:

Before submitting the first statement on the substance of the dispute, the party waives his right to invoke the arbitration clause.
It is the opinion of the judicial authority that no sufficient relief will be obtained by the party.
The judicial authority is satisfied that no contract has been made between the parties.
The contract itself is fraudulent.
The main contract is void ab initio or illegal or non-existent.
The suit or claim is based on Hundies or on Negotiable Instruments.
The dispute regarding which action is brought is outside the scope of the arbitration agreement.
The applicable law prohibits arbitration of the subject matter of the dispute which is brought. For example, if it concerns public policy, then it cannot be referred to arbitration.
An essential precondition or prerequisite to refer the matter to arbitration has not been fulfilled by either or both the parties.
The arbitration agreement does not exist between the parties.

Remedies against rejection of an application under Section 8

Section 37 of the 1996 Act in its clause (a) of sub-section (1) states that appeal lies in the cases when order of refusal to refer the parties to arbitration under Section 8 is passed. Such appeals can be made to the courts which are authorised by law to hear appeals.
The Delhi High Court in Arun Srivastava vs. M/S Larsen & Toubro Ltd (2021), in this regard, has opined that for refusal of application under Section 8, statutory remedy of appeal is available under Section 37 of the Act but no remedy has been provided for the situation when the application under Section 8 is allowed. The reason behind, being the fact that the intention of enacting the Act is to give opportunity to the party to raise the existence and validity of the arbitration agreement before the Arbitral Tribunal and thus the orders passed by the court allowing the applications under Section 8 has been given finality.

Applicability of Limitation Act to Section 8

Section 43(1) of the Arbitration and Conciliation Act mandates that The Limitation Act, 1963 shall apply to arbitration proceedings. However, Section 8 itself provides a limitation period for its purpose.

Before the Amendment of 2015 to the Act, the Supreme Court in the case of Booze Allen & Hamilton Inc. vs. SBI Home Finance Ltd. and Ors had held that the limitation period was not applicable to Section 8 and that the written application was to be filed at the earliest.

Post 2015 Amendment, the Section read “if an action relating to the subject matter of an arbitration agreement has been brought before the judicial authority by a party not later than the date of submitting his first statement….” – from this it can be presumed that the date of filing of the written statement can be regarded as the limitation period.

This decision of Booze’s case was contradicted in SSIPL Lifestyle Pvt. Ltd. vs. Vama Apparels (India) Pvt. Ltd, (2020), where the Delhi High Court ruled that an application under Section 8 of 1996 Act is governed by limitation period as prescribed under The Code of Civil Procedure, 1908 or The Commercial Courts Act 2015. In this case, the parties had entered into an agreement according to which SSIPL was to supply Vama Apparels products for sale. The agreement contained an arbitration clause apart from mentioning other contractual obligations of the parties. Disputes arose between the parties. SSIPL terminated the agreement. There was continuous correspondence between the parties including notice for cheque dishonour. Suit was filed seeking recoveries. Summons were issued and time was provided to file a written statement. Vama moved applications under Section 8 and prayed to seek reference to arbitration as per the presence of arbitration clause in the agreements.

The issue before the Delhi High Court was whether there is an existence of limitation period for filing the application under Section 8 and whether the limitation period prescribed under CPC and the Commercial Courts Act would be applicable to Section 8. The court held that under the unamended provision, Section 8 application could have been moved at any time before filing of the written statement. The amendment was a conscious step towards prescribing a limitation period for filing the application under Section 8.

Case laws

Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums (2003)

Facts

The appellant is a company engaged in the business of manufacture, sale and distribution of petroleum products. They appointed the respondent as a dealer to sell their products through a retail outlet in Haryana. The appointment is governed by a Dealership Agreement executed by the parties. Clause 30 of the agreement empowered the appellant to cease the supply of its products to a dealer for a period it deems fit, if there is a breach of any of the conditions contained in the agreement.

The appellant contended, besides other contentions, that the officers, in the exercise of their power of inspection, discovered that there was short delivery of Motor Spirit (MS) and High Speed Diesel (HSD) in the dispensing units of the respondent, and also that there were tamperings with weights and measurement seals in the HSD dispensing units. Based on this, the appellant stated that they had issued a show cause notice to the respondent.

The respondent submitted its reply. The appellant not being satisfied with the received reply, suspended the sales and supply of petroleum products for 30 days. Additionally, it levied a penalty of Rs.15,000/- for the mentioned irregularities committed by the respondent. Being aggrieved by such stoppage of supply of products, the respondent filed a Civil Suit. The respondent also filed an application under Order 39 Rules (1) and (2) of the CPC for ad-interim stay. Learned Civil Judge stayed the suspension of supplies by the appellant and regarding the penalty, no stay was granted.

In reply, the appellant filed an application under Section 8 read with Section 5 of the Act praying that the dispute pending before the Civil Court be referred to the arbitrator as per Clause 40 of the Dealership Agreement. For this, the appellant enclosed a copy of the agreement. The learned Civil Judge dismissed the application. The Judge held that the dispute between the parties was outside the scope of the arbitration agreement. A revision application was filed by the appellant in the High Court which was dismissed. Hence, the appellants appealed before the Supreme Court.

Issues

Whether the court was justified in deciding on the existence or validity of the arbitration agreement?
What is the role of the Civil Court given the fact that the arbitration clause does not apply to the facts of the present case?

Judgment

The Supreme Court stated that as per the Clause 40, the parties had agreed to refer any dispute arising out of the agreement to an arbitrator as mentioned in the agreement. Section 8 clearly mandates that when an action is brought before a judicial authority, the action being the subject matter of an arbitration agreement, the judicial authority has to refer the parties to arbitration.

The Court referred to the case of P. Anand Gajapathi Raju & Ors. v. P. V. G. Raju (Dead) & Ors., (2000), wherein it was held that “the language of Section 8 is peremptory”. Thus, when there is an arbitration agreement, it becomes an obligation of the court to refer the parties to arbitration as per the terms of the arbitration agreement that the parties entered into. The court cannot decide on the matter brought before it.

In the given case, there was an existence of an arbitration clause (Clause 40) and this fact has been accepted by both the parties as well as the courts. Despite this, the respondents had filed a civil suit and such dispute was entertained by the civil court. In this regard, the Supreme Court reiterated that the existence of an arbitration clause is accepted by all and considering the mandatory language of the Section 8 of the Act of 1996, the courts ought to have referred the dispute to arbitration.

Regarding the role of the Civil Court when an argument is made that the arbitration clause does not apply to the facts of any case, the Supreme Court referred to Section 16 of the Act of 1996 which empowers the Arbitral Tribunal to rule on its own jurisdiction. This includes ruling on any objection regarding the existence or validity of the arbitration agreement.

The Court referred to the case of Konkan Railway Corporation Ltd. & Anr. v. Rani Construction Pvt. Ltd. (2002) and stated that the Constitution Bench in this case interpreted Section 16. It was held that if there is any objection regarding the applicability of the arbitration clause to the facts of a case, such an objection has to be raised before the appropriate Arbitral Tribunal. Applying this rule in the present case, the courts should not have proceeded with analysing the applicability of the arbitration clause to the facts of the case but should have left the issue to be decided by the concerned Arbitral Tribunal. The same is stated under Clause 40 of the Dealership Agreement and is also in consonance with the requirement under Section 8 and Section 16 of the Arbitration and Conciliation Act, 1996.

H. Srinivas Pai and Anr. v. H.V. Pai (D) thr. L.Rs. and Ors. (2010)

Facts

The first respondent filed a suit for partition in 1991. In that suit, the appellant filed a stay application for proceedings under Section 34 of Arbitration Act, 1940. The stay application was dismissed. The appeal and the further revision filed by the appellant were also dismissed. The suit continued to be pending and the appellant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the matter for arbitration. The application under Section 8 was dismissed by the Trial Court.

Aggrieved, the appellants filed a revision. The Division Bench dismissed the application under Section 8. Then, the appellant filed a review petition, which was also dismissed. Hence, the order of dismissal of the Division Bench and the order of dismissal of the review petition were challenged by a special leave appeal.

Issues

While dismissing the application of the appellant under Section 8, the High Court had stated that the Act in its Section 1(2) provides that application of the Act is limited to the disputes relating to international commercial arbitration or international commercial conciliation. Thus, the Act is restricted to only commercial agreement matters and international commercial matters. Since, the present case is essentially a ‘civil dispute’ as the respondent had claimed a right in a suit for partition in joint family properties, the provisions of the Act of 1996 are not applicable. Hence, the question arose that whether the Arbitration and Conciliation Act, 1996 apply to ‘civil disputes’ or the application is restricted as provided in the statute?

Judgment

The Supreme Court dismissed the observation made by the High Court. The High Court had stated that the Arbitration and Conciliation Act, 1996 would not apply to ‘civil dispute’ and will only apply to commercial disputes or international commercial disputes. The Supreme Court stated that the Act applies to domestic arbitrations, international commercial arbitrations and conciliations. The applicability does not depend on whether the dispute is a commercial dispute or not, what matters is that there is an existence of an arbitration agreement. The dispute can be a civil or commercial dispute- as long as it has an arbitration agreement, reference can be made to arbitration. There can be arbitration agreements in non-commercial, civil disputes as well.

Coming to the case, the application under Section 34 was dismissed, then later, affirmed in appeal, and then attained finality. Thus, an attempt by the appellants to refer the matter to arbitration by submitting an application under Section 8 subsequently was rightfully refused by the Trial Court and the High Court. Considering this, the appeals were disposed of and the dismissal by the High Court was not interfered with.

However, the observation of the High Court regarding the applicability of the 1996 Act to only ‘civil disputes’ was set aside.

Hero Electric Vehicles Private Limited v. Lectro E-Mobility Private Limited (2021)

Facts

The facts of the case revolved around a Family Settlement Agreement (FSA). The 7th Schedule of the Agreement divided the family into four groups. As per the agreement, any dispute which might arise out of or in connection with the agreement (FSA) was to be resolved through arbitration.

Then, a TradeMark and Name Agreement (TMNA) was executed between the parties in 2010 which granted the right to use the Hero Trademark and its variants among the family groups, in relation to their conducted businesses.

The plaintiff asserted that as per the TMNA, the exclusive right to use the trademark “Hero”, “Hero Electric ”, and its variants, on all the electric vehicles, was conferred on them.

Later, Hero Exports incorporated Hero Electric Vehicles Pvt. Ltd. for their electric vehicle business. Its products were sold under the trademark of Hero Exports. The defendants used the Hero Trademark for their electric bicycles.

Then, a dispute arose which was referred to arbitration as there was an arbitration clause present. The previous arbitration award held that electric cycles do not fall under the category of electric bikes and the plaintiff cannot claim its exclusive rights.

Thus, the plaintiffs sought for a permanent injunction to restrain the defendants from using Hero Trademark. The defendants, on the other hand, argued that the matter should be adjudicated through arbitration.

Issues

Whether Intellectual Property (IP) disputes could be resolved by arbitration?

Judgement

The Delhi High Court referred to the Vidya Drolia case and stated that, to prevent arbitration, the cause of action has to be entirely non-arbitrable. The court in the present needs to establish two things. Firstly, that there is the existence of a valid arbitration agreement. Secondly, that the subject matter of the dispute is arbitrable.

It was highlighted that the disputes between the parties are ex-facie arbitrable in nature as seen from the perspective of the two agreements. The dispute did not fall under the categories of dispute under the arbitral umbrella. The dispute was between two family groups regarding the rights arising from the FSA and TMNA, and not from the Trade Marks Act. The two agreements were not meant to be in relation to the whole world, but it was restricted to the family groups, making it exist solely in personam.

Thus, the dispute was a contractual dispute. Moreover, the FSA and TMNA had a valid arbitration agreement. Thus, it was concluded that the dispute was not regarding some case of infringement, but it was ex-facie arbitrable in nature. The Court, deciding that it would be appropriate for the petitioner to present the plaint before the Arbitrator, referred the suit to arbitration.

Indus Biotech Pvt. Ltd. v. Kotak India Venture (Offshore) Fund (2021)

Facts

Indus Biotech Pvt Ltd and Kotak India Venture entered into a few Share Subscription Agreements and Share Purchase Agreements for subscription of Optionally Convertible Redeemable Preference Shares in Indus. The Indus Group took the decision of making a Qualified Initial Public Offering (IPO). Due to that, Kotak Group was also obligated to convert their preference shares into equity shares complying with the SEBI Regulations of 2018.

Then, dispute arose between the parties regarding-

The calculation and application of the conversion formula which was to be applied to convert preference shares into equity shares, and,
The payment which was to be made by the Indus Group for the conversion.

Indus Group alleged that the Kotak Group was entitled to 10% of the total paid up share capital and the Kotak Group maintained that they are entitled to 30% of the total paid up share capital.

Indus Group invoked the arbitration clause and nominated an arbitrator. But owing to the dispute between the parties, the Arbitral Tribunal could not be formed. Indus Group approached the Supreme Court under Section 11 of the Act of 1996 seeking appointment of arbitrator from the side of Kotak Group. Kotak Group filed an application under Section 7 of the Insolvency and Bankruptcy Act before the National Company Law Tribunal of Mumbai seeking initiation of insolvency proceedings against Indus Group for default of payment.

Indus Group filed an application under Section 8 of the Arbitration and Conciliation Act praying that the parties be referred to arbitration as the agreement contained an arbitration clause. The Tribunal allowed the Section 8 application of Indus Group and referred the matter to arbitration. It also stated that since the conversion process was yet to be completed, there is no debt and thus no default on the part of the Indus Group.

This judgement was challenged in the Supreme Court.

Issues

Whether a direct appeal to the Supreme Court was the only remedy available?
Whether there was any existence of a debt in this case?
Is the issue arbitrable under the Act of 1996?

Judgement

The Supreme Court decided in negative, inferring that, since the application under Section 7 was rejected and the application under Section 8 was allowed, there was a remedy available, that is, to appeal before the National Company Law Appellate Tribunal in accordance with Section 61 of the Insolvency and Bankruptcy Code.
The Supreme Court agreed with the National Company Law Tribunal and proceeded to hold that since the process of calculation and share conversion was yet to be completed and was in the middle of its process, the parties were still deliberating on it, hence it cannot be said there was any ‘debt’ due and thus, there is no existence of any ‘default’.
The Supreme Court referred to the case of Vidya Drolia vs. Durga Trading Corporation (2019), and the test laid therein. The court further mentioned that non-arbitrable disputes include insolvency matters, grant of patent and trademark, criminal matters, company related matters, matrimonial disputes, testamentary and probate related disputes. The Court clarified that mere filing of an application under Section 7 of IBC does not amount to proceeding in rem. Again relying on Section 238 of IBC, the Court stated that if an application under Section 8 of Act of 1996 is filed in a proceeding initiated under Section 7 of IBC, the Tribunal has to decide the application under Section 7 first. And if the application under Section 7 is allowed, and the insolvency proceeding is initiated, then the proceeding becomes in rem, and non-arbitrable. If it is found that there is no default and the application under Section 7 is dismissed then, the Tribunal need not decide the application under Section 8 because then the parties can avail the alternate remedies available.

In the light of these observations, the Supreme Court upheld the rejection of insolvency application by the National Law Company Tribunal. On the other hand, the Court also provided that the Tribunal should not have allowed the application under Section 8. The court then proceeded with the nomination of arbitrators and constitution of arbitral tribunals.

This judgement settled an important question of law by mandating that an application under Section 8 of Arbitration and Conciliation Act is not maintainable in insolvency proceedings under Section 7 of IBC.

Madhu Sudan Sharma and Ors v. Omaxe Ltd (2023)

Facts

The appellants and defendants entered into a Memorandum of Understanding (MoU), under which 29 bighas of land owned by the respondents were to be acquired by the appellants. The respondents paid the amount to the appellants. The MoU stated that if the appellant failed to obtain the required permissions from statutory authorities in respect of the land, the MoU will stand terminated at the option of the respondent and the amount paid by the respondent will be refunded by the appellants with the costs, expenses and all other charges.

The respondents’ contention was that the appellants did not fulfil their obligations despite the respondent’s requests and thus, the appellant is liable to refund the amount paid by the respondent. The appellant provided a cheque which was dishonoured by the bank, and due to this the respondent initiated a suit against the appellant under Order XXXVII of the CPC 1908 seeking the recovery of the amount paid by the respondent with interest.

The Delhi High Court, by order dated 7 May 2010, granted conditional leave to the appellants. The order was upheld in the appeal by the Division Bench through their order dated 27 September 2011 with the modification that the appellant has to furnish some alternate security along with furnishing of the bank guarantee. The appellant furnished the alternate security, but it was provided beyond the time limit as allotted by the Division Bench. Due to the late furnishing, it was opined by the Court that the condition subject to which the leave was granted was not complied with and decreed the suit.

The appellants challenged the judgement and decree before the Division Bench. The Division Bench allowed the withdrawal of the appeal by the appellants and allowed the appellants to approach the Single Judge for review of the order. The appellants filed a review petition before the Single Judge which was dismissed. The appellants then challenged this order before the Division Bench and the appeal was allowed. The suit was decreed on 15 July 2019 and the defendants appealed against it.

Issues

Whether the plea of objection was raised belatedly?
Whether there was compliance with Section 8?
Whether the appellant waived the objection?
Whether the judge was wrong in proceeding to decide the suit on merits as the objection by the appellants was based on Section 8 of the Arbitration and Conciliation Act, 1996?

Judgment

The Delhi High Court held that according to Section 8, the first statement on the substance of the dispute includes the written statement. Thus, before the written statement, if an objection is raised in the application for leave to defend, it cannot be considered to be late. Section 8(1) of the Act of 1996 requires an application of the first statement of defence on the substance of the dispute to be made by the Section 8 applicant before the date of submission.

In the present case, the appellants had taken objection both in an application under Order XXXVII Rule 3(5) for grant of leave to defend the suit as well as in the written statement after it. Thus, the Delhi High Court held that the Commercial Court was clearly wrong in holding that the objection under Section 8 was raised at a later stage than as provided in the provision. The appellant’s objection has been wrongfully rejected on the ground that it was raised late.

The appellant’s extraction of the arbitration clause was indicative enough of the fact that the appellants have relied on it. It is not needed that the appellants reproduce the clause separately. Hence, the fact that the appellants did not request for reference to arbitration separately is of little importance. The appellants extracted the clause and relied on it, and also contested the maintainability of the suit on the basis of the arbitration clause- this clearly shows their intention to refer the dispute to arbitration. It will not be correct to hold that because a separate request was not made, there is no compliance with Section 8(1) of the Act of 1996.

The Division Bench in Sharad P. Jagtiani v. Edelweiss Securities Ltd, (2014), had held that even when there is no specific request to refer the dispute to arbitration, raising of an objection to the effect that the suit is not maintainable considering the presence of an arbitration clause- will be taken as an implied request to refer the dispute to arbitration.

Thus, the position in law is that the requirement of making an application seeking to refer the disputes between the parties to arbitration as provided in Section 8(1) is a requirement of form rather than of substance. The basic requirement is that there should be a valid and subsisting arbitration agreement between the parties. The absence of a separate formal request to refer the dispute to arbitration makes no difference.

In this case, the appellants presented a specific objection based on Section 8 in the application under Order XXXVII Rule 3(5) seeking leave to defend the suit. Again, the same objection was reiterated in the written statement. Again, it was mentioned in the arguments before the ADJ. Hence, it could not be said that the appellant waived the objection.
When an objection is raised based on Section 8, along with the existence of an arbitration agreement, the Court ipso facto loses its jurisdiction to continue to entertain the suit. In the case of Sukanya Holdings (P) Ltd v. Jayesh H. Pandya, (2003) and A. Ayyasamy v. A. Paramasivam, (1989), it was held that if there is an arbitration agreement between the parties and the defendant has invoked Section 8 in a suit, the Civil Court has to refer the dispute to arbitration. It cannot continue with the suit on its own.

Gujarat Composite Limited v. A Infrastructure Limited (2023)

Facts

The appellants and respondents entered into licence agreements for licensing the operation of the appellant’s manufacturing units. Then, both the parties executed a supplementary agreement for advancing a certain sum to the appellant. It was also agreed that the respondent would be permitted to create a mortgage on the licensed manufacturing units to secure that advance.

Then, a tripartite agreement was executed between the parties and a bank, whereby the bank sanctioned a loan amount to the respondent. An amendment was introduced to the tripartite agreement which restricted the transfer of title deeds of the land of the appellant during the subsistence of the licence agreement.

Then, a dispute arose when the appellant was called upon to extend the term of the licence agreement. The appellant denied. The extension was applied for because of the inability of the appellant to pay certain dues owed to the respondent. The tenure of the agreement ended yet the respondent did not return the possession and declared that it will continue with the possession. The appellant issued a notice claiming recovery of possession and monetary dues on the basis that the tenure of the agreement had ended and hence the possession was illegal.

The arbitration clause under the licence agreement was invoked by the appellant and the respondent questioned the arbitrability of the dispute since it was related to other transactions and the arbitrator only had jurisdiction on matters related to the original agreement, hence, the adjudication of the dispute would be beyond the scope of the agreement.

Issues

Whether the issues raised in the case were beyond the licence agreement for the application of Section 8.

Judgement

The Supreme Court held that except the original licence agreement, the other additional agreements did not possess any arbitration clause. The contractual relationship between the parties established from the existence of the original licence agreement. Since the dispute arose from the tripartite agreement, it cannot be held that the arbitration clause from the main agreement is available for disputes arising from the tripartite agreement.

Thus, it was concluded that since there is no arbitration agreement relating to the subject matter of the suit, and the reliefs claimed there are outside the arbitration clause, reference to arbitration under Section 8 cannot be made.

Conclusion

Section 8 of the Act of 1996 restricts judicial intervention in the process of arbitration. There has been a catena of judicial precedents which have made it clear enough, that, when there is an existence of a valid arbitration agreement or an arbitration clause between the parties, and one of the parties to the dispute informs the judicial authority of such existence, then it is imminent that the parties will take the matter to arbitration. Nothing can change that.

The Section also makes the Court powerless and bars it from adjudicating on the matter in any way, the Court or the judicial authority is obliged to refer the parties to arbitration. The intention of the legislature behind enacting such a provision is to motivate more parties to choose arbitration as a method to resolve their disputes.

Frequently Asked Questions (FAQs)

Is the power of judicial authority to refer the parties to the arbitration a discretionary power?

No, the power vested in the judicial authority by virtue of Section 8 of the arbitration and conciliation act, 1996 is obligatory.

When did the 2015 Amendment come into force?

23rd October 2015

Can the arbitration clause cease to operate after the termination of the agreement between the parties by mutual consent?

No, the arbitration clause remains operative even after the termination of the agreement.

Does Section 8 apply to civil disputes?

Yes. As long as there is an arbitration agreement existing, Section 8 will apply, regardless of whether the dispute is civil or commercial. The applicability depends on the existence of an arbitration agreement or arbitration clause, not the type of dispute.

Can the validity of the arbitration clause be disputed before the Court?

No. When an action is brought before any judicial authority, the action being the subject matter of an arbitration agreement, the authority is obliged to refer the parties to arbitration. It cannot adjudicate on the matter by itself. Even the validity of the arbitration agreement is to be disputed before and decided by the concerned Arbitral Tribunal.

References

Labour laws in India

By

Sneha Mahawar

-

April 9, 2024

0

This article has been written by Naveen Talawar. The article deals with the concept, origin, and evolution of labour laws in India. It also highlights the principles and factors that have contributed to the development of labour laws with certain constitutional provisions. The article further discusses the four labour codes recently enacted by the Indian government in detail.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

Labour laws are also known as employment laws. They are the body of laws, administrative rulings, and precedents that address the legal rights and restrictions of working people and their organizations. Labour laws attempt to regulate the relationships between an employer or group of employers and their employees. This branch of law has the broadest application, as it affects more men and women than any other branch of law. As a result of its vast implications and dynamic facets, it is also considered the most fascinating area to study. These laws generally address issues like health and safety at the workplace, collective bargaining, unfair labour practices, certification of unions, labour-management relations, general holidays, annual leave, working hours, unfair terminations, minimum wage, layoff procedures, and so on.

In India, the Central Government has promulgated around 44 labour-related statutes, 29 of which have been consolidated into four new labour codes. This article summarizes some of the labour laws in India, as well as the four labour codes.

Concept and origin of labour laws in India

In society, institutions develop to abhor the gaps that changes leave behind. The Industrial Revolution, a historical phenomenon, completely transformed society from rural and agricultural to industrial and consumerist. The changes brought by the industrial revolution had left some gaps, and it became the responsibility of society to fill those gaps. To fill those gaps, society turned to certain social devices, which are known as labour laws. Labour laws are the result of the industrial revolution, and they were formed to address the problems caused during the industrial revolution. They are different from ordinary legislation in that they are meant to address unique issues brought on by particular situations. As a result, their orientation, philosophy, and concepts are specific rather than general.

Industrial society resulted in the over-exploitation of the working classes by employers who took advantage of the individual worker’s dispensability and sought the highest profit from their investment. Due to the capitalist axiom that ‘risk and right’ go hand in hand, they had the authority to ‘hire and fire.’ At that point in time, the law also included ideas such as ‘master and servant’, etc., and the common law principle was in effect. The terms of contract were typically verbal and were mostly used in cases of breach. This resulted in the prosecution and imprisonment of the workers.

Over time, the scope and purpose of labour laws have evolved. Earlier, labour laws were enacted to protect the interests of employers. It was governed by the laissez-faire doctrine, which means a policy of minimal government intervention in the economic affairs of individuals and society.

On the other hand, contemporary labour law safeguards employees from the exploitation of the employer. The progressiveness of social philosophy, or the doctrine that forms the foundations for a welfare state, has made laissez-faire doctrines obsolete. Theories like ‘hire and fire’ as well as those of ‘supply and demand’, which were treated under the notion of laissez-faire, are no longer valid.

The approach to labour law and the sphere of industrial relations has changed dramatically since the Philadelphia Charter, which proclaimed “labour is not a commodity” and that “poverty anywhere is a danger for prosperity everywhere.” W. Friedmann and other scholars trying to analyse legal development in this field identify social duty on the part of an employer as one of the corresponding principles.

Evolution of labour legislation in India

The laws relating to labour in India go back 125 years with the enactment of the Apprentice Act, 1850. This Act allowed orphaned children to seek employment when they reach 18 years of age. This led to the enactment of several Acts relating to labour dealing with various aspects pertaining to industrial employment.

Labour laws not only set the standard of labour in industrial establishments but are also concerned with issues such as trade unions, payment of wages, dispute resolution mechanisms, and others. They also include within their scope the social security provisions for workers, with the Indian Constitution being considered the fundamental basis for all the labour laws. According to the Constitution, labour as a subject falls under the concurrent list and thus allows both central and state governments to enact labour laws. State legislatures may, however, not enact laws contrary to central legislation.

Further, the Factories Act of 1881 and the Bombay Trade Disputes (and Conciliation) Act of 1934 were also enacted following the Apprentice Act of 1850. These Acts were further amended during the Second World War.

The Bombay Industrial Disputes Act, 1938, was replaced by the Bombay Industrial Relations Act, 1946. In the same year, the Industrial Employment (Standing Orders) Act, 1946, was enacted by the central government. Further, the Industrial Disputes Act, 1947, was subsequently amended, superseding the Trade Disputes Act, 1947, which later became the primary tool for government intervention in labour disputes. After independence, many laws relating to labour, employment, and social security were enacted. These laws are discussed in brief in the latter part of this article.

Principles of labour laws in India

The fundamentals of labour law establish that in a civilised society, workers have rights and responsibilities. The current labour laws of the country, as a form of social security for all citizens, provide progressive benefits like health insurance, an old-age pension, maternity benefits, gratuity payments, and others. Some of the principles of labour laws are as follows:

Principle of social justice

The basis of this principle is that all social groups must be treated equally, notwithstanding their circumstances, so that they are considered on equal terms. It seeks to eliminate social inequality because it is clear that certain groups face some form of socio-economic disadvantage in terms of employment or labour. The core purpose of this principle is to facilitate equal access for everyone, regardless of social status, to available employment opportunities.

Principle of social equity

In general, the principle of social equity means the creation of fair standards for everyone through statutory obligations. The fundamental idea of this principle involves the preservation of labour-friendly laws for collective social equity, as circumstances do not remain the same and change from time to time. Thus, laws should be updated regularly. Based on this principle, the government intervenes to make changes in the laws to reflect the evolving situation.

Principle of social security

Social security includes the overall security of the person and their family, place of employment, etc. The social security system meets basic needs and unexpected life events as a way of ensuring that people continue to have an adequate standard of living. It envisages collective action against social risks, which are at the heart of labour laws.

Principle of the national economy

This principle states that while enacting labour laws, the overall economic situation of the country must be taken into account because the economic condition of the nation has a significant impact on labour laws in any country.

Factors influencing labour laws in India

There are various factors that have influenced the development of labour laws. These factors are as follows;

Early industrial society of exploitation

The labour laws in India have a long and complicated history. The roots of labour laws initially emerged as a response to the overindulgences of early industrialisation following the industrial revolution. Early industrialisation was accompanied by very long working days and the hiring of young children in very unhygienic conditions, as well as low wages being paid to the workers. Legal protection was also limited for the workers. Such abuses could not have gone on forever without public protests and the call for change.

Development of trade unionism

The trade union movement, which emerged from the industrial revolution, was another factor that contributed to the rapid development of labour laws. They helped to protect the interests of the working class, and as a result of this, laws were enacted on wages, working conditions, women’s rights, social security, and other issues. However, laws on industrial disputes, their prevention and resolution, as well as trade union privileges and rights, became inevitable due to its expansion.

Emergence of socialist and other revolutionary ideas

Through his analysis of capitalism, Karl Marx demonstrated that the economic system based on capital is innately a form of exploitation against labour. Therefore, he supported the abolition of the capitalist system. The slogan “The workers of the world unite; you have nothing to lose but your chains” sent shivers down conservative and capitalist circles by bringing forth ameliorative as well as protective labour laws that worked very safely. Soon they realised that an application of labour laws could serve as a measure to prevent the propagation of revolutionary ideals. The trend towards progressive labour laws was bolstered by the first and second internationals, as well as socialist and communist parties established in numerous countries.

Establishment of the International Labour Organisation (ILO)

The establishment of the International Labour Organisation (ILO) in 1919 drastically transformed the way in which labour laws evolved across the globe. It can be read through the acceptance of the principle ‘labour is not a commodity’, and the slogan that ‘poverty anywhere is a threat to prosperity everywhere’. Moreover, the ILO has always identified the need for better laws governing labour conditions by investigating workers’ living conditions. It has proposed new labour laws, undergone a lot of discussion, and reviewed and adopted conventions and recommendations. In an attempt to unify labour standards as far as the conditions prevailing across the globe and the uneven development of the global economy allow, the ILO has done that singular service in the field of labour legislation.

Factors that affect labour laws in India

All the above-mentioned factors played a significant role in formulating labour laws. India has unique characteristics that have formed its labour laws. They are as follows:

Impact of colonial rule

The first of the early labour laws in India were enacted under pressure from Lancashire and Birmingham manufacturers. They considered the labour, which worked in factories and mills across India, to be very cheap when compared with that of their British counterparts. These laws no doubt helped Indian labour, but they were more concerned with safeguarding the interests of British capitalists. The British Civil Servants carried the democratic and pragmatic traditions of the British. The Workmen’s Compensation Act, 1923; the Indian Trade Unions Act, 1926; the Payment of Wages Act, 1936; and other Acts followed the British model.

The adoption of the Indian Constitution and the struggle for national emancipation

Indian labour laws were shaped through the adoption of the Indian Constitution as well as the struggle for national emancipation. With the backing of freedom fighters and nationalist leaders, industrial workers worked tirelessly to ensure that protective labour laws were passed. The Indian Trade Unions Act, 1926, the Royal Commission on Labor, and other statutes were framed in pursuance of their fight for freedom. The Preamble, Fundamental Rights and Directive Principles of State Policy in the Indian Constitution are all expressions of promises given by the leaders during the national movement about how a better and more sustainable social order should be established once independence is achieved.

Constitutional provisions relating to labour laws in India

The Constitution of India is the supreme law of the land, and all laws are based on it. To this effect, the Constitution guarantees its citizens a ‘Socialistic Pattern of Society’ and carries on to assert that there would be the creation or formation of the welfare state. The Indian labour laws have been greatly shaped by the interpretation of the Preamble, Fundamental Rights, Directive Principles of State Policy, and judicial wisdom.

Seventh Schedule of the Indian Constitution

The Seventh Schedule of the Constitution outlines the distribution of legislative powers between central and state legislatures on different matters. List III (Concurrent List) covers most of the labour-related issues. These include topics such as maternity benefits, liability of employers, workmen’s compensation, invalidity, and old age pensions; social security and social insurance; employment and unemployment; labour unions; industrial and labour disputes; and provident funds. Parliament has legislated labour laws in most of these fields since the majority of issues related to labour are found on the Concurrent List.

Directive Principles of State Policy in India

The constitution emphasises the significance of socio-economic justice as a fundamental right. The framers of the Constitution thought that in a developing country like India, without economic democracy, political democracy would be meaningless, and hence they incorporated certain Articles in the Constitution to improve the socio-economic conditions of the common man. These Articles are known as the Directive Principles of State Policy (DPSP), which are provided under Part IV of the Constitution.

The main purpose of these principles is to ensure the socio-economic objectives that the government must pursue to strengthen and advance the social and economic democracy of the country.

When it comes to the law relating to labour, Articles 38, 39, 41, 42, and 43 are very important as they serve as the ‘Magna Carta’ of industrial law. These articles impose an obligation on the central and state governments to ensure social order and living wages as per the economic and political circumstances of the nation.

It is also important to note that while DPSPs are not legally enforceable by the courts, they are still considered a fundamental part of the Constitution. They serve as the guiding principles for the government while framing policies and enacting laws that promote the welfare of the people.

Article 38 of the Indian Constitution

The concept of social justice has been provided under Article 38 of the Constitution, which states that “the state shall strive to promote the welfare of the people by securing and protecting, as effectively as it can, social order where justice, social, economic, and political, shall inform all institutions of national life.” This principle reaffirms what has been stated in the Preamble to the Constitution, i.e., that the function of the Republic is to ensure social, economic, and political justice. Further, Article 39 mandates the state to incorporate specific principles relating to social justice in its legislative process.

Justice Gajendragadkar, in the case of State of Mysore v. Workers of Gold Mines, 1958, stated that “the idea of social and economic justice is a living idea of revolutionary import that upholds the rule of law and gives the welfare state ideal meaning and significance.”

Article 39 of the Indian Constitution

According to the Supreme Court’s interpretation of Article 39(a), the right to livelihood has been incorporated under Article 21 of the Constitution. In Olga Tellis v. Bombay Municipal Corporation (1986), the Supreme Court stated, “If the state has an obligation to secure to its citizens an adequate means of livelihood and the right to work, it would be sheer pedantry to exclude the right to livelihood from the content of the right to life.”

Articles 39(b) and (c) are important constitutional provisions as they have an impact on the entire economic system of India. Socialism seeks to distribute the community’s material resources in a way that promotes the welfare of all. According to Article 39(b), socialism requires distributive justice.

Article 39(d) provides for ‘equal pay for equal work. Under this Article, the parliament has enacted the Equal Remuneration Act, 1976. The Act prohibits discrimination based on gender and requires that both men and women be paid equally for performing the same or similar work. The Supreme Court, in many of its decisions, has drawn the general principle of equal pay for equal work from the combined reading of Articles 14, 16, and 39(d).

The Supreme Court in Randhir Singh v. Union of India (1982), has identified that even though the idea of ‘equal pay for equal work’ is not a fundamental right, it is unquestionably a constitutional objective that can be upheld through constitutional remedies under Article 32 of the Constitution.

Articles 42 and 43 of the Indian Constitution

Article 42 mandates the state to make provisions relating to just and humane conditions of work and maternity relief. Article 43, on the other hand, provides for a living wage for the workers. These Articles signify a groundbreaking concept, asserting that specific benefits are inherently owed to employees as a matter of right.

In many cases, the Supreme Court has emphasised that the Constitution expresses strong concerns with respect to the welfare of workers under Articles 42 and 43. It has given a broad interpretation to Article 21, including the right to live with human dignity, by combining it with several Directive principles, including Article 42.

Fundamental Rights (Part III of the Indian Constitution)

Part III of the Constitution provides for fundamental rights. The freedoms and rights that are mentioned in Part III are intended to be protected against the arbitrary actions of the state.

Article 14 of the Indian Constitution

Article 14 states that “the State shall not deny to any person within the territory of India equality before the law or equal protection of the laws.” There are two aspects of equality under Article 14, i.e., equality before the law and equal protection of the law. Equality before the law is a negative concept, and it strictly prohibits discrimination. Whereas the concept of equal protection of laws is a positive one, it states that to achieve equality among all, the state has to provide special treatment to people under certain circumstances.

Article 16 of the Indian Constitution

Article 16 provides for equality of opportunity in matters of public employment. It states that no citizen shall be discriminated against on the grounds of religion, race, caste, sex, descent, place of birth, residence or any of them. The state, under this Article, is also empowered to make special provisions for the underprivileged classes.

Article 19 of the Indian Constitution

Article 19 provides the bundle of rights; it protects ‘the right to free speech and expression, the right to peaceful assembly without arms, the right to assemble in unions or associations, the right to practise any profession, and the right to engage in any occupation, trade, or business.’

Under the purview of labour laws, these constitutional guarantees, including minimum standard legislation, play a significant role. The ability of lawmakers to decide and choose which businesses or industries should adhere to the minimum standard is constrained by equal protection. The freedom to practise any trade, profession or business eliminates the burden that legislation might place on businesses for the sake of workers. These provisions protect workers’ rights to free speech, assembly, and association, as well as unionisation, which facilitates their efforts to organise themselves through picketing or by going on strike to advance personal interests.

Article 21 of the Indian Constitution

Article 21 protects the right to life and personal liberty of every person. The interpretation of the term ‘life’ by the Supreme Court has evolved significantly to include in its ambit various rights that contribute to the personal liberty of the individual. Further, the term personal liberty has been construed broadly to include a wide range of rights. These rights must adhere to a proper legal process that is fair, just, and reasonable. Thus, this broad interpretation reflects the developing notion of human rights, elaborating on significant parts of human life within the borders determined by constitutional protection.

Articles 23 and 24 of the Indian Constitution

Article 23 prohibits trafficking in human beings and forced labour. It states that trafficking in human beings, and begar and other similar forms of forced labour is prohibited, and any contravention of this provision is punishable by law. The Supreme Court has interpreted the term life under Article 21 to include livelihood, and it has held in several cases that any employment below minimum wage levels is illegal as it amounts to slavery.

Further, the employment of children below the age of 14 in any factory, mine, or other hazardous occupation is prohibited under Article 24.

Preamble of the Indian Constitution

The preamble to the constitution is another significant source of authority for the legislature to consider while enacting labour laws. It promises ‘Social, economic, and political justice; liberty of thought expression, belief, faith, and worship, equality of status and opportunity’. The elaboration of the principles provided under the preamble is found in Part IV of the Constitution, i.e., Directive Principles of State Policy. This part of the constitution states that the state is responsible for ensuring and safeguarding a social order that is characterised by justice, social equality, and political stability. These principles are intended to permeate all facets of national institutions working towards the promotion of the welfare of the people.

The promotion of the welfare of the people is addressed by some of these directives, such as minimising inequalities, directing the policy of the state towards securing the satisfaction of certain minimum needs, the right to work, an education, public assistance in some circumstances, just and humane working conditions, maternity leave, a living wage, the participation of workers in the management of industry, providing free and mandatory education for children, and enhancing public health.

Labour laws in India

Some of the labour laws in India are as follows:

Laws related to industrial relations

Trade Union’s Act, 1926

One of the earliest labour laws passed in India is the Trade Unions Act, 1926. Its early enactment as well as the constitutional guarantee of freedom of association have greatly aided in legitimising the lives and workings of trade unions. The main function of trade unions is to enable workers to act collectively. During negotiations with employers, workers find themselves in a subordinate position because strikes are the final solution for trade unions and should only be used when all other options have failed.

The Act contains rules concerning the formation and regulation of trade unions, as well as conditions under which registration can be granted, along with benefits arising from such registration. The Act covers both employer associations and labour unions.

The Industrial Employment (Standing Orders) Act, 1946

One of the most common reasons for a conflict between management and employees in industrial enterprises is not having standing orders. To solve this issue, the Industrial Employment (Standing Orders) Act was enacted in 1946 to control recruitment, termination of services, disciplinary actions, holidays and other benefits accruable to workers engaged in industrial undertakings. The Act stipulates that employers in industrial establishments should clearly define and properly describe the employees’ working conditions. Standing orders that provide for the conditions of recruitment, termination, disciplinary action, holidays, leave, etc. can reduce conflictual situations between management workers in industrial enterprises. It applies to all industries with 100 employees or more.

Industrial Disputes Act, 1947

Industrial disputes occur when there is a disagreement in labour relations. Industrial relations involve many aspects of relationships between employers and employees. Such relationships can always result in dissatisfaction for one or another party involved in a conflict of interests, which sometimes causes conflicts or industrial disputes. The conflict could manifest as demonstrations, strikes, lockouts and other actions like layoffs.

The Industrial Disputes Act, 1947,(ID Act) is a progressive social welfare Act passed by the Indian parliament to provide for better working environments in industries. The main goal of this Act is to minimise conflicts between labour and management while still providing the highest level of assurance for economic and social justice. This Act addresses the investigation and resolution of labour disputes.

The Act promotes harmonious relationships between employees and employers, providing guidelines for resolving disputes in a peaceful manner. The Act is beneficial legislation that seeks to address industrial conflicts and provides mechanisms for resolving disputes. The Act defines the powers, responsibilities, and roles of conciliation officers, work committees, courts of inquiry, labour courts, industrial tribunals, and national tribunals, as well as the procedures to be followed by them.

It further sets forth the grounds upon which a worker may be laid off, retrenched, dismissed or discharged; when an industrial establishment might close down; when strikes and lockouts may be lawfully used; and numerous other issues affecting workers’ lives with regard to their employers.

Laws related to wages in India

The Payment of Wages Act, 1936

Two common forms of employer malpractice during the early stages of industrialisation were paying wages late and making unauthorised deductions from wages. The Payment of Wages Act, 1936, was enacted to put an end to such practices after the Royal Commission on Labour had recommended it back in 1931.

The primary goal of this Act is to eliminate all types of malpractice by specifying the time and manner in which wage payments are made, as well as making sure that workers get their wages on a timely basis without any unauthorised deductions. The Act gives the government the authority to raise the ceiling in the future through a notification for greater outreach and efficiency of enforcement.

Minimum Wages Act, 1948

The Minimum Wages Act, passed in 1948, was enacted to secure the rights of workers by establishing a minimum wage for some occupations. This Act also adheres to the provisions of Article 43 of the Indian Constitution, which provide for a living wage and decent working conditions.

The Act was primarily aimed at safeguarding the interests of workers in the unorganised sector. The Act sets and reviews the minimum wage for workers in scheduled employment. The Act requires that the central and state governments set and review the minimum wage periodically, as well as enforce the payment of such scheduled employment.

Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965, does not define the word ‘bonus’. According to Webster’s International Dictionary, “a bonus is something given in addition to what is ordinarily received by or strictly due to the recipient.” The bonuses are made to narrow down the difference between actual wages and the ideal of a living wage. The Payment of Bonus Act, 1965, is applicable to every factory as defined in the Factories Act, 1948, and also to any other establishment employing twenty or more people on any day during an accounting year.

If an employee serves for his or her employer for a minimum of 30 working days in any accounting year, that individual is entitled to a bonus from their employer. A bonus must not be less than 8.33% of an employee’s annual salary or wages or one hundred rupees, whichever is higher. The appropriate government appoints inspectors for the enforcement of the Act. A controversy regarding the payment of a bonus is considered an industrial dispute under the Industrial Disputes Act of 1947.

The Equal Remuneration Act, 1976

In the International Year of Women in 1975, India passed the Equal Remuneration Ordinance to fulfil Article 39 of the Constitution, which demands that men and women should be paid equally. Finally, the ordinance was replaced by the Equal Remuneration Act in 1976. The Act makes it clear that women employees could not be discriminated against in recruitment for the same or similar work, as well as in respect of any condition of service after such an employee is recruited. It also requires that there should be equal pay for men and women employees who have been engaged in similar or the same work without any exception. The Act applies to all public and private establishments as well as employment, including domestic work.

The Factories Act, 1948

Another law enacted to promote social change was the Factories Act, 1948. The Act is unambiguous in that its labour regulations serve the interests and welfare of workers, whereas it intends to guide labour discipline. The main functions of the Act are to regulate working conditions in a factory, take necessary steps towards the welfare of the worker, safety and health, control long working hours, and provide proper means for efficient execution of the Act.

The purpose of this Act is to safeguard workers working in factories against industrial occupational hazards and provide them with healthy living and working conditions. It incorporates broad guidelines on the health, safety, and welfare of employees to provide a preferable work environment as well as other benefits aimed at improving the quality of their lives.

In the case of Ravi Shankar Sharma v. The State of Rajasthan (1993), the Rajasthan High Court stated that the Factories Act is social legislation which addresses matters related to welfare, safety, and health for factory workers. In a nutshell, the Act is designed to contribute to providing a better working environment in industrial premises and protect workers from unscrupulous commercial establishments greedy for profits.

The Plantations Labour Act, 1951

The working conditions for plantation labourers are governed by the Plantation Labour Act, 1951. It concerns plantations that produce cinchona, rubber, tea and coffee. The Act provides for the registration of plantations with a registering officer and is mainly focused on the problems associated with welfare and health-related issues.

The Act provides for working hours, a weekly holiday, and paid leave. It further allows the employment of qualified inspecting, medical, or other personnel to ensure compliance with the various provisions of the Act. According to the Act, employers are supposed to provide housing, child care, health care, and welfare for their employees. To fulfil the provisions of the Act, it gives power to the state government to notify regulations as well as appoint various types of officials, such as registering officers, chief inspectors, certifying surgeons, and commissioners. In addition, the Act prohibits child labour on plantations.

The Mines Act, 1952

The Mines Act, 1952, covers various measures related to health coupled with the safety and welfare of mine workers. The term ‘mine’ encompasses an excavation where a mining operation has been or is being conducted for the purpose of finding minerals. This would include all borings, boreholes, oil wells, accessory crude conditioning plants, shafts, opencast workings, conveyors or aerial ropeways, planes, machinery works, railways, tramways, slidings, workshops, power stations, and other locations that are near or in the mining area.

The Act has various stipulations to be adhered to so as to ensure the safety and medical demands for the working conditions of miners. Moreover, these sections outline the minimum qualifications for all activities regulated by this Act.

The Act provides provisions on working hours and restrictions that range from a weekly day of rest to a compensatory day of rest, hours worked during night shifts above and below ground, overtime pay, a limit on daily hours of work, a prohibition on the presence of people under the age of 18, and the employment of women.

It examines the workers to ensure a fair and healthy environment in the mines. Under the Act, the Central Government has the power to appoint Chief Inspectors and Inspectors, who are provided with a wide range of powers and responsibilities to ensure effective implementation of the law. The Act also has rules regarding the payment of overtime and night shifts.

Motor Transport Workers Act, 1961

The Motor Transport Workers Act, 1961, was passed with the aim of regulating the appropriate working conditions for motor transport workers. The Act applies to any motor transport company that has five or more employees engaged in operation of such a means of transportation. Employers using motor transport must register the undertaking under this Act.

The welfare and health facilities to be provided to all workers are uniforms, canteens where 100 or more motor transport employees have been employed, restrooms where workers are required to stop at night, and medical and first-aid facilities.

Laws related to social security in India

The Workmen’s Compensation Act, 1923

Parliament has passed several laws concerning the social security of workers. This was one of the first Acts passed to benefit workers. It was passed in 1923, but it didn’t take effect until July 1st, 1924. The Workmen’s Compensation Act was subsequently renamed the Employees’ Compensation Act, 1923. The Act covered workers in the sewage, firefighting, railway, tram, factory, mine, sea dock and building industries.

The Act grants compensation for losses resulting from accidents or occupational diseases that occur in the course of and during employment, including death benefits, permanent total disability, partial disablement and temporary disability. It sets compensation with regard to the degree of damage sustained during duty. The Act requires employers to pay compensation, both for employees and their dependents, in case of death or disability arising out of industrial accidents or occupational disease caused by employment.

Employees’ State Insurance Act, 1948

The Indian Parliament enacted the Employees’ State Insurance Act in 1948. It was the first substantial legislation for social security enacted in free India, granting such benefits to workers in the organised sector under conditions of illness, maternal condition, and industrial employment.

Apart from addressing other issues that are equally important, the purpose of this Act is to provide specific benefits for employees in cases of illness, pregnancy, and workplace injuries. The insured and their dependents are eligible for a number of benefits based on the established scale. The right to receive benefits is not transferable or assignable.

The Act grants the state government the power to set up an Employees Insurance (EI) Court. The EI Court can make decisions about an individual’s employee status under such legislation, including the number of wages or contributions he or she is making, who their principal employer is or was, and whether they are eligible for any benefits provided by the Act.

The EI Court may also entertain actions for default or negligence in the payment of contributions, claims for recovery of any benefit admissible under the Act, and claims for contribution recovery from a principal or immediate employer.

Employees’ Provident Fund and Miscellaneous Provisions Act, 1952

The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, along with the Employees State Insurance Act, is a very significant social security legislation in India. It covers any factory linked to one of the industries listed in Schedule I of the Act that employs 20 or more people, as well as an average establishment employing 20 or more people incorporated by notification from the central government.

The three major schemes that are provided by the Employees’ Provident Fund Act are the Employees’ Provident Fund Scheme, 1952; the Employees’ Deposit-Linked Insurance Scheme, 1976, and the Employee Pension Scheme, 1995.

The Act aims at furnishing social security and timely financial assistance to industrial workers who need help and their family members. Thus, three schemes are adopted in compliance with the Act. Together, the schemes provide the employee’s protection and security for life, along with survivorship advantages as well as benefits to family members after the death of an insured person in terms of long-term support concerning insurance payments. Also, arrangements include timely advances, which are available from health-related loans through the purchase or construction of dwellings during the membership period.

The Maternity Benefit Act, 1961

According to Article 42 of the Indian Constitution, the government should formulate laws to ensure fair and comfortable working conditions, along with maternity leave. This Act was enacted to promote social equity for female employees. This law on social welfare also provides various provisions for benefits to female wage earners. The Act was passed to give maternity allowances and other payments, as well as to control women’s conditions at work on certain premises during some days before and after childbirth.

Employment of women employees working in factories, mines, plantations, etc. with ten or more people is regulated by the Maternity Benefit Act, 1961. However, this Act does not cover those persons who are employed under the ESI scheme for a certain period after childbirth and before delivery. It also offers maternity and other benefits.

The Payment of Gratuity Act, 1972

Gratuity is another major social security benefit in India. As per the Payment of Gratuity Act, 1972, a gratuity is a one-time payment. When an employee chooses to retire, it is said that the employer provides them with a gratuity as a gesture of gratitude for their many years of outstanding service. It compensates at least for part of the income that gets lost because an individual has decided to retire or resign his job or is no longer able to work as a result of death or disabling illnesses or injuries. This Act covers businesses with 10 or more employees, including factories, mines, oil fields, plantations, ports, railways, and retail establishments.

The Unorganised Workers Social Security Act, 2008

The Unorganised Workers’ Social Security Act of 2008 requires the states and the Centre to come up with various welfare programmes aimed at benefiting those already working in the unorganised sector. As stated in the Act, workers ought to be registered and must carry smart cards with personally identifiable social security numbers to provide social security benefits to those employed in the unorganised sector.

According to the Act, the Central Government should establish appropriate welfare programmes for unorganised workers in the areas of health and maternity benefits, life insurance, disability insurance, or old-age security, as well as other benefits it deems appropriate. The government has developed 10 schemes under Schedule I of the Act. According to the Act, states can establish welfare programmes involving provident funds, workers’ compensation for those who suffer an injury on the job, and housing facilities for employees and parents of children who are continuing with basic education beyond the primary school level to improve skills or in old age homes.

Employment and training laws in India

The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959

The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, imposes a statutory obligation on employers to notify employment exchanges about vacant positions and submit an employment return. Accordingly, major roles performed by employment agencies are registration services, job placement assistance, career counselling and vocational guidance, and data collection on the labour market.

The Act applies to all public and private sector establishments that are involved in non-agricultural activities with 25 or more employees. All employers in the public service in any state or region have to submit all necessary information and returns required by employment exchanges with regard to openings that have occurred or are about to appear at their establishment.

Apprentices Act, 1961

The Apprentices Act, 1961, was therefore enacted to regulate and administer the apprenticeship training programme as well as other related areas. The term apprentice means a person who is completing his or her training as related to the contract of traineeship. It is a training programme that must be undertaken in any field or establishment as specified by an apprenticeship contract with terms and conditions set for different categories of apprentices.

Employers, both in the public and private sectors, are mandated by the Act to provide training infrastructure as specified in this Act. Every employer must train apprentices in their trade as per the provisions of the Act and its rules. The Apprentices Act of 1961 was updated in 2014 to help increase the number of apprenticeship slots that were available for young people.

The Labour Codes

Recently, the Government of India initiated substantial reforms in labour laws throughout the country based on recommendations made by the 2nd National Commission on Labour. So to avoid any confusion and ambiguity regarding definitions and approaches, the Commission stressed on unifying existing labour laws while making them simpler. Moreover, consolidating labour laws would support more comprehensive labour coverage, as different and even separate sets of labour laws apply to several employee types or within multiple thresholds. To fulfil the demands provided by suggestions emanating from the National Commission of Labour recommendations, Parliament introduced four Codes on wages, labour relations, social security and occupational safety.

There are about 40 or more laws regulating wages, industrial relations, social protection, security at the workplace, and working conditions currently in place. Therefore, a major concern for Indian industries is the multiplication of rules and regulations that often result in spending more resources, documentation, administrative time, and costs. New labour Codes seek to equalise India’s different labour laws and simplify the numerous compliance obligations in the country. Each Code applies to a particular field of labour law, as shown by the title, and it aims at coding or replacing old laws in that area.

Objectives of the Labour Codes

The following are some of the objectives of the Codes:

The amalgamation of 29 laws relating to wages, working conditions, social security, safety, and health.
To ensure consistency in definitions for ease of compliance.
To increase business accessibility, generate employment, and give employers more flexibility in terms of employee mix and hiring.
To simplify and make clear the issues surrounding contract labour.
To standardise issues related to union recognition and negotiating agents, rationalise wages, and address unethical behaviour.
The rationalisation of enforcement authorities and the implementation of a web-based inspection process.

The Code on Wages, 2019

The Code on Wages, 2019 was passed by both Houses of Parliament and received the assent of the President on August 8th, 2019. The Code aims to regulate wages in all types of jobs that take part in any sector, trade business, or manufacture, including salary and bonuses. The Code consolidates the following laws pertaining to wages:

Minimum Wage Act, 1948
Payment of Wages Act, 1936
Payment of Bonus Act, 1965
Equal Remuneration Act, 1976

Two significant definitional changes came about as a result of the codification. The Code broadened the horizons by eliminating the difference between organised and unorganised employment, whereas the Minimum Wage Act of 1948 applied only to the ‘schedule of employment’ covered under the Wages Law. Therefore, the concepts of employee and employer have been made all-encompassing to include both the formal as well as informal sectors.

Secondly, the Code made application of both the Minimum Wage Act of 1948 and the Payment of Wages Act of 1936 to all establishments and employees, unless expressly exempted, rather than just those whose income had to be below a fixed limit.

Important provisions of the Labour Codes

Some of the important provisions of the Code are as follows:

Application of the Code

One of the main features of the Code is to universalise its application. Earlier, the payment of the minimum wage was limited to the workers specified in the scheduled employment. However, with the introduction of this Code, minimum wages are now expanded to include employees of both organised and unorganised sectors. This wider application of the Code provides security to over 50 crore workers working in these sectors.

Gender Discrimination

The Code prohibits discrimination based on gender in matters related to wages and the recruitment of employees for the same or similar work. The Code defines the term “same work or work of similar nature” in Section 2(v) as work for which the skill, effort, experience, and responsibility required are the same and are carried out under similar working conditions. The Code places an obligation on the employer to ensure equal pay for the same or similar work and prohibits reducing wages based on gender. This provision seeks to increase the involvement of women in the labour market, which can empower them socially and financially.

Minimum wage

The process of determining the minimum wage under the Code has been made more efficient and rationalised. The central and relevant state governments have to review and revise the minimum wage every five years. This places an obligation on employers to comply with the revised minimum wage standards.

Fixation of minimum wages

Section 8 provides for the fixation of minimum wages; it states that, subject to Section 9, the appropriate government is responsible for determining minimum wages based on the recommendations of the advisory board.

Further, Section 6(6) provides that the determination of the minimum wage will be categorised based on skill levels, which include unskilled, semi-skilled, and skilled. It also states that there shall be no distinction based on scheduled employment; this means that the minimum wages established will be uniformly applicable to all levels of employment, regardless of the nature of the industry.

Floor wage

Floor wage generally refers to the minimum wage that employers are legally required to pay their workers. It serves as a baseline or floor, ensuring that workers receive a certain level of compensation for their labour. Section 9 states that the central government is responsible for determining the floor wage. While determining the floor wage, the central government has to take into account the living standards of the workers, and it also empowers the central government to set different floor wages for different areas. Before finalising the floor wage, the central government may seek advice from the central advisory board, in consultation with the relevant state governments.

Overtime wages

Section 14 provides for overtime wages; either the central or state governments have the authority to determine the standard number of hours constituting a regular working day. If the employees work beyond the set hours of the working day, they shall be entitled to receive overtime wages. Further, the provision provides that the prescribed overtime wage shall be at least twice the normal rate of wages, which ensures fair compensation for additional hours worked.

Payment of wages

Section 15 provides for various methods for payment of wages, such as coins, currency notes, cheques, credit to the bank account, or by electronic mode. Further, Section 16 states that the employers shall fix the wage period for the employees, either daily, weekly, fortnightly, or monthly.

Deductions

Deductions that may be made from the wages are provided under Section 18. According to this section, no deductions from the wages of the employee are permitted except those which are expressly authorised under the Act.

For the purpose of this section, if an employee has made any payment to the employer or his agent, it shall be deemed to be a deduction from wages. However, any loss of wages to an employee that occurs due to the withholding of an increment or promotion, including stoppage of an increment, reduction to a lower post, or suspension, shall not be deemed to be a deduction if the employer’s actions satisfy the requirements as notified by the appropriate government.

Grounds for deductions

The employer shall make deductions from the wages of an employee in accordance with the provisions of the Code, and they shall be made only for the following purposes:

fines imposed on the employee;
deductions for employees’ absence from duty;
deductions for the damage to or loss of goods particularly entrusted to the employee for custody that is directly attributable to the employee’s neglect or default;
deductions for house accommodations supplied by the employer, by the appropriate government, or by any housing board;
deductions for amenities and services supplied by the employer as authorised by the appropriate government or any officer;
deductions for recovery of advances, loans, and interest;
deductions for recovery of loans granted for house-building or for any other purposes that are approved by the appropriate government;
deductions of income tax or any other statutory levy levied by the central government or state government which is payable by the employee;
deductions for subscription to and repayment of advances from any social security funds or schemes;
deductions for payment to co-operative society;
deductions made with the written authorisation of the employee for the membership of trade union fees., etc.

Further, the section states that these deductions shall not exceed 50% of the total wage of the employee. If the total deductions authorised exceed 50% of the wages, the excess may be recovered in such manner as may be prescribed.

Payment of the bonus

Eligibility for a bonus has been provided under Section 26. Any employee who is drawing monthly wages not exceeding an amount predetermined by the appropriate government and has worked for a minimum of 30 days is eligible for the annual minimum bonus. This bonus is calculated at the rate of 8.33% of the wages earned by the employee or Rs 100, whichever is higher. Further, this provision is valid irrespective of whether the employer had any allocable surplus in the previous accounting year.

Allocable surplus refers to the available surplus after certain allocations and deductions have been made as per the provisions of the Act. This surplus is the basis for determining the amount of bonus that can be distributed among eligible employees.

If the wages of the employee exceed such an amount as determined by the appropriate government, the bonus payable to such an employee shall be calculated as if such an amount is equal to the employee’s wage as specified by the appropriate government or the minimum wage fixed by the appropriate government, whichever is higher.

Further, if the allocable surplus for the given accounting year exceeds the minimum bonus required for employees, the employer is under obligation to pay every employee a bonus for that accounting year. The bonus shall be calculated proportionally based on the wages earned by the employee during the accounting year, subject to a maximum limit of twenty percent of such wages.

Disqualifications for bonuses

Section 29 provides for disqualifications for bonuses; it states that an employee will be disqualified from receiving a bonus under this Code if they are dismissed from service for the following reasons:

Fraud.
Riotous or violent behaviour while on the premises of the establishment.
Theft, misappropriation, or sabotage of any property of the establishment.
Conviction for sexual harassment.

In these specified situations, the employee is ineligible to receive a bonus.

Advisory boards

Section 42 provides for the constitution of the central and state advisory boards. Accordingly, the central government shall establish the central advisory board, which shall consist of members appointed by the central government. The board includes an equal number of representatives from both the employers and the employees, independent persons not exceeding one-third of the total members, and five representatives who are nominated by the state governments.

Further, the section also provides that one-third of the members appointed to the board shall be women, and the chairperson appointed by the central government shall be from the category of independent persons.

It is also provided that the Central Advisory Board shall advise the Central Government on various issues, such as minimum wages, employment opportunities for women, employment for women in specific establishments, and other matters under this Code. The Central Government may issue directions to state governments based on the advice of the Board.

The section also states that the state government shall constitute a state advisory board to advise on matters relating to minimum wages, employment opportunities for women, and other matters. The board shall consist of committees and subcommittees which include an equal number of representatives from both employers and employees, independent persons not exceeding one-third of the total members.

It also states that one-third of the members appointed to the board shall be women, and the chairperson shall be appointed by the state government. Both the Central and State Advisory Boards shall regulate their procedures, including committees, and their terms of office shall be as prescribed by relevant regulations.

Offences and penalties

Section 54 provides for the penalties for offences, and employers can be held liable under the following circumstances:

If an employer pays an employee an amount less than what is due under the Code, he shall be punished with a fine that may extend up to fifty thousand rupees. If the employer within 5 years has committed the second or subsequent offence, he shall be punishable with imprisonment for up to 3 months, a fine of up to Rs. 1,00,000, or both.
If any employer contravenes any other provision of this Code or any rule or order made under it, they shall be punished with a fine, which may extend to 20,000 rupees. If the employer within 5 years has committed the second or subsequent offence, he shall be punishable with imprisonment for up to one month, a fine of up to Rs. 40000, or both.

The Industrial Relations Code, 2020

The Industrial Relations Code was passed by Parliament in September 2020 and received the President’s assent on September 28, 2020. The Industrial Relations Code came into force to consolidate and amend the laws governing trade unions, working conditions in industrial establishments, undertaking investigations, resolving industrial disputes, etc. It consolidates the following labour laws:

Industrial Disputes Act, 1947
Trade Unions Act, 1926
Industrial Employment (Standing Orders) Act, 1946

Important provisions of the Code

The Code consists of 104 sections organised into 14 chapters and is supplemented by three schedules. These schedules cover standing orders, unfair labour practices, and conditions of service for which advance notice must be provided.

Definitions

Some of the important definitions under the Code are as follows:

Employer

The term ’employer’ has been defined under Section 2(m) of the Code, which is broader in comparison to Section 2(g) of the Industrial Disputes Act, 1947 (hereinafter referred to as the ID Act). The definition in its ambit includes the occupier of the factory, the factory manager, contractors, and the legal representative of a deceased employer.

Worker and employee

The term “worker” in the context of this Code is defined as any person employed in an industry, excluding an apprentice as defined under clause (aa) of Section 2 of the Apprentices Act, 1961. A worker encompasses individuals engaged in manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward, whether the terms of employment are explicitly stated or implied. This definition also includes working journalists as defined in clause (f) of Section 2 of the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955, as well as sales promotion employees as defined in clause (d) of Section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976.

However, the definition excludes the following categories:

Any person who is subject to the Air Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957;
Any person employed in the police service or as an officer or other employee of a prison;
Any person employed mainly in a managerial or administrative capacity; or
Any person employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.

The term ’employee’ was not incorporated under the ID Act. However, the Code has introduced the definition of ’employee’ under Section 2(l), which encompasses a broader definition than that of ‘worker’ in Section 2(zr). This broader definition includes in its ambit the persons involved in skilled, semi-skilled, or unskilled manual, operational, supervisory, managerial, administrative, technical, or clerical work for hire or reward, and excludes the members of the Armed Forces of the Union.

The simultaneous use of both the terms ’employee’ and ‘worker’ without providing clear explanations in the Code creates confusion regarding the rights of individuals falling under the scope of the definition ’employee’ but falling outside the scope of ‘worker’.

For example, Section 2(q) of the Code provides for the definition of ‘industrial dispute’ which explicitly mentions the term ‘worker’ and not ’employee.’ This suggests that the mechanisms for resolving the industrial dispute can be accessed by only those persons falling under the definition of ‘worker’ under Section 2(zr), while ’employees’ may not possess such a right. Section 91, on the other hand, excludes workers and states that an ’employee’ can file a complaint with the concerned authority if the employer adversely changes their working conditions during the pendency of an industrial dispute.

Industry

Section 2(p) of the Code defines the term ‘industry’ which is more comprehensive as compared to the definition provided in Section 2(j) of the ID Act. According to this definition, ‘industry’ means ‘any systematic activity carried on by cooperation between an employer and worker for the production, supply, or distribution of goods or services with a view to satisfying human wants or wishes, whether or not any capital has been invested for the purpose of carrying on such activity, or any activity is carried on for any gain.’

However, Section 2(p) excludes certain categories from its ambit. Which includes;

institutions owned or managed by organisations engaged in charitable, social, or philanthropic services,
activities related to the sovereign functions of the appropriate government,
domestic service, and
any other activity that may be notified by the Central Government.

Fixed-term employment

The Code has introduced a new term referred to as ‘fixed-term employment’, which means engaging a worker based on a written contract for a specific period with certain conditions, which include:

The fixed-term employee shall receive the same hours of work, wages, allowances, and other benefits as a permanent worker doing the same or similar work.
The fixed-term employee is also entitled to all statutory benefits available to a permanent worker, adjusted proportionately based on the duration of service, even if their employment period is shorter than the qualifying period specified by law.
If the fixed-term employee serves under the contract for one year, they shall be eligible for gratuity.

Bipartite forums

For resolving industrial disputes and addressing grievances, the Code has provided two bipartite forums, which include;

Works committee

Section 3 provides for the constitution of the works committee. The main purpose of this committee is to enhance protective measures and ensure positive relations between the employer and the workers. If an industrial establishment employs 100 or more workers in the preceding 12 months, the appropriate government, by general or special order, may need to establish a work committee.

The work committee consists of representatives of both the employers and the workers engaged in the establishment. Further, it states that the number of representatives of workers in a committee shall not be less than the number of representatives of the employer.

Grievance Redressal Committee

The Code also provides for the establishment of Grievance Redressal Committees under Section 4 for resolving disputes arising from individual grievances. If an industrial establishment has 20 or more workers, one or more Grievance Redressal Committees must be formed, each comprising a maximum of 10 members. It shall consist of an equal number of members, representing both the employer and the workers.

Registration of a trade union

The criteria for registration of trade unions have been provided under Section 6 of the Code. Accordingly, a trade union with a minimum of seven or more subscribing members can apply for the registration of a trade union. Further, it states that at the time of applying for registration, the trade union is required to have a membership of at least ten percent of the workers, or 100 workers, whichever is less.

After a successful registration process, the trade union is obligated to maintain its membership of at least ten percent of the workers, or 100 workers, whichever is less. It also provides that a minimum of seven members of the trade union must be engaged in or employed in an industrial establishment or industry which is associated with the union.

Suppose the proposed name of the trade union registration is identical to that of an existing registered union. In that case, the registrar of the trade union is under an obligation to modify the name to avoid confusion or duplication.

Section 12 provides that upon formal registration of the trade union, it attains the legal status of a distinct entity. This involves being incorporated under its registered name, having a common seal, and enjoying perpetual succession. Further, the registered trade union has the power to acquire and hold both movable and immovable property and to contract. It shall also have the power to sue and be sued under the registered name.

Negotiating trade unions

Section 14 provides for the establishment of the negotiating union or negotiating council in an industrial establishment having a registered trade union for negotiating with the employer of the industrial establishment on matters specified by regulations. If an industrial establishment has only one registered trade union, then the employer, subject to the specified criteria, has to recognise it as the sole negotiating union for the workers.

If an industrial establishment has more than one trade union, the employer shall recognise the trade union that has the support of 51 percent or more of the workers on the muster roll as the sole negotiating union.

Further, it states that if an industrial establishment has more than one trade union and no single trade union has the support of 51 percent or more of the workers, then in that situation the employer shall establish a negotiating council. The council shall consist of representatives from registered trade unions having the support of at least twenty percent of the total workers on the muster roll.

Negotiations between the employer and the negotiating council will result in an agreement if it is approved by the majority of representatives of the trade union council. Further, the negotiating council constituted under and recognitions made under this section shall be valid for three years from the date of recognition and constitution.

Standing orders

Standing orders refer to the directions formulated by the employer on the matters provided under the first schedule of the Code. These matters primarily govern the relationship between the employer and worker in an industrial establishment and include the classification of workers, working hours, attendance, suspension, termination, etc.

Application of standing orders

While the Industrial Employment (Standing Orders) Act, 1946, applied to industrial establishments with 100 or more workers, this Code has raised the threshold to 300 workers.

According to Section 28, the Standing Orders apply to every industrial establishment that employs or has employed 300 or more workers on any day in the preceding 12 months. However, it excludes workers covered by Fundamental and Supplementary Rules, Civil Services (Classification, Control, and Appeal) Rules, Civil Services (Temporary Service) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Service (Classification, Control, and Appeal) Rules, or the Indian Railway Establishment Code and any other rules or regulations notified by the appropriate government.

Model standing orders

Section 29 provides that the central government is responsible for making the model standing orders related to conditions of service and other relevant matters.

Draft standing orders

Section 30 provides for the preparation of draft standing orders by the employer. It states that the employer, within six months after the commencement of this Code, is required to prepare the draft standing order based on the model provided by the central government.

The order prepared by the employer should not be inconsistent with any of the provisions of the Code and has to cover every matter provided in the first schedule.

During the drafting process, the employer shall consult the trade unions, recognised negotiating unions, or council and submit the draft electronically or by other means to the certifying officer for certification. Where the employer adopts the model standing order of the central government without modification, then the same shall be deemed to be certified. The employer is then required to inform the relevant certifying officer.

The certifying officer, after receiving the draft standing order, shall issue notice to

trade union, negotiating union or council associated with the industrial establishment, and
where there is no trade union operating, to representatives of the workers of the industrial establishment,

And shall collect comments on the matter and, upon receiving feedback, provide an opportunity for a hearing to the negotiating union, negotiating council, or, as applicable, to the trade unions or representatives of the workers. Further, the certifying authority has to decide whether any modification or addition to the draft standing order is necessary for it to be certifiable. The decision shall be made in writing.

The certifying officer shall complete the procedure of certification for the draft standing order or modifications within 60 days. If the certification procedure does not complete within the stipulated time period, then the draft standing orders or modifications to the standing orders shall be deemed to have been certified upon the expiration of the specified period.

If an industrial establishment has any existing standing orders at the commencement of this Code, they shall be deemed to be certified under the Code if they are not inconsistent with the provisions of the Code.

Change in notice

Section 40 of the legislation stipulates that no employer can make changes to the conditions of service for workers concerning matters listed in the Third Schedule without adhering to certain procedures. Specifically, the employer must provide notice of the proposed changes in the manner prescribed. The notice shall be given to the affected workers, clearly outlining the nature of the proposed changes. Further, the notice shall be given within 21 days before the intended implementation of the changes.

However, there are certain exceptions to this notice, and they are:

Changes made in accordance with a settlement or award.
Changes affecting workers are covered by specific rules or regulations notified by the appropriate government.
Emergency situations requiring a change of shift or shift working, in consultation with the Grievance Redressal Committee.
Changes made in accordance with the orders of the appropriate government or as per settlement or award.

Section 41 empowers the appropriate government to assess the impact of Section 40 on certain industrial establishments or classes of workers. If the government is of the opinion that the application of Section 40 may severely prejudice employers and have significant repercussions on the industry, it can issue a notification. This notification may either exempt certain classes of industrial establishments or workers from the application of Section 40 or subject its application to specified conditions.

The matters that are provided under the third schedule are as follows:

Modifications to the wages.
Changes made in the contributions paid or payable by the employer to any provident fund or pension fund under any law for the time being in force.
Compensatory and other allowances.
Changes made to the fixed hours of work and rest intervals for employees.
Changes to provisions concerning leave with wages and holidays.
Changes made to the commencement, modification, or cessation of shift operations which deviate from the standing orders.
Changes made to the classification of employees by grades.
Notification of the withdrawal of any customary concession, privilege, or modification in usage.
Introduction of new provisions for discipline or amendments to existing rules, unless already addressed in standing orders.
Changes related to the rationalisation, standardisation, or improvement of a plant or technique may lead to worker retrenchment.
Any increase or reduction in the number of persons employed or to be employed in any occupation, process, department, or shift, not resulting from circumstances beyond the employer’s control.

Mechanisms for the resolution of industrial disputes

The Code provides for the following methods for the resolution of industrial disputes:

Conciliation officers

Section 43 provides that the appropriate government, through notification, has to appoint the conciliation officers, whose main function is to mediate and promote the settlement of industrial disputes. Further, the section states that the conciliation officers may be appointed for a specified area, specific industries within a given area, or one or more specified industries. These appointments may be either permanent or for a specified duration.

Industrial tribunals

The establishment, composition, and jurisdiction of the industrial tribunals have been provided under Section 44.

The appropriate government may, by notification, constitute one or more industrial tribunals for adjudicating industrial disputes and other functions as provided under the Code. Further, a tribunal constituted by the central government has conferred the jurisdiction, powers and authority as provided under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Every industrial tribunal shall consist of two members who are appointed by the appropriate government. Out of which one shall be judicial and the other an administrative member. If the Tribunal consists of one judicial member and one administrative member, the judicial member shall preside over the Tribunal.

Further, the Code provides for the detailed procedure of the tribunal, including the distribution of cases among its benches. It states that if the benches comprising both the judicial member and an administrative member shall try the cases relating to the discharge or dismissal of workmen, the legality of strikes or lockouts, retrenchment, closure of establishments, and trade union disputes, they are specifically designated for benches comprising both the judicial member and an administrative member. The remaining cases are to be heard and decided by a bench consisting of either a judicial member or an administrative member.

National industrial tribunal

Section 46 provides for the constitution of the national industrial tribunal. The central government may, by notification, constitute a national industrial tribunal which is designed to adjudicate industrial disputes of national importance or on those matters which are likely to impact establishments across multiple states.

The tribunal consists of two members appointed by the central government, with one being the judicial member and the other the administrative member.

Further, the section prescribes the eligibility criteria for the judicial member and the administrative member. It states that to be a judicial member, they must have served as a judge of a high court. On the other hand, to become an Administrative Member, they must have served as Secretary to the Government of India or have held an equivalent rank either in state or central government, with adequate experience in labour-related matters. The judicial member shall preside over the tribunal.

Strikes and lockouts

Section 62 prohibits workers in an industrial establishment from participating in strikes and lockouts. Every person employed in such establishments adheres to the following conditions:

Employees must provide a 60-day advance notice of strikes and lockouts to the employer.
Strikes may not be initiated within 14 days from the date of providing such notice.

Section 63 provides for illegal strikes and lockouts. According to this section, a strike or lockout is considered illegal if:

It is commenced or declared in contravention of the provisions of Section 62.
It is continued in contravention of an order issued by the appropriate government when an industrial dispute has been referred to arbitration.

Section 64 prohibits providing financial aid to illegal strikes or lockouts. It states that no person shall knowingly spend or apply any money in direct furtherance or support of any illegal strike or lock-out.

Lay-offs, retrenchment, and closure

The threshold limit for obtaining prior government permission before closure, lay-off, or retrenchment in an industrial establishment (excluding those of a seasonal nature or where work is performed intermittently) has been increased from 100 to 300 workers. Further, the Code prescribes that the appropriate government has the authority to increase this threshold through an official notification.

Worker Re-Skilling Fund

Section 83 provides for a worker re-skilling fund. The appropriate government, through notification, has to set up a fund to be known as the Worker Re-Skilling Fund. The fund shall consist of:

Contribution from the employer of an industrial establishment, which is equivalent to 15 days of wages last drawn by the worker immediately before retrenchment.
Contribution from other sources as prescribed by the appropriate government.

Further, the section provides that the fund is to be utilised by crediting an amount equal to 15 days’ wages last drawn by the retrenched worker to their account within 45 days of retrenchment.

Unfair labour practices

Prohibition of unfair labour practices has been provided under Section 84. According to this section, no employer, worker, or trade union, whether registered under this Code or not, shall commit any unfair labour practice specified in the Second Schedule.

The Occupational Safety, Health, and Working Conditions Code, 2020

The aim and scope of the Code are to unify and amend laws concerning occupational safety, health, and working conditions with regard to persons employed at an establishment and other connected matters. It has also specified guidelines pertaining to female labour employed in all types of work. The Code combines the following laws:

The Factories Act, 1948
The Contract Labour (Regulation and Abolition) Act, 1970
The Mines Act, 1952
The Dock Workers (Safety, Health and Welfare) Act, 1986
The Building & Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
The Plantations Labour Act, 1951
The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
The Working Journalist and Other Newspaper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955
The Working Journalists (Fixation of Rates of Wages) Act, 1958
The Cine Workers and Cinema Theatre Workers Act, 1981
The Motor Transport Workers Act, 1961
The Sales Promotion Employees (Conditions of Service) Act, 1976
The Beedi and Cigar Workers (Conditions of Employment) Act, 1966

Important provisions of the Code

Some of the important provisions of the Code are as follows:

Application of the Code

The Code applies to all establishments. It has defined establishments as;

a place where any industry, trade, business, manufacturing, or occupation takes place, which employs ten or more workers, or
a motor transport undertaking, newspaper establishment, audio-video production, building and other construction work, or plantation, which employs ten or more workers; etc.

However, the Code does not apply to the offices of the central government, state government, or any warship, except for contract labourers appointed by a contractor for any state or central government office.

Registration

Chapter 2 of the Code provides for the registration of the establishments. The Code has introduced the requirement of single registration and eliminated the need for multiple registrations, which was mandated by various legislations.

Registration of certain establishments has been provided under Section 3. It states that the employer of all the establishments within 60 days after the commencement of the Code shall register their establishments electronically. The registration shall be carried out by the registering officers, who are appointed by the appropriate government.

If the establishments have already registered under any other central labour laws, they shall be considered registered under the Code and are exempt from obtaining fresh registrations.

Further, the section states that if an employer of an establishment has obtained the registration through:

misrepresentation or suppression of any material fact, or
fraudulent means or the registration has become useless or ineffective to run the establishment, then the same is considered as a violation of the provisions of the Code.

Misrepresentation or suppression of any material fact leads to the prosecution of the employer under Section 94. However, the prosecution does not impact the registration or operation of the establishment.

If it has been obtained through fraudulent means or the registration has become useless or ineffective to run the establishment, then in that case, the registering officer shall, after providing an opportunity for the employer to be heard, revoke the registration through an order. The process for revocation shall be completed by the registering officer within sixty days after coming to his notice of the facts.

Duties of an employer and employee

The duties of employers and employees have been prescribed broadly under Chapter 3 of the Code. Section 6 provides for the duties of the employer; accordingly, every employer is required to:

ensure the workplace is free from hazards that cause or are likely to cause injury or occupational disease to the employees;
adhere to the occupational safety and health standards specified under Section 18 or the regulations, rules, bye-laws, or orders provided under this Code;
provide annual health examinations or tests, at no cost, to employees of all age groups or specific classes of employees in establishments, as prescribed by the appropriate government;
provide and ensure, to the extent reasonably feasible, a work environment that is secure without posing a risk to the health for employees;
ensure the proper disposal of hazardous and toxic waste, including e-waste disposal;
issue a letter of appointment to each employee upon their appointment in the establishment, containing information and in a format prescribed by the appropriate government. If an employee has not been issued such an appointment letter on or before the commencement of this Code, it shall be issued within three months from the said commencement;
prohibit the imposition of charges on any employee for activities or provisions related to maintaining safety and health in the workplace, including the conduct of medical examinations and investigations for detecting occupational diseases;
for establishments involving factories, mines, dock work, building or other construction work, or plantations, ensure and take responsibility for the safety and health of employees, workers, and any other individuals present on the premises of the employer, whether or not the employer is aware of their presence.

The Code also prescribes explicit duties to ensure the safety of workers, including those who are engaged in designing, manufacturing, supplying plant and machinery (including importation), architects, project engineers, building designers, agencies, etc.

Section 13 prescribes the duties of employees. Every employee in the workplace shall

exercise reasonable care for his own health and safety, as well as that of other individuals who may be affected by his actions or omissions at the workplace;
comply with the safety and health requirements provided in the standards;
cooperate with the employer in fulfilling the statutory obligations imposed on the employer by this Code;
to report any unsafe or unhealthy situation that comes to his attention to the employer or to the health and safety representative,
not willfully interfere with, misuse, or neglect any appliance, convenience, or other equipment provided in the workplace to ensure the health, safety, and welfare of workers;
avoid willfully and without reasonable cause engaging in any actions likely to endanger himself or others; and
perform any other duties as specified by the appropriate government.

Occupational safety and health

Provisions relating to occupational safety and health are provided under Chapter 4 of the Code. The chapter contains the following provisions:

National and State Advisory Boards

The central government, through notification, shall constitute the National Occupational Safety and Health Advisory Board to discharge the functions conferred on it and to advise the central government on the matters of occupational safety and health mentioned under the Code. Similarly, it is the responsibility of the respective state governments to constitute the State Occupational Safety and Health Advisory Board.

Declaration of health standards

Section 18 of the Code provides for occupational safety and health standards. It states that the central government has the authority to declare standards on occupational safety and health for workplaces. This includes the standards relating to factories, mines, dock work, beedi and cigar, building and other construction work, and other establishments.

Surveys and inspections

The Code provides for safety and occupational health surveys under Section 20. It states that the concerned authorities specified in the Code and members of the Advisory Boards have the right to conduct surveys of any factories, mines, or other establishments. Further, the section states that the employer must make all the necessary arrangements for these surveys.

Safety Committee and Safety Officers

Section 22 provides that the appropriate government, through general or special order, has the power to constitute safety committees in establishments. The committee consists of representatives of employers and workers engaged in such establishments. The number of representatives of workers on the committee shall not be less than the number of representatives of the employer.

Further, the section also provides for the appointment of safety officers. It states that the employer shall appoint safety officers for every establishment, which is,

a factory with five hundred workers or more,
a factory engaged in a hazardous process with two hundred fifty workers or more,
building or other construction work with two hundred fifty workers or more, and
a mine with one hundred workers or more.

These safety officers shall possess the prescribed qualifications and perform duties as prescribed by the appropriate government.

Health, safety, and working conditions

Section 23 imposes responsibility on the employer to maintain health, safety, and working conditions for the employees. The central government has the power to prescribe regulations for maintaining health, safety, and working conditions, which include;

Cleanliness and hygiene
Ventilation, temperature, and humidity
maintaining an environment free from dust, noxious gases, fumes, and other impurities
Establishing adequate standards for humidification, artificially increasing air humidity, ventilation, and air cooling in workrooms
Providing potable drinking water
Maintaining adequate standards to prevent overcrowding and ensuring sufficient space for employees or other individuals employed therein
Ensuring adequate lighting
Establishing sufficient arrangements for separate latrine and urinal accommodation for male, female, and transgender employees and maintaining hygiene.
Implementing effective arrangements for the treatment of wastes and effluents
Any other arrangements considered appropriate by the Central Government.

Working hours

The Code has reduced the daily working hours for employees in an establishment from 9 to 8 hours. Further, it states that if the worker is willing to engage in overtime work, then the explicit consent of such worker must be given, and the employer is under the obligation to pay double the regular wages. Earlier, the Factories Act necessitated not only the consent of the worker but also required the state government to provide a special exemption through notified rules for employers to engage workers in overtime.

Inspector-Cum-Facilitator

Section 34 provides for the appointment of Inspector-cum-Facilitator. It states that the appropriate government has the authority to appoint Inspector-cum-Facilitators through notification by granting them powers across specific jurisdictions. It provides for the appointment of Chief Inspector-cum-Facilitators, Additional Chief Inspector-cum-Facilitators, Joint Chief Inspector-cum-Facilitators, and Deputy Chief Inspector-cum-Facilitators. These Inspectors-cum-Facilitators, apart from their general duties, are responsible for conducting inspections as specified under the Code.

The Inspector-cum-Facilitators shall operate within a structured inspection scheme, potentially incorporating web-based inspections and a random selection of establishments and inspectors. The integral components of the scheme include unique numbering, uploading of timely reports, provisions for special inspections, and workplace nature.

Further, Section 35 provides the powers of Inspector-cum-Facilitators. These include;

To enter into any premises used for a workplace with the assistance of any relevant persons or experts and inspect such establishments.
To inspect and examine establishments, premises, plants, machinery, articles or any other relevant materials.
To inquire into accidents or dangerous occurrences, whether they result in injuries, disabilities, fatalities, or not, and to record statements on the spot from the individuals involved in such accidents or occurrences.
To sensitise employers and workers regarding the provisions of the Code and to ensure compliance.
To demand the production of registers, documents, or any other documents related to the workplace or work activity.
To search, seize, or copy registers, records, or relevant documents that, in his belief, are in contravention of the provisions of the Code.
To take measurements, photographs, videographs, and recordings that are necessary for examinations or inquiries.
To collect samples of articles or substances in establishments or premises, as well as the air of the atmosphere in or in the vicinity, as prescribed by the appropriate government.
To issue directives for dismantling, testing, or any necessary process, in the case of articles or substances posing danger to the health and safety of the employee.
To issue show cause notices related to safety, health, and welfare provisions under the Code.
To prosecute, conduct, or defend complaints or proceedings in courts arising under the Code.
To exercise additional powers and duties as prescribed by the appropriate government.

Special provisions relating to the employment of women

The Code prescribes special provisions relating to the employment of women. Section 43 states that women shall be entitled to be employed in all establishments for all types of work. Further, it states that women may also be employed before 6 a.m. and beyond 7 p.m. with their consent. However, this is subject to conditions relating to safety, holidays, working hours, or any other conditions specified by the appropriate government.

Further, adequate safety in dangerous operations for the employment of women has been provided under Section 44. It states that if the appropriate government considers that the employment of women poses a potential risk to their health and safety in a specific establishment or class of establishments, it may, in the prescribed manner, instruct the employer to implement adequate safeguards before employing women in such operations.

Contract labourers

Chapter 9, Part 1 of the Code deals with the provisions relating to contract labour. Some of them are discussed below:

Application of the chapter

The Code applies to establishments that employed fifty or more contract labourers in the preceding 12 months. The implementation of these provisions is governed by the designated authorities, which are appointed by the appropriate government. These authorities have such jurisdictions, powers, and duties as defined under the Code, including the issuance and revocation of licences electronically.

Licensing of contractors

The Code also prescribes provisions relating to the licensing of contractors under Section 47. It states that every contractor to which this chapter applies shall obtain a licence to supply or engage contract labour or execute work through them. The licence shall be issued for a term of 5 years by the authority mentioned under Section 119 of the Code. The licence also prescribes specific conditions and particulars, including the number of labourers and security deposits. Further, the procedure relating to the issue or renewal of licences has been provided under Section 48.

Prohibition and obligations of contractors

The chapter also includes provisions that prohibit the contractors from charging any fees or commissions from contract labourers, whether directly or indirectly. Further, on receiving the work order to supply or engage contract labour, it is the duty of the contractor to inform the concerned authority under Section 119. Failure to provide this information shall result in the suspension or cancellation of the licence.

Appeals

The chapter also includes provisions relating to appeals. It states that appeals against the orders passed by the authorities under this chapter can be filed within thirty days.

Liabilities on contractors and principal employer

Further, the Code provides for certain liabilities, which are as follows:

The principal employers are liable for providing welfare facilities to contract labour and shall face consequences for engaging non-licenced contractors.
The contractor is under obligation for the payment of wages on time, and in case of non-payment, the principal employers are liable to make full payments.

Issuance of an experience certificate

Section 56 provides that every concerned contractor shall issue an experience certificate on demand in such form as prescribed by the appropriate government.

Prohibition of the employment of contract labour in core activities

The employment of contract labour in the core activities of any establishment is prohibited except under certain conditions as prescribed under Section 57. The appropriate government may appoint a designated authority to determine whether an activity qualifies as a core activity or otherwise.

Power to exempt in special cases

The appropriate government has the authority to exempt specific establishments or contractors from certain provisions of the Code, subject to specified conditions and restrictions for a defined period in emergencies.

Inter-state migrant workers

Earlier, the definition of the ‘inter-state migrant worker’ only included those persons who are recruited by a contractor in one state for employment in another. However, the present Code has broadened the definition to include in its ambit the persons who have independently migrated for employment from one state to another. The provisions relating to ‘inter-state migrant workers’ are provided under Part 2 of Chapter 9. Some of the important provisions are as follows:

Application and Facilities for Inter-State Migrant Workers

The Code applies to every establishment in which ten or more inter-state migrant workers are employed since the preceding 12 months. Further, the Code puts an obligation on the contractors or employers to ensure suitable working conditions, report fatal accidents or serious injuries to the specified authorities of both the states and also to the next of kin of the worker and ensure medical checkups and other statutory benefits to the inter-state migrant workers.

Journey allowance and other benefits

Under Section 61, employers are under obligation to pay an annual lump sum fare for the journey of the inter-state migrant workers from their native place to their place of employment. The payment shall be based on factors such as minimum service for entitlement, periodicity, and class of travel.

Further, the Code has also introduced schemes for availing the benefits of public distribution systems in either the native or destination state where the interstate migrant worker is employed.

Helpline, studies, and past Liabilities

The appropriate government shall establish a toll-free helpline and shall also conduct a study on interstate migrant workers as provided under the Code. Further, Section 65 states that no legal action can be initiated against the interstate migrant workers for the recovery of debt after the completion of their employment. Any unsettled obligations become void, and the debt is considered extinguished upon the completion of the worker’s period of employment.

Audio visual workers

The Code introduces certain conditions for regulating audio-visual workers in the production of audio-visual programmes under Section 66. The section explicitly prohibits the employment of audio-visual workers in the absence of a written agreement. And the producer of such an audio-visual programme shall register the agreement with the competent authority as notified by the appropriate authority.

The agreement must be in the prescribed format and shall include all the aspects of the audio-visual worker, such as the nature of the assignment, wages (inclusive of the provident fund), health and working conditions, safety measures, hours of work, welfare facilities, and a detailed dispute resolution process as specified by the appropriate government.

In the event of a failure of dispute resolution, either party can approach the industrial tribunal under the Industrial Disputes Act, 1947. Further, it is stated that the producer of the audiovisual programme is under obligation to provide the facilities specified in the agreement to the audiovisual worker, and the payment of such wages shall be made through electronic mode.

Mines

Part 4 of Chapter 9 provides certain provisions for the management of mines. According to the provisions, every mine, unless exempted under the Code, shall appoint a qualified manager with such qualifications as prescribed by the Central Government.

It also states that the owner or agent of every mine shall appoint a person to be a manager if he possesses such qualifications as prescribed by the Central Government. The appointed manager shall have the responsibility for the overall management, control, supervision, and direction of the mine.

The chapter also contains certain provisions which have exceptions for mines used solely for prospecting or extracting specific materials under prescribed conditions. During emergencies or accidents, Section 69 allows the manager to permit employment, even in contravention of specific sections of the Code, to safeguard the well-being and safety of the mine. Also, the manager is under obligation to maintain the records and submit reports to the Chief Inspector-cum-Facilitator or the Inspector-cum-Facilitator.

Section 70 explicitly prohibits the employment of persons below eighteen years of age in any mine. However, apprentices and other trainees, not below sixteen years of age, may be allowed to work under proper supervision.

Beedi and cigar workers

The Code contains provisions relating to beedi and cigar workers. Section 74 provides that no employer shall use or allow to use any place as an industrial premises without having a valid licence issued by the competent authority under Section 119. Further, it states that the use of such premises must comply with the terms and conditions specified in the licence. Any person who intends to use such premises shall submit an application to the relevant authority as provided under Section 119, along with the prescribed fees.

The relevant authority, while granting a licence, has to consider certain factors, such as the suitability of the premises or place, the experience and financial status of the applicant, and the overall welfare of the labour in the locality. A licence granted shall be valid for five years and can be renewed afterwards. However, the same is subject to compliance with the provisions of the Code and rules.

The authority shall also have the power to cancel or suspend the licence if it is obtained through misrepresentation or is in contravention of any of the provisions of the Code. Provisions relating to appeals are also provided under Section 75. It states that an appeal can be made to the appellate authority against the order of the relevant authority. Further, it has been stated under Section 77 that the provisions of this part are not applicable to self-employed persons in private dwelling houses.

Building or other construction workers

Section 78 explicitly prohibits the employment of certain buildings or other construction work. The section forbids the employer from allowing individuals with known impairments such as deafness, defective vision, or a tendency to giddiness to work in building or construction operations.

Factories

Sections 79 to 91 of the Code provide for the provisions relating to factories.

Approval and licensing of factories have been provided under Section 79. It states that the appropriate government has the power to make rules relating to factories, which shall include the submission of plans, prior permission for the selection and construction of sites, and the process of licencing. The application for permission has to be made to the state government or Chief Inspector-cum-Facilitator in electronic mode. If the applicant does not receive the response within 30 days from the date of application, then it shall be deemed that permission was granted.

The applicant has the right to file an appeal if the state government or Chief Inspector-cum-Facilitator refuses to grant permission for the site, construction, or extension of a factory. However, the appeal shall be made within thirty days from the date of such refusal. If the decision in question originated with the state government, then the appeal shall be directed to the central government. In other cases, the appeal shall be made to the state government.

Section 80 establishes the liability of the owner of premises in specific situations. If premises or separate buildings are leased to different occupiers for use as distinct factories, the owner of the premises and the occupiers of the factories will be jointly and severally responsible for ensuring the maintenance of prescribed safety measures and facilities.

Section 82 provides authority to the appropriate government to make rules concerning dangerous operations in factories. It grants the authority to regulate any factory or a specific category of factories engaged in manufacturing processes or operations that involve a significant risk of bodily injury, poisoning, or disease to individuals. The rules provided under the section include:

Identification and declaration of specific manufacturing processes or operations as dangerous.
Restriction or prohibition of the employment of pregnant women in the identified hazardous manufacturing processes or operations.
Implementation of regular medical examinations, either before or during employment, to evaluate the fitness of workers or employees for hazardous employment, with the associated costs borne by the occupier.
Mandating the provision of welfare amenities, sanitary facilities, protective equipment and clothing, and any other necessary requirements essential for ensuring the safety of individuals engaged in dangerous operations.

The constitution of the site appraisal committee has been provided under Section 83. It states that the appropriate government has the authority to establish one or more site appraisal committees. The committee shall consist of a chairman and other members whose purpose is to evaluate and provide recommendations on applications seeking permission for the initial establishment of a factory engaged in a hazardous process or for the expansion of an existing factory. The site appraisal committee shall make its recommendations within thirty days from the receipt of the application.

Section 86 states that the Central Government may direct the National Board to inquire into the standards of health and safety in the event of the occurrence of an extraordinary situation involving a factory engaged in a hazardous process. The purpose of this inquiry is to find out the causes of any failure or neglect in the adoption of any measures or standards prescribed by the state government.

Further, the right of workers to warn about imminent danger has been provided under Section 89. It states that the workers engaged in the hazardous process have a reasonable apprehension that there is a likelihood of imminent danger to their lives or health due to any type of accident. They have the right to bring this concern directly to the attention of the occupier, agent, manager or any other person who is in-charge of the factory or the process. This can either be made directly or through their representatives in the Safety Committee. Simultaneously, they should also notify the inspector-cum-facilitator.

The occupier, agent, manager, or person in charge of the factory or process is under obligation to take remedial measures if they believe that there is an imminent danger. If the occupier, agent, manager, or person in charge of the factory or process is not convinced of the existence of any imminent danger, then the same shall be immediately reported to the inspector-cum-facilitator.

Plantation

Sections 92 and 93 of Chapter 9, Part 8, provide for the provisions relating to plantations.

Facilities for workers on plantations are provided under Section 92. It states that the state government may prescribe requirements for every employer to make provisions in their plantation for:
Housing accommodation, including drinking water, kitchen, and toilet facilities, for every worker employed on the plantation (including their family).
Crèche facilities on the plantation when fifty or more workers (including those employed by any contractor) are employed or were employed in the preceding twelve months. However, establishments may avail themselves of common crèche facilities provided by the Central Government, State Government, municipality, private entity, non-governmental organisation, or any other organisation, or a group of establishments may agree to pool their resources for setting up a common crèche.
Educational facilities are provided for the children of workers on the plantation when the number of children between the ages of six and twelve exceeds twenty-five.
Health facilities for every worker employed in the plantation (including their family) or coverage under the Employees State Insurance Act, 1948.
Recreational facilities for workers employed on the plantation.

An employer of a plantation shall be responsible for providing and maintaining welfare facilities either from his/her own resources or through the schemes of the Central Government, State Government, Municipality, or Panchayat for the locality in which the plantation is situated.

Section 93 provides for the provisions relating to safety in plantations. Some of them are as follows:

The employer shall make arrangements to ensure the safety of workers on every plantation in connection with the use, handling, storage, and transport of insecticides, pesticides, chemicals, and toxic substances.
The state government may prescribe special safeguards for the employment of women or adolescents in using or handling hazardous chemicals.
The employer shall appoint qualified individuals as prescribed under the Code to supervise the use, handling, storage, and transportation of insecticides, chemicals, and toxic substances on his plantation.
Every worker who has been exposed to insecticides, pesticides, chemicals, and toxic substances shall undergo periodic medical examinations as prescribed by the state government.
The employer shall maintain health records of every worker on the plantation who is exposed to these substances.
Every employer of the plantation shall provide facilities like washing, bathing, clock rooms, and protective clothing to the workers handling such substances as prescribed by the state government.

Social Security Fund

The appropriate authority under Section 115 establishes the Social Security Fund. The fund shall be administered and expended for the welfare of the unorganised workers. Further, the section states that the appropriate government can transfer the funds from this specific fund to any other fund established under existing laws that is dedicated to the welfare of unorganised workers.

The Code on Social Security, 2020

The Social Security Code, 2020, was passed by both Houses of Parliament and got presidential assent on September 28. The Code was enacted to amend and consolidate the relevant provisions of nine central labour statutes which are as follows:

The Employees’ Compensation Act, 1923
The Employees’ State Insurance Act, 1948
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
The Maternity Benefit Act, 1961
The Payment of Gratuity Act, 1972
The Cine Workers Welfare Fund Act, 1981,
The Building and Other Construction Workers Welfare Cess Act, 1996, and
The Unorganised Workers’ Social Security Act, 2008.

Important provisions of the Code

Some of the important provisions of the Code are as follows:

Registration and cancellation of an establishment

Section 3 states that every establishment to which this Code applies shall register either electronically or through other means within the specified period as prescribed by the central government. However, an establishment that has already registered under any of the prevailing central Acts need not obtain registration under this Code.

The section also provides for the cancellation of the registration. It states that establishments falling under the purview of chapters 3 and 4 and whose activities of the business are in the process of closure may make an application for cancellation. The process of making an application for the cancellation of registration, the conditions under which the registration shall be cancelled, the procedural aspects of cancellation, and all other relevant matters shall be determined and specified by the Central Government.

Social security organisations

Chapter 2 of the Code provides for the constitution and establishment of various boards and corporations which are responsible for social security schemes in India. Some of them are mentioned below:

Constitution of the Board of Trustees of the Employees’ Provident Fund

According to Section 4, the Central Government, through notification, shall establish the Central Board, also known as the Board of Trustees of the Employees’ Provident Fund. This Board is responsible for administering funds as per Chapter III and other related provisions of the Code. The Central Board consists of a Chairperson, a Vice-Chairperson appointed by the Central Government, government officials, representatives from specified states, employers, employees, and the ex officio Central Provident Fund Commissioner. The Central Board is a body corporate with perpetual succession and a common seal. An Executive Committee may be constituted, and committees can be formed to assist the Central Board. Delegation of powers to the chairperson, executive committee, officers, and state boards is allowed. The Central Board performs functions as prescribed by the Central Government.

Constitution of the Employees’ State Insurance Corporation

Section 5 provides that the Central Government, through notification, establishes the Employees’ State Insurance Corporation (Corporation) for the purpose of Chapter IV. The corporation comprises a chairperson, vice-chairperson, officials, representatives from states, union territories, employers, employees, medical professionals, and members of Parliament. It is a body corporate with perpetual succession. A standing committee administers the affairs of the corporation, and a medical benefit committee assists in medical benefit administration. The corporation can form committees, and terms and conditions for members are set by the central government. The Corporation advises the government, monitors welfare schemes, and undertakes other prescribed functions.

National Social Security Board and the State Unorganised Workers’ Board

According to Section 6, the Central Government establishes a National Social Security Board for unorganised workers. This Board includes the Union Minister for Labour and Employment as Chairperson, officials, representatives from different sectors, and the Director General of Labour Welfare. The Board recommends schemes, advises the government, and monitors social welfare programmes. It also provides for the formation of the advisory committees.

Every state establishes a State Unorganised Workers’ Social Security Board. The State Board includes the State’s Labour Minister as Chairperson, officials, representatives, and a Member-Secretary. Functions include recommending state schemes, advising the government, and monitoring welfare programmes.

Constitution of State Building Workers’ Welfare Boards

Section 7 states that every state government establishes a Building and Other Construction Workers’ Welfare Board. It includes a nominated chairperson, a member nominated by the central government, and members representing the state government, employers, and building workers, with adequate female representation. The Board is a body corporate. The state government determines terms, conditions, and allowances for members. The Board administers various welfare measures for building workers, including benefits, pensions, educational schemes, medical expenses, and more. Advisory committees may be formed.

State Boards, Regional Boards, local committees, etc.

Section 12 provides that the Central Government, through notification, shall constitute a state board for specific states, also known as a board of trustees. The State Board exercises powers as assigned by the Central Government and is constituted as specified in the regulations. The corporation can appoint regional boards and local committees as specified in the regulations and also prescribe their powers and functions.

Employees provident fund

Chapter 3 of the Code provides for the provisions related to the employee provident fund. Some of the provisions are mentioned below:

Appointment of officers of the Central Board

Section 14 provides for the appointment of officers of the central government. It states that the Central Government may appoint a Central Provident Fund Commissioner, who shall serve as the Chief Executive Officer of the Central Board and shall also be the head of the Employees’ Provident Fund Organisation. The Central Provident Fund Commissioner operates under the general control and superintendence of the Central Board. Further, to assist the Commissioner , a financial advisor and chief accounting officer are also appointed. The Central Board may appoint other officers and employees necessary for the efficient administration of the schemes provided under the Code.

Schemes

According to Section 15, the Central Government, through notification, may frame various schemes under Chapter III. The schemes under Chapter 3 include the Employees’ Provident Fund Scheme, Employees’ Pension Scheme, Employees’ Deposit-Linked Insurance Scheme, and other schemes for self-employed workers or other classes of persons. These schemes may cover matters specified in Part A, Part B, and Part C of the Fifth Schedule.

Funds

For the Provident Fund Scheme, Pension Scheme, and Insurance Scheme, the Central Government may establish the Provident Fund, Pension Fund, and Insurance Fund, respectively, under Section 16. It also includes contributions from employers and employees. These funds shall vest in and be administered by the Central Board. The Central Government determines the rates of the employee’s contributions and may specify the rates and periods for certain establishments.

Contribution in respect of employees and contractors

Section 17 prescribes the mechanisms for the recovery of contributions. It empowers an employer to recover the total contribution amount (comprising the contributions of both the employer and employee) and charges for fund administration paid or payable in connection with an employee employed through a contractor. This recovery can be achieved by deducting the specified amounts from any payment due to the contractor under an existing contract or treating it as a debt owed by the contractor. Further, it enables a contractor to recover the contributions of the employee from his wages. However, contractors cannot deduct employer contributions or charges from employees’ wages.

Chapter not to apply to certain establishments

According to Section 20, this chapter shall not apply to:

establishments registered under the Co-operative Societies Act.
establishments belonging to or under the control of central or state government with existing provident fund or pension schemes
to the employees receiving provident fund benefits before the commencement of the Code.

Transfer of accounts

According to Section 22, when an employee relinquishes his employment from one establishment and obtains employment in another establishment, whether it falls within the scope of Chapter III or not, his accumulated provident fund or pension account is transferred or dealt with as per the Provident Fund Scheme or Pension Scheme.

Appeal to the Tribunal

Provisions relating to appeals are provided under Section 23. It states that an appeal to the Tribunal can be made by any person aggrieved by orders related to the determination and assessment of dues or the levy of damages under Chapter III. The appeal must be filed within the prescribed time, manner and fees. The employers appealed for the determination and assessment of dues; they must deposit 25% of the determined amount. Further, the section states that the Tribunal endeavours to decide the appeal within one year.

Employees State Insurance Corporation

Chapter IV provides for the provisions related to the Employees State Insurance Corporation (ESIC), specifically focusing on principal officers, appointments of staff, the Employees’ State Insurance Fund, contributions, benefits, and other related matters. Some of the provisions of the Chapter are mentioned below.

Principal Officers and Other Staff

Section 24 provides for provision relating to the appointment of principal officers and other staff for the corporation. The Central Government appoints a Director General and a Financial Commissioner, who shall be the principal officers of the Corporation. They shall hold the office for a period not exceeding five years and shall be eligible for re-appointment. Their powers, duties, salaries, allowances and other functions are defined by the central government.

Further, the provision provides that the corporation may employ other officers and employees for the efficient transaction of its business and for the discharge of any other responsibilities assigned to the corporation from time to time by the central government. Provision also states that every appointment to posts (other than medical, nursing, or para-medical posts) corresponding to Group ‘A’ and Group ‘B’ Gazetted posts under the Central Government shall be made in consultation with the Union Public Service Commission.

Employees’ State Insurance Fund

Section 25 states that all the contributions and user charges which are paid and other funds collected under this chapter are deposited into the Employees’ State Insurance Fund. It also states that the corporation may accept grants, donations, corporate social responsibility funds, and gifts from the central or any state government, local authority, any individual or any body whether incorporated or not. Funds shall be deposited in approved banks, and their usage is regulated by the Central Government.

Contributions

Section 29 sets forth the essential provisions governing contributions within this chapter. The contribution structure for each employee involves two distinct components: the “employer’s contribution” which denotes the sum that the employer is liable to pay, and the “employee’s contribution” which represents the amount the employee is obligated to contribute. Both of these contributions are directed to be remitted to the corporation according to the provisions of the Code.

The central government regulates the specific rates at which the employer and the employee have to contribute their portions. Further, the section introduces the concept of the “wage period.” The wage period, which is explicitly defined under the regulations, serves as the fundamental unit for the calculation and payment of contributions.

Benefits

Section 32 states that the persons insured and their dependents are entitled to sickness, maternity, disablement, dependants’, medical and funeral benefits. The corporation may extend medical benefits to the family of an insured person.

The qualifications and conditions for such benefits are prescribed by the Central Government, and the Corporation can make regulations for any matter relating to or incidental to the accrual and payment of benefits payable under this Chapter.

Schemes for Unorganised Workers, Gig Workers, and Platform Workers

Section 45 empowers the Central Government to frame schemes for the welfare of unorganised workers, gig workers, and platform workers and the members of their families for providing benefits under the provisions of this Chapter.

The operation and the terms and conditions of such schemes shall be specified by the Central Government, which are explicitly mentioned in the scheme itself. These include the determination of contributions, user charges, the scale of benefits, and the qualifying and eligibility conditions.

Employees’ Insurance Court

Section 49 provides that all matters are to be decided by the Employees’ Insurance Court. These matters include the following:

Determination of the status of the employee and his liability to pay the employee’s contribution.
Assessment of the rate of wages or average daily wages of an employee.
Calculation of the contribution payable by an employer.
Identification of the employer in relation to any employee.
Adjudication of rights to benefits and determination of the amount and duration thereof.
Resolution of disputes between an employer and the corporation, employer and contractor, person and the corporation, or employee and employer or contractor regarding contributions, benefits or other dues.
Claims for recovery of contributions from employers and contractors.
Claims for the recovery of benefits received unlawfully.

Further, Section 52 provides for the provisions relating to appeals. It states that no appeal lies from an order of an Employees’ Insurance Court. However, an exception is made for cases involving

substantial questions of law, where an appeal can be filed with the High Court
The appeal must be submitted within sixty days of the order of the Employees’ Insurance Court.
The provisions of sections 5 and 12 of the Limitation Act, 1963, shall apply to appeals under this section.
In cases where the corporation has initiated an appeal against an order of the Employees’ Insurance Court, the latter has the discretionary power to withhold the payment of any sum directed to be paid by the order being appealed. However, if directed by the High Court, the Employees’ Insurance Court shall withhold payment pending the decision of the appeal.

Gratuity

Sections 53 to 58 of Chapter V contain the provisions relating to the payment of gratuities to employees.

Payment of Gratuity

According to Section 53, a gratuity becomes payable to an employee upon the termination of their employment after rendering continuous service for not less than five years. The grounds for termination include superannuation, retirement, resignation, death, disablement due to accident or disease, termination of a fixed-term employment contract, or on the happening of any such event as notified by the Central Government.

The requirement of completing five years of continuous service to be eligible for gratuity is reduced to three years for working journalists, as defined in clause (f) of Section 2 of the Working Journalists and Other Newspaper Employees (Condition of Service) and Miscellaneous Provisions Act, 1955.

The completion of continuous service for five years is not mandatory in certain situations, such as in the event of the termination of employment due to death or disability, the expiration of fixed-term employment or the happening of any event notified by the Central Government.

Payment of gratuity in case of death

In the unfortunate event of the death of the employee, the gratuity payable to the deceased employee shall be provided to their nominee. If no nomination has been made, the gratuity shall be paid to the heirs of the deceased employee.

If the nominee or heirs are minors, their respective amounts will be deposited with the competent authority as notified by the appropriate government. The competent authority will invest these amounts for the benefit of the minors in a specified bank or financial institution until they attain the age of majority.

Calculation of gratuity

Gratuity becomes payable upon the termination of employment after the employee has completed at least five years of continuous service. The gratuity amount is calculated based on fifteen days’ wages for every completed year of service or part thereof exceeding six months. For piece-rated employees, the daily wages are computed on the average total wages of the three months preceding termination, excluding the wages paid for overtime work.

Seasonal workers receive gratuity at the rate of seven days’ wages for each season. In cases of fixed-term employment or deceased employees, gratuity is paid on a pro-rata basis. The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government.

Forfeiture of gratuity

Section 53 also provides certain forfeiture conditions, where the employer may withhold gratuity for acts causing damage, riotous conduct, disorderly behaviour, violence, or offences involving moral turpitude.

Continuous service

Section 54 prescribes detailed criteria for continuous service relevant to gratuity. Continuous service is defined as uninterrupted employment, which includes periods of sickness, leave, or other authorised absences. If an employee is not in continuous service, they are deemed to be so for one year or six months under certain conditions. The calculation considers the number of days worked, with variations for different types of establishments. For seasonal workers, deemed continuous service is based on working at least seventy-five percent of operational days.

Nomination

Section 55 states that employees with one year of service shall make a nomination within the specified time using the prescribed form and method prescribed by the appropriate government. Further, an employee can distribute the gratuity amount among more than one nominee as per their preference.

If the employee has a family, the nomination should be made in favour of family members. Any nomination for a person who is not a member of his family shall be considered void. If, at the time of nomination, the employee has no family, then the employee can nominate any person. However, if the employee later acquires a family, the nomination becomes invalid, and a fresh nomination in favour of family members is required.

The section also provides for the modification of nominations. It states that employees can modify their nomination at any time by providing a written intimation to the employer, following the prescribed form and method.

Competent Authority

Section 58 provides that the appropriate government has the authority to appoint an officer with prescribed qualifications and experience through a notification. The appointed officer shall be the competent authority responsible for implementing the provisions of this chapter within a specified area.

Further, it states that if there is more than one competent authority designated for an area, the appropriate government can issue general or special orders to regulate the distribution of business among them. A competent authority, while deciding on matters referred to them under this chapter, has the discretion to engage one or more individuals possessing special knowledge relevant to the subject matter.

Maternity Benefit

Sections 59-72 provide for the provisions relating to maternity benefits.

Section 59 ensures the well-being of women employees during pregnancy and childbirth. This section specifically prohibits the employment of women during the six weeks immediately following the day of delivery, miscarriage or medical termination of pregnancy. Further, it provides that no pregnant woman shall engage in any work which is arduous in nature, involves long hours of standing, or in any way is likely to interfere with her pregnancy.

Section 60 further provides the right to payment of maternity benefits. It states that the employers are under obligation to pay maternity benefits at the rate of the average daily wage for the period of her actual absence, i.e., the period immediately preceding the day of her delivery and any period immediately following that day. To avail the maternity benefit a woman must have worked for at least eighty days in the twelve months preceding the expected date of delivery.

A notice of claim for maternity benefit and payment has been provided under Section 62. It states that any woman employed in an establishment entitled to maternity benefits may provide written notice to her employer as prescribed by the Central Government. The notice shall include a nomination for the payment of maternity benefits and other entitled amounts.

Section 63 further ensures the payment of maternity benefits in case of the death of a woman. It states that if a woman who is supposed to get maternity benefits dies before receiving them, the employer must pay the benefits to the person nominated by the woman in the notice. In cases where there are no nominees, the benefits should be given to her legal representative.

Section 71 states that employers are under obligation to display an abstract of the provisions of this chapter in a conspicuous place within the establishment to promote awareness among employees. Further, Section 72 empowers the Inspector-cum-Facilitator to address complaints related to withholding of payments or wrongful discharge during maternity leave, ensuring timely resolution and fair treatment.

Social Security for Unorganised Workers, Gig Workers, and Platform Workers

Chapter IX provides for the provisions relating to Social Security for Unorganised Workers, Gig Workers, and Platform Workers.

Section 109 empowers the Central Government to frame suitable welfare schemes for unorganised workers on matters relating to life and disability cover, health and maternity benefits, old age protection, education and any other benefit as determined by the Central Government.

Further, the Section states that the state governments shall frame suitable welfare schemes for unorganised workers, which shall include provident funds, employment injury benefits, housing, educational schemes for children, skill upgradation of workers, funeral assistance and old age homes, with funding from multiple sources, including the government, beneficiaries, employers, and corporate social responsibility funds.

Section 110 states that any scheme framed by the state government under Section 109 can be funded in various ways as determined by the state government. Which includes:

wholly funding the scheme using state government resources.
partial fund from the state government and collect contributions from beneficiaries or employers as specified in the scheme.
funds from any other source, which includes the corporate social responsibility fund mentioned in the clause

The state government has the power to decide the funding model based on the requirements of the scheme and available resources. Further, the state government is empowered to seek financial assistance from the central government for the schemes it frames. The Central Government, in turn, has the discretion to provide financial assistance to state governments for the specified period and under such terms and conditions as deemed appropriate.

Section 112 empowers the appropriate government to establish essential support services for unorganised workers, gig workers, and platform workers. The services shall include a toll-free call centre, helpline, or facilitation centres, as deemed necessary. The primary functions of these support services are as follows:

To disseminate information on available social security schemes for unorganised workers, gig workers, and platform workers.
To facilitate the filing, processing, and forwarding of application forms for the registration of unorganised workers, gig workers, and platform workers.
To assist unorganised workers, gig workers, and platform workers in obtaining registration under the relevant schemes.
To facilitate the enrolment of registered unorganised workers, gig workers, and platform workers in the various social security schemes.

Further, Section 113 prescribes conditions and processes for the registration of unorganised workers. To be eligible for registration, individuals must have attained at least sixteen years of age or the age specified by the Central Government and have to submit a self-declaration with the prescribed information. Upon fulfilling these conditions, eligible workers can apply for registration, providing the necessary documents, including the Aadhaar number. Each applicant receives a unique identification number. The section also provides an alternative option for self-registration through the electronic system maintained by the appropriate government.

Similarly, Section 114 empowers the central government to frame suitable social security schemes for gig workers and platform workers.

Conclusion

Labour law was developed as a result of workers’ struggles for their justly deserved rights and lives throughout the world. They engaged in disputes to defend themselves and improve their living conditions. The field of labour law is dynamic and has a unique place in the legal profession. It has specific components aimed towards employees. In some ways, India’s labour laws resemble those of advanced industrial societies. Many laws govern social security, workplace health and safety, and other issues, such as minimum employment standards. However, only a small portion of India’s workforce is formally covered by the nation’s labour laws, and even among that group, the actual application of the law is very limited.

The consolidation of multiple labour laws is a significant step towards making compliance easier. Because of the rationalisation of definitions and the expansion of coverage to include the unorganised sector, the benefits of the law will be available to a larger workforce. Even though it took decades, the change should pave the way for more significant ones in the years ahead, improving India’s ease of doing business, creating jobs, and influencing the country’s future industrial relations.

References

Gurbaksh Singh Sibbia v. State of Punjab (1980) : case analysis

By

Diva Rai

-

April 8, 2024

0

Anticipatory Bail — Image source - http://bit.ly/2kHBCrm

The article seeks to critically analyse the landmark decision of the Hon’ble Supreme Court in Gurbaksh Singh Sibbia v. State of Punjab. In this case, the Hon’ble Supreme Court laid down several guidelines while considering an application for granting anticipatory bail. These guidelines have been crucial to ensure that anticipatory bail cannot be used as a means to abuse the process of law and to grant sufficient discretion to the courts dealing with such applications.

Table of Contents

Introduction

It is often said that ‘bail is the rule and jail is the exception’. This basically implies that a person who is accused of an offence must be set free on bail, unless there is an apprehension that such person might abscond if not detained or arrested. The primary object of arrest or detention is to ensure the smooth functioning of the legal proceedings and the availability of the accused whenever required during the proceedings. However, more often than not, we have witnessed various instances where people may be arrested or detained just to harass them or exert any undue influence. In the context of the same, the Hon’ble Supreme Court laid down certain guidelines for granting anticipatory bail to balance the interests of the accused as well as those of the prosecution in the criminal justice system. This case has been elaborately discussed in the present article hereafter, in light of the relevant legal provisions and judicial precedents.

Concept of anticipatory bail

Before delving deep into the case, it is pertinent to understand the concept of anticipatory bail. Depending on the severity of the offence committed, a person may be arrested or given bail. Accordingly, the Code of Criminal Procedure, 1973 (‘CrPC’ or ‘the Code’) categorises offences into bailable and non-bailable offences. Section 2(a) of the Code provides that bailable offences are those offences which have been mentioned as bailable under the First Schedule or by any other law for the time being in force. All the other residuary offences have been categorised as non-bailable offences. The former usually comprises offences that are less severe in nature, whereas the latter usually involves much more severe offences.

One must understand that any offender who is charged with a bailable offence is mostly eligible for bail, except when such person fails to comply with the conditions of the bail bond, as has been provided under Section 436(2) of the CrPC. The question of granting bail or anticipatory bail arises in the case of a non-bailable offence.

Section 438 CrPC

The term ‘anticipatory bail’ has not been defined in the Code. However, Section 438 of the Code specifically deals with the scope and conditions for granting anticipatory bail.

It is also imperative to make reference to the 41st Law Commission Report, wherein the true object of the insertion of this provision was emphasised. The report stated that “the necessity for granting anticipatory bail arises mainly because sometimes influential persons try to implicate their rivals in false causes for the purpose of disgracing them or for other purposes by getting detained in jail for some days”.

Sub-section 1 of the provision states that a person may make an application for anticipatory bail before the Sessions Court or the High Court if he has a ‘reason to believe’ or an ‘apprehension’ that he may be arrested for being falsely implicated for a non-bailable offence. It further states that if such a court deems fit, it may direct that the applicant be granted bail in case of arrest.

Sub-section 2 provides certain conditions that the court may impose while directing anticipatory bail. These conditions, though not exhaustive, include:

The person will be readily available for interrogation by the police whenever required.
The person will not threaten or influence any person or witness, directly or indirectly, to disable him from disclosing any relevant information before the police officer or the court.
The person may not travel abroad without the due permission of the concerned court.
Any other condition that can be imposed by the court under Section 437(3) of the Code.

Sub-section 3 provides for the procedure to be followed where a person has been arrested or detained, even when the court has directed anticipatory bail. It states that where the police officer arrests the person without a warrant or prepares the warrant while the person is in custody, the person must be released on bail. Secondly, where a magistrate takes cognizance of such an offence and decides that a warrant should be issued, a bailable warrant must be issued in accordance with the directions of the court directing anticipatory bail.

Lastly, sub-section 4 was inserted in 2018 through the Criminal Law (Amendment) Act, 2018. The Amendment bars the courts from granting anticipatory bail in offences of rape or gangrape of a minor woman under the age of twelve or sixteen years, as stipulated under Sections 376(3), 376AB, 376DA, and 376DB of the Indian Penal Code, 1860.

Details of Gurbaksh Singh Sibbia v. State of Punjab (1980)

Case Name: Gurbaksh Singh Sibbia & Ors. v. State of Punjab
Equivalent Citations: (1980) 2 SCC 565, 1980 SCC (Cri) 465, 1980 Cri LJ 1125, AIR 1980 SC 1632
Court: Hon’ble Supreme Court of India
Bench: Justice Y.V. Chandrachud, Justice P.N. Bhagwati, Justice N.L. Untwalia, Justice R.S. Pathak, and Justice O. Chinnappa Reddy
Appellants: Gurbaksh Singh Sibbia, Sarbajit Singh
Respondent: State of Punjab
Date of the judgement: April 09, 1980
Legal provision involved: Section 438 of the Code of Criminal Procedure, 1973

Facts of Gurbaksh Singh Sibbia v. State of Punjab (1980)

The case is related to the Minister of Irrigation and Power of the Punjab Government, Gurbaksh Singh Sibbia. He, along with other ministers, was accused of grave corruption. Anticipating their arrest, the ministers filed applications before the Hon’ble Punjab and Haryana High Court for anticipatory bail under Section 438 of the CrPC. Realising the importance of the matter, the single judge referred the case to the full bench of the High Court. The High Court dismissed the applications on the ground that the powers of the High Court to grant anticipatory bail were limited and had to be guided by Section 437 of the CrPC. These powers could be exercised only under certain special circumstances. Aggrieved by the decision of the High Court, the applicants preferred an appeal through a Special Leave Petition before the Hon’ble Supreme Court of India under Article 136 of the Indian Constitution.

Issue raised before the Supreme Court

The issue before the Supreme Court was whether a straight-jacket formula could be applied to Section 438 of the CrPC, which has to be followed by the Court while granting anticipatory bail.

Contentions of parties in Gurbaksh Singh Sibbia v. State of Punjab (1980)

Contentions on behalf of the appellants

The first contention on behalf of the appellants was that denial of bail to a person who has not been convicted of an offence amounts to deprivation of his personal liberty. Thus, the Court should not lean towards unnecessary conditions being imposed on granting anticipatory bail under Section 438 of the CrPC. It was further contended that the legislative intention behind Section 438 was not to impose any unnecessary restrictions.

Another important argument raised by the appellants was that even if there were any restrictions imposed under Section 438 of the CrPC, it would have been struck down as being violative of Article 21 of the Indian Constitution. Any unreasonable restriction on the power to grant bail would be violative of the personal liberty of the person seeking bail. Such a person has to be presumed innocent until proven guilty.

Contentions on behalf of the respondents

The primary contention on behalf of the respondents was that anticipatory bail should be granted in exceptional cases wherein the applicant is able to prove that the arrest is anticipated for frivolous or malicious grounds. It was further argued that anticipatory bail is an extraordinary remedy, and therefore, whenever it appears that the proposed accusations are prima facie plausible, the applicant should be left to the ordinary remedy of applying for bail under Section 437 or Section 439 of the CrPC after he is arrested.

Decision of the High Court

The Full Bench of the Punjab and Haryana High Court rejected the applications of the appellants after summarising the provisions of Section 438 of the CrPC. The summary was provided in the following manner:

The power to grant anticipatory bail is of extraordinary character and must be used rarely;
No provision of the CrPC empowers the court to grant blanket bail against all offences that are not committed or for which accusations are pressed against the person;
All the limitations imposed under Section 437 of the CrPC are to be read into Section 438;
In addition to these limitations, the applicant must prove a special case for the grant of anticipatory bail;
The power under Section 438 cannot be exercised if a sufficient case for remand of the accused to the police custody or custody of the investigating authority is made under Section 167(2) of CrPC, or a reasonable case of collecting incriminating material from the accused under Section 27 of the Indian Evidence Act, 1872 is made;
The discretion under Section 438 cannot be exercised with regard to offences punishable with death or imprisonment for life unless the court at that very stage is satisfied that such a charge appears to be false or groundless;
The discretion under Section 438 shall also not be exercised in cases of public importance, such as corruption, by using political powers; and
The Court shall be satisfied that the accusations against the applicant are mala fide on the face of it in order to exercise the discretion provided under Section 438.

On the aforementioned grounds, the Punjab and Haryana High Court rejected the application for anticipatory bail.

Decision of the Supreme Court

The Supreme Court refused to accept the contentions raised by the Respondents as well as the conditions laid down by the Punjab and Haryana High Court, which it considered to be the true meaning of Section 438. It was held that it could not be accepted that there was a legislative oversight while drafting the provision of Section 438, as it is not an ordinary provision of law. It entails one of the most important rights of a person, the right to be presumed innocent until proven guilty. If the legislature intended to impose any restrictions on the power of granting anticipatory bail, it would have included the same under the provision itself.

Moreover, it was stated that the legislature was not penning down the provision on a clean slate. It relied on Section 437 and Section 439 while drafting Section 438. Moreover, the Parliament also relied upon the 41st Law Commission Report, wherein the power of a court to grant anticipatory bail was duly considered. The report concluded with the connotation that the court must have the discretionary power to grant anticipatory bail and ought not to be fettered with unnecessary conditions.

According to the Court, the legislature conferred wide powers of granting anticipatory bail on the Courts of Sessions and the High Courts for two reasons. Firstly, it would be very difficult to determine fixed conditions to be pursued by the courts to grant anticipatory bail. Secondly, to grant ample discretion to the courts to exercise such power.

The Court also held that anticipatory bail is different from bail under Section 437 of the CrPC. A bail is important to protect the personal liberty of an individual and the presumption of his innocence. An anticipatory bail protects liberty at the time of arrest, whereas a bail under Section 437 can be granted after the arrest has taken place and the data is provided to the court. It is based on this data that the court can accept or reject the application for bail for a non-bailable offence. Whereas in the case of anticipatory bail, the court has the power to protect the liberty of an individual in the event of an arrest.

The Court also clarified that it is not the case that an anticipatory bail has to be granted without imposing any conditions whatsoever. Section 438(2) of the CrPC gives the courts the power to impose such conditions as they may deem necessary while granting anticipatory bail.

Thus, the Supreme Court overturned the decision of the High Court and provided certain guidelines to be followed by the High Courts and the Courts of Session while granting anticipatory bail under Section 438, which have been discussed hereunder.

Guidelines issued by the Court

The Supreme Court issued certain guidelines regarding the scope of powers under Section 438 of the CrPC. The guidelines have been summarised as follows:

Section 438 of the CrPC cannot be invoked on vague and unclear accusations. The provision can only be invoked when the applicant has the ‘reasons to believe’ that he may be arrested. Mere fear cannot be equated with the belief of the applicant. Thus, the applicant must bear in mind that the grounds on which anticipatory bail is prayed for are of such nature as can be objectively analysed by the Court. Mere accusations without due cause could not entitle a person to apply for an anticipatory bail.
The object of Section 438 is to grant discretionary powers to the High Court or the Court of Session, as the case may be. Thus, such a court cannot leave the question to be decided by a Magistrate as stipulated under Section 437 of the CrPC. Such an action would defeat the very purpose of the provision.
The filing of an FIR before the application for anticipatory bail is not a condition precedent. It may be applied for even if the applicant has concrete reasons to anticipate an arrest.
Even if an FIR has been filed against such a person, he can still be granted an anticipatory bail, provided that he has not been arrested.
If the person has been arrested, he is not entitled to be granted anticipatory bail. In such a case, the person has to apply for bail either under Section 437 or Section 439 of the CrPC, as the case may be.
Apart from these guidelines, the Supreme Court accepted one view of the High Court, i.e., a blanket anticipatory bail cannot be granted in cases wherein the person has no proper reason to believe or anticipate an arrest. A blanket anticipatory bail means an order that serves as blanket protection against arrest for any offence whatsoever. Such an order would cause grave injustice to the power of the investigating agency and, hence, would be against the public interest. Thus, blanket anticipatory bail cannot be issued.

Analysis

The guidelines laid down by the Hon’ble Supreme Court in the above-mentioned case raise certain questions for consideration, which have been discussed hereafter.

Discretion of the court

It is noteworthy that sub-section 1 of Section 438 clearly uses the phrase ‘if the court deems fit’, thereby signifying the wide discretion of the Sessions Court or High Court in granting anticipatory bail. The concerned court has wide discretion and may reject the application of anticipatory bail if the situation warrants, in the view of the court. Where it appears to the court that the applicant may abscond during the trial when required or has a previous history of absconding, the court may not allow the grant of bail in such a case.

Though wide discretion has been given to courts in this regard, yet they are compelled to follow the principles of natural justice while deciding the application. In the case of State of Maharashtra v. Vishwas Shripati Patil (1978), the Hon’ble Bombay High Court has held that the court must record reasons in writing while granting an anticipatory bail. This view has also been affirmed by the Hon’ble Supreme Court in State of Maharashtra v. Dhanendra Shriram Bhurle (2009).

Apprehension to be reasonable

It has already been emphasised enough that the applicant must have a reasonable belief of apprehension before filing for anticipatory bail under Section 438 of the CrPC. There must be a reasonable apprehension or anticipation of arrest and not a mere fear on the part of the applicant. The reasonableness of the anticipation is required to be determined by the courts. Yet, one observation that can be made from the guidelines of the Court as well as various other cases, including Suresh Vasudeva v. State (1977), is that there need not be a formal filing of the case with the police in the form of an FIR to cause an anticipation of arrest. Such anticipation, if reasonable, can occur even before the filing of the FIR.

Duration for grant of anticipatory bail

Once anticipatory bail is granted by the concerned court, the direction of the court remains effective until the conclusion of the trial. Recently, there have been multiple instances wherein the courts have held that bail must not be for a limited duration. This view has been reaffirmed by the Hon’ble Supreme Court in Siddharam Satlingappa Mhetre v. State of Maharashtra (2010) as well as Sushila Aggarwal v. State (NCT of Delhi) (2020). In Sushila Aggarwal, a five-judge bench examined this issue and gave views consistent with the Gurbaksh Singh case. However, it overruled the Siddharam Satlingappa Mhetre case on the point that no restrictive conditions could be imposed as the same was violative of the provision itself.

No absolute direction to grant bail

There cannot be an absolute direction by the courts to grant anticipatory bail. In Srikant Upadhyay v. State of Bihar (2024), the Court held, “Though in many cases it was held that bail is said to be a rule, it cannot, by any stretch of imagination, be said that anticipatory bail is the rule”. The Court made this statement in the context of an applicant who was defying the orders of the court, thereby affecting the process of trial. It is already settled through various decisions that the courts must refrain from granting blanket protection to applicants seeking anticipatory bail. Therefore, one may infer that this opinion of the court is in line with the case of Gurbaksh Singh Sibbia.

Conclusion

In a country like India where political rivalry has no leaps and bounds, the provision of anticipatory bail comes as a rescue to innocent people who may be harassed by influential members of society. Yet, at the same time, it is also imperative that the provision is not misused by actual offenders committing serious offences and escaping due process of law. In this sense, the guidelines laid down in the case become crucial in the justice delivery system and act as a guiding light for judicial authorities while examining an application for anticipatory bail. It enables the courts to balance the interests of innocent applicants, who are victims of frivolous complaints, with those of offenders who try to escape under the garb of this provision. These guidelines have time and again been emphasised, applied, and affirmed by the courts, as has been discussed above through various judicial pronouncements.

Frequently Asked Questions (FAQs)

What is anticipatory bail?

An anticipatory bail is a bail that can be granted by the High Court or the Court of Session before the arrest of the applicant. The applicant has to prove apprehension of arrest in a non-bailable case to make an application for anticipatory bail. It shall become effective only in the event of the arrest of the person, not before that. It is pertinent to note that such an application can be made only before the arrest takes place, as the trial court and the Magistrate have been provided the power to grant bail after the arrest of the person.

What is the difference between an application for bail under Section 437 and Section 438 of the Code?

Section 437 of the CrPC provides the power to the courts other than a High Court or a Court of Session to grant bail in the case of a non-bailable offence. Section 438 of CrPC deals with the power of the High Court or the Court of Session to grant an anticipatory bail in cases wherein the applicant has an apprehension of arrest.

A bail under Section 437 can be granted only after the applicant has been arrested and not before that. However, a bail under Section 438 can be granted only before the person has been arrested, although the bail shall be effective only upon the event of arrest.

What is the relevance of the Supreme Court case of Gurbaksh Singh Sibbia v. State of Punjab?

The Supreme Court in the case of Gurbaksh Singh Sibbia v. State of Punjab clarified the position of Section 438 of the Code. The Punjab and Haryana High Court had laid down certain limitations on the power of the court to grant an anticipatory bail, which were not included by the legislature itself. The Supreme Court set aside these limitations and held that the High Court and the Court of Session have a wide discretionary power to grant anticipatory bail, as it is a necessary right for an individual to be presumed innocent until proven guilty. Further, the Supreme Court also issued certain guidelines to be followed by the courts while exercising such power.

Does the Session Court and High Court have concurrent jurisdiction for considering an application of anticipatory bail?

Section 438 of the CrPC gives both the High Court as well as the Court of Session the jurisdiction to entertain an application for anticipatory bail. However, it is not mandatory to file the application before the Court of Session first and approach the High Court later. The Hon’ble Allahabad High Court in Onkar Nath Agarwal v. State (1976) has held that the applicant is allowed to approach either the High Court or the Court of Session, under whose territorial jurisdiction the matter falls.

Which place has the territorial jurisdiction to entertain an application for anticipatory bail?

There is often confusion regarding the territorial jurisdiction of anticipatory bail as to whether it has to be filed at a place where the FIR has been registered or where the arrest is anticipated. The position has been settled in the case of Pritam Singh v. State of Punjab (1980), wherein the Hon’ble Delhi High Court held that it could also be filed where the arrest is anticipated, irrespective of the FIR being registered in another jurisdiction.

References

R.V. Kelkar’s Criminal Procedure Code, 7th Edition (2021).
D.D. Basu, Code of Criminal Procedure, 1973, 6th Edition (2017).
https://www.scconline.com/blog/post/2024/03/18/person-defying-orders-absconding-not-entitled-anticipatory-bail-supreme-court/
https://www.lexology.com/library/detail.aspx?g=1b5a7e16-578b-4fc7-9885-056aad286f38
https://www.mondaq.com/india/crime/1131678/anticipatory-bail-law-in-india
https://www.deccanherald.com/india/by-no-stretch-of-imagination-anticipatory-bail-is-rule-supreme-court-2937859
https://blog.ipleaders.in/important-anticipatory-bail-case-laws/

Corporate Social Responsibility (CSR) under Companies Act, 2013

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saurabhk9431

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April 8, 2024

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This article is written by Naincy Mishra. This article discusses the concept, need and significance of Corporate Social Responsibility (CSR) in the Indian corporate arena. The article also delves into the theories of corporate governance, importance of ESG (Environmental Social and Governance) in corporate law, laws mandating CSR, advantages of CSR and the global trends of CSR in recent times.

Introduction

Corporate governance stands as the foundation of organisational integrity and accountability. In the present era defined by rapid globalisation and increased societal awareness, the significance of corporate governance has become more strong. Earlier, the companies followed the conventional approach of prioritising the interests of the shareholder, but the modern framework seeks to drive the businesses towards recognizing an even broader responsibility – one that extends to the society and the environment. This big shift is incorporated in the essence of the Corporate Social Responsibility (CSR). CSR is an ethical framework that goes beyond the profit-driven motives, and promotes a more inclusive and sustainable approach for the business operations. It tries to conceptualise the idea that success in the present era is not solely measured by the financial metrics of the businesses, but by the positive impact a business can create on the society it operates in and the environment it draws the resources from.

Today, as the businesses struggle with the multifaceted challenges posed by climate change, social inequality, resource depletion, etc., the need for a comprehensive CSR framework has become increasingly evident. Additionally, it has become all the more important for nations like India, which aim to achieve ambitious climate targets as per their commitments at the international level agreements and summits. Thus, by adopting sustainable business practices and contributing to the well-being of local communities, businesses can play a crucial role in steering the country towards environmental sustainability and India can thus be positioned as a responsible and forward-thinking player in the international arena. In the present article, an attempt has been made to elaborately discuss the concept of corporate social responsibility.

What is corporate governance

As per the Organization for Economic Cooperation and Development (OECD), ‘corporate governance involves a set of relationships between a company’s management, its board, shareholders and other stakeholders’. It provides the structure that can be helpful for setting the objectives of a company and determines the methods of achieving those objectives while monitoring the company’s performance. The purpose of corporate governance is to help build an environment of trust, transparency and accountability that is important to encourage long-term investment, financial stability as well as business integrity.

Principles of corporate governance

OECD lays down six major principles of corporate governance which are as follows:

Promotion of transparent and fair markets, and efficient allocation of resources.
Protection and facilitation of an environment where the shareholders can exercise their rights and ensure an equitable treatment of all the shareholders, including minority as well as foreign shareholders.
Providing sound incentives all through the investment chain and ensuring the functioning of the stock markets in a manner that leads to good corporate governance.
Recognition of stakeholders’ rights established by law as well as those decided by mutual agreements and encouraging active cooperation between the corporations and their stakeholders in order to create wealth, jobs, and sustainability of the financially sound enterprises.
Ensuring accurate and timely disclosure of all the material matters concerning the corporation, including its financial situation, performance, ownership, and governance of the company.
Ensuring strategic guidance of the company, effective monitoring of the management by the company’s board, as well as accountability of the board towards the company and its shareholders.

Theories of corporate governance

In order to understand the importance of Environmental Social and Governance (ESG) factors and the nature of CSR law in India, it is important to understand the theories of corporate governance. Primarily, there are six theories of corporate governance – agency theory, stewardship theory, stakeholder theory, resource dependency theory, transaction cost theory and political theory.

Agency theory

Agency theory is a fundamental concept in corporate governance that examines the relationship between the principals (typically shareholders) and their agents (usually managers or directors) within a company. This theory provides insights into the potential conflicts of interest that may arise between these two groups and proposes mechanisms to align their interests. Here are certain key aspects of the agency theory of corporate governance:

Principal-agent relationship

The central idea of agency theory is built around the concept of a principal-agent relationship. In a corporation, shareholders (the principals) delegate decision-making authority to directors or managers (the agents) to run the company on their behalf.

Information asymmetry and conflict of interests

Information asymmetry occurs when agents possess more information about the company’s operations, performance, and opportunities than the principal itself. This information gap can lead to conflicts of interest as agents may act in their own interest rather than in the best interest of shareholders. For example, managers may prioritise short-term gains to boost their own compensation, even if it does not align with the long-term interests of shareholders.

Risk aversion

Agents may be risk-averse and may not take risks that could potentially benefit the company in the long term but carry short-term uncertainties. This risk aversion can result from the agents’ desire to protect their own positions and bonuses.

How can the conflict of interests be mitigated?

To mitigate conflicts, agency theory suggests the implementation of monitoring and control mechanisms. These mechanisms are designed to align the interests of agents with those of principals. For example, performance-based compensation, board oversight, external audits etc.
In fact, well-designed employment contracts providing for incentives tied to long-term goals can help align the interests of both principals and agents.
Shareholders may engage in proxy contests or activism to influence the corporate decisions and ensure that the interests of the principal are being served. In this way, shareholders can influence the behaviour of agents.
Sometimes, the underperforming entities become targets for potential acquisition and thus, the threat of a takeover incentivizes managers to act in the best interest of shareholders to retain control of the company.

Stewardship theory

Stewardship theory is an alternative perspective to agency theory in the field of corporate governance. This theory assumes that managers are inherently motivated to act in the best interests of the company and its shareholders and to act as responsible stewards of the company’s resources even in the absence of explicit contractual incentives. It suggests that fostering a positive relationship and mutual trust between the owners (principals) and managers (stewards) is crucial for the effective functioning of the organisation. Promoting a long-term orientation in decision-making, the stewards are expected to prioritise sustainable growth and value creation over short-term gains. This theory suggests that a more supportive and trusting environment can lead to better organisational outcomes.

Stakeholder theory

Stakeholder theory is a framework in business ethics and corporate governance that recognizes and addresses the interests of various stakeholders beyond just ‘shareholders’. This theory says that a company should consider and manage the needs and expectations of all its stakeholders, not just those who own shares, including all individuals, groups, or entities that can affect or are affected by a company’s actions, decisions, and policies. For example, the employees, customers, suppliers, communities, government bodies, and others with a vested interest in the company.

As per this theory, different stakeholders have diverse and sometimes conflicting interests. For example, shareholders may prioritise financial returns, while employees may be concerned with job security and fair wages. The challenge for companies is to balance these interests to create value for all stakeholders. By addressing the needs of various stakeholders, companies aim to achieve long-term sustainability because satisfied employees, loyal customers, and positive relationships with the community can contribute to the company’s overall success and resilience by mitigating potential risks related to reputation, legal issues, and operational challenges. This is the reason why it is also said that this theory closely aligns with the concept of corporate social responsibility (CSR) as per which, companies have a responsibility to operate ethically, consider environmental and social impacts, and contribute positively to the communities in which they operate.

Resource dependency theory

Resource dependency theory explains how corporations manage their dependence on external resources. In the context of corporate governance, this theory helps understand the relationships between a corporation and its external environment, particularly in terms of resource acquisition, control, and strategic decision-making. It introduces the concept of power dynamics in the corporate governance structures. Organisations with control over critical resources may exert influence over corporate decision-making which can manifest in power struggles within boards of directors, management teams, and other governance bodies. Thus, it emphasises the interdependence between corporations and various stakeholders such as suppliers, customers, regulators, and investors and the corporate governance mechanisms are designed to manage these interdependencies and enhance the overall resource base of the organisation. It says that the governance structures and practices are shaped by the need to secure, control, and manage critical resources for the corporation’s sustained success.

Transaction cost theory

Transaction cost theory is concerned with the decision-making processes related to organising and governing economic transactions within a firm. It says that firms can choose between different governance structures based on the nature of transactions. The theory distinguishes between market governance (relying on external markets and contracts) and hierarchical governance (internalising transactions within the firm). Corporate governance involves making decisions about the optimal governance structure to minimise transaction costs and to achieve efficiency in organising economic transactions, for example, deciding whether to produce goods or services internally (make) or acquire them from external markets (buy). It suggests that when the costs of coordinating and contracting in the external market (e.g., searching for suppliers, negotiating contracts) exceed the costs of managing transactions internally, or where the transactions are characterised by high uncertainty or frequent interactions, firms tend to internalise those transactions.

Political theory

Political theory in corporate governance explores the relationships between various stakeholders within a corporation and examines the distribution of power, authority, and decision-making. This perspective draws on political science principles to analyse the dynamics of corporate governance structures. It considers the issues of representation, examining how effectively managers represent the interests of shareholders and other stakeholders. It explores questions of accountability and transparency in decision-making processes. It also contributes to the understanding of corporate governance reforms by examining the political processes that lead to regulatory changes and shifting the balance of power within corporations.

What is Environmental Social and Governance (ESG)

Concept and history

The full form of ESG is ‘Environmental Social and Governance’. The ESG framework is part of the wider corporate governance framework, driving the companies towards adopting more sustainable business practices, especially relating to their societal and environmental interactions. Although the principles behind the ESG framework may be centuries old, the modern concept took shape in the mid-twentieth century. These were evident from the improvement of the basic labour working conditions which included the non-exploitative rules regarding their wages and holidays. A 2004 report of the United Nations titled Who Cares Wins was among the first documents to recognise the obligations of entities as well as their stakeholders towards the ESG in the modern context. Since then, different nations have been coming up with their own ESG obligations mandating for their business corporations.

This is often associated with the concept of ‘corporate sustainability’ which essentially refers to the role that the companies can play in meeting the goals of sustainable development and it calls for a more balanced approach to socio-economic progress as well as for environmental conservation.

Triple bottom line

In economics, a term called the ‘Triple Bottom Line’ is often used which suggests that the companies should commit to giving as much attention to the social and environmental concerns as they give to profits. It conceptualises three elements: profit, people and the planet. It is important to understand that the environmental concerns should go hand in hand with the profit-making attitude with which a company is set up. Thus, a company’s positive efforts towards the planet are not necessarily assessed by its investments in big environmental projects, but by its choice of environment-friendly alternatives as and when required.

Theorizing the relationship between corporations and Environmental Social and Governance (ESG)

As per the above discussion of the theories of corporate governance, it is clear that the agency theory is more about the relationship only between the directors and shareholders. However, with the passage of time, there has been a shift from the prevailing agency theory to the stakeholder theory with respect to corporate governance. The environment is considered one of the company’s stakeholders and thus requires much attention from the company owners. It has been observed that companies setting realistic goals with this outlook and attempting to formulate good sustainable solutions are the ones helping to create a more prosperous future for themselves as well as for the planet.

Significance

In the present era, the environmental, social, and governance factors are increasingly considered in the corporate governance framework. The following aspects reflect the paramount importance of ESG in corporate governance:

Risk management

Environmental Risks – Assessing and managing environmental risks helps companies mitigate potential damage to their operations, reputation, and bottom line. This includes considerations like climate change, resource scarcity, and pollution.
Social Risks – Evaluating social factors helps companies address issues related to human rights, labour practices, diversity, and community relations. Managing these risks can prevent legal issues, protests, and negative public perception.

Reputation and brand value

Demonstrating good commitment to the ESG principles can contribute to enhancing a company’s reputation as well as its brand value. In present times, the consumers and investors are increasingly considering a company’s ESG performance as a key factor in their decision-making.

Access to capital

Many investors are nowadays incorporating the ESG criteria into their investment decision-making approach. Companies with strong ESG performance may find it easier to attract investment, access capital markets, and benefit from lower financing costs.

Long-term sustainability

Integrating ESG factors into corporate governance helps companies focus on long-term sustainability. This involves considering the impact of business decisions on not just short-term financial performance but also on environmental and social sustainability.

Regulatory compliance

Governments and regulatory bodies are increasingly emphasising ESG considerations. Adhering to ESG standards ensures compliance with evolving regulations and reduces the risk of legal and regulatory challenges.

Stakeholder engagement

The ESG principles encourage the companies to engage with a wider range of stakeholders, including employees, customers, communities, and the suppliers. This can promote positive relationships and enable a more inclusive decision-making process.

Innovation and efficiency

Adopting ESG practices often leads to increased innovation and operational efficiency. Companies that prioritise sustainability may find new ways to reduce resource consumption, cut costs, and develop innovative products and services.

Talent attraction and retention

Employees, especially the younger generation, often prioritise working for companies that align with their values. Demonstrating a commitment to ESG principles can help attract and retain top talent.

Transparency and accountability

ESG reporting enhances transparency and accountability. By disclosing relevant ESG information, companies demonstrate a commitment to openness, allowing stakeholders to assess performance and hold them accountable for their impact on the environment and society.

Legal framework surrounding Environmental Social and Governance (ESG)

Constitutional provisions

Our supreme law, i.e. the Constitution of India, 1950 is perhaps one of the first constitutions in the world that contains specific provisions for the protection and improvement of the environment. At the very outset, the Preamble of the Indian Constitution itself provides that India is a country based on socialist principles wherein the state pays more attention to the social welfare than the capitalist reforms. Interestingly, the word ‘socialist’ was added to the Preamble by the Constitution 42nd (Amendment) Act, 1976, when there was a wave of environmental discussions at the international level. Further, vide Article 48A of the Constitution, it has been provided that the State must protect and improve the environment and safeguard the forests and wildlife of the country.

In addition, Article 47 provides that it is the duty of the State to raise the level of nutrition as well as living standards of its people and improve public health. Environmental protection concerns have also been highlighted by laying down duties for a citizen under Article 51A(g). Thus, it is not solely the obligation of the State or an individual, but rather collective action is encouraged.

Corporate and banking laws

The regulatory framework related to ESG cannot be found in a single piece of legislation, but various laws must be referred to for the same. With respect to the environment, the Companies Act, 2013 (hereinafter ‘the 2013 Act’), SEBI Regulations, RBI Rules, etc., contain different provisions. Setting up the foremost liability of the persons managing a corporation, Section 166(2) of the Companies Act 2013 obligates a company’s directors to act in good faith in order to promote the company’s objectives for the benefit of its members as a whole, and in the best interests of the company, its employees, shareholders, community as well as for environmental protection. Recently, in the case of M.K. Ranjitsinh v. Union of India (2021), the Supreme Court clarified that this section “ordains the director of a company to act in good faith, not only in the best interest of the company, its employees, the shareholders and the community but also for the protection of the environment.” There is no hierarchy between the duties that are owed to the company and the other stakeholders as mentioned under the said section. Thus, consideration of the matters for example, climate risk and environmental protection is not an option for the directors of the Indian companies but rather ‘obligatory’, which may create a significant risk of liability if neglected.

The Act also mandates the Board’s report to incorporate the details on the steps taken by the company towards energy conservation as well as technology absorption under Section 134(3)(m). Various companies, such as Reliance Industries Ltd, ITC Limited, Vedanta Ltd, and HDFC Bank, etc. have signed up to go carbon neutral in the coming years. In fact, some companies are modifying their businesses to meet the net-zero emission deadlines.

SEBI also via Regulation 34 (2)(f) of the Listing Obligations and Disclosure Requirements Regulations, 2015 and its BRSR framework (Business Responsibility and Sustainability Reporting, 2021) makes it mandatory for the top 1000 listed companies based on market capitalization, to include in their annual report, a business responsibility report describing the initiatives taken by the listed entity from an ESG perspective. This more particularly includes companies’ material ESG risks and opportunities, approach to mitigate or adapt to the same, sustainability-related goals, disclosures such as greenhouse gas emissions, waste management practices, etc.

Further, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 under Schedule VI, Part A, Para. 11(I)(C)(iv) also mandate disclosure of management’s discussion and analysis of the financial condition of the company, alongside a discussion of various factors such as unusual or infrequent events or transactions, including unusual trends, significant economic changes, known trends or uncertainties, etc. that materially affected or are likely to affect income from continuing operations. These provisions become all the more important for vulnerable companies such as those engaged in the oil and gas business, chemical industries, etc.

RBI has also joined the Network for Greening the Financial System as a member in 2021 to assess the progress of RBI-regulated entities in managing climate risks. RBI keeps on formulating new rules to facilitate environmental protection by the entities. In 2023, RBI came up with a regulatory framework for the banks to accept green deposits from the customers, and this money is supposed to be invested towards environment-friendly projects such as financing renewable energy projects in a fight against climate change. These rules aim at preventing greenwashing and helping achieve sustainable objectives.

What is corporate social responsibility (CSR)

Concept of corporate social responsibility (CSR)

One of the most important provisions related to ESG in the present times is that of corporate social responsibility (CSR) as given in Section 135 of the Companies Act 2013, read with The Companies (Corporate Social Responsibility Policy) Rules, 2014. It mandates companies with a specific net worth or turnover to annually spend at least 2% of their average net profits of the last three financial years on CSR. India is one of the few nations in the world to have a dedicated mandatory provision for the business entities for abiding by their corporate social responsibility.

In India, having a CSR law reflects the country’s commitment to operate in a manner that is economically, socially, and environmentally sustainable. CSR involves taking into account the impact of actions of a company on its various stakeholders, such as its employees, customers, community, and the environment. The goal of CSR is to go beyond financial success and contribute positively to society and the environment. According to the United Nations Industrial Development Organization (UNIDO), CSR, as based on the ‘Triple Bottom Line’ approach, can help countries to advance their socio-economic growth and to become more competitive in the present era.

CSR activities

CSR motivates the companies to contribute socially, economically and environmentally by engaging in acts like :

Engaging members of the local community
Using “Socially Responsible Investment” (SRI)
Developing cordial relationship with the employees as well as the consumers
Engaging in actions/ activities for the protection and sustainability of the environment eg. using chain of sustainable manufacturing/production practices
Paying fair wages to the workers
Supporting reforms in the social justice policy
Innovating the products to solve any environmental or a social issue
Undertaking to reduce the carbon footprint
Contributing appreciable profits to any charitable cause

Section 135 of the Companies Act, 2013

Section 135 of the Companies Act, 2013 provides for the mandate for constitution of a Corporate Social Responsibility Committee (CSR Committee) of the Board, its obligations and the contribution that must be made by the specified entities towards its CSR policy.

Corporate social responsibility committee

Sub-section 1 of Section 135 states that every company that has a net worth equal to or more than Rs. 500 crore, or a turnover equal to or more than Rs. 1000 crore, or a net profit equal to or more than Rs. 5 crore during any financial year, is required to constitute a CSR Committee of the Board which shall consist of three or more directors, amongst whom at least one director should be an independent director.

It says that the Board must disclose the composition of such a committee under its report to be laid before the company in its general meeting as mandated by Section 134(3).

Functions of the committee

Sub-section 3 of Section 135 further provides the responsibilities of the committee. It says that the committee shall:-

Formulate and recommend a CSR Policy to the Board, mentioning the activities which are to be undertaken by the company as specified in Schedule VII of the Act;
Recommend the expenditure amount which is to be spent on the activities referred hereinabove; and
Monitor the company’s CSR policy from time to time.

The provision also states that after considering the recommendations made by the CSR Committee, the Board has to approve the CSR policy and disclose the contents of the policy in its report. Moreover, it must also be ensured that the contents are also placed on the company’s website in the manner prescribed by the Government. In addition, the Board must ensure that the activities as envisioned in the policy are actually undertaken by the company because if the activities are not undertaken in practice, it will defeat the whole purpose of this provision.

Contribution towards CSR policy

Sub-section 5 of Section 135 states that in pursuance of its CSR Policy, the Board of every company, as referred to hereinabove (company having a net worth equal to or more than Rs. 500 crore, or a turnover equal to or more than Rs. 1000 crore, or a net profit equal to or more than Rs. 5 crore during any financial year), is required to ensure that in every financial year, the company is spending at least 2% of the company’s average net profits made during the past three financial years. Moreover, in case the company has not completed three years since its incorporation, the average will be taken out proportionately.

It also states that for spending such an amount as specified for the CSR activities, preference shall be given by the company to the local area(s) around it, where such company carries its operations.

Non-compliance of this provision

The provision further states that if the company fails in spending such an amount towards the CSR activities as laid down by the CSR policy, the company’s Board has to specify the reasons therewith, in its report as mentioned under Section 134(3)(o).

Average net profit

Explanation attached to Section 135 of the Act states that the “average net profit” of the company is to be calculated in conformity to Section 198 of the Act. Section 198 provides that the computation of a company’s net profits in a financial year must conform to the following things:-

Sums to be credited

Firstly, credit must be given to the bounties and subsidies received from the Central or State Government or any public authority constituted or authorised by any government in this behalf, except in cases where the Central Government directs otherwise.

Sums to not be credited

Section 198(3) provides that the following sums must not be credited :

Profits occurred by way of premium on the company’s shares or debentures issued or sold;
Profits on sale of forfeited shares of the company;
Profits of capital nature which also includes profits from the sale of the company’s undertaking(s);
Profits from the sale of any immovable property or fixed assets of a capital nature comprised in the company’s undertaking(s), unless the company’s business, wholly or in part, consists of buying and selling of such property/assets; and
Any change in the carrying amount of an asset or liability that is recognised in the equity reserves, which also includes any surplus in the ‘profit and loss account’ measuring such asset or liability at a fair value.

Sums to be deducted

According to Section 198(4), following sums shall be deducted while computing the net profit :

All usual working charges;
Remuneration of the directors;
Bonus/commission paid or payable to any staff member, or to any engineer, technician or a person employed by the company on a whole/ part time basis;
Any notified as a tax on excess or abnormal profits by the Central Government;
Any tax imposed on business profits for special reasons/in special circumstances as notified by the Central Government;
Interest on debentures issued by the company;
Interest on mortgages executed by the company and on loans and advances secured by a charge on the fixed or floating assets of the company;
Interest on unsecured loans and advances of the company;
Company’s expenses on the repair of immovable or to movable property, provided that the repairs must not be of a capital nature;
Outgoings including the contributions made under Section 181 (contribution to bona fide and charitable funds);
Depreciation to the extent as specified in Section 123 (declaration of dividend);
The excess of expenditure over the income, having arisen while computing the net profits in compliance with this provision in any year, to the extent that such excess amount has not been deducted in any subsequent year preceding the year for which the net profits have to be determined;
Any damages or compensation to be paid in lieu of any legal liability which also includes any liability arising from a contractual breach, and any sum paid as insurance against the risk of meeting any liability for it;
Bad debts and debts written off or adjusted during the year of accounting.

Sums that shall not be deducted

Sub-section 5 of Section 198 provides for the sums that shall not be deducted :

Income-tax and super-tax payable by the company under the Income Tax Act, 1961, or any other tax on the company’s income not falling under:-
- Any tax notified to be in the nature of a tax on excess or abnormal profits by notification of the Central Government ;
- Any tax imposed on business profits for special reasons/in special circumstances as notified by the Central Government;
Any compensation, damages or payments made voluntarily, i.e. except any damages or compensation to be paid in lieu of any legal liability which also includes any liability arising from a contractual breach, and any sum paid as insurance against the risk of meeting any liability for it;
Loss of a capital nature including loss on sale of the undertaking(s) of the company, not including any excess of the written-down value of any asset that is sold/discarded/demolished/destroyed over its sale proceeds or its scrap value;
Any change in carrying amount of an asset or a liability as recognised in the equity reserves which also includes the surplus in profit and loss account on measurement of such asset or liability at fair value.

Schedule VII

This schedule mentions the activities that may be included by companies in their corporate social responsibility policies. It states that the activities may be relating to :

Eradicating extreme hunger and poverty;
Promotion of education;
Promoting gender equality and women empowerment;
Reducing child mortality and enhancing maternal health;
Combating human immunodeficiency virus, acquired immune deficiency syndrome (AIDS), malaria and other diseases;
Ensuring environmental sustainability;
Employment improving vocational skills;
Social business projects;
Contribution to the PM’s National Relief Fund (PMNRF) or any other fund set up by the Central or State Government for socio-economic development and relief and funds for the welfare of the SCs, the STs, OBCs, minorities and women; and
Any other prescribed matters.

Ineligible activities under CSR provisions

Following are the activities that do not fall under the purview of the CSR provisions :

Activities that are carried out in conformity to the normal course of the company’s business.

Nevertheless, any company engaged in R&D activity of any new vaccine, drugs and medical devices in its normal course of business may carry out such work related to COVID-19 for the financial years 2020-21, 2021-22, 2022-23 depending upon fulfilment of the conditions that :

Such R&D activities are undertaken in partnership with any institutes or organisations specified in item (ix) of Schedule VII of the Act;
Particulars of such activity are disclosed independently in the CSR Annual report as submitted by the Board.

Activities undertaken by the company outside the Indian territory, apart from the training of Indian sports persons representing any State/UT at the national level or representing India at an international level.
Activities that benefit the employees of the company.
Activities supported by the companies on the basis of sponsorship, to derive marketing advantages for the products or services of the company.
Activities that are carried out in order to fulfil any other statutory obligations under any other law enacted in India.

Companies (Corporate Social Responsibility Rules Policy) Rules, 2014

Definition

Rule 2(c) defines that “Corporate Social Responsibility” means and includes but is not limited to:

Projects/programs relating to activities, areas or subjects specified in Schedule VII to the Act; or
Projects/ programs relating to activities undertaken by the company’s board of directors (BOD) pursuant to the recommendations of Committee of the Board as per the company’s declared CSR Policy subject to condition that such policy will include activities, areas or subjects specified in Schedule VII of the Act.

Applicability

Rule 3 states that every company including its holding or subsidiary, and a foreign company defined under Section 2(42) of the Companies Act, 2013 having its branch office or project office in India that fulfils the criteria specified in Section 135(1) of the Act has to comply with these rules as well. However, a proviso has been added to this provision which states that the net worth, turnover or net profit of a foreign company as stated shall be computed in accordance with the balance sheet and profit and loss account of such company prepared according to Section 381(1)(a) and Section 198 of the Act.

Section 198 has already been discussed earlier in detail. On the other hand, Section 382 provides that in each calendar year, every foreign company is required to make out a balance sheet and a profit and loss account containing such particulars and attach such documents as may be prescribed for the purpose of this provision. Additionally, the foreign company has to submit a copy of those documents to the Registrar.

Companies (CSR Policy) Amendment Rules, 2021

In order to determine the effectiveness and results of the CSR initiatives, the Ministry of Corporate Affairs (MCA) has notified the Companies (CSR Policy) Amendment Rules, 2021 through which it introduced the Impact Assessment tool. It requires specified companies to undertake an impact assessment through an independent agency.

Annual action plan

Rule 5 of these rules provide that the CSR Committee has to recommend an annual action plan to the Board which must include:-

List of the CSR projects/programmes as approved to be undertaken in the areas specified in Schedule VII of the Act.
Manner of execution of such projects/programmes.
Modalities of the fund utilisation and the schedule for implementation of such projects/programmes.
Monitoring and reporting mechanism for the projects/programmes.
Details of the need and impact assessment for the projects.

It is further given that as per the recommendation of the CSR Committee, the annual action plan may be altered at any time during the financial year. However, reasonable justification for the same has to be given while altering.

CSR expenditure

Regarding the CSR expenditure, the rules provide that it is the duty of the Board to ensure that the administrative heads do not exceed 5% of the total CSR expenditure of the company for the financial year.

With respect to any surplus that arises out of the CSR activities, it has been provided that any such surplus must not form part of the company’s business profits and the same has to be:-

Spent on the project, or
It can be transferred to the ‘Unspent CSR Account’ and then spent for the company’s CSR policy/annual action plan, or
It can be transferred to the fund as specified in Schedule VII, within 6 months of expiration of the financial year.

Creation or acquisition of a capital asset

The rules also provide that the company may spend the CSR amount for the creation or acquisition of a capital asset which will be held by-

A company which is established under Section 8 of the Companies Act 2013, or a Registered Public Trust or a Registered Society, that has charitable objects and the CSR Registration Number; or
Beneficiaries of the CSR project, in form of SHGs, collectives, entities, etc.; or
A public authority.

Significance of corporate social responsibility (CSR)

Since the concept of the CSR has its origination from the ‘environmental social and governance’ (ESG) framework, it is obvious that the advantages flowing from the actions of the corporations in pursuance of ESG will also benefit the corporations that abide by the law of CSR. Thus, the need of CSR can be understood in light of the following roles:

Legal mandate

India has a legal framework that mandates certain companies to spend a specified percentage of their profits on CSR activities. Section 135 requires qualifying companies to allocate 2% of their average net profits (ANP) over the preceding three years to CSR initiatives.

Social development

CSR initiatives in India play an important role in addressing the social issues and contributing to the overall development of the country. Companies engage in projects related to healthcare, poverty alleviation, education, etc. making a positive impact on society.

Inclusive growth

CSR activities in India often focus on inclusive growth, aiming to bridge socio-economic gap and ensure that the benefits of economic development reach marginalised and underprivileged communities. This contributes to a more equitable and sustainable development model.

Environmental sustainability

Many CSR initiatives in India also focus on environmental sustainability. Companies engage in projects related to renewable energy, environmental conservation, and sustainable practices to mitigate their environmental impact and contribute to a greener future.

Community engagement

CSR provides companies with an opportunity to actively engage with the communities in which they operate. This helps build positive relationships, foster trust, and create a sense of shared responsibility between businesses and local communities.

Brand image and reputation

Engaging in meaningful CSR activities positively influences a company’s brand image and reputation. Consumers, investors, and other stakeholders often appreciate companies that demonstrate a commitment to social responsibility, leading to enhanced trust and loyalty.

Employee morale and productivity

Companies that actively participate in CSR activities tend to have higher employee morale. Employees often take pride in working for socially responsible organisations, and this can positively impact productivity, employee retention, and overall workplace satisfaction.

Risk mitigation

Proactive CSR initiatives can help companies mitigate certain business risks. By addressing social and environmental concerns, companies reduce the likelihood of facing regulatory issues, negative public perception, or legal challenges.

Global standards and expectations

As India integrates further into the global economy, adherence to international CSR standards becomes increasingly important. Many multinational companies operating in India follow global CSR practices, and local companies are aligning their strategies to meet these expectations.

Comparative analysis of corporate social responsibility (CSR) provisions in different countries

Global outlook

Globally, the transformation in consumer behaviour with the passage of time has led the corporate businesses to cast a socially responsible image with the aim of maintaining positive relations with the public. With the increase in an informed citizenry, the corporates are increasingly aspiring to implement the CSR initiatives that are sustainable and socially impactful. Therefore, it has moved from being optional to being an important requirement. While the issues such as illiteracy, poverty, poor health and sanitation, absence of clean water and electricity, etc are prominent in the under-developed nations, other broader issues such as climate change, terrorism, GHG emissions, etc. have a uniform detrimental effect all over the world. As a result, the legislative framework around CSR also comes up with regional variations.

For curtailing and eliminating these pressing societal as well as environmental issues, various international organisations are roping in commitments in the form of sustainable development goals or legally as well as non-legally binding frameworks. These frameworks obligate the signatories or the member states to bring positive change in their short and long-term operations through their national bodies and corporations. These frameworks thus prompt the already existing as well as emerging corporations to incorporate promising stipulations and initiatives in their operations to have beneficial impact on the society and aid their nations to achieve their respective commitments on the global level.

UN Global Compact

The United Nations Global Compact is a principle-based framework for corporate entities, whereunder, the companies around the world are brought together with the UN agencies, civil society and labour groups. It is amongst one of the most followed guidelines across the world for the businesses and companies with respect to their CSR rules. The ten principles to be followed by the businesses are as follows:

Supporting and respecting the protection of internationally proclaimed human rights.
Non-involvement in human rights abuses.
Upholding freedom of association and right to collective bargaining.
Elimination of all forms of forced and compulsory labour.
Abolition of child labour.
Non-discrimination in employment and occupation.
Precautionary approach to environmental issues.
Taking initiatives for promoting greater environmental responsibility.
Encouraging the development and diffusion of environmentally friendly technologies.
Working against corruption in all its forms.

Global Reporting Initiative

Global Reporting Initiative (GRI) is another such globally acclaimed initiative that guides as well as supports the governments, businesses and other organisations in understanding and communicating the influence of business on major sustainability issues around the world. GRI has been providing sustainability reporting since the late 1990s, modifying it from a niche practice to a practice that is embraced today by the majority of organisations worldwide.

Organisation for Economic Co-operation and Development

Organisation for Economic Co-operation and Development (OECD) is an international organisation working with nations to address the socio-economic as well as the environmental challenges of globalisation. The OECD Guidelines for Multinational Enterprises provide voluntary principles and standards for responsible business conduct that is in accordance with the applicable laws as well as government policies. These guidelines aim to reinforce the basis of mutual confidence between the enterprises and the societies where they operate, and to intensify the contribution by multinational enterprises towards sustainable development.

ISO 26000

ISO 26000 is an International Standard which guides the manner in which the organisations can enhance their social responsibility and thus be instrumental in sustainable socio-economic and environmental development. The core content of these standards comprise of seven principles; seven core subjects and the stakeholder engagement.

Europe

CSR has always been an important feature for the European Union’s ambitions towards sustainable development, innovation and competitiveness. The European Commission (EC) strongly promotes CSR activities to be undertaken by sustainable and responsible enterprises of the region as with the changing social expectations, it is important to ensure consumer trust as well. The EU started giving recognition to the need for CSR activities as part of its sustainable development strategy since the 1990s itself. It also strongly stimulates the effective implementation of CSR in the European enterprises as an important factor for contributing to its long term strategies. EC defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

In 2014, it was declared that the CSR directive will require all public companies having more than 500 employees to annually give a report of their performance on various non-financial metrics. The companies were also mandated to provide ‘relevant and useful information’ with respect to their human rights impacts, environmental performance as well as anti-corruption measures in the report. These reports are based on recognized CSR frameworks such as the OECD Guidelines for Multinational Enterprises. Nonetheless, given the cultural, economic and demographic diversity across the European nations, CSR has been followed differently by them. While some nations have traditionally practised CSR, others perceive it a contribution towards societal well-being. In recent times, various socio-economic and political factors have revisited the boundaries between the public and private sector with more focus towards CSR as a voluntary initiative by the enterprises in order to manage their socio-economic and environmental impacts. However, they are also legally defined in some European nations.

Austria

Various environmental, labour and social protection laws setting efficient business standards regulate the market economy of Austria. The Companies Act, 1966 provided for the corporations to extend their benefits to the general public beyond the shareholders. Subsequently, the government adopted the joint sustainability strategy in 2002 in order to integrate social, economic and environmental spheres. However, there is absence of any specific legal framework providing for CSR related mandatory reporting except for the CSR Guiding Vision of 2009 ‘recommending’ for the same.

Belgium

Belgium is a high income nation with a highly productive and skilled workforce. It comprises three regions, each having a number of initiatives on the CSR. The national level law on ‘Coordination of the Federal Policy for Sustainable Development’ of 1997 lays down a framework of the strategies to be followed with six priority areas translated in several actions including CSR. The federal action plan for CSR in Belgium was developed in 2006 to implement CSR and encourage the companies to incorporate it in their management. However, it is obligatory in nature rather than being mandatory.

Finland

Although there is a lack of specific legislation with respect to CSR or its reporting in Finland, the country does have laws covering several aspects of CSR such as social, educational and environmental. Lately, the companies have been using global frameworks such as UNGCN, OECD and GRI guidelines to involve the stakeholders in their CSR initiatives.

France

There are various legal texts on the application of CSR in France. The first such law was on social reporting in 1977. Further in 2001, the NRE law (Nouvelles Regulations Economiques) was enforced mandating the listed companies to record the social and environmental impacts of their activities. Subsequently, the French government has been enacting more laws to complete the CSR legal framework in the country.

Germany

While there exists some ambiguity with respect to the concept of CSR in Germany, it seems quite probable that CSR is understood as a voluntary activity for the businesses in the absence of any mandatory law with respect to the same. However, as a significant step, there was the constitution of a multi stakeholder forum on CSR in 2009, which contained the recommendation for having a national action plan on CSR.

Russia

In Russia, the CSR practices by the businesses is open to interpretation within the local contexts and it is often beyond what is legally mandated. The Russian enterprises have been undertaking CSR activities in conformity with the government’s increasing acknowledgement that CSR is very crucial in order to address the pressing social, political and environmental issues but there is lack of any specific legislation with respect to the same.

Sweden

Sweden is one of the few countries that has been amongst the top ranked countries in various socio-economic indices at the international level. The country’s public sector dominates the space of social responsibility, thereby setting examples for the private companies and civil society to follow. In 2000, the government took a major approach to CSR and launched ‘Globalt Ansvar’ (The Swedish Partnership for Global Responsibility) a national initiative – with the aim of assuming increased roles in social responsibility.

United Kingdom (UK)

In the UK, the concept of CSR was developed some 200 years ago when the country was emerging as the world leader in this field. The UK Corporate Governance Code provides that the duties of a company extend beyond its shareholders. However, the code does not explicitly mention CSR. The major step towards formalising the approach to CSR in the UK was the inclusion of a mandatory CSR provision in the Companies Act of 2006 by which the companies were asked to report on the emerging socio-environmental issues.

Ireland

Supporting the EU’s viewpoint in this regard, Ireland also perceives CSR as a voluntary practice by the businesses. The country does not have any legislation on CSR. However, the Credit Institution (Financial Support) Act of 2008 mandates the financial institutions of the country which are supported by the government guarantee scheme to account for their corporate responsibility through the Irish Banking Federation.

East Asia

On a broader outlook it has been perceived that Asia, amongst its other eastern counterparts, has been lagging behind the western countries in defining the approach to (or the concept of) corporate social responsibility and driving the corporate entities to undertake the practices related to CSR. Asia, which continues to accommodate the largest number of poor people, lags behind in various international indices relating to economic inequality, human development and declining quality of life. The increasing social as well as environmental problems in the continent stress upon the businesses to function more responsibly towards their shareholders, stakeholders as well as the community. CSR related provision has started finding its place in the Asian context as the businesses begin to streamline their CSR operations and policies.

China

China’s political ecosystem including various ministries as well as its government bodies and the country’s local authorities such as the Environmental Protection Bureaus (EPBs) and CSR Departments play vital roles in furthering the obligations owed towards CSR. While it is better known in the more developed parts of the country (for example Beijing and Shanghai), it is less prominent in the western part of the country. After 2004, the government has been a step forward in bringing key legislations providing for the CSR as an fruitful means to achieve sustainable development and build a harmonious society. In fact, recent years have witnessed the working of the Chinese government towards putting the businesses as well as the civil society under pressure to follow the environmental law as well as responsible business policies. Some key CSR policies of China include – regional improvement of CSR initiatives, proposing a mandatory disclosure system, supporting voluntary services, clarification upon the tax related to environmental protection, targeted poverty reduction etc.

Japan

The traditional ideology on CSR in Japan is termed ‘Sanpo-yoshi’ meaning, a three-way satisfaction relating to benefits for seller, buyer and of the local community. It has been argued that Japan has come late towards realising corporate social responsibility. Moreover, the change has been brought down through the initiatives and demands of the foreign investors, generally pertaining to a more liberal and a shareholder-oriented model of the corporations.

The Japanese Business Federation (‘Keidanren’) emphasises upon the reporting related to the initiatives towards the CSR as well as towards environmental conservation in order to gain public trust and rapport. This organisation advocates that every corporation has a responsibility to partake in the economic development of the country and to make their existence advantageous. Studies indicate that the Japanese firms perform much better in the environmental aspect in comparison to the firms in other OECD countries. Japanese firms are often acknowledged among the first adopters of environmental policies. However, promising initiatives in the social facets are less clearly developed. In this regard, the corporations have scored less than the European or especially Nordic firms.

America

United States of America (USA)

In the USA, the practice of CSR has been evolving irregularly across industries due to variations in the leadership, perspectives, economic incentives, government regulations and influence of the communities. Although the concept was undertaken as a philanthropic activity by the businesses, the present definitions have broadened its ambit to entail the ‘corporate citizenship’ through CSR by recognizing the importance of other stakeholders. Even at present, the country does not provide for a mandatory obligation for the companies to undertake social and environmental commitment processes. Since there is absence of any regulatory compliance for undertaking CSR initiatives and reporting thereof, the corporate social responsibility in the US is often characterised by voluntary societal involvements by the businesses for their long term sustainability. For example, cause-related marketing, charitable contributions, etc.

The principal enabling and propelling factor for the US corporations to undertake CSR is the legitimate expectation of the people. In 1971, the Committee for Economic Development of the US brought the concept of social contract between the corporations and the society. As per this theory, the corporates are able to function because of public consent, and thus, they owe a duty to effectively constructively serve the society. As per the social contract, the corporations are duty bound to:

Supplying jobs and promoting economic growth.
Running the business fairly to the employees.
Involving themselves in betterment of the community as well as the environment in which they operate.

Brazil

Until the 1960s, the businesses of Brazil hardly acknowledged any social problems, however, after the introduction of the concept of CSR, companies started acknowledging the existing socio-economic problems and owned them by proposing probable solutions. Currently, though there have been initiatives to make the CSR announcement compulsory, the country is still away from a mandatory legislative provision which specifies the definition of CSR or which mandates social responsibility of the corporates. Thus, the concept has been interpreted differently by different stakeholders.

Middle East and Africa

These are the most resourceful regions in terms of petroleum, natural gas, radioactive elements, etc. Their exports to other nations of the world consist of more than half of the total exports. The concept of CSR in these regions has always been between being a philanthropic activity to a responsibly prompted social investment by the corporates. The historical concept of ‘giving’ is the basis for interpretation of the CSR in these regions. Nevertheless, some countries have moved forward towards creating a regulating framework for performing as well as reporting CSR activities, but robust steps must be taken given the high emissions from these regions.

Egypt

Historically, Egypt has a powerful culture of giving and thus, the corporate sector has been voluntarily contributing to community development. Even though there have been several political and economic reforms, the country still treats corporate social responsibility as a non-institutionalized concept, rather than as a philanthropic one. Due to the lack of a legislative binding in the corporate milieu of the country, CSR has been subjected to various interpretations and hence, pursued differently by different institutions.

Nonetheless, based on the suggestions given in the ‘Business Solutions for Human Development Report’ in 2007, the Egyptian Corporate Responsibility Center (ECRC) was established in 2008 which has been working on the principles of the UN-GCN to provide business improvement advisory as well as capacity building training to the private companies so that the overall position to design, apply and monitor sustainable CSR policies can be effectively improved. Nevertheless, there is still the need to reform the CSR policy of the country to make the state as well as non-state actors responsible and harmonised to bring about sustainable changes.

South Africa

In South Africa, the concept of CSR was traditionally understood in terms of corporate social investment (CSI) or a strategic philanthropy in the corporate ecosystem, but CSI was criticised as it seemed as an extension of business strategies without ensuring any social outcome or sustainability. Although there is no CSR legislation in the country binding the corporates to carry out the CSR activities, there has been an addition in the Companies Act 2008 providing for the companies to constitute a social and ethics committee. Moreover, it provides for creation of a CSR board committee responsible for supervising and enacting the CSR policies of the corporation.

UAE

In the UAE, 2017 was declared as the “year of giving” by the UAE during which 11 initiatives were launched by the Ministry of Economy guiding the companies on CSR initiatives, thereby promoting social responsibility and corporate investments. To incentivize corporates to invest in the development initiatives, the government launched ‘National Corporate Social Responsibility Index’ and ‘Social Responsibility Passport’. Subsequently, in the next year, the CSR law in UAE was enforced requiring the companies to report on CSR activities and financial contributions.

Australia

In Australia, there is a lack of consensus on a widely accepted definition of CSR; the country has no specified CSR legislation requiring the corporates to perform or report on CSR. The Corporations Act of 2001 does not explicitly mention corporate social responsibility or sustainability. However, it indirectly mentions performing business to be responsible giving due consideration to the welfare of other stakeholders as well.

Even though CSR continues to be open to interpretation in the corporate ecosystem, the country has not been left behind in reporting requirements related to social responsibility investments of the corporates. Community pressure on the corporates continues to increase by requiring them to report on aspects other than the financial bottom line.

Corporate social responsibility (CSR) spending in India in recent years

The data from MCA (released May 2023) indicates that the top three developmental sectors receiving the CSR funds are education, healthcare, and rural development. Ever since the enactment of the CSR provisions, these sectors have attracted major CSR funds owing to their necessity, possible results on the society as well as their alignment with the country’s SDGs. Analysing the numbers from 2014-15 till 2020-21, it can be deduced that these sectors together comprised nearly 76.6% of the total CSR expenditure.

The data is based on the filings made by corporates in the MCA-21 registry:-

S. No.	Sector	What all are included?	Funds received (in crores)	Share of total CSR Expenditure
1.	Education	Education, livelihood enhancement projects, special education and vocational skills	47187.68	37%
2.	Health	Health care, poverty, sanitation and Swachh Bharat Kosh	38011.49	30%
3.	Rural development	Rural roads, sanitation, etc.	12,300	9.6%

However, for the overall development of the country, it is essential that the companies incur their CSR expenditure towards all the development sectors.

With respect to the fiscal year 2022-23, the CSR spending made by certain companies across different sectors can be analysed as follows:

S. No.	Company	CSR spending (in crores)
1.	Tata Consulting Services Ltd.	783.00
2.	Tata Services Ltd.	481.00
3.	Infosys Ltd.	391.51
4.	State Bank of India (SBI)	316.76
5.	Wipro Ltd.	215.70
6.	Hindustan Unilever Ltd.	208.32
7.	Tech Mahindra Ltd.	123.70
8.	Asian Paints Ltd.	77.00
9.	Piramal Enterprises Ltd.	20.00
10.	Tata Consumer Products Ltd.	16.24
11.	Tata Power Company Ltd.	4.06
12.	Aditya Birla Money Ltd.	00.56

Is corporate social responsibility (CSR) an ineffective law

While CSR is a good initiative towards the ESG framework, it suffers from several infirmities that hamper its effective implementation in the present arena.

Lack of adequate knowledge

Scholars claim that companies despite having enormous fiscal resources lack adequate knowledge of existing public problems and policy measures. As a result, their CSR efforts are misguided and do not help the public in the long run with sustaining benefits. For example- companies blinded by carrying out their mandated CSR activities might employ contractual workers with extremely low pay and virtually no other benefits.

Focus on short term projects

Some companies may focus on short-term, one-off projects to fulfil CSR requirements rather than engaging in sustained, impactful initiatives that address long-term societal issues. Many companies tend to concentrate their CSR efforts in areas such as education, healthcare, and sanitation. While these are essential, broader issues like environmental sustainability and social justice may receive less attention.

In fact, companies often face difficulties in identifying and selecting suitable CSR projects that align with both their business values and societal needs. Lack of this kind of strategic alignment affects the overall effectiveness of CSR efforts. Moreover, the absence of a standardised and comprehensive impact measurement framework also makes it challenging to assess the tangible outcomes and effectiveness of CSR initiatives.

Low in Priority

CSR activities carried out by companies often clash with their commercial and other vested interests which are prioritised over serving the society. Furthermore, it is also claimed by scholars that social issues often cannot be solved by money alone and most corporations do not want to look beyond fiscal measures to help the society.

Incomplete disclosures

As per Section 135 of the Companies Act, 2013, CSR efforts will be equated with the money spent, which should be at least 2 percent of the net profit. However, companies are not very transparent in declaring their CSR income. Companies in the past have fudged figures to meet the mandatory CSR spending. Furthermore, companies that were spending more than 2 percent before the said law came into place, have started spending much less these days. More lately, companies have been engaging in selective CSR tasks that ultimately benefit their brand value and help them prosper rather than activities that genuinely help the society at large. According to some corporations, the mandated 2 percent CSR on net profit is also a way of extracting higher profits illegitimately via a “back door” and forcing them to fill in areas where the government has not acted enough. Furthermore, the government’s action was unilateral and the corporations were not consulted before the government decided to implement this rule.

Targeted entities

It is important to note that the requirement of abiding by the CSR law is only for entities meeting specific profit criteria. By linking CSR obligations solely to profit levels, there is a risk of overlooking innovative contributions from smaller companies and reinforcing a narrow definition of corporate responsibility. This profit-centric focus may encourage short-term profit maximisation over sustainable business practices, and the exclusion of certain sectors may result in an inequitable distribution of social responsibility.

How can corporate social responsibility (CSR) law be effective

Pursuant to understanding the deficiencies lying in effective implementation of the CSR law, certain ways can be resorted to, in order to fill the gap:-

Utilization of Specialization of companies

Firstly, it is important to effectively utilise the specialisation of the corporations in this regard. CSR should not be simply seen as the spending of fiscal resources, but as the smart spending of CSR resources. For example, a multi-national company engaged in the production of packaged food should provide those below the poverty line with similar assets; telephone companies should set up telecom services in remote areas lacking such services. Section 135 of the Companies Act should be amended to include measures to allow companies to do CSR activities as per their strengths and specialties.

Nevertheless, it is important to build the capacity and skills of company personnel involved in CSR planning and implementation. This primarily includes understanding the complexities of social issues and effective project management.

Corporate social responsibility (CSR) activities based on expert data

It must be ensured that the CSR activities are based on expert data. Companies should not blindly spend fiscal resources but rely on the data and suggestions of research institutes so that their efforts result in actual eradication of pre-existing social problems. Therefore, companies should collaborate with social organisations and research institutes.

Increased collaboration

Companies should collaborate with the people on the grassroots level- those who are supposed to receive their CSR aid. This will help them realise what people actually need and what their actual problems are and accordingly plan their CSR aid to help a number of people with greater efficiency. In fact, the companies must also compulsorily collaborate with non-government institutions that have acted in a particular field for at least three years. This will help them utilise their fiscal resources better as dedicated NGOs will guide them in effectively implementing their aid programmes.

Remedies if corporate social responsibility (CSR) is not followed

In this regard, the role of shareholders is paramount. Shareholders are often referred to as the owners of a company. They hold stock(s) in the company and possess a right to vote in matters pertaining to the company. When the company does well and makes profits, it is very well reflected in the form of dividends received by the shareholders. However, the role of shareholders is much more than just receiving profits. The company law mandates the presence and voting of the shareholders in certain important matters because if the decision-making is left to the key managerial personnel (KMPs) proposing the agenda, there will be an element of bias and ultimately, no objection can be raised even if the proposed agenda or change is unfavourable to the interests of the company. Since environmental protection is a collective action, shareholders must give their full attention while any idea is being proposed and analyse the short and long-term environmental effects of the same.

Nevertheless, the shareholders can resort to the remedies mentioned in the Companies Act, 2013 if they wish to bring about a desired change in the operations of a company that would possibly result in a better decision ensuring greater environmental benefits: –

To this end, the shareholders have the right to invoke Section 241 of the 2013 Act when they are aggrieved by oppression or mismanagement of the company. Denial of voting rights to a shareholder is an example of oppression. On the other hand, mismanagement occurs when the company is managed in a manner prejudicial to the public interest.
The Act also provides for a ‘class action suit’ under Section 245 of the 2013 Act for the minority shareholders representing a common interest. It can be invoked whenever there is any prejudicial or abusive conduct committed by the Board of Directors (BOD) or the KMPs.
Sometimes, even one shareholder with a minority shareholding, can bring a cause of action to sue the BOD on behalf of the company itself. This is called a ‘derivative action’ which is not incorporated per se in the Act but the courts in India as well as in other countries have recognized it as a claim. In fact, in a recent case of Valluvar Kuzhumam Pvt. Ltd. v. APC Drilling & Construction Pvt. Ltd, (2022) decided by the Madras High Court, a derivative action was held to be included in Section 241 of the 2013 Act.

In the recent times, this shareholder activism, taken into consideration with respect to environment-related proposals submitted by the shareholders to their company, has actually led the companies to take steps towards the same. For instance, on an average, the extent of climate-risk disclosure by the companies has increased by approximately 4.6% for each such submitted environment-related proposal. Thus, shareholders play a big role in bringing about this kind of desired change in the company’s functioning.

Conclusion

Development is indispensable for any society, but it should not be entertained at the cost of the environment. The present law on corporate governance addresses environmental concerns in many ways. However, no law can ever be effective unless the people sitting in the Board room for decision-making take the environmental concerns seriously. Therefore, an understanding of related future risks and opportunities is necessary. Finally, ways that can harmonise corporate interests along with the protection of the environment, such as optimal utilisation of natural assets, taxation (rebate) policies or incentivization of companies, carbon or emissions trading, etc., will be of more help to address this concern and would provide a win-win situation for the companies as well as the government in fulfilling the ultimate objective of equitable and sustainable development. Thus, providing for robust CSR laws in the present times is crucial as it not only benefits the society and the environment but also positions companies and, by extension, nations as global leaders in sustainable development.

Frequently Asked Questions (FAQs)

How can one define CSR?

Generally, corporate social responsibility can be understood as the way through which a company achieves a balance of economic, environmental and social imperatives, while addressing the expectations of its shareholders and various other stakeholders.

Which section of the Indian Companies Act deals with corporate social responsibility (CSR)?

Section 135 of the Companies Act, 2013 deals with the CSR. Further, the permitted activities have been mentioned in Schedule VII attached to the Act.

How can a company calculate its average net profit?

The average net profit of a company can be calculated by virtue of Section 198 of the Companies Act, 2013, as discussed above.

Is it necessary to comply with the CSR obligations?

Yes. As per the Companies Act, 2013, every company that has a net worth equal to or more than Rs. 500 crore, or a turnover equal to or more than Rs. 1000 crore, or a net profit equal to or more than Rs. 5 crore during any financial year, is required to contribute at least 2% of the company’s average net profits made during the three immediately preceding financial years.

Does ESG mean the same as CSR?

No. While the environment, social and governance (ESG) is a broader concept of corporate governance, the concept of corporate social responsibility (CSR) can be said to be a sub-part of the ESG obligations of the corporations.

Is there any liability on the company and directors for not abiding the CSR obligations?

Section 135(7) of the 2013 Act provides for the penal action if the company fails to comply with the CSR provision. It states in case there is default by a company in complying with the provisions of sub-section (5) or sub-section (6) of Section 135, such company shall be imposed with a penalty of twice the amount that is required to be transferred by the company in the Fund specified in Schedule VII or in the Unspent Corporate Social Responsibility Account (Unspent CSR Account), as the case may be, or Rs 1 crore, whichever is less. Moreover, it provides that the officer-in-default shall also be liable to a penalty of one-tenth of the amount that is required to be transferred by the company to such Fund as specified in Schedule VII, or the Unspent Corporate Social Responsibility Account (Unspent CSR Account), as the case may be, or Rs 2 lakh, whichever is less.

What role can the shareholders play to bring the company’s focus towards its environmental-related concerns?

Yes. The Companies Act, 2013 provides for individual as well as class action to be undertaken by the shareholders to bring about any positive change in the company’s affairs. The related provisions are Section 241 and 245 respectively.

How can Indian businesses contribute towards India’s ambitious commitments at the international level?

Indian businesses can contribute towards achieving the national targets by abiding the obligations such as CSR, honest annual reporting by the Board and taking appropriate measures against any discrepancies in fulfilling the environmental social and governance framework.

References

An overview of ESG towards better corporate governance

By

Vanshika Kapoor

-

April 8, 2024

0

This article has been written by Pawan Kumar and Aman Kumar Pandey pursuing a Diploma in Corporate Litigation course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

Environmental, Social, and Governance (ESG) are the regulatory measures formulated to encourage business practices towards sustainability and responsibility. There are emerging environmental issues such as pollution, climate change, deforestation, waste management, etc. Social issues such as inequality, poverty, human rights abuses, and discrimination, while governance issues such as regulatory compliance, lack of transparency, corruption, and failure of corporate governance, show the need for the implementation of a robust mechanism like ESG in India, which is very significant for investors making an investment in companies that are really committed to considering these issues and have robust governance practices to address these issues and mitigate the potential risk associated with these issues.

In India, companies have started recognising the importance of aligning their operations and strategies with ESG principles. Talking about ESG reporting in India, it was initiated in 2009 by the Ministry of Corporate Affairs by issuing the Voluntary Guidelines on Corporate Social Responsibility (CSR). In this article, we will learn how the term “ESG” is different from the term “CSR,” the significance and implications of ESG in India, the provisions that primarily govern ESG regulation in India, ESG reporting and other nuances with respect to ESG.

ESG pillars

ESG frameworks have the following three pillars:

Environmental pillar

It deals with pollution, biodiversity loss, corporate climate policies, energy efficiency, greenhouse gas emissions, complying with environmental regulations, deforestation, waste and water management, etc.

Social pillar

It deals with working conditions, the company’s relationship with internal and external stakeholders, diversity in work culture, employees’ health and safety, employee engagement, etc.

Governance pillar

It deals with ensuring that a company uses transparent and accurate methods of accounting, is accountable to shareholders, pursues integrity and diversity while selecting their leaders, deals with how the leader interacts with and responds to all the stakeholders of the company, prevents corruption, etc.

Differences between ESG and CSR

The key differences between ESG and CSR are as follows:

Scope: ESG is a broader concept that encompasses social, environmental, and governance factors, while CSR primarily focuses on the social and environmental impact of a company’s operations.
Integration: ESG factors are increasingly being integrated into investment decisions, while CSR is less commonly used in this context.
Reporting: Many companies are voluntarily reporting on their ESG performance, while CSR reporting is less standardised and not as widely adopted.
Regulatory environment: ESG is becoming increasingly regulated, with many countries and jurisdictions implementing mandatory ESG reporting requirements. CSR, on the other hand, remains largely voluntary.
Stakeholder engagement: ESG emphasises stakeholder engagement and considers the interests of various stakeholders, such as shareholders, employees, customers, and the community. CSR, while also considering stakeholders, may not have the same level of engagement and focus on long-term value creation.
Long-term impact: ESG is often seen as a more comprehensive and long-term approach to sustainability, while CSR may be considered a more short-term and reactive approach.
ESG is driven by external factors like regulatory compliance for ESG reporting, whereas CSR is usually driven by the internal values of a company and its desire to become a better corporate citizen.
ESG factors are more quantitative in nature, whereas CSR initiatives are primarily qualitative.

It would not be wrong to say that CSR is the actions that a company takes to become socially responsible, whereas ESG can be considered a scoreboard that evaluates the impact of those actions taken by the company. In other words, CSR initiatives are about doing good to society, whereas ESG factors are about assessing and reporting the impact or the end result of that good deed. ESG and CSR both play a significant role for companies in the present world.

ESG regulatory environment in India

The Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI) play an important role in encouraging ESG integration and reporting into corporate practices in India. SEBI, as the chief regulatory authority for the Indian securities market, has taken various initiatives to encourage ESG compliance and reporting and made it mandatory for the top 1000 publicly listed companies.

Recognition of some ESG rating agencies by the Security and Exchange Board of India for scoring and verifying companies’ ESG disclosure helps to ensure transparency, reliability, and comparability of ESG data. Subsequently, this helps in gaining investor’s trust in the credibility and accuracy of ESG data.

MCA’s role in ESG integration and reporting

The Ministry of Corporate Affairs (MCA) plays a crucial role in promoting ESG integration and reporting in India. Through the Companies Act, 2013, the MCA has introduced several provisions that encourage companies to adopt ESG practices.

The Companies Act of 2013 in India has incorporated several provisions that emphasise and promote the integration of Environmental, Social, and Governance (ESG) considerations into corporate practices. These provisions are crucial in aligning business operations with sustainable development goals and fostering responsible corporate behavior.

Section 135 and Schedule VII

Section 135 mandates companies with a net worth of INR 500 crore or more, a turnover of INR 1000 crore or more, or a net profit of INR 5 crore or more to spend at least 2% of their average net profits over the preceding three years on Corporate Social Responsibility (CSR) activities. Schedule VII of the Act provides a list of CSR activities that fall within the ambit of ESG, such as promoting education, healthcare, and environmental sustainability initiatives.

Business responsibility reporting

The Act requires companies to include a Business Responsibility Report as part of their annual report, which encompasses ESG-related disclosures. This report must detail the company’s CSR initiatives, policies, and performance, providing stakeholders with transparency and accountability.

Board diversity

The Act mandates listed companies to have at least one woman director on their board, promoting gender diversity and inclusivity in corporate decision-making.

Stakeholder engagement

The Act emphasises the importance of stakeholder engagement, encouraging companies to engage with their stakeholders, including employees, customers, suppliers, and communities, to address ESG-related concerns and incorporate their perspectives into their strategies.

Sustainability reporting

While not explicitly mandated, the Securities and Exchange Board of India (SEBI), the capital markets regulator, has encouraged listed companies to adopt sustainability reporting frameworks, such as the Global Reporting Initiative (GRI), to enhance ESG disclosures and provide comprehensive information to investors and stakeholders.

Further, Section 134(3)(m) of the Companies Act 2013 (the Act) mandates a report by the company’s Board of Directors (BoD) to include details on energy conservation. Likewise, Section 166(2) of the Act imposes a duty on a director to act in good faith, to promote the objectives of the company for the benefit of its members, and in the best interests of the company, all the stakeholders (employees, shareholders, and community), and for the protection of the environment. Moreover, Section 149 of the Act mandates specific classes or classes of companies to have at least one female director, which shows a social element of ESG to encourage women’s participation in corporate decision-making. Section 177 of the Act mandates the BoD of every listed public company to form an Audit Committee, which shall consist of a minimum of three directors, wherein independent directors have a majority. Likewise, Section 178 of the Act mandates the BoD of every listed public company to form a Nomination and Remuneration Committee, which shall consist of three or more non-executive directors, out of which not less than a half shall be independent directors, which shows a governance element of ESG to promote better corporate governance practices in companies.

National Voluntary Guidelines on ESG Reporting

In 2021, the MCA released the National Voluntary Guidelines on ESG Reporting. These guidelines provide a comprehensive framework for companies to adopt ESG reporting practices. The guidelines cover various aspects of ESG reporting, including ESG performance indicators, disclosures, and reporting methodologies.

Investor relations

The MCA recognises the growing importance of ESG for investors. In recent years, there has been a significant increase in investor demand for ESG-compliant investments. To meet this demand, the MCA has taken steps to encourage companies to disclose ESG-related information.

Capacity building

The MCA is also working to build capacity among companies to adopt ESG reporting practices. The ministry has organised several training programmes and workshops for companies on ESG reporting. Additionally, the MCA has partnered with various organisations to develop resources and tools to assist companies with ESG reporting.

The MCA’s efforts to promote ESG integration and reporting are significant in several ways. First, they help to align India’s corporate sector with global best practices in ESG. Second, they provide investors with the information they need to make informed investment decisions. Third, they encourage companies to adopt sustainable practices that benefit both their stakeholders and the environment.

SEBI’s role in ESG integration and reporting

Integration of ESG into investment decisions

The Securities and Exchange Board of India (SEBI) has been proactive in promoting the integration of environmental, social, and governance (ESG) factors into investment decisions. Recognising the growing importance of ESG considerations in global financial markets, SEBI has taken several steps to encourage institutional investors to incorporate ESG factors into their investment processes.

In 2015, SEBI issued a circular on “Integration of Environmental, Social and Governance (ESG) Factors in Investment Decisions by Institutional Investors.” This circular urges asset management companies (AMCs) and mutual funds to consider ESG factors when making investment decisions. It emphasised that ESG factors can have a material impact on a company’s long-term performance and can help investors make more informed decisions.

In 2018, SEBI issued another circular on “ESG Reporting by Listed Entities.” This circular mandated the top 100 listed companies by market capitalization to report on ESG-related disclosures in their annual reports. This move was aimed at enhancing the transparency and comparability of ESG-related information for investors.

SEBI’s efforts have been instrumental in raising awareness about ESG investing among institutional investors in India. Many AMCs and mutual funds have developed ESG-focused investment strategies and products in response to SEBI’s guidelines.

The integration of ESG factors into investment decisions has several benefits. ESG factors can help investors:

Identify and manage risks: ESG factors can help investors identify and manage risks related to climate change, social unrest, and governance failures.
Generate long-term returns: Studies have shown that companies with strong ESG performance tend to outperform their peers in the long run.
Attract and retain investors: Investors are increasingly looking for investments that align with their values. By integrating ESG factors, institutional investors can attract and retain investors who are seeking sustainable and responsible investments.

SEBI’s initiatives have played a significant role in promoting ESG investing in India. As more investors adopt ESG-focused investment strategies, it is expected that ESG factors will become increasingly mainstream in the Indian capital markets.

ESG disclosure requirements

SEBI, through its Business Responsibility and Sustainability Reporting (BRSR) framework, requires listed companies to make ESG-related disclosures in their annual reports. These disclosures cover aspects such as environmental performance, social impact, and governance practices.

ESG reporting guidance

SEBI has also published guidance for companies on ESG reporting. The guidance provides detailed explanations of ESG reporting requirements, including industry-specific disclosures and best practices.

Collaborative efforts

Joint working group

MCA and SEBI have established a joint working group to enhance coordination in the area of ESG integration and reporting. This group aims to address challenges and develop strategies for promoting ESG reporting practices in India.

Adoption of global frameworks

Both MCA and SEBI recognise the importance of aligning with global ESG frameworks. They actively participate in international forums, such as the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB), to stay updated on emerging ESG reporting standards.

The regulations related to ESG are not only found in the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, but they also come under several legislations, which include the Environment (Protection) Act, 1986; Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2016; Water (Prevention and Control of Pollution) Act, 1974; Air (Prevention and Control of Pollution) Act, 1981; Factories Act, 1948; Prevention of Corruption Act, 1988; Prevention of Money Laundering Act, 2002; and several laws relating to the payment of minimum wage, health and safety, gratuity, bonus, welfare activities, etc.

Integration of SDG with ESG

The SDGs outline a set of 17 interrelated goals that were adopted by the members of the United Nations at the 2015 UN Summit and were implemented on January 1, 2016. It was adopted by the member states to achieve the goal by the year 2030 of providing the world with a better and more sustainable future for the coming generations.

SDGs and ESG are the two major frameworks that are responsible for driving businesses towards sustainable and accountable practices. Businesses can integrate their SDGs with their ESG strategies, as this integration will enhance the business’s reputation and attract more investors. The integration will also contribute by solving global problems and creating a better future for society.

India’s rank in achieving the Sustainable Development Goals has improved to 112^th in 2023 but it still remains at the bottom of the list. Aligning SDGs with ESG practices can help India improve its rank.

The integration of SDGs with ESG can be done by businesses by identifying and aligning the most relevant SDGs that fit with the core operation of the company and their practical implementation by the board of directors with the existing ESG strategy of the company.

SDGs and ESG can be considered two sides of the same coin and there are a lot of ways in which SDGs can be achieved by working on ESG strategies:

A company working with an ESG strategy to reduce carbon emissions and putting efforts into promoting renewable energy will also contribute to Clean Energy- SDG 7 and Climate Action- SDG 13.
Clean Water and Sanitation- SDG 6 can be achieved by implementing ESG strategies such as reducing water pollution, preserving water resources, and putting efforts into building a future where access to clean water can be provided to everyone by implementing sustainable water management practices.
A company can align decent work and economic Growth- SDG 8 with its ESG strategy and promote sustainable economic development by providing decent working conditions, fair wages and a safe working environment for its employees.
If the ESG strategy of an organisation works on reducing waste generation by minimising waste during their operations and by recycling or reusing the products, it will contribute towards Responsible Consumption and Production- SDG 12.

We can unlock the pathway for a sustainable future by aligning businesses with the global vision of the SDGs and ESG.

ESG reporting

Companies can use the ESG reporting framework to show that their business is sustainable and ethical in nature. The ESG frameworks provide a cohesive layout for evaluating the company’s environmental and social impact, and they also deal with the risks and opportunities involved in the business.

What is ESG reporting

ESG reporting can be defined as companies publishing their ESG reports every year to show the progress made towards their environmental, social and governance goals. The annual report consists of various ESG metrics to assess the performance of the company in the areas of environmental, social and governance by using both numerical and qualitative data. The report often outlines the company’s long-term ESG vision.

ESG reporting in India

Earlier in 2009, the MCA (Ministry of Corporate Affairs) introduced BRR (Business Responsibility Reporting), which was used as a framework for reporting ESG but because of its failure to provide comprehensive and relevant data, there was a requirement to refine it to meet the complexity of the ESG programme.

In 2021, BRSR (Business Responsibility and Sustainability Report) was introduced by SEBI. The reporting format was established on the basis of nine principles that were outlined in the NGRBC (National Guidelines for Responsible Business Conduct). Companies need to include the BRSR report in their annual report, which will readily be available on the company’s website, on stock exchanges and directly provided to the company’s shareholders. Non-compliance or failure to submit a BRSR report may lead to fines and penalties by the SEBI. The BRSR framework is built on nine principles outlined in the National Guidelines for Responsible Business Conduct (NGRBC). These principles provide guidance on various aspects of responsible business conduct, including respect for human rights, labour standards, environmental protection, and stakeholder engagement. By aligning their reporting with these principles, companies can demonstrate their commitment to responsible practices and ensure transparency in their operations.

The BRSR reporting format encompasses a wide range of disclosures, covering areas such as corporate governance, risk management, supply chain management, employee well-being, and community engagement. It requires companies to provide detailed information on their ESG initiatives, performance metrics, and targets. This comprehensive reporting format enables investors, consumers, and other stakeholders to assess a company’s sustainability efforts and make informed decisions based on their ESG commitments.

The introduction of the BRSR framework represents a significant step towards promoting responsible business practices and enhancing corporate transparency in India. It encourages companies to integrate sustainability into their core operations and contribute to achieving sustainable development goals. By embracing the principles outlined in the NGRBC, companies can foster a culture of responsible business conduct and positively impact society and the environment.

ESG challenges

Despite the numerous benefits of practicing ESG, companies are still facing a lot of challenges when implementing ESG practices effectively.

Adoption of ESG

Although India is witnessing a growing awareness of ESG practices, a lot of businesses in India are still facing a significant challenge in adopting ESG practices. In a survey conducted by Deloitte, it was found that only 27% of companies are effectively meeting the current ESG framework. In India, there is a limited supply of ESG professionals, which is not meeting up with the growing demand. Adopting ESG practices will not only lead a path towards a sustainable future but also improve the public image of the company.

Short-term focus

The biggest hurdle in implementing ESG practices in India is that most Indian companies are still attracted to fulfilling their financial goals while neglecting their long-term sustainability goals, as the businesses have not yet realised the value of implementing ESG practices in their operations.

Supply chain

A major challenge faced by the companies while aligning their operations with ESG lies in their supply chain, as the few partners who form a part of the chain are small businesses, and it becomes tedious work to make them understand the importance of sustainability and goals, as well as the necessary ESG data.

Criticism of ESG

Decline in popularity

Despite the growing popularity of ESG, the increasing number of greenwashing cases is potentially reducing its credibility and impact.

There’s been a decline in the investor’s interest in the ESG factor of the company, as there was a fall from 65% in 2021 to 53% in 2023 in the UK. In a survey that was conducted by Edelman, nearly 75% of institutional investors lack trust in the company’s ability to deliver on its ESG commitments.

Lower returns

While there is widespread support for ESG investing, certain studies show that there are not many financial advantages for both businesses and investors.

In a study held by the European Corporate Institute, it was found that the investment in businesses made by “responsible investors” was not able to improve their ESG scores and it even led to lower financial returns. Furthermore, critics argue that ESG investing may lead to portfolio underperformance. They contend that by focusing on ESG factors, investors may sacrifice financial returns, as ESG-compliant companies may not always be the most profitable. However, studies have shown mixed results on the relationship between ESG performance and financial performance, with some indicating a positive correlation and others finding no significant impact.

Additionally, some critics question the effectiveness of ESG investing in driving positive social and environmental change. They argue that while ESG investing may raise awareness and encourage companies to adopt more sustainable practices, its impact on systemic issues such as climate change and social inequality may be limited. They suggest that more comprehensive policy interventions and government regulations are necessary to address these challenges effectively.

Despite the criticisms, ESG investing continues to gain traction among investors who seek to align their portfolios with their values and contribute to a more sustainable future. As the field evolves, efforts are being made to address the challenges and improve the transparency, consistency, and impact of ESG investing.

Conclusion

Emerging environmental, social, and corporate governance issues show the need for the implementation of a robust mechanism like ESG. ESG consists of three important pillars, as the name suggests, including the environmental, social, and governance pillars to tackle respective issues. Companies in India have started recognising the importance of aligning their operations and strategies with ESG principles.

Regulatory bodies such as the Ministry of Corporate Affairs and the Securities and Exchange Board of India play an important role in promoting ESG integration and reporting into corporate practices in India. Despite the numerous benefits of practicing ESG, companies are still facing a lot of challenges when implementing ESG practices into their businesses. Although there is a growing popularity for ESG, the increasing number of greenwashing cases is potentially reducing the credibility and impact of ESG, and certain studies show that there are not many financial benefits for both businesses and investors. To tackle such issues as increasing greenwashing cases associated with ESG practices, comprehensive and more transparent reporting guidelines are needed.

Regulatory bodies can take capacity-building initiatives and organise training programmes to ensure businesses are equipped with the essential tools and knowledge. Through these training programmes, companies will know the significance of ESG adoptions and be able to effectively include these aspects in their reporting systems. Such small measures will form the foundation for fostering transparency, sustainability, and accountability in India’s corporate landscape.

References

An overview of NFT and IPR

By

Vanshika Kapoor

-

April 8, 2024

0

This article has been written by Dipika Chhotwani pursuing a Diploma in US Intellectual Property Law and Paralegal Studies course from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Table of Contents

Introduction

In India, Non-Fungible Tokens (NFTs) are at an infant stage, wherein people are still developing and upgrading their knowledge of what they are, how it work, how to monetize them, what platforms they can create them on, etc. While NFT has become a tech tool used for marketing purposes, a new form of asset investment and transfer of the product/service into the metaverse have raised major challenges with regards to Intellectual Property Rights (IPR). NFT has become a buzz in the world and with the witnessing evolution in technology, NFT with artificial intelligence, digitalization of assets, and certain legal parameters come into the picture while creating and selling the NFT with reference to protection and infringement of IPR. Therefore, it is important to stay legally encrypted and aware of the rights of the creator, buyer, or marketplace to prevent any wrongdoing.

With the increase of NFTs around the world, it has come across various challenges and their legality across the globe has increased as digital solutions to the digital problems over the blockchain. For instance, in the case of D’Aloia vs. Binance Holdings & Ors. (2022), the UK High Court, has served document proceedings against an unknown person using blockchain technology. That is how the emerging stage of blockchain technology involves legal proceedings and the future of legal matters in the digital world around the globe.

NFT provides new possibilities for businesses and brand owners with relation to their artwork, goods, and services and to introduce their work in digital form in the metaverse to be a whole new playground and marketplace to unlock their scope of making money out of such work in a new tech global era.

Bollywood superstar Amitabh Bachchan’s NFT collection has been sold for a whopping 9,66,000 dollars (Rs 7.18 crore, approx.) for a collectible series inclusive of the poem by his father, Madhushala.

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFTs) are blockchain-based tokens linked to a specific asset, unique digital assets, minted, recorded, and traded specifically on a platform called Blockchain with respect to the fundamental advantage of Ownership and authenticity and with zero possibility to temper the data, which is decentralised among the people and viewable by everyone. NFTs are non-replaceable and non-exchangeable but unique codes stored and protected on a blockchain cannot be copied by anyone.

In other words, NFT is a set of metadata (such metadata also includes the relevant digital asset available online originally or in other media or storage such as the Inter-Planetary File System, also known as “IPFS”) in which data is stored, including a ‘Hash’ (a unique code generated to identify an asset) and previous ‘hash’ if any (its blocks), which is exchanged by way of coding through smart contracts.

NFT is proof of owning a unique digital version of an asset through a unique identification number linked to it, rather than the asset itself, which has a certain value as a commodity and can be resold at a higher price.

Blockchain

There are instances wherein under-the-table transactions take place and records of the transactions are stored in a database but the same is not reliable due to a lack of access or it can be changed by the admin at any time.

Blockchain is a ledger distributed and shared among a network with decentralised records of the chain and used to make the data immutable. Blockchain is mostly known for creating cryptocurrencies, NFTs, digital decentralised finance, and highly encrypted smart contracts, but it is not limited to that.

Blockchain is a system that is decentralised and shared with everyone who is connected to it, and changing the data is next to impossible. Once the data has been put on the blockchain, there is no way to modify or alter it; instead, to alter any data, one has to add another block, which will be seen in chronological order and immutable, and all the users have collective control over the blockchain.

Blockchain was first introduced in the 1990s and implemented in 2009 by an anonymous developer (Satoshi Nakamoto), who made Bitcoin with the help of blockchain, which created the buzz of cryptocurrency in the world.

For instance, any song, movie clip, painting, virtual gaming, or real-world item and its tokenization, i.e., being owned digitally and converted into digitised form as NFT, such artwork with the proof of its ownership, authenticity, and transparency in a digital token can be tracked down by the public in the form of Blockchain and the transfer record is seen by everyone and visible in the public record.

Intellectual Property (IP) and Non-Fungible Tokens (NFTs)

The spread of NFTs has paved the way for several questions about the most strategic ways to protect Intellectual Property (IP) Rights and its infringements. Any artwork and its legal document for future IP with the smart document enable its legal enforceability and its implementation rounds forth for the document. It is a combination of Legal Documents and Smart contracts. A document stating ownership and contractual obligation of an asset, along with controlling and managing such obligations, restricts access to certain data, IP or other assets of such an NFT and follows the global token standard further, which enables the use of one owing the NFT on blockchain and is enforceable in certain jurisdictions.

In India, currently, there is no such governing law for blockchain, NFTs, or cryptocurrency, as it is yet developing and gaining popularity among the public, covering the grey areas and compliances to make it legally binding and enforceable digitally with global standards.

China issued its first judgement involving NFT infringement in the case of Shenzhen Qice Diechu Culture Creation Co., Ltd. vs. Hangzhou Yuanyuzhou Technology Co., Ltd., a.k.a. “chubby tiger having its shot.”

NFT and its relationship with Intellectual property rights

Non-fungible tokens (NFTs) have emerged as a new and exciting way to represent ownership of digital assets. While NFTs have gained popularity in the art world, they also have significant implications for intellectual property (IP) rights.

NFTs as a form of digital property:
- NFTs are unique, non-interchangeable tokens that can be used to represent ownership of digital assets such as art, music, videos, and even virtual real estate.
- By creating an NFT, a creator can establish a clear record of ownership on a blockchain, which provides a decentralised and immutable ledger.
IP protection and NFTs:
- NFTs can be used to protect IP rights by providing a secure and verifiable way to establish ownership and authenticity.
- When an NFT is created, metadata associated with the asset is recorded on the blockchain, which can include information about the creator, ownership history, and copyright details.
Digital rights management (DRM):
- NFTs can be used for digital rights management (DRM) by controlling access to and distribution of digital content.
- Creators can set permissions and restrictions on NFTs, allowing them to control how their work is used and shared.
Copyright and NFTs:
- NFTs can be used to enforce copyright laws by providing a clear chain of ownership.
- When an NFT is transferred or sold, the transaction is recorded on the blockchain, creating a transparent and auditable record of ownership.
Fractional ownership and NFTs:
- NFTs can be fractionalized, allowing multiple individuals to co-own a digital asset.
- This can be beneficial for expensive digital assets or when multiple parties want to share ownership and potential profits.
IP licencing and NFTs:
- NFTs can be used to facilitate IP licencing by creating a secure and transparent framework for licencing digital assets.
- Creators can grant licences to third parties for specific uses of their work while maintaining control over the NFT.
IP monetisation and NFTs:
- NFTs can be used to monetize IP rights by allowing creators to sell their work directly to consumers without intermediaries.
- Creators can set prices for their NFTs and receive royalties on subsequent sales.
IP disputes and NFTs:
- NFTs can provide evidence of ownership in IP disputes by establishing a clear and verifiable chain of ownership.
- The transparent nature of blockchain technology can help resolve disputes and protect the rights of creators.
New business models and NFTs:
- NFTs have the potential to create new business models and revenue streams for creators and IP holders.
- For example, NFTs can be used to create limited-edition digital collectibles, virtual experiences, and exclusive access to content.
Regulatory considerations:
- As the NFT market evolves, regulatory considerations related to IP rights, copyright laws, and consumer protection will need to be addressed.
- Governments and regulatory bodies will need to develop frameworks to ensure the protection of IP rights while fostering innovation in the NFT space.

The relationship between NFTs and intellectual property rights is complex and evolving. As NFTs continue to gain popularity, it is essential for creators, IP holders, and policymakers to understand the implications and opportunities presented by this technology. By leveraging NFTs, creators can protect their IP rights, monetize their work, and explore new avenues for creative expression.

Certain issues that are buzzing with respect to NFT and IPR

How to mint NFT

One needs to select a marketplace, then create a wallet and connect the wallet with the selected marketplace to fund the wallet. Create the work, Fix the Price, and mint the same by paying the Gas Fee and put it on sale with the Terms and Conditions for such NFT with respect to the Terms and Conditions of The Marketplace and then it can be visible to buy on Blockchain for all the buyers.

NFTs and Copyright

Copyright exclusively arises automatically when any original work is created and according to the Copyright Act of 1957, this includes literary work, musical work, dramatic works, cinematographic films, sound recordings, and architecture, which grants protection only to the original work, and is not copied, infringed work or any idea. However, any fair use, such as personal work, research work, judicial proceedings, or reporting, is permitted in copyright, except the usage of such work for commercial purposes, subject to the ambit of fair use under the Copyright Law.

In the landmark case of V. Govindan vs. E.M. Gopalakrishna Kone And Anr. (1954), the Indian courts established a significant precedent regarding copyright protection for original works. The primary issue in this case centered around the protection of small or minor creations under copyright law.

The plaintiff, V. Govindan, was the proprietor of a magazine called “Janasakthi.” In one of the magazine’s issues, Govindan published a short poem titled “Kannappan,” written by a well-known poet. The poem was not registered under the Copyright Act, 1957. Some time later, a rival magazine, “Kerala Kaumudi,” published a slightly modified version of the same poem without obtaining permission from Govindan or the original poet.

Govindan filed a lawsuit against the publishers of “Kerala Kaumudi,” alleging copyright infringement. The defendants argued that the poem was not an original work as it was based on a mythological tale and thus was not eligible for copyright protection. They claimed that only substantial or unique creations could be protected under copyright law.

The Madras High Court, where the case was initially heard, held in favour of the plaintiff. The court recognised that even small or minor creations, such as poems, short stories, or articles, could be protected under copyright law. The court reasoned that the originality of a work lies in its expression, not in the subject matter or idea itself. The High Court’s decision was upheld by the Supreme Court of India. The apex court emphasised that copyright law aims to protect the expression of ideas, regardless of the extent or significance of the work. The court observed that the poem in question exhibited originality in its expression and was therefore entitled to copyright protection. The V. Govindan vs. E.M. Gopalakrishna Kone And Anr. case established the principle that even small or minor creations, if they are original in their expression, are eligible for copyright protection. This decision has had a profound impact on the interpretation of copyright law in India, ensuring that authors and creators receive due recognition and protection for their original works, irrespective of their size or scope.

Who has the right to be an author

The one who originally created the work and created the NFT is the author. However, in the case of collective or joint work, the rights and authority have to be defined by the agreement and smart contract. The creation of any work through artificial intelligence (AI) and putting it on NFT is still a grey area with respect to the authorship and rights, wherein certain factors have to be taken into consideration in the circle of such work and may differ from work to work.

In the case of Thaler vs. Perlmutter (“Thaler”), the US Court, in its Appellate Court, upheld the original decision of the District Court of Columbia that AI-generated work cannot be protected under copyright due to a lack of human authorship. This decision has significant implications for the future of copyright law and the role of AI in creative endeavours.

The case centred around a copyright infringement lawsuit filed by Stephen Thaler, the creator of an AI system called Creativity Machine. Thaler argued that the AI system was the author of a work of art, and that he, as the owner of the AI system, should be granted copyright protection for the work. The lower court, however, ruled that AI-generated works cannot be copyrighted because they lack the requisite human authorship.

The Appellate Court agreed with the lower court’s decision, stating that copyright law requires that works be created by humans in order to be eligible for protection. The court noted that AI systems are not capable of independent thought or creativity, and that any works they produce are simply the result of programming and data input by human creators.

The Thaler decision has been met with mixed reactions. Some experts argue that it is a necessary step to protect the rights of human authors and to ensure that AI does not replace human creativity. Others, however, argue that the decision stifles innovation and creativity in the field of AI-generated art and music.

The implications of the Thaler decision are far-reaching. It is likely to have a significant impact on the development of AI-generated art, music, and other creative works. It may also lead to changes in copyright law, as lawmakers grapple with the challenges posed by AI-generated content.

The Thaler decision is a reminder that the law is still struggling to keep pace with the rapid developments in AI technology. As AI becomes increasingly sophisticated, it is likely that we will see more legal challenges related to AI-generated content. The Thaler decision is just the beginning of a long and complex debate about the role of AI in copyright law.

Ownership of such work relies upon and differs as to the terms and conditions of the marketplace, platform, and group of people. The owner of the NFT work is subject to the agreement and its smart contract.

Does the NFT infringe copyrights and licences, and what rights are transferred with the NFT (and on resale)?

The journey from paper to digital in the global market is fraught with challenges yet important for the future of a changing world and is beyond the limitations of paper. This is the question of awareness with respect to the buyer and creator who puts it on sale at the marketplace and the one who buys it from there before creating or buying it must be careful and attentive towards the terms and conditions of the owner as well as the marketplace with respect to ownership, royalty, resale, reproduction, distribution, commercial usage, derivative works, public display and other rights related to the NFTs. However, the rights related to ownership can only be transferred by an agreement that is legally binding on all the parties and the same can be codified with the NFT through a smart contract that has to be signed by all the parties. Rights can only be transferred using the licence of NFT, which is a legal document stating the contractual obligations and present and future rights of all the parties.

Creators can enter into NFTs licences with the help of lawyers bound by an agreement, putting out the terms and conditions of the agreement to protect their IPR as well as their economic rights to limit or expand the use of their work. Future infringements or mishaps that cannot be predicted in the present scenario or cannot be codified under the smart contract can be put into the legal contract along with the remedies to protect the rights.

Creators minting their NFTs shall be aware of the revenue sharing, royalty program, and other commercial forms with respect to the marketplace and their contract with the originality of the work and non-violation of existing IPR.

Buyers in this scenario shall be aware of whether they are buying the ownership rights of NFT or just a digital asset and their sell/purchase agreement for such NFT. To check the originality of such an NFT, buyers need to check the metadata of the NFT wherein certain procedures are involved and once it is verified that the initial storage manner of such work is correct, the founding team, utility, and roadmap must be checked to avoid any mishaps.

In most cases, the marketplace holds the major rights related to NFTs and can be acquired by them at any point in time and one may lose the utility rights. Therefore, it is advisable to check all the conditions and agreements of such a marketplace before creating or buying any NFTs.

In the case of any resale or copying of NFT, it must be expressly restricted to protect such action in the contract; otherwise, it will protect the digital asset against illegal copying under the Copyright Law.

Most copyright disputes are resolved by Marketplace by taking such NFTs down.

Miramax vs. Tarantino – It was ordered to delete the infringing NFT from the marketplace and pay compensation to the plaintiff for the economic losses.

In Dastar Corp. vs. Twentieth Century Fox Film Corp. (2003), the Supreme Court held that the origin of the product and its sale on its own are important factors and do not prevent the unaccredited copying of an un-copyrighted work.

How is this transfer morally correct

The rights that are being transferred related to the NFT should be flexible enough that they are codified in such a manner that the buyer should use them in some or other way; otherwise, they will become obsolete in the early phase itself. However, the creator shall create a Legal structure of the NFT and specify the terms and conditions in the smart contract or put it out separately. However, in the present scenario, no such basic legal structure has been provided by law for NFTs. In the case of any breach of the terms, one may seek the help of judicial measures.

NFT and trademark

Trademarks are words, phrases, symbols, and designs that identify any brand’s products and services, and infringement of them can lead to legal proceedings.

The growth of the metaverse has undoubtedly raised a new era of Trademark Filing. A new category for Trademarks and their registration in relation to NFT is being used by several Trademark Offices, including the EUIPO and IP Australia.

In the case of Juventus Football Club S.P.A. vs. Blockeras S.r.l., the Court in Italy granted an injunction in favour of the Italian soccer team Juventus against the production and marketing of NFTs and related content created by a third party. The Court of Rome ruled that an existing registration for ‘downloadable electronic publications’ covered the sale of NFTs.

D.M. Entertainment Pvt. Ltd. vs. Baby Gift House and Ors. (2010) Plaintiff won and awarded a permanent injunction, held the defendants liable for passing off, and restrained the defendants from selling lookalike toys of pop icon Daler Mehndi, said that it is the exclusive right of the celebrity on his image or personality and the court highlighted Section 29 of the Trademark Act 1999. Celebrity Merchandising is yet to be explored and has a larger scope from a legal perspective in India. This decision has clarified the rights of the celebrity and its image, name, and other rights with respect to the commercial purpose and its limitations.

Hermes Int’l vs. Rothschild (2023) In a trademark suit, the jury held the defendant Rothschild liable on the ground of trademark violations – trademark infringement, trademark dilution, and cybersquatting and also gave a decision in favour of the complainant Hermes and awarded $23,000 for statutory damages in cybersquatting and $110000 in compensation for the net profits earned by Rothschild. This is one of the first decisions held in the US for the digital form of NFT and may prove to be influential in the different courts of the world while giving judgements with respect to virtual world cases.

Remedies for intellectual property infringement by NFT

Non-fungible tokens (NFTs) are a new and rapidly growing asset class. With the rise of NFTs, there has been an increase in intellectual property (IP) infringement. This is because NFTs can be used to represent ownership of digital assets, which can include copyrighted works, trademarks, and patents.

Injunctions

An injunction is a court order that prevents someone from doing something. In the context of IP infringement, an injunction can be used to prevent the infringer from continuing to infringe the IP owner’s rights. This could include preventing the infringer from creating, selling, or distributing NFTs that infringe on the IP owner’s copyright, trademark, or other IP rights.

Damages

Damages are a monetary award that is paid to the IP owner to compensate them for the losses they have suffered as a result of the infringement. Damages can be awarded for a variety of losses, such as lost profits, harm to reputation, and emotional distress.

Disgorgement of profits

Disgorgement of profits is a remedy that requires the infringer to give up any profits they have made from the infringement. This remedy is designed to prevent the infringer from profiting from their wrongdoing and to discourage future infringement.

Impoundment

Impoundment is a remedy that allows the IP owner to seize the infringing NFTs. This remedy can be used to prevent the infringer from continuing to use the NFTs and to preserve them as evidence in the case.

Destruction

Destruction is a remedy that allows the IP owner to destroy the infringing NFTs. This remedy is typically used as a last resort when other remedies are not sufficient to protect the IP owner’s rights.

Other remedies:

Declaration of invalidity: A court declaration that the NFT is invalid or unenforceable.
Rectification: A court order requiring the infringer to take steps to correct the infringement, such as removing the infringing content from the blockchain or transferring the NFT to the IP owner.
Settlement: The IP owner and the infringer may agree to settle the dispute out of court, often involving a combination of remedies such as a cease-and-desist order, damages, and/or the transfer of the NFT to the IP owner.

The availability of these remedies will depend on the specific circumstances of each case. However, these remedies can be effective in protecting IP owners from infringement by NFTs.

Conclusion

NFT is likely to begin the race in the metaverse with roles in influential brand image development and monetization out of it but it is still in its developing sphere to its full potential. The possibility of NFTs is limitless and revolutionary and will shape the era of technology in the upcoming years but it is still in its growing stage and constantly growing with business development and replacing traditional tactics. In India, NFTs haven’t caught the attention of the judiciary yet, and answers are still to be found regarding the legality and infringement aspects, which will differ in every scenario with respect to IPR and the tech laws and certain frameworks followed by global standards are still to be created to regulate technology and its remedies. For anyone protecting or minting NFTs, care must be taken to ensure necessary actions have been taken to protect the IP rights and not infringe on any third-party rights in order to stay away from any IP troubles so vigilance and monitoring are highly advisable.

References

Punishment for murder in India

By

Vanshika Kapoor

-

April 8, 2024

0

This article has been authored by Sakshi Kuthari. The objective of this article is to exhaustively discuss Section 103 of the Bharatiya Nyaya Sanhita, 2023. It discusses the essentials and exceptions of murder, the different types of punishments covered in these penal provisions, and the other offences under BNS that prescribe punishment for murder. The landmark judgements related to punishment for murders in India that come into play with respect to the section are also discussed.

Table of Contents

Introduction

Under criminal law, the offence of murder is one of the worst crimes that shakes the fabric of society and leaves irreparable wounds to the victims and their families. In the Indian legal system, murder is considered a very serious offence that casts a long shadow on society. In the year 2022, the National Crime Records Bureau (NCRB) published in its report that India recorded a total of 28,522 murder cases, and 95.24% of them were adult victims. The female victims were 8,125 out of the total victims, while 70 percent of the victims were men. Third-gender people were nine among the total victims of murder. The report stated that the motives behind the murders for most of the offences were related to dowry, communal or religious reasons, caste-based discrimination, political objectives, societal class clashes, honour killing-related violence, etc.

For the sake of everyone’s safety, the primary objectives of criminal law are to discourage the wrong done to the individual and society and establish a standard of behaviour for the community. Further, it forces one to exercise caution when engaging in a strict liability statute-governed activity and encourages one to exercise much more caution. The wrongdoer should always be aware that breaking the terms of the strict liability statute could result in the imposition of certain criminal sanctions. The Bharatiya Nyaya Sanhita, 2023 (hereinafter mentioned as “BNS”) serves as India’s strict liability law to discourage crime. An individual is convicted for the offence of culpable homicide amounting to murder under Section 101 of the BNS. Culpable homicide is implied in the definition of murder, but the contrary is not always true. This article explains murder, its penal provisions in Indian law, and the landmark judgements relating to the offence of murder.

What is culpable homicide

According to James Stephen, “homicide” means a human being killing a human being. It may be of two types, lawful and unlawful. The former explains the general exceptions falling under Chapter III of the BNS, and the latter includes offences of culpable homicide not amounting to murder (Sections 100 and 105), murder (Sections 101 and 103), causing death by negligence (Section 106), and abetment to suicide (Sections 107 and 108).

Under Section 100 of the BNS, the offence of culpable homicide takes place when a person’s actions cause the death of another human being in the cases mentioned below:

With the intention of causing death: Firstly, it is necessary to understand the meaning of the term “intention”. For convicting or acquitting an accused for an offence, it is necessary to know with what intent and for what purpose or reason an act is done. Prior knowledge while doing an act is implied in the intentions of the wrongdoer. Intentions cannot be confused with expectations. For instance, a shooter aiming to target a particular person might anticipate missing but still have the intent to shoot because he has the desire to kill that particular person. On the contrary, expecting an outcome from an act done is not equivalent to intending it. For example, a heart operation done by a cardiologist might anticipate the potential for a patient to die during a surgery done by him without actually having the intention to kill the patient. Whenever the death of a person is caused, there is an implicit presumption that there was an intention to cause the death until the contradictory evidence is proved by the accused.
With the intention of causing such bodily injury as is likely to cause death: There should be an intelligible and undeviating connection between the act of the accused and the death of the victim to hold any person liable for the offence of culpable homicide. This expression means that merely an intention to cause a particular injury must be such that it turns out to be causing death. For instance, a blow to the head with a rod will probably cause death and constitute the crime of culpable homicide.
With the knowledge that such an act is likely to cause death: “Knowledge” can be defined as acknowledging the outcome of an act done. In R. v. Govinda (1876), the accused knocked down his wife, held his knee against her chest, and with his closed fist struck her face, leading to extreme blood flow from the brain and consequently causing her death. The Hon’ble Court held that the accused was not guilty of the offence of murder but only of culpable homicide not amounting to murder. Since there was no express intent of the husband to cause her death, though he had the knowledge that death could have been caused by the alleged act done. Knowledge is to be gathered from the circumstances of the case. In some cases, there may be specific knowledge that death is likely to be caused, while in others, such knowledge may be presumed even if the accused had no such specific knowledge.

When either of the above three elements is present, a person may be deemed accountable for the said crime. The mere death of a person is not sufficient to invoke criminal liability on the accused for the offence of culpable homicide. The first two elements, as defined in Section 100, are pertinent to intention being different from knowledge. The third element solely concerns knowledge, not intention. Intention signifies a deliberate act done to achieve a particular outcome, and knowledge is the awareness and recognition of certain facts wherein the mind remains passive.

What is murder

The term “murder” has its origins in the German term “mortna,” which means covert killing. Murder is simply an extended form of fixed or provoking culpable homicide. The cause of death applies to both murder and culpable homicide, and there is a presence of criminal intent or a standard of criminality exhibited by the act done. For the offence of murder, there exists a greater degree of intention or knowledge as compared to the offence of culpable homicide. This elucidates why the term “likely” as mentioned in Section 100 of the BNS indicates a lower likelihood, while the same term “likely” in Section 101 of the BNS suggests an increased likelihood of death.

Sir Edward Coke’s definition of murder sets out the unlawful killing of a reasonable being under the King’s peace, within the realm, by a person of sound mind and the age of discretion. This killing may either be expressly premeditated by the perpetrator of the crime or implied by law, resulting in the demise of the victim within a year and the day of the inflicted injury. Section 100 of the BNS gives a detailed explanation of the essence of the offence of culpable homicide, while Section 101 of the BNS describes the circumstances under which it comes within the scope of “murder”. Apart from the exceptions provided in Section 101 of the BNS, culpable homicide constitutes murder if the action that causes the death is taken up with the intent of causing death, or if it comes within any of the three explanations of Section 100 of the BNS. If the accused’s intention or knowledge, which are essential requisites under Section 100 of the BNS, is established by the prosecution, then the accused is guilty only for the offence of culpable homicide. Further, the killing must not fall within one or other of the five exceptions specified in Section 101 of the BNS. If any of those mitigating circumstances apply, the prima facie presumption that the offence is murder is removed, and the offence becomes ‘culpable homicide not amounting to murder’.

Essentials of murder

It is important to note that Section 101 of the BNS provides for the definition of murder in relation to culpable homicide, as provided in Section 100 of the BNS. The definition of murder gives an extended explanation of culpable homicide. Each of the four explanations of culpable homicide warrants that the act done by the accused results in death, which may either be intentional or done with the understanding that death is the foreseeable result of the act done. For the purpose of establishing a charge of murder against the accused, intent is not always a prerequisite. Only possessing the knowledge that death is the real and likely consequence of an act done is sufficient to convict under Section 103. The essential elements required to convict an accused for the offence of murder are as follows:

Culpable homicide amounts to murder if it is done with:

The intention of causing death: Clause (a) of Section 101 of the BNS provides for the “act done with the intention of causing death” and is similar to Explanation 1 of Section 100 of the BNS, which also deals with “doing an act with the intention of causing death”. The word “act” includes omission as well, which is provided under Section 3(4) of the BNS. Any failure to act in a supposed and reasonable way resulting in death will be punishable as though the death was caused directly by the act done. In Ganga Singh v. Chedi Lal (1873), the Hon’ble Allahabad High Court held that if parents fail to provide reasonable food to their children despite recurrent warnings about the potential consequences, resulting in the child’s death, the parents would be liable for the murder of the children. From the actions of a person, the intention to cause death could be inferred. Therefore, the intentions of a person can be reconciled with the act done and its resulting consequences. The intentions of a person could be deduced from their acts exhibited and done. In the case of Chahat Khan v. State of Haryana (1972), the Hon’ble Supreme Court held that intention is inherently a mental state and can only be proven from its outward exhibition. Thus, when injuries are inflicted on vital body parts using sharp-edged weapons, the intention to kill can be put down to the accused.
The intention to cause such bodily injury, knowing that the injury caused is likely to cause death: Clause (b) of Section 101 of the BNS does not necessitate the intention to cause death on the part of the accused but should rather have the intention to inflict bodily injury that is likely to result in the death of the individual harmed. The mens rea, or guilty mind, comprises two essential elements. Firstly, there must be an intent to cause bodily harm, and secondly, there must be a subjective knowledge that death is likely to result from such bodily injury. The inclusion of the word “likely” in conjunction with ‘knowledge’ marks a greater degree of probable certainty regarding death than a mere possibility. It outlines a screenplay where the offender possesses specific knowledge relating to the victim’s health condition, stipulating that the deliberate bodily injury caused is likely to result in death.
The intention to cause bodily injury and such bodily injury is sufficient in the ordinary course of nature to cause death: The provision of this clause does not necessitate an intention to cause death or knowledge on the part of the wrongdoer that death is the probable outcome of such bodily injury. Unlike the second clause, this clause disregards the requirement of knowledge and solely emphasises the deliberate infliction of injury resulting in death according to the ordinary course of nature. It is not necessary that the offender have knowledge about the sufficiency of injury to cause death. Whenever an injury is sufficient in the ordinary course of nature, it is a question of fact, and it does not cease to be sufficient merely because the person who causes the injury does not know that it is sufficient. In the case of Mangesh v. State of Maharashtra (2011), the Hon’ble Supreme Court stated that circumstances from which it may be gathered as to whether there was an intention to cause death included circumstances like the nature of the weapon, on what part of the body the blow was given, the use of force, whether it was a result of a sudden fight or not, whether the incident occurred by chance or was premeditated, prior enmity, grave and sudden provocation, the number of blows given, etc. While solely none of the injuries may be enough to cause death in the natural course of events, altogether, these injuries may prove to be adequate to cause death in the ordinary course of events.
The person doing the act must have knowledge that the act is so imminently dangerous that in all probability it will cause death or bodily injury as is likely to cause death, and the act is done without legal justification: This clause requires neither an intention to cause death nor the presence of any intentional injury. Intention is not a requisite component in this clause. When a bodily injury is intentionally inflicted upon an individual, whether such an act constitutes an offence of murder or not is determined by making reference to the first three clauses of Section 101 of the BNS. However, this clause cannot be applied until it is evident that Clauses (a), (b), or (c) of this section are not applicable to the circumstances. In this clause, the act done does not need to target any specific individual, nor is there a requirement for an intention to cause the death of any particular individual.

Exceptions to murder

Culpable homicide will not amount to murder if it is:

Grave and sudden provocation

In order to plead provocation as a defence to a charge of murder, it is necessary that there be provocation that is grave and sudden. The expression “grave” suggests that the provocation should be sufficient to cause harm to the accused. The term “sudden” implies an action that must be expeditious and unanticipated, resulting in the provocation of the accused. While determining whether provocation was grave and sudden, it is a matter of fact rather than one of law. The Hon’ble Court in Kanhaiya Lal v. The State (1952) observed that in order for provocation to be pleaded in defence to a charge of murder, four things are necessary:

Existence of provocation.
The provocation that arose must be grave and sudden.
As a consequence of such a grave and sudden provocation, the wrongdoer must have lost self-control and
The death of the person who provoked it or of any other person, by mistake or by accident, must have taken place.

Right of private defence

The entitlement to claim the right of self-defence is acknowledged as a legitimate justification for exemption from criminal liability under Chapter III of the BNS. Where an individual lawfully exercises his right of private defence within the boundaries set by law, the individual commits no offence. It is a fundamental principle of the law governing self-defence that this right should never extend to causing any more harm than is necessary for the purpose of defence (Section 37, BNS), as its purpose is solely preventive and not punitive. This exception is an essential consequence of Section 37, BNS. The principle underlying this exception is based on the idea that if the law itself permits an individual to inflict harm short of death, it should impose the most severe punishment if death is inflicted.

When an act is done in good faith without premeditation while exercising the right to defend oneself or one’s property and without causing more harm than was necessary for self-defence, this exception may be applied. Both parties can be convicted for their individual acts, and if neither party has the right to self-defence, they will be held accountable for their actions. Where there is a lack of evidence indicating that the accused acted in good faith, Exception 2 will not apply. The law, in this respect, honours the human instinct of self-preservation. Thus, the burden is not upon the accused to establish beyond a reasonable doubt that he acted in self-defence; he has only to raise a probability in his favour of the same being true.

An act done by a public servant

Exception 3 to Section 101, BNS, gives immunity to a public servant or an individual assisting a public servant who, while carrying out duties for the advancement of public justice, exceeds their lawful authority and causes someone’s death. This exception provides immunity to them so long as the public servant acts with full sincerity. But it does not shield them if their actions are unlawful or go beyond the powers conferred upon them by law. There is an assumption that the public servant causing the death must do so with genuine intent and while fulfilling their duties as a public servant, and without ill will towards the individual whose death occurs.

Sudden fight

Exception 4 to Section 101, BNS, 2023, does not statutorily define the term “fight”. The situation involves the participation of two individuals. A heat of passion requires an absence of time for the person to calm down, and in this case, the parties become enraged due to a verbal altercation at the outset. A fight involves a confrontation between two or more individuals, with or without weapons. Establishing a straight-jacket formula to determine what constitutes a sudden fight is challenging. It is a matter of fact, and whether a fight is sudden or not depends on the proven circumstances of each case.

When a sudden fight takes place in the heat of passion without the offender taking an undue advantage or engaging in a cruel or unusual manner, it falls under this exception. It is not pertinent to which party provoked the situation or initiated the first assault. The language of this exception clarifies that culpable homicide does not amount to murder if it occurs without premeditation during a sudden fight in the heat of passion over a sudden quarrel, provided the offender has not taken undue advantage or acted with cruelty, or acted unusually.

Consent

The severity of the crime is lessened after consent is given for a particular act. It can never absolve the wrongdoer entirely. Consent given by the deceased mitigates the gravity of the offence to culpable homicide, not amounting to murder. The consent referred to in the exception must be unconditional and unequivocal; that is, there should be no coercion or limitations of options imposed upon the individual whose life is taken by consent. It must be proved that the deceased was fully aware of both the circumstances under which consent is given and willingly accepted the possibility of death and maintained this resolve up to and including the moment of the demise.

Section 103 of Bharatiya Nyaya Sanhita prescribing punishment for murder

Section 103 of the BNS provides that any individual who commits murder shall face either a capital sentence or a sentence of imprisonment for life along with a fine. Additionally, it is important to note here that if a group of five or more individuals, after agreeing altogether, commit murder on the grounds of race, caste or community, sex, place of birth, language, personal belief, or any other similar ground, each member of the group shall be subject to either the death penalty or life imprisonment, in addition to a fine. The punishments under this provision are elaborated in detail below:

Death penalty

Death punishment, also known as capital punishment, stands on a very different footing from other types of punishments. It is generally resorted to for serious and heinous offences like murder, rape, etc. The death penalty serves as a mode to deter potential wrongdoers to the greatest and utmost extent, especially for those who are aware of this type of punishment and the severity of its consequences. It is considered to be more powerful, effective, and deterrent than life imprisonment. Men fear death more than life imprisonment. It also serves as a unique deterrent to professional criminals.

Different tests to award the death penalty

The tests that the courts apply while awarding death sentences are the “crime test” or “criminal test” and the rarest of the rare test.

Crime or criminal test

Any type of crime done must satisfy the crime test entirely, i.e., 100%, while a criminal test involves 0%, indicating no mitigating circumstances that could in any way favour the accused. If any circumstances favour the accused, the “criminal test” may help the accused to avoid death penalty, such as lack of intention to commit the crime, possibility of rehabilitation, the young age or minority of the accused, no previous track record of a criminal offence committed by the accused, etc. The criminal test was applied in the case of Kumudi Lal v. State of U.P. (1999), in which a fourteen year old girl was raped and murdered by stragulation. The Hon’ble Court considered the brutality of the crime and commuted the death penalty to life imprisonment. The court noted that the evidence presented did not conclusively prove that the girl absolutely was not interested; rather it indicated that the girl initially let the accused take liberties but later expressed her unwillingness. Applying the “Criminal Test,” the Court found that some mitigating factors favoured the accused, leading to the avoidance of a death sentence.

Rarest of rare test

‘Rarest of the rare’ is neither defined in the BNS nor does it specify the situations that come under the scope of this principle. It only hinges on the different facts and circumstances of each individual case, including the brutality and heinousness of the crime, the previous and subsequent behaviour of the offender, their prior criminal history, and the potential for rehabilitation and reform. This principle suggests that an individual who has committed a heinous offence should also face commensurate punishment. While imposing the death penalty in such exceedingly rare instances, it aims to serve as a discouragement, inculcating fear in society and preventing others from engaging in the like offences.

In Bachan Singh v. State of Punjab (1980), the Constitution Bench of the Hon’ble Supreme Court laid down the following guidelines for the death penalty:

The death penalty should only be imposed in cases of extreme culpability.
Before awarding the death penalty, the facts and circumstances of the case and the offender’s background should be thoroughly evaluated.
Capital punishment should only be imposed when life imprisonment is deemed insufficient and inappropriate for the purpose of providing justice to the victim.
Before a decision to impose the death penalty is taken, a check on the fair balance of aggravating and mitigating circumstances is important to be taken, with especially placing importance on all the mitigating factors of the case.

Aggravating and mitigating circumstances

When two different people are given punishments for committing the same offence, it could be perceived as unfair or unjust. But these differences arise due to some legitimate reasons, such as the severity of the crime, manner of doing the crime, criminal history of the offender, circumstances surrounding the offence, etc. The court considers all the relevant factors when determining the punishment to be awarded to the offender. The punishment should always be in proportion to the offence committed and should serve the interests of justice.

Aggravating factors are those circumstances that magnify the gravity or answerability of the offence. The aggravating factors for causing the commission of heinous or inhumane crimes are mostly crimes of murder, rape, and armed robbery, which basically involve a lengthy criminal record of the accused or consequential harm inflicted on the victim. Conversely, mitigating circumstances are those factors that diminish the gravity or seriousness of the offence committed or the imposition of fine. This could only be done by portraying the action of the wrongdoer as reasonable or less blameworthy. It may include mental illness, coercion, duress, self-defence, etc.

In both Bachan Singh and Machhi Singh’s cases, the Hon’ble Supreme Court has laid down guidelines for when an extreme sentence should be granted and when it should not. The court was of the opinion that a comprehensive assessment of both aggravating and mitigating circumstances is done to ensure that mitigating circumstances are duly considered and given full significance. It highlights the necessity of striking a fair balance between the two factors before deciding on the sentence to be imposed.

The foundational questions that must be addressed are as follows:

Is there something extraordinary about the offence that makes life imprisonment insufficient and necessitates the imposition of the death penalty?
Are the circumstances relating to the offence such that there is no substitute but to award a death sentence, even after diligently considering the mitigating circumstances that support the offender?

To reach a conclusion that the death sentence awarded is justified or not, the Court proceeds accordingly, having thoroughly examined all the relevant circumstances.

Imprisonment for life

In its strict interpretation, life imprisonment denotes confinement for the entirety of the convicted individual’s remaining natural life. There are various state jail manuals that refer to life imprisonment for a definite period. But the Hon’ble Court in G.V. Godse v. The State (1961), held that life imprisonment cannot be regarded as having a set duration unless officially granted remission by the appropriate government.

In Abdul Azad v. State (1976) it was further observed that if any remission of sentence is granted by the government, the prisoner would be entitled to set-off his detention period experienced by him during the period of investigation, inquiry or trial.

An examination of the various provisions and the judicial pronouncements would result in the following conclusions:

Life imprisonment means confinement for the whole of the accused’s remaining life unless the sentence is set aside, either wholly or in part. It is necessary to note here that imprisonment for life does not automatically terminate after twenty years.
The state, where the prisoner has been convicted and sentenced, alone has the power to remit the sentence.
The remission of imprisonment for life under the rules framed under the Prisons Acts or Jail Manuals are merely administrative directions for the administration and functioning of the jails and prisons and cannot in any way supersede the statutory provisions of the BNS.

Fine

The fine serves as an additional or alternative method of punishment, endorsed both by the law and judicial authorities. As provided in the BNS, the imposition of fines follows four different paths. For some specific types of offences, it stands as the sole form of punishment with a prescribed maximum limit. In certain cases, it acts as an alternative punishment, although with restrictive amounts. Furthermore, fines are obligatory for certain individuals either alongside another penalty or independently without a set pecuniary limit. The determination of the amount of the fine is carefully regulated after considering the nature of the offence committed and the financial capacity of the offender.

A person accused of the offence of murder may also be liable to pay a fine, along with the punishment directed by the court. The amount of the fine imposed on the convict is totally at the court’s discretion. The court has the power to consider the circumstances surrounding the commission of the murder, and, after due diligence, it shall pay the exact amount of the fine to be paid by the accused. Whenever an accused is convicted of murder, irrespective of what punishment is awarded, i.e., life imprisonment or the death penalty, a fine will be imposed on the convict of murder.

Other provisions of the Bharatiya Nyaya Sanhita, 2023, prescribing punishment for murder

Section 103 of the BNS provides punishment for murder. Further, there are other provisions for specific types of murder or related offences, such as:

Section 80 of the BNS

The offence of dowry death constitutes the demise of a woman that is caused by any burns, bodily injury, or occurs otherwise than under normal circumstances. It must occur within seven years of her marriage, and the evidence submitted shows that shortly before her death, she suffered cruelty or harassment by her husband or any relative of her husband regarding the demand for dowry. Anyone who is found guilty of such an offence shall be imprisoned for a minimum period of seven years, extendable to life imprisonment.

To know more about dowry death, click here.

Section 104 of the BNS

This section lays down that when an individual serving a life imprisonment sentence commits murder, they shall face the death sentence. A similar provision was earlier present in Section 303 of the Indian Penal Code (1860), but it was invalidated by the Hon’ble Supreme Court in Mithu v. State of Punjab (1983) as it contravened Articles 14 and 21 of the Constitution. This section unjustly categorises life convicts as an inherently dangerous class without any empirical basis, thereby violating the principle of justness and fairness under Article 21 of the Indian Constitution. The Court also opined that this section was formerly intended to deter the assault by life convicts on prison staff, but its language extended beyond this intent. Furthermore, the court found no scientific evidence to support the assumption that life convicts constitute a uniformly dangerous class. The Supreme Court’s Full Bench concluded that this essentially violates Article 21 of the Constitution.

Section 106 of the BNS

This section provides that where the death of an individual is caused by a rash or negligent act, without the intention to cause death or knowledge that the act could cause death. This constitutes a different type of homicide, often referred to as “homicide by negligence”, along with the other two categories of homicide: homicide amounting to murder and homicide not amounting to murder. In instances where death is caused due to rash or negligent act, the provision provides a punishment of either imprisonment for a term extending up to two years, a fine, or with both.

To know more about the offence of causing death by negligence, click here.

Section 140 of the BNS

This section provides that anyone who kidnaps or abducts any individual with the intention of either murdering them or placing them in a situation where they are at a risk of being murdered shall face either life imprisonment or rigorous imprisonment for up to ten years and shall also be liable to a fine.

Section 310(3) of the BNS

This section provides that if five or more persons are jointly committing dacoity and, along with that, committing murder during that time, each of those persons shall suffer punishment by death, life imprisonment, or rigorous imprisonment for a duration of not less than ten years, and shall also be liable to pay a fine.

Landmark case laws for punishment for murders in India

R. Venkalu v. State of Hyderabad (1956)

In this case, the two accused, Rawalpenta Venkalu and Bodla Ram Narsiah, had a dispute regarding a piece of land with the deceased, Moinuddin. The accused had set fire to the cottage in which the deceased was sleeping. Both the accused locked the door of the cottage from outside so that neither Moinuddin’s servants who were sleeping outside might come to help him nor he himself would be able to leave the cottage. They also took steps to prevent the villagers from providing any type of help to Moinuddin.

The Hon’ble Supreme Court observed that the intention to kill the deceased is clear from the fact that they took care to lock the door from outside so that the deceased’s servants sleeping outside could be of no help, and when the villagers were roused from their sleep and were proceeding towards the cottage, they were prevented from rendering any help. There was also clear evidence that both accused lit a matchstick and set fire to the cottage, and both of them are liable for the offence of murder. Their subsequent acts in repelling all attempts at bringing succour to Moinuddin clearly showed their common intention of bringing about the same result, i.e., the death of the deceased. The Court held that there is no doubt that the evidence led by the prosecution in this case against both the appellants, Rawalpenta and Bodla, found them guilty of murder under Section 300 of the Indian Penal Code, 1860, and awarded them the death penalty under Section 302 of the Indian Penal Code, 1860.

Virsa Singh v. State of Punjab (1958)

In this case, the accused-appellant thrust a spear into the abdomen of the deceased. There was only one injury, but the injury was through the whole thickness of the abdominal wall. Three coils of intestines came out of the wound. The doctor said that the injury was sufficient to cause death in the ordinary course of nature. The Sessions Judge and the High Court said that the accused was guilty under Section 300 “thirdly” and so he was convicted under Section 302. The accused contended that the facts of the case do not expressly disclose an offence of murder because the prosecution did not prove that there was an intention to inflict a bodily injury that was sufficient to cause death in the ordinary course of nature. The question that arose was what is the extent and nature of intent that Section 300 “thirdly” requires, and how is it to be proved?

The Hon’ble Supreme Court observed that the following facts should be taken into consideration by the prosecution before it can bring a case under Section 300 “thirdly”:

It must be established quite objectively that a bodily injury is present.
The nature of the injury must be proved.
It must be proved that there was an intention to inflict that particular bodily injury, i.e., it was not accidental or unintentional, or that some other kind of injury was inflicted;
And, lastly, it must be proved that the injury made up of the three elements set out above is sufficient in the ordinary course of nature to cause death.

The Hon’ble Supreme Court held that the appellant was guilty under Section 302 and dismissed the appeal.

Jagmohan Singh v. State of Uttar Pradesh (1972)

In this case, it was argued that the death penalty is an invalid mode of punishment and is unconstitutional. It was contended that the freedom guaranteed under Article 19 of the Indian Constitution cannot be co-extensive with the legislature prescribing the punishment of death as a restriction on fundamental rights. Any legislative attempt at the destruction of life cannot be deemed to be a reasonable restriction on the right to life implicitly found in the fundamental freedoms. It was contended that the discretion to impose the death sentence was not based on any policy but rather on the vice of excessive delegation of legislative power. It violated the equal protection of law under Article 14 of the Indian Constitution, and in the absence of any procedure established by law in the matter of a death sentence, the protection given under Article 21 of the Indian Constitution was also violated.

The Hon’ble Supreme Court did not agree with the above-mentioned contentions. The Court held the death penalty to be a valid punishment since deprivation of life is constitutionally permissible if it is done according to the procedure established by law. They also observed that it is difficult to say that capital punishment per se is unreasonable or is not in the public interest.

K.M. Nanavati v. State of Maharashtra (1961)

In this case, the deceased seduced the wife of the accused. When Sylvia confessed to the accused that she had illicit intimate relations with Ahuja, the latter was not present. It was very natural that the accused was enraged at the conduct of the deceased and had, therefore, sufficient motive to do away with the deceased. The accused contended that he was only thinking of the future of his wife and children and also of asking for an explanation from Ahuja for his conduct. This somehow shows the attitude of the accused, which indicates that he had not only regained his self-control but was also planning for the future.

The accused drove his wife and children to a cinema, left them there, went to his ship, deliberately secured the revolver on a false pretext from the ship, loaded it with six rounds, and drove his car to the office of Ahuja and then to his flat. He entered his bedroom with a loaded revolver in hand and, in about a few seconds thereafter, came out with a revolver in his hand.

The deceased was found dead in his bathroom with bullet injuries to his body. The injuries found on the body of the deceased are similar to intentional shooting and wholly inconsistent with accidental shooting. Between 1.30 PM, when he left his house, and 4.20 p.m., when the murder took place, three hours had elapsed, and there was sufficient time for him to regain his self-control, even if he had not regained it earlier. The accused’s conduct clearly shows that the murder was deliberate and calculated.

Even if any conversation took place between the accused and the deceased in the manner described by the accused, it does not affect the question, for the accused entered the bedroom of the deceased to shoot him. The mere fact that, before the shooting, the accused abused the deceased, and the abuse provoked an equally abusive reply, could not be conceived as a provocation for the murder. The facts of the case did not attract the provisions of exception 1 to Section 300, IPC. The conviction was confirmed, and the accused’s appeal was dismissed.

To know more about this case, click here.

Dasrath Paswan v. State of Bihar (1957)

In this case, the accused was a student in class X. He had failed the annual examination for three consecutive years. The accused was very upset and depressed at these failures in succession. He took his last failure so much to heart that he decided to end his life. He informed his wife, an illiterate woman of about 19 years of age, of his decision. His wife asked him to kill her first and then kill himself. In accordance with the pact between the two of them, the accused killed his wife first but was arrested before he could kill himself. It was held that the deceased was above 18 years of age and that she had suffered death with her own consent. The consent of the deceased was not obtained by force nor under a misconception of fact, but voluntarily, so the case would fall under Exception 5 to Section 300 of the IPC, and the accused is held to be not guilty of her wife’s murder.

People’s Union for Democratic Rights v. Union of India (2015)

In this case, the essential procedural safeguards were mandated to be followed before the execution of a death sentence so that Article 21 of the Constitution is not denuded. Those procedural safeguards are given below:

Sufficient notice is to be given to the convicts before the sentence of death warrant by the Sessions Court;
A death warrant must specify a date and time of execution;
There should be a reasonable period between the date of the order on the execution warrant and the date fixed in the warrant for execution,
A copy of the death warrant must be immediately supplied to the convict, and
If the convict requires, he should be provided with legal aid.

Gopal v. State of Karnataka (2011)

In this case, the question that arose was whether a dying declaration can be made the sole basis for conviction under Section 302, IPC. In this case, the accused was alleged to have poured kerosene on the body of his wife, the deceased, and set her on fire. The accused was not able to explain how kerosene was found to be present on the undergarments and sarees of the deceased. The accused did not plead that the death was accidental or suicidal. It was held that the fact that the witness who carried the deceased to the hospital turned hostile is immaterial, as circumstantial evidence is sufficient proof to prove that it was the accused alone who committed the offence. The deceased was in a fit mental state to make the statement. It was also held that the failure to make an attempt to record a second dying declaration will not render an earlier dying declaration of the deceased incredible. Hence, a conviction can be made on a dying declaration.

Dakhi Singh v. State of Uttar Pradesh (1955)

In this case, a police constable was taking a suspected thief by train after arresting him. But the thief escaped from the running train. The constable chased him, and when he was not in a position to apprehend him, he fired at him. But in this process, the bullet hit the railway engine fireman, who got killed. It was held that the constable was entitled to the benefit of Exception 3 to Section 300, IPC.

Nathan v. State of Madras (1972)

In this case, the landlord had tried to forcefully evict the accused, and the accused, in the exercise of his right of private defence, killed the deceased. Even though the deceased was not armed with any deadly weapon, there could not have been any fear of instant death or grievous hurt on the part of the accused. The right of the accused was limited to causing any harm other than death. There was no intention on the part of the accused to cause death, and the act was done in good faith. It was, therefore, held that the accused had exceeded his right of private defence and the case would fall under Exception 2 to Section 300 of the IPC, and the offence committed by the accused was held to be culpable homicide, not amounting to murder.

Conclusion

Section 103 of the BNS provides a very detailed provision for punishment for murder. Whenever a person is charged and later convicted for the offence of murder, all the necessary facts, circumstances, and connecting evidence should always be taken into account in each and every case. The main difficulty that arises for the court under this section while convicting the accused is whether to award imprisonment or the death penalty.

In the four decades following the Bachan Singh case, which upheld the constitutional validity of the death penalty in 1980, numerous concerns have emanated regarding the structure for death penalty sentencing established by the majority judgement. These concerns primarily revolve around inconsistent application, interpretational errors, and a tendency towards judge-centric decision-making. It is imperative again to go through these concerns arising from the incorrect application of the Bachan Singh case. Instead, attention should be drawn towards the loopholes within the Bachan Singh case itself and how these gaps have contributed to the subsequent fate of the sentencing framework. This highlights a complete collapse of what has been termed the “rarest of rare” doctrine. Identification of substantive and procedural faults that have widened over the last forty years is essential. There is a need to identify the procedural and substantive fault lines that have only widened over the last four decades. There is a lack of profound commitment to the principle of rule of law and fair trial rights, burdening the courts with a standard that is barely judicially maintainable. Without significant normative coherence and full enforcement of fair trial rights in sentencing procedures, the constitutional crisis with death penalty sentencing will inevitably intensify.

Frequently Asked Questions (FAQs)

Who can be charged with murder under Section 103 of the BNS?

Any person who commits an act of murder, as defined under Section 101 of the BNS, can be charged with murder. Section 103 of the BNS stipulates that the punishment of murder is applicable to all persons, regardless of their age or gender.

When does a person become guilty of murder?

There are different types of acts that hold a person guilty of murder. Some of the acts are as follows:

Poisoning;
Gives poison voluntarily and knowingly to be likely to cause death;
Administering noxious things with the intent to commit suicide;
Wilfully doing an act that endangers human life; or
Wilfully causing or procuring the miscarriage of a woman.

What elements are required to prove murder?

To hold a person guilty of murder under Section 103 of the BNS, the following essential elements should be present:

Mens rea: Intention to cause death;
Actus reus: Act done with the knowledge that it could result in death;
Bodily injury: Intent to inflict bodily harm that is likely to result in death.

How are murder trials conducted in India?

If the accused does not plead guilty to murder, the court calls the prosecution and gives a date to examine the witnesses. Once the prosecution evidence is taken and examined, the court calls the accused for his defence. Under Section 381 of the Bharatiya Suraksha Sanhita, 2023 (hereinafter referred to as “BNSS”), the court examines and interrogates the accused so as to enable the accused to explain any circumstantial evidence which is brought by the prosecution against him. After examination of the accused under Section 255 of the BNSS, the judge hears the prosecution and the accused. Should the judge determine there are no proper and complete evidence against the accused, they have the authority to issue an order of acquittal.

But if the accused is not acquitted after trial under Section 255 of the BNSS, the accused may present his defence or give any other evidence that may be in his favour. After the conclusion of the defence evidence, the final argument takes place.

What evidence can be used for proving murder cases?

The prosecution uses any of the following evidence so as to convict the accused for the offence of murder. Some of them are:

Fingerprints;
Blood and other DNA evidence;
Crime scene reconstruction;
Ballistic and Trajectory Analysis.

References

“The Indian Penal Code” authored by Ratanlal and Dhirajlal.
https://www.centurylawfirm.in/blog/section-302-ipc-indian-penal-code-sod/
https://www.masseymcclusky.com/violent-crimes/murder-homicide-faqs/
https://www.ndtv.com/india-news/india-saw-28-522-murder-cases-in-2022-government-data-reveals-motives-4637675

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Govindaswamy v. State of Kerala (2016) : case analysis

Introduction

Details of Govindaswamy v. State of Kerala (2016)

Name of the case

Equivalent citations

Type of the case

Parties to the case

Appellant

Respondent

Court

Bench

Author of the judgment

Date of the judgment

Laws involved

Facts of Govindaswamy v. State of Kerala (2016)

Issues raised

Arguments raised by the parties

Appellant’s Arguments

Respondent’s arguments

Laws discussed in Govindaswamy v. State of Kerala (2016)

Section 375 r/w Section 376 of IPC

Section 300 r/w Section 302 of IPC

Section 6, Indian Evidence Act, 1872

Section 366 (1) of CrPC

Section 325 of IPC

Issue-wise judgment of Govindaswamy v. State of Kerala (2016)

Whether the accused can be held guilty of the relevant charges under the IPC

Whether the second injury (the fall from the train) that ultimately led to the death of the victim (Soumya) can be attributed to the accused or not?

Whether the accused is liable for the offence under Section 302 of IPC, i.e., the murder of the deceased?

Review Petition

Analysis of Govindaswamy v. State of Kerala (2016)

Conclusion

What is a review of judgment?

How is the review of a judgment different from its appeal?

What is hearsay evidence?

What is Article 124(7)?

Was Article 124(7) attracted in this case?

Healthcare’s vital role in addressing social determinants of health

Introduction

Social determinants of health

Economic factors

Educational factors

Social and community

Interplay of social determinants and health

Identifying vulnerable populations

Crucial role of healthcare

Policy and advocacy

Challenges and opportunities

Conclusion

References

Towards a greener future : demystifying principles of sustainability and climate action

Introduction

Understanding sustainability

Understanding the concept of climate change

Historical context of climate change

Need for a solution

Recognition and action towards climate change

The Carbon Footprint

Understanding ‘net-zero’ and ‘decarbonization’

Crucial role of energy sector

Decarbonization targets and international commitments

International commitments

Socio-economic benefits of sustainable energy

Economic growth and job creation

Technological innovation

Improved public health

Access to energy for all

Social equality

Challenges towards transition to renewable energy

Technological challenges

Intermittency of renewable energy sources

Grid integration challenge

Battery storage limitation

Economic challenges

High upfront initial cost

Social and political challenges

Social acceptance

Policy frameworks for green energy

Co-operation at geopolitical level