IPR and biodiversity

By

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February 2, 2024

This article is written by Arya Senapati. This article intends to explore the relationship between Intellectual Property Rights and Biodiversity Conservation by explaining their conjunctions like biopiracy, bioprospecting and provisions like Access and Benefit Sharing, Prior Informed Consent and Mutually Agreed Terms.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

Intellectual property rights (IPR) seek to protect any creation, invention or existing traditional knowledge through the protection accorded by law. Biodiversity, on the other hand, refers to the coverage of flora and fauna in a specific region. In the globalised world, the relationship between biodiversity and IPR is of significant importance. Talks of climate change and global warming have led to crucial considerations for the preservation of biodiversity through regulations. The intellectual property regime is intricately linked to biodiversity as it seeks to protect, preserve and prevent its misutilisation while exploring its many benefits. In a capitalist world, corporations and individuals seek to derive monetary benefits from various sources. Biological and natural resources are regularly capitalized by sectors like pharmaceuticals, cosmetics, agriculture and even academics for research and knowledge transfer. In this process, many rights associated with biodiversity are prone to violation, and therefore, the international frameworks on Intellectual Property Law and Biodiversity need to complement each other to devise a balance and solution to the threats.

Relationship between Intellectual Property Rights (IPR) and biodiversity

Biodiversity conservation and Intellectual Property Rights, share an intricate relationship due to the effect they have on each other. Researchers utilise bio-resources and natural resources to derive their benefits and create products for pharma, cosmetics, agriculture and other industries that may require patenting or any other form of legal protection or sharing the knowledge through technology transfer, which are all facets of Intellectual Property Law. Still, over-exploitation of these resources and utilising resources that have community rights attached to them or are prevented from being used for human exploitation pose a threat to local and global biodiversity coverage. This must be tackled by both biodiversity conservation law and intellectual property law. Both of these legal disciplines need to incorporate commonalities of effect and cause to prevent each from overlapping with the other to a significant extent, with a detrimental effect. There are many ways in which these effects can be felt. Some of them are:

Biopiracy

Biopiracy is one of the most inevitable concerns in the spheres of IPR and Biodiversity. It refers to the utilisation or exploitation of bio and natural resources for capital gains without providing any credit to the local community that preserves the biodiversity resources or has preserved the traditional knowledge attached to them. They are not compensated adequately or at all for their contribution, and neither is their consent obtained before venturing into the territory and researching their local biodiversity. This leads to conflict between industry and indigenous people, who have been protecting the resources for many generations. Due to the overarching effects that biopiracy has on local communities, many international frameworks, like the Nagoya Protocol, have attempted to deal effectively with the problem by trying to establish an equitable access and benefit sharing mechanism that intends to create a positive involvement of local communities in the process of utilizing the biodiversity that they are associated with. This will create a balance between protecting indigenous knowledge and innovation in the field of research while ensuring that local communities are fairly compensated and their consent remains vital.

Bioprospecting

Unlike biopiracy, bioprospecting implies a more positive approach. It is the process of incentivising academia and research institutions to conduct more research on biological and natural resources to create innovative solutions for human problems. This helps in understanding or analysing ways of utilising certain bioresources for the benefit of mankind. It also promotes conducting research towards the discovery of new and unknown species, which can help in the creation of innovation. These innovations can have many tangible benefits for pharma companies and the agricultural sector. Further, they contribute largely to the growth of the economy. While innovation is beneficial, some entities would seek to over-exploit the resources, leading to their exhaustion or extinction, which needs to be prevented by intellectual property law as most of these innovations are patented for commercial use and monopolized under the particular legal system. There need to be limitations in place to conserve the resources from over-exploitation. There also needs to be provision for the promotion of the growth of such resources due to their demonstrated economic value and contribution to society.

Traditional knowledge

Traditional knowledge refers to knowledge about the correct ways of using certain biological resources like plants, forest produce, herbs, and shrubs for deriving medicinal properties or other beneficial uses. This traditional knowledge is preserved by local indigenous communities and passed down through generations to keep it alive. Appropriating this traditional knowledge can have an adverse effect on the local communities, as they are largely dependent on it. Therefore, while appropriation of this knowledge is done for the greater good of mankind and economic valuation, the local communities that pass on this traditional knowledge through their generations must be fairly compensated and must receive credit or benefits arising out of it. One such example of traditional knowledge is using haldi/ turmeric for its antiseptic and anti-bacterial properties for healing wounds. This was also appropriated by a big pharma and we shall discuss the case in detail later. India has a repository of its traditional knowledge in the form of TKDL, i.e., the Traditional Knowledge Digital Library, which enlists the traditional knowledge, its usage and the communities associated with it so as to prevent misappropriation of the same by global industries.

International frameworks – TRIPS and CBD

The Agreement on Trade Related Aspects of Intellectual Property Rights, or TRIPS, is a central part of the WTO (World Trade Organisation) regime and is one of the primary pieces of legislation and the international framework on IPR on a global level. It primarily deals with the commercial nature of intellectual property. Considering how commerce can adversely affect biodiversity, it also has provisions that deal with the interplay of biodiversity conservation and intellectual property rights.

The TRIPS agreement describes the minimum standard of protection that every member nation that is a part of the WTO needs to abide by for parents, especially those dealing with genetic resources. They have to follow certain guidelines when an entity tries to get patent protection for an invention that utilises genetic resources from plants, animals and microbes. In terms of provisions, Article 27.3(b) of TRIPS allows for the registration of patents that involve plants and animals but specifically excludes microorganisms. It also allows for the registration of patents involving “essential biological processes” for the production of plants and animals, but it also enables member nations to restrict the usage of certain microorganisms in terms of inventions and their patenting. One of the criticisms that TRIPS faces is that it does not directly mention anything regarding “access and benefit sharing” mechanisms, which has left a huge loophole for entities to exploit biological resources without bearing any compensation to the nations of origin or the local communities dealing with those resources.

TRIPS acknowledges the significance that traditional knowledge holds and recognises the role that indigenous communities play in protecting and preserving it. Yet, at the same time, it does not create any strict protection norm for traditional knowledge except for Article 8(j). The provision simply calls for “mutually supportive” actions for the cross sections of IPR and Traditional knowledge. This lacuna or ambiguity needs to be addressed to effectively deal with concerns regarding the misappropriation of traditional knowledge without equitable monetary benefits for the local communities.

TRIPS vitally deals with patent protection and rights, but it also sheds light on the protection of plant varieties and, by doing so, tries to acknowledge the role that plant variety protection could have on biodiversity conservation. Article 27.3(b) of the TRIPS enables its member nations to create a “sui generis” (nation’s own domestic system of laws) system for the protection of plant variety with the goal of securing various approaches towards the promotion of biodiversity conservation and the ethical use of genetic materials extracted from plant species.

The public health enabling provision of the TRIPS agreement has raised the most crucial contentions about the conservation of biodiversity. This provision, which is essentially a part of the Doha Declaration, allows member nations to take actions suitable for the protection of public health and to increase accessibility to crucial medicines. This is contentious, as this provision is often used by pharmaceutical companies to get unfair access to bio-resources and allows them to exploit biodiversity under the guise of public necessity. There needs to be a balance between public necessity and biological conservation in the sense that both are achieved without hampering the other.

The Convention on Biological Diversity, 2003 or the CBD, is an international framework of legislation that was adopted by nations on the occasion of the Earth Summit of Rio 2000 with the objective of protecting biological and natural resources for future generations. It rests on three main pillars: protection of biological diversity, sustainable use of biological resources, and equitable benefit sharing models. Having recognised the interplay between IPR and biological diversity, CBD enlists certain provisions to manifest this relationship positively.

It enlists the concept of “prior informed consent” in terms of accessibility towards the biological resources of a particular nation. It mandates corporations to acquire prior informed consent from the member nations and the local indigenous communities before granting access to any traditional knowledge or biological material associated with the country or originating from the country. This provision tries to ensure that every nation has the utmost sovereignty over its natural resources and can enact provisions to prevent registration of any form of IPR that could potentially have an adverse effect on the biological diversity and the local communities of the nation. This has caused many nations to modify their patent laws in such a way that they incorporate provisions highlighting the requirements and the process to gain prior informed consent from the local communities and biodiversity boards for gaining access to research and inventing innovations using the genetic resources of plants and animal species.

The most significant effect of CBD has been the creation of a robust “Access and Benefit Sharing Model,” which mandates entities to share equitably any benefit arising from an invention or innovation utilising natural resources of a particular community with the particular indigenous or local community of a member nation. It recognises the interdependence that local communities and biological resources have with each other and therefore requires the entities to fairly and equitably compensate the communities for gaining access to and commercialising the flora and fauna or the traditional knowledge of the community. It mandates disclosure of the origin of the natural resources so as to ensure that the patent applicants have an access and benefit sharing agreement with the local community and are abiding by the provisions secured by CBD.

In terms of provisions, Article 8(j) of the CBD recognises the significance of traditional knowledge and requires member nations to create a repository for the same so as to ensure strict protection of the same and consequently achieve implementation of the ABS (Access and Benefit Sharing Model) for the local communities. Article 15(7) lays out the ABS model in intricate detail as a mandate for member nations to include in their domestic legislation.

The Nagoya Protocol also complements CBD by dealing with prior informed consent and the Access and Benefit Sharing Model. Except for those, it also talks about “mutually agreed terms,” which is a concept that requires thorough negotiation between the inventor and the community that provides the biological material, consequently leading up to an agreement that highlights all the conditions regarding the extent of access, the amount of compensation, etc. This helps empower local communities by giving them the authority to set the terms for the commercialization of their resources. It also requires the creation of an Access and Benefit Sharing Clearing House (ABSCH), which would be a digital documentation of all sorts of information relating to the ABS mechanism and enable access to information on biological material, associated traditional knowledge and IPR norms for researchers and innovators interested in the same.

Indian legislations surrounding IPR and biodiversity

India as a nation is known for its rich biological diversity and natural resources in terms of distinct flora and fauna unique to its soil. It is also home to many indigenous communities and tribes who have preserved their traditional knowledge for generations and are deeply associated with the local natural coverage for their livelihood, medicinal uses and religious beliefs. At the same time, India is also a fast-growing economy with a focus on industry-academia collaboration for research on these natural resources with the intention of gaining commercial value for the same. Therefore, it becomes highly essential for a country like India to have a strict and comprehensive legal regime protecting biological diversity by incorporating provisions in IPR laws, amongst many other laws, that achieve a balance between monopolistic interests and natural conservation.

The Biological Diversity Act of 2002 is one of the prime pieces of legislation in India that deals with the interplay between IPR and Biological Conservation by regulating access to bio-resources and traditional knowledge.

Its Section 3, creates a provision for controlling access to bio-resources by mandating entities to secure prior approval from the National Biodiversity Authority (NBA) or the State Biodiversity Board so as to ensure legal and ethical access to natural resources.

Section 4 also requires the entities to comply with the requirement of getting the approval of the National Biodiversity Authority for implementing any Access and Benefit Sharing Model related to access towards any natural and biological resources arising from India.

Section 6 of the Act states that any individual or entity obtaining IPR protection for any research or invention arising out of access to any biological resources in India must share the benefits with local communities and the NBA.

Section 7 mandates the approval of the NBA for sharing the results or knowledge obtained from any research on natural and biological resources with any foreign body so as to prevent biopiracy and any unintended use, exploitation or misappropriation of any bio-resources and traditional knowledge coming from India.

It also establishes the National Biodiversity Board and State Biodiversity Board, tasked with the responsibility of providing equitable access and benefit sharing mechanisms to local communities and authorities for utilisation of any bio-resource in India.

The Plant Varieties and Farmers Rights Act, 2001 envisions creating a balance between IPR protection and the rights of farmers. Chapter IV talks about the rights and duties of plant breeders while providing the right to protect any new plant variety through IPR registration. It also acknowledges the right of a farmer to sow, resow, utilise, save, share, exchange and sell their farm produce, which can also be seeds and plant material, with the goal of promoting biodiversity and agriculture.

The Indian Patents Act, 1970, through its provision in Section 3(j), directly restricts the registration or grant of any patent that includes inventions contrary to natural laws and involving plant material, animals and traditional knowledge. This is aimed at preventing the loss of biodiversity. Section 25(1), deals with compulsory licensing, which states that every patented invention, in times of necessity and in specific situations, must be made available to the general public at reasonable rates. This is also known as the public necessity doctrine and can be used to counter misuse of any IPR or to counter gaining monopoly over IPR involving beneficial natural resources and traditional knowledge.

Case studies on biopiracy

India has been a victim of multiple cases of biopiracy and has tried to resolve the same on a global level. Some of them are:

Neem (2000) and Turmeric (1993) Patents case

The neem and turmeric patents case is a highly known matter of biopiracy in an Indian context. In this case, the United States Patents and Trademark Office (USPTO) registered a patent with an American company for a product involving the medicinal use of neem and turmeric. This led to conflict as many Indian organisations protested against the misappropriation of this traditional knowledge associated with local communities in India, as haldi and neem have been used since time immemorial in India for their antiseptic and healing properties. The Indian government opposed the grant of this patent, and after an array of legal battles, the USPTO revoked all the patents involving Haldi and Neem for medicinal usage in the year 2000. This was the first case that highlighted the necessity for India to protect its biological resources and traditional knowledge.

Basmati Rice case (2000)

This particular case talks about the granting of a patent for Basmati rice to a US company by the USPTO. Basmati rice is a fragrant variety of rice known for its distinct taste and smell and is largely grown in India and Pakistan. The applicants had falsely claimed that they invented the new variety of basmati rice, which led to conflict between Indian organisations focused on agriculture and American institutions. After multiple arguments, the claims of the patent were narrowed down as the applicants agreed that they didn’t invent basmati rice.

Wheat Varieties case (2003)

It is a case involving the biopiracy of Indian wheat harvests referred to as Nap Hal and Nap Hal-49 which were granted as patented products to a European company as they claimed to be inventors of these wheat varieties. This led to an intervention by the Indian authorities, which provided enough evidence to substantially claim that the wheat varieties originally belonged to India, were its own natural resources and crop varieties, and therefore were not novel inventions. The patents were therefore revoked.

Aloe Vera case

This conflict arose when a South Korean entity was granted a patent for a “method of producing aloe vera extract,” which was originally a traditional knowledge associated with India as aloe vera has been used since time immemorial as a medicinal plant in India. After the intervention of authorities, the patent application was withdrawn, and the importance of supervising patent applications involving traditional knowledge was recognised.

Case studies on access and benefit sharing

While the access and benefit sharing model came after a long time, it has many success stories in terms of helping local communities get the credit that they deserve. Some instances are noted below:

Kani Tribe case (1987)

In this case, we focus on the Kani Tribe, which is an indigenous community local to the Nilgiri Biosphere Reserve. In one instance of bioprospecting, foreign researchers found that that tribe uses a medicinal plant’s leaves to stay high on energy and extend vital functions. The researchers then sought to commercialise the medicinal properties of the plant by trying to patent it and sell it as a product marked as an energy booster. Neither did they obtain prior informed consent from the local communities, nor did they share any compensation or benefit with the local tribe. This led to a conflict, and the Supreme Court of India held that the Kani tribe has a right to utilise their traditional knowledge and must be fairly compensated for the same.

Tea Board of India v. ITC Ltd. (2011)

In this matter, the Tea Board of India highlighted the importance of regulating access to products, which are considered geographical indications in India, as they are rooted in the efforts of the local communities to make them unique to a place and preserve their authenticity. In this case, the Geographical Indication (GI) concerned was Darjeeling tea and the Court ruled in favour of the tea board and stated that there needs to be proper regulation regarding access to products marked as Geographical Indications so as to guarantee that the interests of the local communities associated with the product are not compromised in any way.

Red Sanders Auction case study (2015)

In this matter, the State Government of Andhra Pradesh held a global auction to sell its procure of “Red Sanders,” which is known for its exquisite value and rare and unique charm. The monetary value that accrued from this deal was shared on a 5:95 basis between the NBA and the Regional Management Community for the betterment of the local communities invested in the harvest, growth and conservation of Red Sanders. They involved the indigenous communities in the conservation process.

Novozymes Biologicals case 2004

In this study, a company called “Novozymes” from the USA formed a contract with the NBA to utilise the “Bacillus and Pseudomonas microorganisms” in a commercial way as these enzymes were found in the local forests of Kerala. The NBA was guaranteed a 5% royalty on all the income generated from selling products made from these microorganisms.

Role of the National Biodiversity Authority

Policy measures: The NBA is tasked with the duty of creating policies and guidelines for maintaining the proper implementation of access and benefit sharing models when it comes to natural and biological resources. They also adjudicate the implementation process from a central level.
Granting access: The NBA has the right and power to grant accessibility to certain biological resources and traditional knowledge when requested by entities, both national and global, for research purposes to create innovations through bioprospecting and gaining commercial utilisation.
Sharing of benefits: The NBA has the duty to ensure that any commercial benefits arising from the usage of any natural and biological resources must be shared equitably with the communities attached to those resources and associated knowledge so as to counter any form of bio-piracy.
Maintaining register: The NBA has the duty to maintain and make entries into the National Register for Access and Benefit Sharing to ensure smooth documentation of all ABS agreements and adherence to norms.
International representation: The NBA is also responsible for representing India and its interests in conserving biodiversity at a global level on global platforms such as CBD and Nagoya Protocol.

Role of State Biodiversity Authority

Policy implementation: The SBA is tasked with the duty of ensuring that all national policies related to the conservation of biodiversity are thoroughly implemented at a local level within their jurisdiction. They can also create state-level policies and strategies to advance national goals.
Access granting: They have the power to grant access to biological resources within their own state and jurisdiction for purposes of bioprospecting and creating innovation for commercial uses through research.
Documenting resources: SBAs are required to maintain a thorough and formal record of all the bio-resources and natural resources found within the limits of their jurisdiction for the purposes of promoting research on those resources and for their subsequent conservation.
Local actions: They have the duty to coordinate with local bodies, communities and NGOs acting in the field of biodiversity conservation to ensure coordinated action and the incentivisation of stakeholders through recognition of their efforts.
Awareness raising: They work with local communities to organise educational camps and workshops for promoting methods and techniques of biodiversity conservation and make the local community aware of their rights towards any benefits arising from access to the resources or traditional knowledge.

Conclusion

In conclusion, we can say that IPR and biodiversity are inextricably linked in this capitalist and globalised world. We must affirm that there needs to be a stricter regime or ensure that the ABS models are implemented meticulously and the International Legal Frameworks create stronger obligations for nations to have their domestic laws meet the minimum standard of protection for biodiversity. While human gains and wants are unlimited, natural and biological resources are scarcely limited and can go extinct through overexploitation; therefore, with proper reinforcements in place in terms of legal protection, the global community can successfully conserve biodiversity and achieve sustainable development goals. The National Biodiversity Authority and State Biodiversity Authority must be more active in supervising the implementation of the Access and Benefit Sharing and Prior Informed Consent measures and must ensure strict adherence to the same.

Frequently Asked Questions

How do patents contribute towards the conservation of biodiversity?

Patenting can have a positive impact on the protection of biodiversity as it leads to multiple research projects on biodiversity and innovations that consequently protect biodiversity.

How can traditional knowledge be protected?

Traditional knowledge can be protected through a sui generis system, which can be developed by nations on their own or through geographical indications.

How can IPR impact access to genetic resources?

Strict IPR legislations can limit the access of researchers and institutions to the bioresources of a nation, thereby restricting innovation efforts.

Can legislations be made to regulate biopiracy and bioprospecting?

Yes, through both domestic and international legislations, biopiracy can be curbed and bioprospecting can be regulated.

References

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All about the Doctrine of harmonious construction

By

Sneha Mahawar

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February 2, 2024

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This article is written by Ashutosh Singh, and co-authored by Pruthvi Ramakanta Hegde. This article emphasises the meaning, scope and concept of the doctrine of harmonious construction, further covering various important landmark judgments on harmonious construction.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

A legal doctrine is a principle, a theory, or a position that is commonly applied and upheld by the courts. Different judicial doctrines have developed over time in Indian constitutional law based on different judicial interpretations of the judiciary. These legal concepts did not form or take place at once but they are a result of disagreements, unrest, debates, and legislative solutions, and require improvement. These situations arise when the statutes and their provisions have more than one interpretation because of an ambiguity in the law. After the statute has been enacted, the legislature becomes functus officio (no longer has jurisdiction). The interpreters of the law are then unable to question or get back to the legislature to request the exact interpretation of the legislation while they are making it. Sometimes lawmakers may not have considered such a broad range of circumstances when drafting any given statute. The thumb rule for interpreting any statute is then the rule of harmonious construction. The doctrine of harmonious construction is a tool that helps judges and legal experts make sense of conflicting laws or rules. Instead of declaring any statute void, it is better to save the legislation whenever conflicts arise between two legislations. This principle ensures that laws are understood and applied very smoothly without nullifying the legislation. The doctrine of harmonious construction is followed when there arises an inconsistency between two or more statutes or sections of a particular statute. The fundamental principle behind this doctrine is that a statute has a legal purpose and should be read in its totality and after that, the interpretation that is consistent with all the provisions of that statute should be used. In a situation where harmonising all clauses is unlikely the court’s decision on the provision then takes precedence. This doctrine encourages the judiciary to interpret laws in a manner that avoids clashes and contradictions between them, thereby seeking a balanced interpretation that respects the legislative intent behind each provision.

History behind the doctrine of harmonious construction

The doctrine of harmonious construction came into existence as a result of many varied court interpretations of different statutes in a variety of cases. From time to time, the judiciary decided matters that involved opposition between two distinct provisions. This doctrine came cloaked as the rule of conciliation first in the case of C. P. and Berar Act (1939), where the involved court resolved the inconsistency between an entry of List I, and an entry of List II in the Indian Constitution and interpreted them harmoniously.

In the aforesaid case, the question was whether a tax imposed by a provincial legislature on the sale of oil by a person who manufactured it, based on the ground that it was actually an excise duty. Then, a sales tax could be imposed by a provincial legislature, and an excise duty could be imposed only by the union legislature. The Apex Court, in this case, remarked that it would be peculiar if the Union had exclusive power to tax retail sales when the province had executive power to make laws with respect to trade and commerce, its production and supply, and the distribution of goods within its boundaries. Hence, it was a sales tax and the Act was not ultra vires. The Court added that there was no overlapping or conflict of two entries, so as to apply a non-obstante clause.

The doctrine’s conception can be tracked all the way back to the first amendment to the Constitution of India, 1951, in the landmark judgement of Sri Shankari Prasad Singh Deo v. Union of India (1951). The disagreement between the Fundamental Rights (Part III) and the Directive Principles (Part IV) of the Constitution of India was the subject of the case. Constitutional law is mainly concerned with the creation of the three great organs and the distribution of governmental powers among them, that is the executive, the legislature and the judiciary.

The Apex Court, in this case, made use of the rule of harmonious construction and held that Fundamental Rights are granted against the State and they may be revoked only under certain circumstances and even modified by the Parliament to comply with the constitutional provisions. The Supreme Court gave preference to both and said that the Fundamental Rights and Directive Principles of State Policy are two sides of the same coin, and it is beneficial that they must work together. The Supreme Court further held that the Fundamental Rights enforce limitation over both the legislature and executive power. They are not sacrosanct and the Parliament can amend them to bring them in conformity with the Directive Principles.

The Supreme Court articulated the doctrine of harmonious construction in the case, Re Kerala Education Bill Case (1957). The court added that there was no inherent conflict between the Fundamental Rights and the Directive Principles of the State Policy and they together constitute an integrated scheme and a comprehensive administrative and social programme for a modern democratic state. The court called them supplementary and complementary to each other. Therefore, effort should be put to construe them harmoniously, so that the courts avoid any conflict among the Fundamental Rights and Directive Principles. They basically run parallel to each other and neither one is subordinate to the other.

What is the doctrine of harmonious construction

In general, the doctrine of harmonious construction means that when there arises a conflict between different statutes or between the statutes, in such circumstances, courts try to interpret them in a way that makes them work together smoothly instead of declaring other statutes void. The main aim of this doctrine is to give effect to all the provisions while maintaining the overall coherence and purpose of the law.

Scope and objective of the doctrine of harmonious construction

The aim of the judiciary and the courts should be to view the law as a whole. The interpretation of the law should be such that it prevents confusion or incompatibility between the different sections or parts of the statute being used. Whenever a discrepancy arises between two or more statutes or different clauses or sections of a statute, the doctrine of harmonious construction must be followed. The doctrine is based on the straightforward principle that every statute has a legal purpose and should be read in totality. The interpretation should be such that it is unswerving and all of the statute’s provisions should be used. In the event that harmonising two or more statutes or different clauses or sections of a statute is unlikely, the court’s decision on the provision would take precedence. Harmonious construction comes when there may be different laws or provisions that could apply to particular situations. In such circumstances, it needs to be interpreted in a manner that allows them to complement each other. The doctrine further emphasises that laws are made by the state with the aim of promoting the interests of society as a whole. The role of the judiciary is not to obstruct the implementation of these laws but to complement the efforts of the legislature. In other words, the judiciary should interpret and apply the law in a way that aligns legislative intent with societal goals.

Latin maxims related to the doctrine of harmonious construction

Generalia specialibus non derogant

The Latin maxim means that the courts prefer specific provisions to provisions of general application whenever the provisions are in conflict. In other words, the general rule to be followed in case of a conflict between two statutes is that the latter retracts the previous one. One cannot hold that previous or special legislation indirectly repealed, altered or considered it derogated from, simply by force of such general words, without any suggestion of that particular intention to do so. This means that a prior special law would yield to a later general law if two of the following conditions are satisfied, the later law, even though general, would prevail if:

The two provisions are conflicting with each other.
There is some express reference in the later legislation of the previous enactment.

Generalibus specialia derogant

Generalibus specialia derogant is another legal maxim used in connection with the harmonious construction rule in India. It basically means that special things detract from general things. In other words, if a special provision is made on a certain matter, then that matter is excluded from the general provisions. Applying this rule, the Patna High Court held in its judgement, Vinay Kumar Singh v. Bihar State Electricity Board (2003) that Article 351 of the Constitution of India is a general provision regarding the development of Hindi in India. Article 348 on the other hand, is a specific provision with respect to the language to be used in the Supreme Court and the high courts. Therefore, the applicability of Article 351 of the Constitution is entirely precluded.

Principles that govern the doctrine of harmonious construction

Commissioner of Income Tax v. M/S Hindustan Bulk Carriers (2000) is a landmark case where the Supreme Court laid down five main principles that govern the rule of harmonious construction that are as follows:

First and foremost, the courts should try and avoid a conflict of seemingly disputing provisions and effort must be made to construe the disputing provisions so as to harmonise them.
Secondly, The provision of one section cannot be used to overthrow the provision covered in another section unless the court is unable to find a way to settle their differences despite all its effort. In other words, the court underlined that one section of the law should not be used to override or suppress the other section unless it is impossible to reconcile their differences.
Thirdly, In the situation when the court finds it impossible to entirely reconcile the differences in inconsistent provisions, the courts must interpret them such that effect is given to both the provisions as far as possible.
Fourthly, Courts must also take into account that the interpretation that makes one provision redundant and useless is against the essence of harmonious construction.
Finally, Harmonising two contradicting provisions means not to destroy any statutory provision or to render it ineffective, but rather preserving and respecting all provisions to maintain their legal significance.

Importance of the doctrine of harmonious construction

The doctrine is typically used while interpreting two or more statutes or within the statute whenever there are conflicts between them. The concept of the doctrine of harmonious construction deals with the following aspects, that includes-

Avoid conflicts- Instead of creating contradictions between different statutes or provisions, harmonious construction seeks to interpret them in a way that minimises the conflicts.

For instance, if one statute sets the minimum wage for employees and another specifies certain exceptions in such situations, the court should strive to interpret them in a manner that harmonises both laws, ensuring that employees receive the intended minimum wage without violating the exemption clauses of the statute.

Balancing interest- Harmonious construction often involves striking a balance between competing interests between the statutes.

For instance, imagine a case where one statute imposes strict environmental regulations to protect a particular ecosystem, while another statute encourages economic development in the same area. By applying harmonious construction, courts can interpret in a manner that balances statutes related to environmental protection as well as economic development without nullifying any one of the statutes. In this way, the court can create a balanced approach between the statutes.

Protecting legislative intent- The doctrine ensures that the original intent of the lawmakers must be preserved.

For instance, if one statute seeks to regulate the sale of alcohol to minors and another law addresses licensing requirements for alcohol vendors, harmonious construction would aim to interpret them in a manner that upholds the goal of preventing underage drinking without hindering legitimate businesses.

Application of the doctrine of harmonious construction

The Courts have articulated some procedures for the proper applicability of the aforesaid doctrine after reviewing numerous case laws. They are as follows:

Giving equal importance to both the conflicting provisions, thus reducing their inconsistency.
The provisions that are fundamentally inconsistent or repugnant to each other must be read in their entirety, and the complete enactment must be taken into account.
The provision with a broader reach of the two contradicting provisions should be considered.
Comparing the broad and narrow provisions, the courts should analyse the broad law to see if there are any other concerns. No further thought needs to be given if the result is fair and harmonising both clauses can be done by giving them full weight separately. This is because the legislature was well aware of the situation they were attempting to address when enacting the provisions, and hence all provisions adopted must be given full effect.
When one provision of the Act slivers, the powers conferred by another Act then a non-obstante clause must be used.
It is significant that the court establishes the degree that the legislature wanted to grant one provision overriding authority over another.

In the Jumma Masjid Mercara vs. Kodimaniandra Deviah (1962) case, there was a clash between Section 6A and Section 43 of the Transfer of Property Act 1882. Accordingly, Section 6A dealt with the chance of succession not being allowed to be transferred from one person to another. Section 43 of the Act permits such a transfer on the occasion where erroneous/false representation for consideration takes place. The Honourable Supreme Court of India interpreted both provisions by applying harmonious construction and held that Section 6A was considered a general rule and Section 43 was its exception.

Applicability of the doctrine of harmonious construction on foreign conventions

In the case of Union of India vs. Azadi Bachavo Andolan (2002), the Supreme Court interpreted the statutes by applying the doctrine of harmonious construction to balance the conflicting provisions of the Income Tax Act 1961 and the Double Taxation Avoidance Convention between India and Mauritius. The conflict arose because the said convention provided certain exemptions, while the said Act provisions seemed to tax capital gains. The court used harmonious construction and held that these provisions were constructed in a way that avoids double taxation and upheld the intent of the said convention, ensuring that taxpayers were not subjected to undue tax liability.

Doctrine of harmonious construction in comparison with literal interpretation

Literal interpretation always follows the literal meaning of the words. It means reading and applying the law exactly as it is written in the statutes without considering the broader perspective or legislative intent of the statute. Under this type of interpretation, courts are obligated to interpret the statutes as they are stated. The approach can lead to a strict and narrow understanding of the law. Whereas in harmonious construction, it is a more flexible approach to interpreting the law by taking into account aspects of the entire legal framework, including intent and purpose of the law. The main aim is to reconcile the conflicting provisions within the statute or in between the statutes while ensuring they work together smoothly.

In the case of M/S Rahabhar Production (P) Ltd. vs. Rajendra Tandon (1998), the honourable Supreme Court of India observed that the Delhi Rent Control Act 1958, was comprehensive legislation with both a beneficial and restrictive approach. Therefore, the court has to interpret the provisions in a way that complements each landlord and tenant by harmonising the situation. The court also noted that the legislative object of the said Act was to prevent landlords from evicting tenants who paid lower rent in the guise of personal occupation and then renting out premises at higher rates. In order to understand the intent of legislation, the court has to look beyond the literal interpretation. In this circumstance, harmonious construction plays a crucial role.

Case laws explaining the application of doctrine of harmonious construction

Following are some famous Indian case laws where the courts have tried to interpret certain statutes with the help of applying the rule of harmonious construction.

Sri Jagannath Temple Managing Committee v. Siddha Math and Others (2015)

In this case, provisions of the Sri Jagannath Temple Act,1955 and the Orissa Estate Abolition Act, (OEA) 1951 came into scrutiny. The Supreme Court said that a clear conflict arose between Section 2(oo) of the Orissa Estates Abolition Act,1951 and Sections 5 and Section 30 of the Shri Jagannath Temple Act, 1955. The Court added that it was also clear that both the given statutory provisions of the aforementioned Acts cannot survive together. The Court said that while using the rule of harmonious construction it should be taken into account that when the provisions of two statutes are irreconcilable, one must decide which provision must be given effect to.

In this case, Section 2(oo) of the OEA Act in its entirety was not violating the provisions of Sri Jagannath Temple Act. It was only the first part of the proviso which was contradicting the Jagannath Temple Act. If that part of the proviso continued to be given effect then Sections 5 and 30 of the Jagannath Temple Act, by which the estates of the Jagannath temple at Puri are entrusted in the temple committee, would then lose their meaning. The Court further explained that by striking down Section 2(oo) proviso of the OEA Act, both the provisions would be operable. Whenever a question comes up about the application of specific and general laws in the same case then the nature of the case and the issues must be scrutinised by the court concerned. If, however, the two laws are in absolute conflict, then there must be a check on the limitations placed and exceptions foisted by the Legislature.

The Apex Court held that the special provisions of the Jagannath Temple Act would prevail in this case, and thus, the principle of generalia specialibus non derogant was applied.

Venkataramana Devaru v. State of Mysore (1957)

In this case, the trustees of an ancient, renowned temple of Sri Venkataramana filed a suit under Section 92 of the Code of Civil Procedure, 1908 (CPC) against the exclusion of Harijans from entering into Hindu temples after the passing of the Madras Temple Entry Authorization Act (Madras V of 1947). The trustees made a representation to the Government that the temple was a private one and founded exclusively for the Gowda Saraswath Brahmins, and, therefore, outside the operation of the Madras Temple Entry Authorization Act. However, the Government did not accept that position and held that the said Act applied to the temple.

The trustees argued that the temple was not defined under Section 2(2) of the Madras Temple Entry Authorization Act and Section 3 of the Act was void because it was offensive to Article 26(b) of the Constitution of India. Thus, an appeal was made to the Trial Court which gave a decision against the appellants. But the High Court of Madras passed a limited decree in the favour of the appellants stating that although the public, in general, were entitled to worship in a temple, the appellants had a right to exclude the general public during certain ceremonies in which only the members of the Gowda Saraswath Brahmins alone were entitled to participate. Dealing with the controversy that Section 3 of the Madras Temple Entry Authorization Act was in violation of Article 26(b) of the Indian Constitution, the High Court held that a denominational institution is also a public institution, Article 25(2)(b) of the Constitution would apply, and therefore, all classes of Hindus were entitled to enter into the temple for worship.

The Court further added that Article 25(1) of the Constitution deals with the rights of individuals and Article 26(b) with the rights of religious denominations. However, Article 25(2) covers a much wider ground and controls both the Articles. Article 26(b) must, therefore, be read keeping in mind Article 25(2)(b) of the Constitution.

The decision by the Supreme Court clarified the challenge in the interpretation of Section 2(2) and Section 3 of the Madras Temple Entry Authorisation Act (V of 1947) while also laying clearly the concepts pertaining to the matter of religion and harmonisation of irregularities arising at the time of interpretation of Article 25(2)(b) and Article 26(b) of the Indian Constitution. The Apex Court dismissed both the appeal and the application for special leave to appeal.

State of Rajasthan v. Gopi Kishan Sen (1992)

The respondent, in this case, was appointed as an untrained teacher in Rajasthan in 1972. The State of Rajasthan, who is the appellant, in this case, refused him his claim of salary on the pay scale of Rs. 160-360/- per month. The respondent then made an application under Article 226 of the Constitution of India in the High Court of Rajasthan which was allowed by the impugned judgement. However, the pay scale of Rs. 160-360/- per month was given only to trained teachers. The respondent was not a trained teacher and hence, he was appointed at a fixed salary of Rs. 130/- per month until he became trained which comes under the provisions of the Rajasthan Civil Services (New Pay Scales) Rules, 1969 that is read with Rajasthan Education Subordinate Service Rules, 1971.

The pay scales, however, have been revised subsequently. The amount of Rs. 130/- per month was fixed as the salary of the untrained teacher and this provision was struck down by the High Court in part, considering it to be illegal discrimination. Accordingly, the appellant was asked to pay the respondent his salary at the higher rate for the period of 1972 to 1982 and this was challenged on behalf of the appellant as flawed.

When the case reached the Supreme Court, the Court observed that the rule of harmonious construction of seemingly contradictory statutory provisions is well recognized for as far as it may be possible to uphold and give effect to all the provisions and avoid the interpretation which may render any of them powerless.

Rule 29 of the Rajasthan Services Rules, 1951 dealing with the increment in pay scale is in general terms, while the schedule in the Rajasthan Civil Services (New Pay Scales) Rules, 1969 has a special provision overseeing the untrained teachers. This case thus attracts the maxim ‘generalibus specialia derogant’ because when a special provision is made on a certain subject then that subject is excluded from the general provision.

Unni Krishnan, J.P., etc. v. State of Andhra Pradesh and Others (1993)

The case of Unni Krishnan was momentous with respect to the Right to education in India as it contested the question of the ‘Right to life’ as provided under Article 21 of the Constitution of India. Article 21 guarantees every citizen a right to education. The issues which came before the Apex Court were, whether a citizen has a Fundamental Right to education for professional degrees like medicine, engineering etc. and whether our Constitution guarantees the right to education to all its citizens.

A writ petition was filed challenging whether the ‘Right to life’ under Article 21 also covers and guarantees the right to education to all the citizens of India, and the right to education here also includes professional education or degree.

The Supreme Court held that the right to basic education was inferred by the: Right to life under Article 21 when read with Article 41 of the directive principle on education. The Court also referred to Article 45 and inferred that there is no fundamental right to education for a professional degree that emanates from Article 21. On the issue of the prevalence of Fundamental Rights over Directive Principles of State Policy (DPSP), the Court commented that the provisions of Part Three and Part Four are supplementary and complementary to each other and that the Fundamental Rights and Directive Principles should be interpreted harmoniously as they form the social conscience of the Indian Constitution.

Sirsilk v. Government of Andhra Pradesh (1963)

In this case, the Sirsilk Company entered into a dispute with the Government of Andhra Pradesh and their employees. The dispute was also taken to an Industrial Tribunal. After deciding on it, the authority delivered its award in September 1957 after which it was to be published in the Official Gazette of the Government of Andhra Pradesh. But the corporation and the employees jointly asked not to publish the award because they had already resolved their disagreement amicably. The Government declined to acknowledge the appeal of the parties after which the parties lodged a writ application with the High Court, for issuance of an order to the government for stopping them from publishing the issue of the award in a publication. The High Court rejected the writ application and said that it was mandatory under Section 17 in the Industrial Disputes Act, 1947 and the government should not withhold the publication of an award submitted to it by the Industrial Tribunal. The appeal by the Sirsilk Company was then filed in the Supreme Court by the parties.

The corporation and the employees submitted that since both the parties signed a resolution that is binding to them under Section 18(1) of the Industrial Dispute Act, the government’s award under Section 17(1), is daunting on the group and it should not be released. The resolution agreed by the parties should be observed and the industrial peace preserved. The Government on the other hand quoting the mandatory nature of Section 17(1) of the Industrial Dispute Act said that the award had to be issued within 30 days of receipt of the same. The objective of the reference to the Tribunal is to settle disputes and when a resolution is reached between the parties then the question of the award for publication, issued by the Tribunal appears to be illogical and has no essence since there is no conflict left to be resolved by publication of the award.

The Supreme Court observed that there is a difference of opinion between Section 17 and Section 18 of the Act and it is important to find a remedy that preserves the primary spectrum of the Industrial Dispute Act. The Supreme Court held that the only way to resolve the two contradictory clauses of such a case is to allow the Government to withdraw the publication of the award and to permit the parties to continue with their resolution. The Supreme Court said that while Section 17 and Section 18 of the Act were mandatory, in spite of the fact that the parties have already settled their dispute amicably by agreement, in the present case, no dispute remained to be resolved by the publication of the award, and hence, the Apex Court directed the Government not to publish the award in compliance with Act 17(1) and the appeal was approved.

This decision of the Supreme Court is a perfect example of how one provisions’ rules can be applied without rendering meaningless or obsolete another provision of the law.

K.M. Nanavati v. The State of Maharashtra, (1961)

This is one of the most famous cases in Indian legal history and the jury trials were abolished after this case in India. A Navy Commander KM Nanavati was accused of murdering his wife’s secret lover, Prem Ahuja, and as a result, was held guilty under Section 302 of the Indian Penal Code.

He was charged under Section 302 and Section 304 of the IPC and the trial was held by a Sessions Judge, Bombay and the special jury held him not guilty under both the sections involved under IPC. However, the Sessions Judge was dissatisfied with the jury’s decision as he felt that it was not a logical decision taking into view the evidence of the case. So, he took the case to the High Court of Bombay under Section 307 of the Code of Criminal Procedure, 1973 giving reasons for his views. The High Court approved the reasoning of the Sessions Judge. The High Court said that taking into account the circumstances of the case, the offence could not be reduced from murder to culpable homicide not amounting to murder. The High Court held Nanavati guilty of the offence of murder and this decision was further challenged in the Supreme Court. In the meantime, the Governor of Bombay by the use of power vested in him under Article 161 of the Constitution of India passed an order for the suspension of Nanavati.

The decision of the Governor was questioned because when the suspension was ordered the case was sub-judice under the Supreme Court. Applying the principle of harmonious construction to settle the conflict that arose between the executive and the judiciary, the Supreme Court held that Article 161 and the suspension by the Governor was not applicable when the case was sub-judice.

Calcutta Gas Company Private Limited v. State of West Bengal (1962)

Oriental Gas Company Act,1960 was passed by the State Legislative Assembly of West Bengal. The appellant, in this case, challenged the validity of this Act on the grounds that the State Legislative Assembly had no power to pass such an Act under Entry 24 and Entry 25 (Constitution of India, List II) of the State since the Government wanted to take over the management of the company. The appellant reasoned that the Parliament had already enacted the Industries Development and Regulation Act, 1951 under Entry 52 of the Union list/List I, which dealt with industries.

Entire industries in the State List are covered under Entry 24, and Entry 25 is only limited to the gas industry. The Supreme Court in this case used the rule of harmonious construction and held that it was clear that the gas industry was covered completely by Entry 25 of the State List over which the State had full control. Therefore, the state had the power to make laws in this regard. Therefore, with the help of the rule of harmonious construction, the Supreme Court expressed that the gas industry came under Entry 25 which is a part of the State List, and this gives the State full control over it.

Sales Tax Officer, Banaras v. Kanhaiya Lal Mukund Lal Saraf (1958)

In this case, the Honourable Supreme Court dealt with disputes related to sales tax law. Accordingly, the case revolved around the interpretation of the provision between the Uttar Pradesh Sales Tax Act, 1948 and the Central Sales Tax Act of 1956. The conflict arose from the fact that the Uttar Pradesh Sales Tax Act 1948 imposed a tax on the sale of goods within the state of Uttar Pradesh, while the Central Sales Tax Act 1956 dealt with the inter-state sale of goods and provided for the concessional rate of tax. The question before the Supreme Court was how to harmonise these two statutes when goods were sold from Uttar Pradesh to other states. The court held that there was no conflict between the two statutes; the Uttar Pradesh Sales Tax Act 1948 applied to sales that occurred within the state’s territory, while the Central Sales Tax Act 1956 applied to sales that took place between the states. Therefore, the two statutes operate in their own spheres, and there is no overlap between these statutes. In this way, the court applied harmonious construction.

Raj Krushna Bose v. Binod Kanunga and others (1954)

In this case, there was a legal conflict involving rules in the Representation of People Act 1951. Accordingly, Section 33(2) of the Act states that government employees could support or recommend candidates running for office. On the other hand, Section 123(8) of the same Act states that government employees cannot help candidates in an election except by casting their own votes. The honourable Supreme Court interpreted both statutes by applying harmonious construction and holding that government employees could indeed support or recommend a candidate by nominating or seconding them. However, they couldn’t assist candidates in any other way. So, they could nominate or support someone, but they couldn’t do anything else to help them in the election. In this way, the court found a balance between these provisions, allowing government employees to have a limited role in elections.

R.K Garg v. Union of India (1981)

In this case, the honourable Supreme Court of India addressed the constitutional validity of the Special Bearer Bonds (Immunities and Exemptions) Ordinance 1981, and the subsequent Special Bearer Bonds (Immunities and Exemptions) Act 1981. These laws provided certain immunities and tax exemptions for holders of special bearer bonds. The issue in this case was whether the provisions of the Special Bearer Bonds Act were in conformity with the Constitution of India. Specifically, the immunities and exemptions granted under this statute were consistent with the provisions of equality and non-discrimination enshrined in the Constitution. The court emphasised the doctrine of harmonious construction while interpreting the statutes. This doctrine requires that when faced with conflicting provisions, the court should make an effort to reconcile these provisions in a way that aligns with legislative intent. Further held that if there are two possible interpretations of a provision, one leading to unconstitutionality and the other not, then later one needs to be preferred.

Conclusion

The judiciary and the courts in India are making all efforts to protect and maintain the object of every provision of the Indian Constitution by using the doctrine of harmonious construction as one of the tools. Using the principle of harmonious construction, the Indian Judiciary has tried to explain the intention or objective of the framers of the Constitution for framing the different statutes. The rule of harmonious construction brings consistency between different conflicting provisions so that none of them is rendered powerless or dead-letter as there has been considerable thought by the legislature in making them. Through the analysis of the different cases in this article, it can be concluded that the principle of harmonious construction or interpretation is an effective tool of interpretation used by the Indian courts to not only resolve conflicts but also to make important decisions on subject matters of different lists. Harmonious construction stands as a vital doctrine in the realm of the legal field. It plays a crucial role when there arises a conflict between two or more statutes or within the statutes. This doctrine ensures that societal interests and legislative intentions must be protected by the judiciary by harmonising and creating a balanced approach while interpreting the statutes. On the other hand, it emphasises the adaptability and fairness of the legal system, ensuring that the law remains a just and effective instrument in our society.

Frequently Asked Questions (FAQs)

Why is harmonious construction important in legal interpretation?

It is a needed doctrine that resolves the conflicts or ambiguities between the provisions of law. The doctrine prevents contradictions and promotes a balanced approach. It encourages the court to interpret in that manner thereby providing the way for saving the provisions of statutes.

When should harmonious construction be applied?

Whenever there arises a conflict between the different sections or provisions of the same statute or in between the statutes, in such circumstances, the judiciary has to protect the intent of the legislation by applying harmonious construction to give smooth effect without nullifying other provisions or statutes.

Are there any limitations to the doctrine of harmonious construction?

Yes, there are limitations to this doctrine. In situations where statutory conflicts are irrecoverable or when the legislative intent is unclear and unambiguous and also not consistent with constitutional provisions, this doctrine cannot be applied; instead, the court prioritises applying other heads of principles.

What role does legislative intent play in the doctrine of harmonious construction?

In harmonious construction, legislative intention plays a crucial role as it guides the court in reconciling conflicting provisions within a statute. The goal is to interpret the law in a manner that aligns with what the lawmakers intended when enacting the statute. By respecting and upholding the legislative intent, the court can harmonise provisions to work together cohesively while upholding the purpose and goals set by the legislature.

What is the difference between literal and harmonious interpretation?

Literal interpretation sticks closely to the exact words of the law, taking their plain meaning without much consideration for the overall context. It follows the words precisely, even if it leads to an impractical or unfair result. On the other hand, harmonious interpretation aims to blend different parts of the law together, resolving conflicts or ambiguities. It seeks a balanced approach, ensuring that all provisions work together smoothly and don’t contradict each other. While literal interpretation is like following the words strictly, harmonious interpretation is like making sure all the words work well together, creating a cohesive and sensible outcome.

How does harmonious construction help to avoid legal confusion and conflicts?

Harmonious construction makes laws work well together, without declaring anyone as void. It stops laws from causing confusion. It keeps things clear and certain. So, if there are different rules, harmonious construction helps to make sure that they all make sense together instead of declaring any statute as not valid.

References

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Collateral agreements : an overview

By

Vanshika Kapoor

-

February 1, 2024

0

This article has been written by Saachi Agarwal pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho and edited by Shashawt Kaushik.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

In our modern world, contracts have become an integral part of our lives. It helps to provide a formal way of communication while protecting our rights. The legislature, as well as the judiciary, has provided several safeguards to protect these rights. Collateral agreements aim to achieve the same and help provide an additional level of security. Although the formal term of collateral agreements as a separate kind might not be known to many, we all, in some way or another, have come across and even dealt with the same in our day-to-day lives. Be it a buyer of goods, an employee, a borrower, a tenant or a policyholder, we all have become recipients of the same and, as such, are subjected to certain rights and liabilities. Thus, it becomes very important for us as individuals to gain an understanding of such contracts so as to equip us to deal with them.

Understanding collateral agreements

The word collateral is derived from the Latin word ‘collateralis’, where ‘col-‘ means ‘together ‘ and ‘latus’ means ‘side.’ The word ‘collateral’ thus means ‘parallel’ or ‘alongside,’ emphasising the idea of something running alongside or in conjunction with something else. Collateral agreements, in the realm of contracts, refer to supplementary agreements made alongside the main contract, serving as a guarantee or assurance for the fulfilment of obligations and are meant to ensure that the pre-contract promises are met. It is generally formed when one party makes a promise to the other party to induce them to enter into the main contract. Collateral agreements may either be oral or written and are usually made before or simultaneously with the original contract. Collateral contracts are often used in business transactions to ensure that all parties involved are committed to the agreement.

For example, a real estate developer may enter into a collateral contract with a construction company to build a new apartment building. The developer would promise to pay the construction company a certain amount of money in exchange for the company’s promise to build the building according to the developer’s specifications. The collateral contract would serve as a guarantee that the construction company would complete the project, even if the developer were to default on its payments.

Collateral contracts can also be used to protect third parties. For example, a lender may require a borrower to sign a collateral contract with a guarantor. The guarantor would promise to repay the loan if the borrower defaulted. This would protect the lender in case the borrower were unable to repay the loan.

Collateral contracts are a valuable tool for businesses and individuals to protect their interests in business transactions. They can provide a guarantee that all parties involved will uphold their end of the bargain.

Nature of collateral agreements

A collateral contract is independent and separate and exists besides the main contract but is related to and dependent upon it. Thus, if the main contract is deemed illegal, the collateral contract may still be ruled valid and enforceable. The main and collateral contracts are active at the same time, and in some cases, the provisions of the latter may override those of the former. For example, if X (the landlord) agrees to rent an apartment to Y (the tenant), the lease agreement signed by Y with X becomes the main contract. However, if X (the landlord) promises to fix the toilet drainage at the time of letting out the property and fails to do so within the stipulated time period, the main contract may become voidable at the option of the parties.

A person’s promise or representation might not form a term of a main contract, but the courts can still treat it as a binding collateral contract where:

The person making the promise or representation intended it to be legally binding.
The person to whom the promise or representation was made entered into the main contract in reliance on the statement.

Essential elements of collateral agreements

There are seven essential elements necessary to establish collateral contracts.

There must be a main contract between the parties.
It must be supported by consideration,
It must be promissory in nature and such promise must be intended to be legally binding.
The promise in the collateral contract must be made to induce the other party to enter into the main contract.
The promise must be followed by a statement.
It must be consistent with the main contract.
It must contain all elements of a contract.

Collateral agreement with a third person

A contract between two persons may be accompanied by a collateral contract between the same parties or between any one of them and a third person relating to the same subject matter. When a person buys goods from a dealer, he is given a “guarantee” in the name of the manufacturer. Here, the main contract of sale is between the customer and the dealer, but the “guarantee” could also be regarded as a collateral contract between the manufacturer and the customer. For instance, when a customer purchases goods from the dealer for consideration, the guarantee from the manufacturer is a collateral contract between the manufacturer and the customer. Again, if payment of such consideration is made via cheque or any credit or other card issued by the bank, the main contract might be between the customer and the shopkeeper, but there is also a contract between the shopkeeper and the issuer of the credit card, by which the latter undertakes that the shopkeeper will be paid.

Again, an arbitration agreement or even an arbitration clause contained in a contract is often referred to as a collateral or ancillary contract in relation to the main contract of which it forms a part. The repudiation or breach of the main contract may not put an end to the arbitration clause, which might still survive for measuring the claims arising out of the breach and for determining the mode of their settlement. However, in the interesting case of National Thermal Power Corporation vs. Singer Company & Ors. (1993), the Apex Court of India held that even though an arbitration agreement can be called a collateral contract, when an arbitration clause is contained in a main contract, it cannot be termed independent since the latter is only a procedural machinery that is activated when disputes arise between parties and has no meaningful existence except in relation to the rights and liabilities of the parties under the main contract. The law governing such rights and liabilities is the proper law of the contract, and unless otherwise provided, such law governs the whole contract, including the arbitration agreement.

Legal framework

The Indian Contract Act, 1872, is the legislation governing the formation and enforcement of contracts in India. The Act defines a contract as “an agreement enforceable by law.” A collateral contract is a contract that is subordinate to or supportive of a main contract and is dependent on the main contract for its existence. For example, a contract to provide security for a loan is a collateral contract to the loan agreement.

Collateral contracts are governed by the same principles as other contracts, but there are some specific rules that apply to collateral contracts. For example, a collateral contract must be in writing if it is for a sum of money exceeding 100 rupees. Also, a collateral contract cannot be enforced if the main contract is unenforceable.

Collateral contracts can be used to achieve a variety of purposes. For example, a collateral contract can be used to:

Provide security for a loan.
Assign rights under a contract.
Create a guarantee of performance.
Distribute the risk of loss in a contract.

Collateral contracts can be a useful tool for businesses and individuals to achieve their contractual goals. However, it is important to understand the legal requirements for collateral contracts in order to avoid any potential problems. While the Act does not explicitly use the term “collateral contract,” it contains provisions that are relevant to the concept. Section 10 of the Act specifies that all agreements are contracts if they are made with the free consent of the parties, for a lawful consideration, and with a lawful object. Collateral contracts must meet these criteria to be valid and enforceable. Consent is said to be free if it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.

Common examples of collateral contracts

Guarantees and surety agreements: When an individual or a business applies for a loan, the bank may require a collateral contract in the form of a guarantee from a third party.
Lease agreements: In many cases, a landlord may require a third party to act as a guarantor for the tenant’s lease. The guarantor agrees to be responsible for rent payments and other obligations if the tenant fails to fulfil them.
Employment contracts: In employment contracts, there may be collateral agreements related to confidentiality clauses, non-compete clauses, or other post-employment obligations.
Construction contracts: In construction projects, contractors may enter into collateral contracts with subcontractors or suppliers for delivery of materials on time, etc.
Sale of goods with warranty: When purchasing electronic devices or appliances, manufacturers often provide warranties. Here, the manufacturer promises to repair or replace the product in the event of defects.
Insurance policies: Insurance contracts often involve collateral agreements. For instance, in life insurance, a policyholder might have to make a disclosure of health conditions to induce the insurance company to enter into the main insurance contract.
Franchise agreements: In franchise relationships, there may be collateral contracts related to the use of trademarks, trade secrets, or other intellectual property.

Cases and precedents

Courts in India have recognised the existence and enforceability of collateral contracts in various cases. Precedents set by the judiciary contribute to the understanding and application of collateral contracts in Indian contract law.

It was held in Shanklin Pier Ltd. vs. Detel Products Ltd. (1951) that where a necessary contractual intention is present, the Courts would treat or would construe an assurance as a collateral contract or warranty conferring a right to damages.

In Firm of Pratapchand Nopaji vs. Firm of Kotrike Venkatta Setty & Sons, etc. (1975), the Apex Court of India held that agreements collateral to prohibited contracts are also unenforceable because a taint attaches to them, which makes them also contrary to public policy.

Remedies for breach

If a party breaches a collateral contract, the innocent party may seek remedies similar to those available for breach of the main contract. Remedies may include:

Damages, i.e., monetary compensation;
Specific performance requiring the party in breach to fulfil its obligations;
Injunction;
Rescission or termination of contract;
The remedies specified in the collateral agreement itself in the event of a breach.

Conclusion

Among the various kinds of contracts, collateral contracts play a significant role. These contracts have contributed greatly to the overall stability of financial dealings. However, the law regarding the same is not exhaustive and further growth is required to facilitate smooth dealings in collateral contracts. A clear and precise definition of collateral contracts in legislation, recognition of collateral contracts, especially guarantee agreements, as distinct and enforceable legal agreements, including standardised terms and disclosures for addressing unfair practices, and the incorporation of rules relating to their breach can provide clarity and help avoid confusion.

References

Oral contracts vs. written contracts : an overview

By

Vanshika Kapoor

-

February 1, 2024

0

This article has been written by Puneet Singh pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement course from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Introduction

The importance of treaties cannot be ignored; they have existed from the British colonial period up to the 21st century. The British traded with kings of various Indian states and executed a contract on a copper plate (Tamrapatra) that contained the stamp of a particular dynasty. Today, business transactions take place in a verbal or documented form, “such as terms and conditions, services, privacy policies, master service agreements, etc.” The key question is whether an oral contract also has the same meaning as a written contract or whether it is only limited to a certain value of consideration. The purpose of this article is to compare written and oral contracts and determine the best fit for transactions.

Essential elements of a contract

There are a few essential elements that need to be adhered to during the formulation of a verbal or written contract. These include:

Offer

To start a transaction, you need to use some form of communication, like an email, a sign in the supermarket, information from a telemarketer, terms and conditions on a website, or a pre-contract meeting. If you don’t do this, no contract will be formed or started, and it won’t be valid.

Acceptance

When one party receives information about the product, services and terms of that transaction and the other party gives their consent, this is called acceptance. For example, if A wants to sell his old cell phone via the Cashify application, he gives consent to sell the old cell phone at the offered price.

Legal validity

The legal validity of a contract is important. If a transaction is to be valid, a contract between the parties must be formed. A few parameters determine legal validity, for example, both parties should not be of unsound mind, consent of both parties should be given without undue influence or coercion and the contract should be legally binding to both parties.

Consideration

A contract is enforceable only with adequate consideration. Consideration is the price paid for a promise. It may be something of value, such as money, property, or services. It can also be something that is not monetary, such as a promise to do something or to refrain from doing something.

In some cases, consideration does not have to be monetary. For example, a father may promise to give his son Rs 1 lakh on his birthday because of natural love and affection. This promise is not enforceable because there is no consideration. However, if the father puts the promise in writing and registers it, the promise becomes enforceable because it now has consideration. The registration of the promise gives it legal value.

Another example of consideration that does not have monetary value is a promise to forbear from doing something. For example, a person may promise not to sue another person in exchange for that person’s promise to pay a certain amount of money. This promise is enforceable because it is supported by consideration.

Types of contract

Express contract

An express contract occurs when parties have a clear understanding and are fully aware of the terms and conditions involved, and there is a deliberate exchange of promises between them. This type of contract is contrasted with an implied contract, which is one that is not explicitly stated but is inferred from the actions of the parties involved.

Express contracts can be written or oral. A written contract is one that is set down in a document, while an oral contract is one that is made verbally. In either case, the terms of the contract must be clear and unambiguous so that both parties understand what they are agreeing to.

There are a number of different elements that are essential to an express contract. These include:

Offer: One party must make an offer to the other party.
Acceptance: The other party must accept the offer.
Consideration: Each party must give something of value in exchange for the other party’s promise.
Intent: Both parties must intend to create a legally binding contract.

If all of these elements are present, then an express contract is formed. It is important to note that even if a contract is not in writing, it can still be enforceable by the courts. However, it is always best to have a written contract, as this can help to avoid any disputes down the road.

Express contracts are used in a number of situations, for example:

Buying or selling a house
Entering into a lease agreement
Hiring an employee
Getting a loan from a bank
Starting a business

By understanding the basics of express contracts, you can protect yourself and ensure that you are entering into legally binding agreements that are in your best interests.

Implied contract

It cannot be expressed in an oral or written form; e.g., during the adoption ceremony of a child, the consent of the adoptive mother is obligatory. However, in this case, the adoptive mother did not explicitly consent ‘yes’ or ‘no’ to the adoption. This is considered an implied contract.

E-contract

When a contract is formed through electronic means, such as email or telephone, terms and conditions may appear as pop-ups when opening or executing any page online. These terms and conditions address matters such as age restrictions and the services offered by the online platform, constituting a form of electronic contract.

Quasi contract

A contract that is formed by virtue of law; for example, if you have ordered some ration stock from Instamart and a delivery boy has delivered it to another address, in this case, the delivery boy, bound by the quasi-contract, will have to deliver the correct address.

Comparison between oral and written contracts

Nature

The most crucial aspect of a written contract is its tangible nature, which facilitates ease of reading and correction in case of any discrepancies in execution. Oral contracts, on the other hand, are intangible in nature. For instance, in a group discussion between the parties, conclusions are reached without any written proof. This can be an obstacle in future deals if some terms are not clear.

Oral contracts are memory-based, so if there is a breach of any transaction, the resolution will also depend on the memory of the communicator and the medium used for communication, such as e-mail, voice mail, written notes,etc.,. or any other electronic form of communication to decide a dispute. This dependence on memory and varied communication mediums can contribute to disputes. In contrast with a written contract, a skilled professional can promptly clarify the issues for both parties related to a clause and rectify the problem. Once the entire process is completed, a final draft will be prepared, and both parties will express their consent by signing it. Once a contract is notarized and signed, neither party can repudiate it or claim it is false, as may be the case with an oral contract.”

Enforceability

The agreement is valid if it contains the essential elements of the contract, such as an offer, acceptance, consideration, competent parties and free consent. If any of these elements are missing from an oral or written agreement, it is deemed invalid in the eyes of the law. Therefore, it is easier to prove the terms of a written agreement. Conversely, proving the enforceability of an oral agreement is challenging, depending on the judge’s discretion, and it is also more challenging to prove as the terms rely on the parties’ memories. During a courtroom hearing, documentary evidence is preferred over verbal evidence, giving a written contract evidentiary value. An oral agreement is equally valid as a written one; the legality of an oral agreement cannot be questioned if it falls under the ambit of requirements stated in Section 10 of the Indian Contract Act of 1872.

Limitation

A verbal contract is easy to evaluate when there are few terms and conditions. However, as the number of clauses in the contract increases, it becomes challenging for the parties to remember every detail. In such circumstances, a written contract is preferable to a verbal contract.

In a written contract, if one of the parties breaches the agreed-upon terms, a reminder can be sent to prompt the other party to fulfil their obligations. In contrast with an oral contract, if a party breaches any condition of an agreement, then there may be a risk of fraud without any proof. For instance, Company A has a verbal contract with Wholesaler B, wherein Company A is to provide a stock of 10 million rupees with the condition of replenishing the stock if the retailer orders 70% of the stock from the wholesaler in a given month. The following month, the wholesaler placed an order for replenishment, but Company A refused, stating that 80% of the products were not sold in the previous month, as per the oral agreement. In this scenario, the wholesaler cannot easily prove that the 70% sales requirement for stock replenishment is due to the limitations of the oral agreement.

Why do parties prefer written contracts to oral contracts

Reliability

The business transaction takes place in documented form and creates trust between the contracting parties. Secondly, when an agreement is made between two unknown multinational companies, both parties are assured that all transactions will be carried out according to the clauses set out in the agreement; if they are not followed, it is legally called a breach of contract. Therefore, a written contract builds mutual trust between the companies or parties and builds further mutual belief.

Review

The verbal contract is memory-based, so a review of contract clauses is possible to a certain extent, but in the case of a written agreement, the review of every clause is possible in-depth, if a clause is missing from the contract, it can be added after discussion with the parties.

Execution time

Whenever a contract is established, the timing for its execution is typically agreed upon by both parties. The written contract clearly states the deadline for completing the transaction; failure to meet this deadline constitutes a breach of contract, against which the aggrieved party can take legal action. However, it is very difficult to prove the date of execution in an oral contract. For example, if a small manufacturer has made the payment for the cotton supplier and the supplier has promised to deliver it within one week, but if the supplier refuses to deliver the material, then how will the manufacturer prove that material will be supplied within a week.

Arbitration of dispute

If any dispute arises between the parties, then there is always an arbitration or dispute resolution clause present in the written contract so that a solution can be found before the breach of contract occurs. Vice versa, there is no such discussion in the oral agreement that if any dispute arises, it will be resolved by both parties. That’s why, due to the dispute resolving clause in the written contract, one gets the privilege over the oral contract.

Conclusion

The need for an oral or written contract is appropriate at their respective places, but if we talk about safety and trust, then a written contract would be a better option. It is appropriate to make an oral contract where the consideration amount is much less, like Rs 1000, whereas it is appropriate to make a written contract where the amount of consideration is very high. A written contract provides an opportunity before it takes final form where parties can decide, after reviewing all the statements of the contract, whether everything aligns with their discussion. If parties have to do any transaction, commercial deal, or daily business transaction, then, in the true sense, a written contract is a better choice than an oral contract. There are many reasons for this. A written contract is a better choice than an oral contract because it is more enforceable, provides a clear record of the agreement, and can help to avoid disputes.

Firstly, written contracts are more enforceable than oral contracts. If there is a dispute over the terms of an oral contract, it can be difficult to prove what was agreed upon. A written contract, on the other hand, provides a clear record of the agreement, which makes it easier to enforce.

Secondly, written contracts can help to avoid disputes. When both parties sign a written contract, they are agreeing to the terms of the agreement. This can help to prevent misunderstandings and disagreements down the road.

Of course, there are some exceptions to the rule. In some cases, an oral contract may be enforceable, such as when the contract is for a small amount of money or when it is made in the presence of witnesses. However, in general, a written contract is the best way to protect your rights and interests.

References

Section 135 of Companies Act, 2013

By

Rachit Garg

-

February 1, 2024

0

This article is written by Diksha Paliwal. The article aims to provide a complete analysis of Section 135 of the Companies Act 2013 along with the rules made for the better implementation of this Section, namely, the Companies (Corporate Social Responsibility Policy) Rules, 2014, and the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. The article before providing the overview of Section 135 and the Rules, explains the concept of corporate social responsibility (also referred to as CSR), the concept that has been statutorily mandated through the aforesaid provision. Further, it provides the historical background of CSR, the need for incorporation of CSR along with fundamental responsibilities that come with the implementation of CSR.

Table of Contents

Introduction

Since ancient times, the people of India have been true supporters of social welfare and have always come forward for the well-being of each other. This long-standing tradition needs no stretching. In today’s world of technology and advancement where unfortunately every other person is being victimised by fraud and other crimes, we must not forget the fundamental principle of welfare and social well-being.

It might look like such principles have lost relevance in this modern world, but they still exist in different forms. Efforts are being made continuously to bring such principles even through various rules, guidelines, and laws.

One such Act that enunciates the provision pertaining to the duty of the companies and businesses contributing to the well-being and welfare of its community including its employees, customers etc., is the Companies Act, 2013 (hereinafter referred to as the 2013 Act). Section 135 of the 2013 Act lays down the provision for the aforesaid. This concept is termed ‘corporate social responsibility’ (also referred to as CSR).

Corporate Social Responsibility, which is philanthropic in nature, is nothing but an idea to contribute to society, thus promoting social welfare and well-being. By the term philanthropy what we mean is an initiative by an individual or association coming together and working for the benefit of society. Owing to the various human, natural and manmade resources that corporations utilise for their profit-making, it becomes their moral obligation to contribute towards environmental, social, and governance (ESG) issues, enhance employee welfare, practise ethical governance, etc.

As discussed in the above paragraphs, Section 135 of the 2013 Act lays down the provisions for corporate social responsibility. It states that a company having a net worth of five hundred crores or more and generating a turnover of one thousand crores or more, or a net profit of five crores or more, is obligated or we may say duty bound to spend two percent of its income for various activities of social welfare and wellbeing incorporated in Schedule VII of the 2013 Act. This shall be done by a committee appointed by the company which will formulate policies for corporate social responsibility as envisaged under Section 135.

Let’s discuss in detail the legal framework for corporate social responsibility laid down in Section 135 of the 2013 Act along with the implications this provision has and other significant legal points pertaining to this provision. However, before coming to the provision of Section 135 let’s understand the concept of corporate social responsibility.

Corporate Social Responsibility (CSR) : all you need to know

In simple words, corporate social responsibility or CSR is the responsibility of a company and the work done by it on environmental, ethical, social and economic issues. CSR basically increases the social accountability and responsibility of companies and or businesses. It has made corporate entities obligated to cater for the interests of their employees, stakeholders, customers, shareholders, communities, and environment, that too, not in just particular sects but in all facets of their business operations. It is a means through which the government has bound the corporate entities to the sustainable development goals of the nation.

The term CSR can be legally understood as the duty or the obligation of corporate entities to act ethically and responsibly, simultaneously working for the betterment of its employees, their families, the local community or society at large along with economic growth. Ultimately, the goal is to facilitate corporate entities voluntarily incorporating social and environmental considerations into their business functioning, in all their operational activities and in their interactions with their employees, stakeholders and society at large.

The United Nations Industrial Development Organization explains the concept of CSR as the business management strategy whereby corporate entities incorporate various activities of social welfare and well-being into their regular day-to-day operational activities and other interactions. It is a way of balancing between social, environmental, and economic necessities. This particular method of striking a balance between the aforementioned three necessities is termed as “Triple-Bottom-Line-Approach”. The aim is to meet multiple expectations simultaneously, be that of stakeholders, or shareholders, or employees or society at large. It must be noted that CSR goes beyond just boosting one’s brand and profit making; it is a way of contributing to activities of good cause.

CSR is defined in Rule 2(f) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter also referred to as 2014 Rules). as below:-

“Corporate Social Responsibility means and includes but is not limited to:

(i) projects or programs relating to activities specified in Schedule VII of the Act; or

(ii) projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per the declared CSR Policy of the company subject to the condition that such policy will cover the subjects enumerated in Schedule VII of the Act.”

Amended definition as per the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (hereinafter also referred to as 2021 Rules).

As per the amended Rule 2(f), CSR pertains to those activities which are carried out by the company pursuant to the statutory mandate created by Section 135 of the 2013 Act, in accordance with the amended 2021 Rules. However, as per this rule, CSR activities shall not include the following below-mentioned activities under its purview, namely;

The activities that the company carries out pursuant to its normal course of business. However, the companies which are engaged in research and development activity pertaining to making new vaccines, drugs and medical devices in their regular course, may carry out such research and development for the purposes of COVID-19 (for financial years 2020-21, 2021-22, 2022-23). Further, the rule provides certain conditions for carrying out the aforesaid activities, namely;

These activities must be in collaboration with the institutions or organisations enumerated in item (ix) of Schedule VII to the 2013 Act.
Disclosure of such activity is mandatory by the board in its annual report on corporate social responsibility, separately.

The activities carried out by the company outside India except the training of sports personnel representing any part of India (state or union territory or the country) at the international level.
Contribution by any company, directly or indirectly to any political party under Section 182 of the 2013 Act.
Activities done for the benefit of the employees as defined under Section 2(k) of the Code on Wages, 2019.
Activities that the company supports on the basis of sponsorship in order to secure marketing benefits.
All the other activities that have been done in pursuance of any other statutory mandates as laid down by the prevalent laws of the country.

Let us have a look at some important definitions to develop an understanding of how the term has evolved, the particular social context in which it is interpreted and how this is factored into the development of business strategies.

S.No.	Source	Definition	Important points and dimensions which shaped the definition
2	Commission of European Communities, 2001	“a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.	Voluntariness of the companies,Stakeholder,Social, environmental, and economic considerations.
	World Business Council for Sustainable Development, 1999	“The commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life.”	StakeholdersSustainable economic development
	World Business Council for Sustainable Development, 2000	“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.”	VoluntarinessSocial and economic development
	Business for Social Responsibility, 2000	“Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. Social responsibility is a guiding principle for every decision made and in every area of a business.”	VoluntarinessSocial and economic developmentStakeholders
	European Union	“A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”	VoluntarinessSocial and economic developmentStakeholders

Source: LSPR Communication and Business Institute

It is the concept of making the company responsible to the society where it functions and carries its business. It in a way is a kind of self-regulatory mechanism of the companies through which they take necessary initiatives for good cause, allowing to balance the aims and aspirations of the company. In a general sense, it must be noted that the connotation of the phrase “socially responsible” may be different for every company and so there is no hard and fast rule or guideline that has been laid down which tells that a company or business is specifically supposed to carry out these activities to be socially responsible. The ultimate result must be “profit, people, planet”. These are the three pillars of a business and this approach is also referred to as “triple-bottom-line”.

Need for incorporating the concept of Corporate Social Responsibility

Incorporating the principle of corporate social responsibility will act as a helpful hand to the government’s aims and endeavours to distribute growth benefits equitably and to include the corporate entities in the wholesome development of the nation, thereby, supporting the philosophy of giving back to society. Further, it will help boost the societal reputation of companies that are voluntarily and actively implementing the principles of corporate social responsibility in their business operations. We must understand and inculcate that it is not just a random attempt of giving but rather a systematic structural endeavour to spread the message to every individual of the nation to contribute in doing their part and make the change they desire, thus, supporting the very famous quote, “be the change you wish to see in others”.

From the above discussions, a few important aspects that make the incorporation of CSR advantageous and a necessity are;

The companies will get long-term benefits after incorporating CSR activities into their regular business operations. For instance, using and investing in sustainable methods will ultimately lead to cost savings.
The employer-employee relationships ultimately strengthen, due to an environment that fosters inclusiveness. Additionally, it will boost the morale of its workers and the persons associated with the company, to work more and thus increase productivity.
People are now much aware of their rights and entitlements, and thus the companies that ignore CSR activities might be at higher risk of facing outrage from the public at large, especially, its customers, shareholders, and employees.
Further, incorporating such positive aspects in business operations will surely have a positive impact on society.
Furthermore, the incorporation of CSR activities will also enhance the brand image of the company.

History of CSR

The concept of CSR is nothing new to India. Our Vedas are the solid proof of its existence. While delivering deeper into our glorious history, we may find the existence of this concept in different forms. It has been written in our Vedas, that a man may live individually, but to survive he must live collectively. Thus, it cannot be emphasised enough that for a progressive community, it is very crucial to balance the needs of an individual and that of a society. For this, it is imperative that people accept and show their willingness to sacrifice smaller things for the common and greater good.

The concept of collective survival and progress has been embedded in our societies since time immemorial. Even our great Indian Philosophers like Kautilya had time and again emphasised working ethically and through following principles especially while operating their businesses. Back then, even the kings had a moral duty towards the merchants and society as a whole. They used to develop places of worship, establish educational institutions, and do charity for the needy. Our Indian rulers have always supported and worked on the idea of “Sarva loka hitam” (well-being of all).

The bare reading of our Vedas suggests a heavy reliance of the state on peace, order, justice, and security. The supreme duty of the one ruling was the ‘welfare of the public’.

In the year 1953, this concept was formally recognized in a book titled “Social Responsibilities of the Businessman” by Howard Bowen. Thus, the concept of CSR which existed in India since time immemorial evolved with the changing needs of the society.

From the above discussion, we came to know about the existence of the concept of CSR in India. However, even though the fundamental concept of CSR always existed in our country, it was an activity that was carried out but was not deliberated. The concept did not even find a place, even indirectly, in the old Companies Act, i.e., the Companies Act, 1956. The concept gained statutory recognition only in 2013 by the Companies Act, 2013.

Fundamental responsibilities that come with the implementation of CSR

From the above discussion, it is clear that the concept of corporate social responsibility holds a wide interpretation and has different connotations for different companies. Also, the implementation of this concept by different companies differs widely. However, to sum up, the three fundamental principles of this doctrine are that the companies operate in a way that is economically, socially and ecologically sustainable.

Broadly, the initiatives taken in pursuance of Corporate Social Responsibility can be categorised into the following;

Environmental responsibility:- The companies or businesses should operate in a way that is economically sustainable. Such activities are basically meant to reduce pollution, and emission of greenhouse gases and to work in a way that aligns with sustainable development. If not reduced, it should not be such that it further creates a negative impact on the environmental conditions.
Ethical responsibility:- This connotes the responsibilities of the companies that it has in pursuance to the concept of CSR of working ethically and fairly. For instance, livable wages for its workers, banning of exploitation of labour, etc.
Philanthropic responsibility:- Through incorporating such responsibilities in the regular day-to-day business operations, the aim is to make the world a better place to live in. The companies are actively involved in activities and make such efforts for humanity and upliftment of the society as a whole.
Economical responsibility:- It implies the responsibility of companies and businesses to grow economically while practising sustainable ways for the company’s growth. The ultimate aim is to not just make a profit but simultaneously have a good social effect as businesses take resources from the society itself.
Till now, we are clear with the concept of corporate social responsibility, the historical background of this concept along with its fundamental principles and the need for the incorporation of this concept in the day-to-day regime of the companies. Now, let us understand its legal framework in India, the provision that incorporates this concept making it a statutory mandate, i.e., Section 135 of the 2013 Act.

Section 135 of Companies Act, 2013 : an overview

Very few legal systems around the world mandate corporate entities to engage or comply with the CSR norms. Section 135 of the 2013 Act is among one such provision which mandates incorporated companies in India to undertake initiatives for social, environmental and economic causes.

Section 135(1) of the 2013 Act provides that the board of any company having a net worth of Rs. 500 Crore or more, or turnover of 1000 Crore or more, or net profit of Rs. 5 crore or more, (in the preceding financial year), has to mandatorily formulate a Corporate Social Responsibility Committee. Further, the committee shall be composed of at least three directors. More importantly, it is pertinent to note that at least one of these directors must mandatorily be an independent director.

The proviso clause of the aforesaid sub-section states that for a company which is exempted from having an independent director (as per Section 149(4)), the Corporate Social Responsibility Committee of such a company shall mandatorily have at least two directors.

Section 135(2) obligates the disclosure of the composition of the committee constituted as per Section 135(1) in the report formulated by the board in consonance with Section 134(3).

Functions of the CSR committee

The various functions or tasks that the committee formed for incorporating Corporate social responsibility into its business’s day-to-day operations are laid down under Section 135(3) of the 2013 Act. The following are the functions assigned to the CSR Committee:

Draft policy relating to CSR [Section 135(3)(a)]:– It has to draft a corporate social responsibility policy and thereafter, forward it to the board. The policy that will be formulated will specify anything and everything related to the CSR activities that the company will engage in its day-to-day operations and otherwise. It is pertinent to note that the areas or subjects to which the activities will be related are the ones specified in Schedule VII of the 2013 Act.
CSR committee to recommend the amount of expenditure [Section 135(3)(b)]:- It shall further recommend and advise the board on the financial outlay (expenditure) that will be required to carry out the activities as formulated in the corporate social responsibility policy.
Surveil the CSR policy [Section 135(3)(c)]:- It is also required to monitor and amend if needed, the CSR policy of the company, from time to time.

Functions of the board in relation to CSR

Under Section 135(4) of the 2013 Act, the functions and duties of the board (in respect of Section 135(1) as discussed in the above paragraphs) are pursuant to the mandatory compliance of CSR. The following are the functions of the board;

Approval of the CSR policy and its disclosure (Section 135(4)(a)):- It has to approve the CSR policy drafted by the CSR committee after taking into account and considering the committee’s recommendations. Further, once the policy is approved, it has to disclose the same in its report and also provide it on its company’s website, if any, in the manner as may be prescribed.
Compliance with CSR policy by the company (Section 135(4)(b)):- It has to ensure that the activities enumerated in the CSR policy are being carried out by the company.

Calculation of money spent on CSR

Section 135(5) mandates that the board shall ensure that at least 2% of the average net profit (that the company has earned in the preceding three financial years) of the company is spent on CSR activities as per the company’s CSR policy. As regards the companies that have not completed three fiscal years since their incorporation, the immediately preceding years will be taken into consideration for the calculation of the net amount required to be spent on CSR.

Further, the proviso of the aforesaid Section states that the companies should give priority to the local area and areas where they conduct their business operations while spending the allocated budget of CSR.

The second proviso mentions that in the event that a company fails to spend the proposed amount as mentioned above, the board shall without any fail, reflect the same in its report as made under Section 134(3)(o) along with mentioning the clarification for such failure. Also, if the amount has not been spent as per the mandate set up by Section 135, and unless that amount relates to any ongoing project as enumerated under Section 135(6), it has to be transferred to a fund specified in Schedule VII of the 2013 Act (within 6 months of expiry of that financial year).

Additionally, the third proviso to sub-section 5 states that if the company spends more than the specified amount for CSR, then, the company may use this extra expenditure against the requirement to spend in the coming financial year, in such a manner as has been prescribed in the rules.

For the purposes of this Section, ‘net profit’ shall not include such sums as may be prescribed from time to time under the law and shall be calculated in pursuance to Section 198 of the 2013 Act.

Other important points

As per Section 135(6), if some percent of the money from the allotted budget of CSR is left, after the completion of all the CSR activities as per its policies, such left amount has to be put in a special bank account (to be called Unspent Corporate Social Responsibility Account) within 30 days after the financial year ends. This amount has to be further utilised for CSR activities within three financial years from the date it has been transferred. In case of failure to do so, the same amount shall be transferred to a fund specified in Schedule VII of the 2013 Act (within 30 days after the completion of the third financial year).

Section 135(7) of the 2013 Act, provides for the penalty in case of non-compliance with the Sub Sections 5 and 6 of Section 135. It provides for the following below-mentioned penalties;

In case of non-compliance with Section 135(5), the company has to pay a fine of double the amount that was to be deposited in the fund as specified in Schedule VII of the 2013 Act, or one crore rupees, whichever is less.
In case of non-compliance with 135(6), the company has to pay a fine of the double amount that was to be deposited in the Unspent Corporate Social Responsibility Account, or one crore rupees, whichever is less.
Also, even the officer is imposed with a fine for non-compliance. The officer in the event of non-compliance is required to either pay a fine amounting to 1/10th of the amount that was supposed to be given to the fund or 1/10th of the unspent CSR Account, or 2 lakhs, whichever is less.

Section 135(8) provides that the Central Government may from time to time if the need be, give instructions or provide guidelines to companies for ensuring the compliance of this Section.

As enumerated in Section 135(9) of the 2013 Act, if the company spends less than 50 lakh rupees, provided that is in accordance with Section 135(5), on CSR activities, there is no need to formulate a special CSR committee. The desired work may be carried out by the directors of the company.

Let us briefly have a look at the tabular representation of the aforesaid Section (pertaining to applicability and committee constitution) to have a better understanding of the same.

Companies on which the Section is applicable

Companies on which the Section is applicable (Either of the three conditions have to be fulfilled)
Networth	Rs. 500 crore or more
Turnover	Rs. 1000 crore or more
Net profit	Rs. 5 crores or more

Constitution of CSR Committee (mentioned in Rule 5 of 2014 Rules)
With independent director	3 or more directors, including one independent directorListed companies Unlisted public companies
Exemption from having an independent director	If as per Section 149(4) company is exempted from having an independent director, then the company shall have a CSR committee comprising at least 2 or more directors. Private companies Foreign company (Out of two one member shall be as specified in Section 380(1)(d) and another as nominated by the foreign company.)

Applicability to different types of companies

As discussed above, Section 135 of the 2013 Act applies to every company having the stipulated net worth, turnover or net profit. Further, let us understand its applicability to different types of companies like foreign companies, holding or subsidiary companies, etc.

Holding and subsidiary companies

Rule 3(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 provides that provision pertaining to CSR, i.e., Section 135 applies to every company along with holding and subsidiary, provided it fulfils the criterion enumerated under Section 135(1). Further, it is pertinent to note that in accordance with this rule, the net worth, turnover or net profit of a foreign company will be calculated and prepared in pursuance to the relevant provisions of the 2013 Act.

Foreign companies

The term ‘foreign company’ has been defined under Section 2(42) of the 2013 Act. As per the relevant provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014, Section 135 shall apply to foreign companies as well. Further, the company’s net worth, turnover, or net profit shall be calculated according to the Indian company law only, so as to determine whether the companies have to follow the aforesaid provision or not.

Rules framed in accordance with Section 135 of Companies Act, 2013

The Ministry of Corporate Affairs in order to ease down and facilitate the smooth implementation of the provisions for incorporating corporate social responsibility activities in day-to-day business operations of corporate enterprises, enacted the Companies (Corporate Social Responsibility Policy) Rules, 2014, which came into effect on 1.04.2014. Further, these rules were amended in the year 2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, which came into effect on 22.01.2021.

Let us have a look at the important provisions of the aforementioned rules.

Companies (Corporate Social Responsibility Policy) Rules, 2014

The aforesaid rules were enacted by the Central Government pursuant to the power conferred upon it by virtue of Section 469(1) and (2) along with Section 135.

Note:- The addition or amendment in the concerned provision of the 2014 Rules have been discussed in the later part. The older version of the 2014 Rules (i.e., before the 2021 amendment) has been provided just for reference and comparison with the new rules.

Definitions

Rule 2 provides various definitions which are significant for the implementation and understanding of corporate social responsibility. Some of these definitions are; Corporate social responsibility (definition provided in the above paragraphs), annexure, CSR policy, net profit, etc. Let’s have a look at the important definitions.

‘CSR committee’ is defined as the committee board referred to in Section 135.
‘CSR policy’ refers to the activities carried out by the company as mentioned in Schedule VII of the 2013 Act and the expenditure thereupon. It is noteworthy that these activities do not include those which are carried out by the company in its normal course.

Please note that the new definition as per the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 is- “‘CSR Policy’ means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan”.

‘Net profit’ has been defined as the profit that the company has made in a financial year as per its financial statement which is prepared as per the concerned and applicable provisions of the 2013 Act. However, as per the definition laid down in the rule, this net profit should not include the following;

Profit that has been procured from any overseas branch or branches of the company, and
Any dividend that the company receives from other companies in India ( the ones which are covered under the category specified in Section 135 and the ones that comply with the provisions laid down in Section 135).

The net profit for a foreign company means the profit and loss of the company as prepared in accordance with Section 381 (1)(a) and Section 198 of the 2013 Act.

Applicability

As discussed in the above paragraphs, Rule 3 of the 2014 Rules provides for the applicability of Section 135 to different companies.

Thus, as per the rule, it shall apply to holding and subsidiary companies, and foreign companies which have a net worth, turnover or net profit of Rs. 500 Crore or more, 1000 Crore or more or Rs. 5 crore or more (specified criteria under Section 135 (1)), respectively. Further Rule 3(2) provides that every company which in future as soon ceases to fall under the aforesaid category is not obligated to constitute a CSR committee and follow the rest of the subsections of Section 135 until it meets the criteria specified in Section 135(1).

CSR activities

The activities are to be undertaken as per the CSR policy of the company framed in pursuance to Section 135(3)(a), in the form of projects or activities or projects. However, these activities shall be different from the ones carried out by the company in its normal course.

Rule 4(2) provides that the board CSR committee may carry out its CSR activities through a society or trust (registered) or a company established by it under Section 8 of the 2013 Act. Rule 4(3) also provides that various companies can also collaborate to perform CSR activities, however, these companies shall separately be in a position to report the parts that they have carried out. Further, as per Rule 4(4) only the expenditure of CSR activities that are done in India will be calculated as per the expenditure referred to in Section 135(5) of the 2013 Act.

Furthermore, Rules 4(5) and 4(7) state the activities that will not amount to CSR activities as per the concerned provisions;

Activities done only for the benefit of the company’s employees.
Contribution of the company directly or indirectly to any political party under Section 182 of the 2013 Act.

Rule 4(6) states that companies can choose their own personnel or hire from institutions staff for doing CSR activities, however, the companies must note that if they are hiring from any other institution, they must have experience of at least three years. Also, the expenditure on this should not exceed 5 percent of their total CSR money in one financial year.

CSR committee

As per Rule 5 of the 2014 Rules, the CSR committee for listed and unlisted companies (public or private) which falls under the category of Section 135(1) which is not required to have an independent director as per Section 149 of the 2013 Act, shall have a CSR committee comprising at least 2 or more directors. For a foreign company which is not required to have an independent director, out of two, one member shall be as specified in Section 380(1)(d) and another as nominated by the foreign company.

Rule 5(2) makes it necessary for the companies to constitute the committees and undertake CSR activities in a transparent monitoring manner.

CSR policy

Rule 6 of the 2014 Rules, provides that the company’s CSR policy, among other things, shall include the below-mentioned things, namely;

List of all the projects, programmes or activities that the company seeks to achieve as per the areas enumerated in Schedule VII.
Monitoring mechanisms of the suggested programmes and projects.

Expenditure on CSR activities

Rule 7 lays down that the expenditure on CSR activities will include the following, namely;

All activities as recommended by the CSR committee, including contribution to the corpus.

However, it shall not include any expenditure that is not in consonance with the activities mentioned in Schedule VII.

Reporting

Rule 8 states that the Board report for a financial year shall also include an annual report relating to the CSR activities conducted as per the particulars specified in the Annexure to these Rules.

Disclosure

Rule 9 provides for the disclosure of CSR policy on the company’s website if any, mandatory.

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021

The Ministry of Corporate Affairs issued a notification on January 22, 2021, to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014, thereby implementing the amendments made to the Companies Act 2013, in the years 2019 and 2020. These amendments were made in order to meet the present needs and development in the corporate world and for the holistic growth of the country.

Definitions

The amendment of 2021 inserted a few new definitions in Rule 2 of the 2014 Rules, namely; international organisations, ongoing projects, and public authority. Further, the definition of CSR policy (please see the above heading of the 2014 Rules for the amended definition) was amended by the 2021 Rules.

International organisations:- It means the organisation that has been notified by the Central Government as an ‘international organisation’ as per Section 3 of the United Nations (Privileges and Immunities) Act, 1947.

Ongoing project:- It refers to a pending ‘multi-year’ project pursuant to a company’s duty of undertaking CSR activities with a maximum duration of three years excluding the financial year it started. It is pertinent to note that, this definition also includes any project which was initially not approved as such a multi-year project, however, it expanded beyond one year by the board, provided that the reason for the extension is valid.

Public authority:- It refers to the authority as defined under Section 2(h) of the Right to Information Act, 2005.

Policy implementation of CSR: amendment in Rule 4

The amendment in Rule 4 has made it mandatory for the companies (from 01.04.2021) to carry out CSR activities through implementing agencies which are registered with the Central Government. The registration shall be done by submitting an application form (which is an electronic form) known as CSR-1. After submitting, a unique number will be generated, the CSR Registration Number. It is to be noted that the Ministry of Corporate Affairs maintains a list of all such registered implementing agencies, and these agencies ensure the timely implementation of proposed CSR activities.

CSR committee- substitution in Rule 5(2)

As per the aforesaid, the committee shall formulate and recommend to the board of the company an annual action plan which shall cover all the CSR activities as laid out in the company policy. This plan shall include the following;

List of all the CSR projects and programmes.
The manner in which the aforesaid shall be executed.
The specific details in which the sanctioned funds shall be utilised.
Monitoring mechanism of the proposed activities.
If there is any need for details of the impact assessment for any projects that have been carried out by the company, then the same shall also be present in the report.

CSR expenditure- amendment in Rule 7

The Rule now mandates that the board of the company has to make sure that the cost of managing CSR activities does not exceed 5 percent of the company’s total budget for CSR. Further, the rule provides that any surplus gained from any CSR project or programme cannot be counted as business profit and the same shall be used in any other CSR project only. Also, the companies are required to explain a valid reason if they do not use 2 percent of their profit for CSR activities. If such an unspent amount of funds does not relate to any ongoing project then the company has to transfer it to the government.

CSR reporting- substitution of the complete Rule 8

The aforesaid amended rule provides that any company which has the obligation to fulfil CSR activities worth Rs. 10 crores or more, then in such a case the company is obligated to hire an independent agency to carry out an impact assessment of all the projects with outlays of Rs 1 crore or more. The expenditure on impact assessment shall not increase 5 percent of the total sanctioned budget for CSR in a financial year or Rs. 50 lakhs, whichever, is less (Rule 8(3)(c)).

Disclosure- amendment in Rule 9

The amendment has made the disclosure by the board of the composition of the CSR committee, CSR policy, projects, and programmes on the website (if any), mandatory.

Transfer of unspent amount- amendment in Rule 10

As these rules were enforced on 22.01.2021, the unspent amount pertaining to any ongoing project in the financial year 2021-2022, shall be transferred to a separate account as mentioned in Schedule VII, till a separate ‘fund’ as per Section 135(5) and Section 135(6) is created or specified.

Audit of CSR activities done in pursuance of Section 135 of Companies Act, 2013

It is pertinent to note that Section 135 of the 2013 Act does nowhere explicitly state or provide for the mandate of audit of the activities done for corporate social responsibility. However, it must be noted that the committee established for CSR, i.e., the CSR committee is required to maintain and must ensure a clear and accountable tracking of the progress and outcomes of the CSR activities undertaken by the company, as per Rule 5(2) of the 2014 Rules. Further, Rule 6(1)(B) of the 2014 Rules provides that the policies formulated by the companies for CSR must include the details of complete activities undertaken by the company in the name of CSR.

CSR in India

As discussed earlier, India has been practising CSR activities way before it was made a statutory mandate by Section 135 of the Companies Act, 2013. In the old times, CSR mainly involved charitable and philanthropic activities. Religion, customs, traditions, family values and industrialization had a deep impact on CSR. Till 1850 (pre-industrialization period), a lot of then-wealthy merchants shared their wealth for making temples, some in medical facilities, etc. Companies like Tata, Godrej, Bajaj, Modi, Birla, and Singhania in the 19th century were seen contributing to economic as well as social considerations.

Thereafter, in a phase when we were fighting for independence, Indian industrialists were under pressure to show their dedication towards the upliftment of our society. Mahatma Gandhi urged the Indian industrialists to manage and use their wealth in a way that also benefits the society at large. ‘Temple of Modern India’ is what he termed the Indian companies, and this was also his vision for the companies. His influence made the companies establish various scientific institutions and trusts for schools.

In the third face, that is when a mixed economy kicked in (during the 1960s-1980s), an increase in cases of corporate malpractices was witnessed and this led to the development of the concept of corporate governance. Along with this, legislations pertaining to labour and environmental issues were also enacted. Public Sector Undertakings were established so as to ensure equitable distribution of resources to the needy. However, this concept did not benefit much and hence the expectation shifted to the private sector. After the 1980s, it was seen that the companies were willingly shifting towards sustainable business strategies. Since then, a lot has changed and improved, thus, leading India to a place where such philanthropic activities are being practised efficiently and actively.

Let us take a look at the contribution of a few companies working in India in CSR activities.

TATA groups

The TATA group has undoubtedly outshined itself by working for the social cause since its inception. The company is the leader in the field of corporate social responsibility. A trust named Tata Trust receives 63 percent of the profit shares from its parent company that is the TATA group for such social welfare activities. CSR is a key business process of the TATA group. Not only this, approximately seven thousand villages situated near Jamshedpur and Orrisa benefit from different programmes in areas like handicrafts and rehabilitation of handicapped persons, education, afforestation, irrigation, adult literacy, vocational training, etc. run by the TATA Steel Rural Development Society (TSRDS). The Department of Community Development and Social Welfare at TATA Steel also conducts various social welfare activities and programmes to promote health and well-being, such as medical and health programmes, blood donation drives, mass screening of Tuberculosis patients immunization camps and drug de-addiction.

Coca-Cola India

The company received the Golden Peacock Global Award 2008 for its initiatives for corporate social responsibility. It mainly worked in water conservation along with management and community development activities and initiatives. Further, Coca-Cola India’s ‘Elixir of Life’ initiative is currently providing around thirty thousand (around 100 primary and panchayat schools) children with drinking water in Chennai. Furthermore, it has around 300+ rainwater conservation systems established in India.

Hindustan-Unilever India (HUL)

The company started an initiative to help and encourage young entrepreneurs in rural India under the initiative named ‘Shakti Unilever’. By training around 13,000 underprivileged women to distribute the products made by the company to 70 million rural consumers, it has achieved a remarkable milestone. Since its establishment in 2000, the company has increased its approach to rural consumers by 30% with the help of these women.

PM care fund and its consideration as CSR activity

After the harsh and severe impact the COVID pandemic had on the people, our Prime Minister Shri Narendra Modi founded a public charitable trust, namely, the PM Cares Fund (Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund), to help the people affected by the pandemic. The establishment of the PM Care fund was mainly done to address the risks and challenges posed by any kind of emergency, distressing situation or pandemic like COVID-19. As per Schedule VII of the 2013 Act, the contributions made by companies in PM Care Fund, pursuant to Section 135 of the 2013, shall be considered as CSR activity. Notification dated 26.05.2020 for the same was issued by the Ministry of Corporate Affairs, thereby amending Schedule VII of the 2013 Act, which retrospectively came into force on 28.03. 2020.

Conclusion

To sum up, corporate social responsibility is a management concept by which corporate enterprises or companies integrate concerns relating to social and environmental aspects in their day-to-day business operations and interactions with stakeholders, shareholders, and employees. Simultaneously, CSR requires the companies to address the concerns of their employees and other office bearers and stakeholders. After the statutory mandate, it has now become a business necessity rather than just the task of a company to do social good. In recent years, CSR in India has witnessed a dynamic change and now it is not just limited to a philanthropic activity.

However, the present drawback of the prevalent laws for corporate social responsibility is that these provisions provide for the mechanism that the companies can escape through the loophole of the ‘comply or explain’ approach. This approach connotes that the companies either spend two percent of their profits on CSR or else they explain the rationale behind the non-compliance and in the event of none of the above-mentioned, face a penalty. Even though the penalty provision of the 2013 Act somehow manages to make the companies comply with the CSR mandate seriously, if this approach is changed and the Section is mandated in a much more stringent manner, then we may see much better implementation of CSR.

Frequently Asked Questions (FAQs)

What are the activities that can be termed as or regarded as Corporate Social Responsibility?

As per Section 135 of the 2013 Act, and the Companies (Corporate Social Responsibility Policy) Rules, 2014, which were further amended in the year 2021 by the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, the following below-mentioned activities related to below-mentioned areas and causes can be included in CSR, namely;

Eradication of extreme hunger and poverty by the companies,
Promoting education,
Reducing child mortality rate and improving maternal health,
Combating various diseases including but not limited to human immunodeficiency virus, acquired immune deficiency syndrome, malaria,
Working on environmental sustainability,
Employment enhancing vocational skills,
Contribution to PM Care Fund or any other such fund by the state or centre for socio-economic development and relief and funds for SC/ST/OBC or any other deprived or vulnerable sect of the society,
Business projects relating to social matters, and
Promoting gender equality and empowering women.

Are there any companies exempted from any of the obligations of the CSR committee as per Section 135 of the Companies Act 2013?

According to Rule 5(1) of the CSR Rules 2014, unlisted public companies and private companies, which are not obligated to have an independent director, are not required to include an independent director in their CSR Committee.

What is the mechanism or process that has been laid down for checking up on the implementation of the concept of corporate social responsibility?

The board of the company usually monitors the implementation of CSR activities in its business operations. It must be noted that CSR is basically a board-driven process, and the board has the power to plan, execute and monitor the CSR activities that are being carried out by the company, based on the recommendations made by the CSR committee established in accordance with the provisions of the 2013 Act. The 2013 Act presently accommodates provisions such as mandatory disclosures, reporting, and CSR committee’s and the board’s accountability, which ultimately helps in monitoring the implementation of CSR.

Further, it must be noted that the disclosure of the activities undertaken by the companies for CSR is mandated by the statute itself. The details are to be annually provided to the MCA21 portal or registry, for instance, the details like disclosure in financial statements pertaining to CSR (including non-compliance).

What say does the Central Government have in designing the CSR initiatives and policies in a company?

The CSR policies of the company as formulated by the board after the recommendations of the CSR committee are made in pursuance to the Schedule VII of the 2013 Act and the 2014 Rules. Thus, the broad framework under which the companies shall work for the implementation of CSR in their business operations is set up by the Central Government.

Will the contribution to the corpus of an entity be calculated as CSR expenditure?

As per the amendment to Rule 7 of the 2014 Rules, which came into effect on 22.01.2021, contribution to the corpus of an entity will not be calculated as CSR expenditure.

Whether ‘profit before tax’ or ‘profit after tax’ is used for the computation of the average net profit for the purposes of Section 135 of the 2013 Act?

Profit before tax is used for the calculation of net profit under Section 135. The computation of the average net pursuant to Section 135 (so as to determine spending on corporate social responsibility activities) of the 2013 Act will be done in accordance with Section 198 of the 2013 Act. Further, such computation will also be specific and exclusive of the items laid down under Rule 2(1)(h) of the Companies (CSR Policy) Rules, 2014. Please note that Section 198 of the 2013 Act lays down certain additions or deletions that are to be done while calculating the net profit of a company. A few major things that the aforesaid Section provides for exclusion are; capital payments/receipts, income tax, and set-off of past losses.

Are the companies obligated to carry out certain activities in the nearby local areas where they work?

Section 135(1) of the 2013 Act provides that the companies should give preference to the local areas and other areas around which they operate while performing CSR activities. However, this is directory in nature and not mandatory.

Is the provision pertaining to CSR applicable to the companies that fall under the category of Section 8 of the 2013 Act?

From the bare reading of Section 135, it can be seen that there is no specific point that states that Section 8 companies are exempted from mandatory compliance with the provision pertaining to CSR.

References

Contracts and the doctrine of accord

By

Vanshika Kapoor

-

January 31, 2024

0

This article has been written by Asmita Gaikwad pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Table of Contents

Introduction

The Indian Contract Act of 1872 defines the term “contract” under Section 2(h) as “an agreement enforceable by law.” Accordingly, a contract is an agreement between two parties where both parties should have given their consent. Contracts are the backbone of commercial and legal transactions in any society, providing a structured framework for parties to engage in economic activities. In India, contract law is governed by the Indian Contract Act, 1872, a comprehensive statute that lays down the principles and rules governing contracts. One intriguing aspect of contract law is the doctrine of accord, a legal principle that allows parties to a contract to mutually agree to substitute a new obligation for an existing one. This doctrine plays a crucial role in adapting contracts to changing circumstances and preserving the harmony of contractual relationships.

What is the doctrine of accord and satisfaction

Accord and satisfaction refer to the agreement (accord) between two contracting parties to accept alternate performance to discharge a pre-existing duty between them and the subsequent performance (satisfaction) of that agreement. The new performance is called Accord. According to the doctrine of accord and satisfaction, the two parties who were in contract further agreed that they could make further changes (addition or deletion) to the existing contract. These changes are agreed upon by both parties. The agreement must be transferred to a new agreement. It must therefore have the essential terms of a contract (parties, subject matter, time for performance, and consideration). If there is a breach of the accord, there will be no “satisfaction,” which will give rise to a breach of the accord. In this instance, the non-offending party has the right to sue under either the original contract or the accord agreement.

63. Section– Promise may dispense with or remit performance of promise

Any party entitled to a promise has the authority to either entirely release or partially waive the performance committed under the said promise. Additionally, such a party holds the prerogative to extend the stipulated time for performance or opt for any satisfaction deemed appropriate.

Illustrations

Example: A commits to creating a painting for B. Subsequently, B prohibits the execution of the artwork. As a result, A is relieved of the obligation to fulfil the promise.

Illustration: A is indebted to B for 5,000 rupees. A tenders and B accepts 2,000 rupees as payment, satisfying the entire debt at the specified time and location originally set for the payment of 5,000 rupees.

Scenario: A owes B a sum of 5,000 rupees. C, a third party, tenders 1,000 rupees to B, and B consents to this amount as a settlement for the entirety of the claim against A. Consequently, this payment serves as a discharge for the entire claim.

Situation: A is obligated to pay B a sum of money under a contract, the exact amount of which remains undetermined. A, without specifying the amount, tenders 2,000 rupees to B, who accepts it as complete satisfaction for the debt, regardless of its undisclosed amount. This transaction results in the complete discharge of the debt.

Case: A owes B 2,000 rupees and has outstanding debts to other creditors. A negotiates an agreement with all creditors, including B, to settle their respective claims at a reduced rate of eight annas in the rupee. Consequently, the payment of 1,000 rupees to B constitutes a discharge of B’s claim in accordance with the agreed-upon composition.

Meaning accord and satisfaction in legal contract

In a legal contract, two parties agree to discharge a tort claim, contract, or other liability for an amount based on terms that differ from the original amount of the contract or claim. Accord and satisfaction are also used to settle legal claims prior to bringing them to court. An accord and satisfaction is a legal agreement in which two parties settle a dispute by agreeing to new terms. The accord is the agreement on the new terms, and the satisfaction is the performance of those terms. When there is an accord and satisfaction, and the performance has been executed, all prior claims relating to the matter are ended.

There are a few key elements to an accord and satisfaction:

There must be a valid underlying debt or obligation.
The parties must agree to new terms that resolve the dispute.
The new terms must be supported by consideration.
The parties must perform their obligations under the accord.

If any of these elements are missing, then there is no accord or satisfaction.

An accord and satisfaction can be used to settle a variety of disputes, including:

Breach of contract
Personal injury claims
Property damage claims
Debt collection

An accord and satisfaction can be a very effective way to resolve a dispute, as it can provide a quick and inexpensive way to get the matter behind you. However, it is important to work with an experienced attorney to ensure that the accord and satisfaction are valid and enforceable.

Accord and satisfaction is a concept from contract law that usually applies to the purchase of a release from a debt obligation.

An accord and satisfaction may occur in debt negotiations. For example, Company A has a credit agreement with a bank that is putting pressure on its balance sheet. The bank works with Company A and the original credit agreement is revised. The new terms might allow Company A to make a larger number of smaller payments, to repay the debt at a lower interest rate, to repay an amount less than the original obligation, or some other arrangement.

If, for some reason, Company A does not deliver on the new terms, it may be liable for the original contract because it did not satisfy the terms of the accord. An accord and satisfaction does not replace the original contract; rather, it suspends that contract’s ability to be enforced, provided that the terms of the accord are satisfied as agreed upon.

Features of accord and satisfaction

When the two parties agree to discharge an accord and satisfaction, it means that the two parties have consented to a new agreement suspending the terms of an existing agreement because now they are into a new agreement.
When two parties consent to the accord on revised terms and conditions, it means that the parties are satisfied with the performance of those terms according to the agreement.
The earlier agreement will remain suspended as long as the parties in the agreement and satisfaction remain in the revised agreement and follow the new terms and conditions.
In case one of the parties fails to follow the revised terms and conditions of the agreement and satisfaction, then the party may be imposed with more harsh terms and conditions than the earlier set off conditions.

Let’s understand these points with a hypothetical example.

An accord may occur in debt negotiation: We have two companies: Company A and Company B. Company A is a large multinational company with high revenues and profits. Company B is a small company trying to meet its ends. The company is in high debt and is struggling to survive. The company has an agreement with Company A. According to the agreement, company B should give 10% returns to company A for the investment of amount X by Company A.

Since Company B is not making any profits, it is unable to give any returns to Company A. The company realises that Company B is running into losses and is not in any position to generate profits in the near future unless further financial aid is provided. Company A has already invested a huge amount in Company B and cannot afford to lose its investments in Company B. Company A decides to provide additional financial help to Company B so that it can recover its losses.

Now, companies A and B both agree to revise their existing terms and conditions and consent to accord and satisfaction.

Benefits of accord and satisfaction

Once both parties consent to the accord, it automatically terminates the old agreement. A new accord benefits both parties.

Let’s try to understand these benefits with the examples of companies A and B. When the companies get into an agreement, Company A can still receive some payment of the debt. At the same time, Company B can get a waiver from full payment of the debt. Instead, it can make a partial payment.

Had it been the older contract, then both companies would have been at a loss. The accord gives both companies a chance to revive their finances. Of course, Company A (the lender) is taking a bigger risk by reinvesting in Company B. With this risk, Company A can also have more control over the management and operations of Company B. Furthermore, according to the new accord company A can ask for a larger share of the profits.

For Company B, the accord can help them remain in the business without worrying about the finances in the bargain; the company might not have complete control over the company’s administrations and operations. These compromises can still be worth making as long as the company is running.

The above example suggests that the accord can be beneficial for both parties.

Legal requirements for accord and satisfaction

There are three prior essentials required for a valid discharge of an existing claim or duty by accord and satisfaction.

Existence of a claim or duty

According to contracts under Indian law, an accord can exist only when a prior claim or duty exists. The purpose of an accord is to revise the existing agreement or to cancel the existing agreement and create or adopt a new agreement.

Offer and acceptance of a substitute performance in full settlement

When an existing contract or agreement is not applicable anymore or the contract fails to discharge the duties or claims, an accord can be brought into effect. The accord must be created with the acceptance and agreement of both parties. The accord can be offered by any of the parties when the party believes or finds out that the existing contract is not sufficient to discharge duties or claim. An accord can also be offered when one party notices that the other party is not in full compliance with the existing contract.

Proper consideration

When both parties accept that the contract has not been honoured by one of the parties, then the other party can propose the accord. In this, both parties understand and accept that one of the parties has not fully adhered to the terms and conditions of the existing contract. In this case, both parties are ready to make certain compromises so that both parties can get certain benefits from the agreement.

Terms of legal accord and satisfaction

The terms of a legal accord and satisfaction must be clear, unambiguous, and agreed upon by both parties. Here are some key terms that are commonly found in accord and satisfaction agreements:

Description of the dispute: The agreement should clearly describe the dispute or disagreement that is being resolved. This description may include the terms of the original contract, the amount owed, or the performance of contractual obligations.
Amount of payment: The agreement should specify the amount of payment that is being made to settle the dispute. This payment may be a lump sum, a series of payments, or other form of consideration.
Payment terms: The agreement should specify the terms and conditions of payment, including the method of payment, the due date, and any late payment penalties.
Release of claims: The agreement should specify that the parties are releasing each other from any further claims arising from the dispute. This means that the parties cannot sue each other for the same issue in the future.
Confidentiality: The agreement may include provisions requiring the parties to keep the terms of the agreement confidential. This is often used to protect sensitive business information or trade secrets.
Governing law: The agreement should specify the governing law that will be used to interpret the terms of the agreement. This is important in the event of a dispute, as the governing law will determine which court has jurisdiction and which laws apply.
Entire agreement: The agreement should include a clause stating that the accord and satisfaction agreement constitutes the entire agreement between the parties and supersedes any prior agreements or understandings.

These are just some of the key terms that are commonly found in accord and satisfaction agreements. It is important to work with an attorney to ensure that the terms of your accord and satisfaction agreement are legally binding and enforceable.

Situations where accord and satisfaction may be beneficial

The following are some common situations where accord and satisfaction can be particularly beneficial:

Debt collection: Accord and satisfaction can be used in debt collection cases to resolve disputes between creditors and debtors.
Contract disputes: Accord and satisfaction can be used in contract disputes to resolve disputes over the terms of an agreement or the performance of a contract.
Personal injury cases: Accord and satisfaction can be used in personal injury cases to resolve disputes over the amount of damages owed to a plaintiff.
Estate planning: Accord and satisfaction can also be used in estate planning to resolve disputes over the distribution of assets, the payment of debts, or other issues related to the administration of an estate.

What is a waiver

A waiver is a legally binding provision where either party in a contract agrees to voluntarily forfeit a claim without the other party being liable. Waivers are commonly seen during settlement talks, when one party may be willing to pay out a slightly higher award as long as the other person, often a claimant, agrees to sign a waiver relinquishing their right to further legal action.

Key takeaways:

A waiver is a legally binding provision where either party in a contract agrees to voluntarily forfeit a claim without the other party being liable.
Waivers can either be in written form or in some form of action.
Examples of waivers include the waiving of parental rights, waiving liability, tangible goods waivers, and waivers for grounds of inadmissibility.
Waivers are common when finalising lawsuits, as one party does not want the other to pursue them after a settlement is transferred.
Waivers are signed in order to mitigate exposure to risk.

Understanding Waivers

In contract law, a waiver can be used to excuse a party from performing a contractual obligation. For example, a contract may require a party to pay rent on time. If the party fails to pay rent on time, the other party may be able to sue for breach of contract. However, if the other party agrees to waive the late payment, the party will no longer be able to sue for breach of contract.

In tort law, a waiver can be used to release a party from liability for their actions. For example, a person may sign a waiver before participating in an activity that involves a risk of injury. If the person is injured during the activity, the person who organised the activity may not be liable for the injury.

In property law, a waiver can be used to give up a right to property. For example, a person may sign a waiver of their right to inherit property. If the person dies, their heirs will not be able to claim the property.

It is important to note that waivers are only valid if they are voluntary. A person cannot be forced to waive their rights. Additionally, waivers must be specific. A person cannot waive their rights in general terms. They must specifically state what rights they are waiving.

Waivers can be a useful tool for businesses and individuals. They can help to avoid disputes and liability. However, it is important to understand the implications of a waiver before signing one.

Essentially, a waiver removes a real or potential liability for the other party in the agreement. For example, in a settlement between two parties, one party might, by means of a waiver, relinquish its right to pursue any further legal action once the settlement is finalised.

Since the party signing the waiver is surrendering a claim that they are entitled to, it stands to reason that they will, usually, only do so if they are receiving some added benefit.

Waivers can either be in written form or in some form of action. A waiver carried out by an action might be based on whether a party in an agreement acts on a right, such as the right to terminate the deal in the first year of the contract. If it does not terminate the deal, which would be the act of “absence of action,” before the first year, that party waives its right to do so in the future.

Examples of waivers

Waiving of parental rights

In cases involving the custody of a child, a biological parent may choose to waive their legal rights as a parent, making that person ineligible to make determinations regarding the child’s upbringing. This also allows a guardian who is not a biological parent to attempt to assert their right over a child through actions such as adoption.

Waivers of liability

Before participating in an activity that could lead to injury or death, a person may be required to sign a waiver as a form of expressed consent to the risks that exist, due to the inherent nature of the activity. This waiver would release the company facilitating the activity from liability should the participant be injured or killed during their participation. Such waivers may be used prior to participating in extreme sports, such as BMX racing, or other activities, such as skydiving.

Waivers and tangible goods

In the case of most tangible goods or personal property, a person may waive the right to continue to make a claim on the item. This can apply to goods that are sold to a new buyer or donated to a particular entity. A transfer of vehicle ownership functions as a waiver of any claim to the item by the seller, and it gives the right to the buyer as the new owner.

Waiver for grounds of inadmissibility

If a person who is not a citizen of the United States wishes to gain entry, they may be required to complete Form I-601, “Application for Waiver of Grounds of Inadmissibility.” This waiver seeks to change the status of the person seeking entry, allowing them the ability to enter the United States legally.

Case laws

P.K. Ramaiah and Company vs. Chairman and Managing Director, National Thermal Power Corporation (1944)

In the case of P.K. Ramaiah and Company v. CMD, National Thermal Power Corp. (1994), when the creditor accepted the final measurements of the work completed and issued a receipt stating that the amount had been received in full and final settlement, there was accord and satisfaction and the creditor was not entitled to claim the balance. Once any dispute is settled in this manner, no arbitral dispute remains, and the arbitration clause cannot be invoked. If a check for a smaller amount than the debt due is sent to the creditor in full satisfaction, it does not discharge the debt if the latter does not accept it as such. It depends on the intention of the parties as expressed in the correspondence and the character of the transaction.

Payana Reena Layana Saminathan Chetty vs. Pana Lana Pana Lana Palaniappa Chetty (1913)

The principle of accord and satisfaction has been stated by the Privy Council as a principle of substituted agreement; thus, in the cases of Reena Saminathan vs. Puna Lana Palaniappa and The Union of India vs. Kishorilal Gupta & Bros (1959), “the’receipt’ given by the appellants, accepted by the respondent, and acted upon by both parties proves conclusively that all the parties agreed to a settlement of all their existing disputes by the arrangement formulated in the ‘receipt’. It is a clear example of what used to be well-known in common law pleading as ‘accord and satisfaction by a substituted agreement’. No matter what the respective rights of the parties are, they are abandoned in consideration of acceptance by all of a new agreement. The consequence is that when such an accord or satisfaction takes place, the prior rights of the parties are extinguished. They have, in fact, been extinguished by the new rights, and the new agreement becomes a new departure and the rights of all the parties are fully represented by it.” There have been two interpretations of this doctrine till date, the situation in which the party, not at fault, accepts any satisfaction in place of the original consideration and most importantly, when he or she accepts a lesser sum as satisfaction until the previous contract is discharged.

Conclusion

According to all the above concepts, contracts and the doctrine of the accord in Indian law are very important because they let the parties revise their terms and conditions and get into a new contract, which is called an accord. Accord and satisfaction, under contract law, refers to the process of purchasing a release order from contractual obligation through any consideration. It is the doctrine that honours the discharge of a contract and the obligations it defines by way of forming a substituted contract. Accord refers to an agreement under which these terms are binding and the valuable consideration that is provided for the discharge of the previous contract is referred to as satisfaction. In a simpler term, this doctrine can be explained as when one party fails to perform the contractual obligations but, in return, makes a purchase of and/or forms another contract that nullifies the older contracts and their obligations, takes the form of an accord, and the valuable consideration that is paid in return for getting contractual obligations released takes the form of satisfaction.

References

Grounds for termination with cause and without cause

By

Vanshika Kapoor

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January 31, 2024

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This article has been written by Md. Mosiur Rahman pursuing a Crack California Bar Examination – Test Prep Course from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Introduction

Employment laws are governed by both federal and state laws to protect the employee’s rights and ensure the employer’s obligations. The terms and conditions of employment for an employee are administered by the employment contracts. The termination of an employee should be specifically described in the employment contract. It should describe the circumstances under which an employee will be terminated, whether for cause or without cause. This article delves into an insight into the termination of employment considering the California Labour Code (Cal. Lab. Code) guidelines regarding “termination for cause” and “termination without cause.” It outlines the situations that are to be considered “terminations” with cause and those that may justify a termination without cause.

Termination of employment

An employer can set out specific reasons for the termination of an employee, taking into account the employee’s service. The termination of an employee can occur for various reasons, such as breach, fraud, incapacity, etc. However, Section 2920 of the California Labour Code (Cal. Lab. Code) outlines that every employment contract can be terminated for any of the following reasons, as discussed in the subsequent subparagraphs. The termination provisions are brief, but the consequences are broad, making it tough to list all the specific reasons that cover the guidelines.

Expiration of its appointed term

If an employee’s employment period ends before the full term specified in the employment contract, they may be fired. Each and every employment contract must specify exactly how long the agreement will last. When such duration expires, it will be automatically terminated, and the employee will get his benefits as per the terms and conditions for such employment. However, there are a few procedures and formalities involved in terminating an employee. Without these procedures, the employee’s continuation of service cannot be stopped. Hence, this is also termed termination of employment upon fulfilment of the contract period.

Extinction of its subject

When the subject matter of employment is discontinued for a particular reason and cannot be continued any further, “the employment” can be terminated. This gives a wide range of scope to consider in what circumstances a subject matter is declared extinct. Employment is created for some specific jobs to achieve desired outcomes based on the subject matter of business. When the purpose of the business is complete and there is no further need for employment, it may be terminated.

Death of the employee

It goes without saying that a worker’s death will have an impact on their ability to perform their duties. Hence, it will bring an automatic termination of employment. However, a lot of responsibilities are created when an employee passes away. All rights and other relevant factors will be applied in accordance with the benefit terms that the employer policy grants to an employee. Legally, it is considered a termination of employment.

The employee’s legal incapacity to act as such

Although there are many potential causes of incapacity, we only take legal incapacity into consideration here. An employee may be fired if he is no longer legally able to carry out the terms and conditions of his employment. However, legal incapacity stipulates a broader viewpoint and brings a more comprehensive explanation of options for many of the underlying causes. Specifically, when an employee is not legally capable of holding his appointment or continuing to serve for his employer, it is required to bring a termination.

Termination with cause

The employer has the legitimate right to terminate an employee at any time. However, they must comply with the rules and regulations relating to such termination. In this regard, Section 2924 of the California Labour Code directs that the employer may terminate an employee for the employee’s willful breach of duty in the course of his employment, for the habitual neglect of his duty, or for continued incapacity to perform his duty. Based on these guidelines, termination for cause may be outlined in an employment contract, covering all the specific areas that constitute a breach of the terms and conditions. Both employers and employees need to be settled on their rights, responsibilities, and obligations in a prescribed manner to maintain a fair and lawful working environment. It is the concern of the employer to meticulously describe the terms and conditions of employment in the employment contract.

Grounds for termination with cause

Employers must thoroughly maintain the documents for termination and follow accurate procedures, including giving warnings, corrective measures, and opportunities for improvement, to ensure compliance with employment laws and avoid potential legal disputes. However, Section 2925 of the California Labour Code states that if an employee is employed for a specified term, he may be terminated at any time by the employee in case of any willful or permanent breach of the obligations of his employer. Here, the law also allows the employee to quit the job for some specific reason. On the part of the employer, numerous causes can be considered vital reasons that most employers consider for termination with cause. Some of the causes are enumerated here as general guidelines.

Breach of confidentiality

Information is vital for every organisation. It is important for every company not to share client’s information with outsiders. If any employee shares the information against the interests of the company, it shall be treated as a breach of confidentiality. The legal provisions empower employers to terminate the employee in the case of breach with just cause.

Bankruptcy

Most companies require that employees, especially those working with finances, maintain themselves as financially stable. So that the impact of being bankrupt cannot deteriorate the company’s financial stability. Therefore, companies should have a legal policy that outlines the grounds for the termination of an employee for the cause of bankruptcy.

Bribery

Bribery is a serious offence that can lead to termination without cause. The handling of a service or good in return for a bribe is known as bribery, and it is a crime. Accepting gifts from clients can have a negative effect on the entire workplace if done by any employee.

Conviction for any criminal offence

If an employee is involved in any criminal offence, it will result in termination of employment due to a breach of trust in the employer-employee relationship. Thus, the employment contracts can be made clear that convictions of criminal offences shall lead to termination.

Insubordination

If you are disrespectful to your colleagues or refuse to follow your boss’s instructions, you may be in breach of the company’s terms and conditions. This is important because it helps to create a positive work environment. This could be considered a serious offence and may result in termination.

Incompetency

Setting goals and targets is an important part of any organization and these goals and targets shall be fulfilled by the employees within a specific time period. If an employee is unable to achieve the target and remains indifferent or generally puts no effort into improving performance, it can lead to termination with cause.

Drug addiction

There are lots of companies that have zero tolerance for drug addiction. Drugs may impair a person’s mental stability and affect the work environment; they are also dangerous for clients as well as other concerned people. This could be a strong reason for termination, as specified in the employment contract.

Sexual harassment

In most jurisdictions, there are separate legal provisions that specifically prohibit sexual harassment in the workplace. To maintain a sound and healthy working environment, all employees should be protected from sexual harassment. So, companies should include this clause in the employment contract as a condition for termination.

Inappropriate relations

Having professional relationships is required in the workplace. Any other kind of romantic relationship in the workplace may lead to sexual harassment and damage the reputation of any organisation. If any relationship is deemed inappropriate or is not treated as professional, it may lead to termination.

Other related causes

Numerous reasons can be set out, such as fraud in the workplace, persistent dishonesty, neglect of duty, excessive absence or lateness, or harassing or abusive language towards other employees, clients, or customers. So, there are no strict constraints that would restrict the underlying reasons, but the legal provision widens the areas that may be suitable for the specific organisation.

Termination without cause

The term is itself controversial, as there is no sense of termination without cause. Termination of employment without cause is not defined specifically in any legal framework. It is evident that when any termination occurs, there are implied reasons. Termination without cause usually occurs when the employee’s service is no longer required by the employer. In such situations, the termination is not necessarily due to the employee’s fault. For example, if an employee is going to downsize his organisation, the employer may terminate his employees without stating any reason for such termination. Termination without cause also occurs when an industry closes down or shuts down a project. However, if an employee is fired without cause, they typically have the right to be notified of their termination and to be paid during that time. However, termination without cause cannot be challenged if it is not contrary to the terms and conditions of the employment contract and the processes outlined by the statutes.

What is notice period

The employer is required to give 30 day’s notice, as outlined in Section 2929 of the California Labour Code, so that the employee can make plans for transitioning to another job, etc. Every employment contract must include a specific notice period. The employer is not bound by 30 day’s notice; it may be more than that but not less than 30 days. While outlining the notice period, other related issues may encompass considering the provision of related laws and regulations. Section 2929 clause(b) of the California Labour Code states that a provision of employment that provides an employee with less protection than is provided by this subdivision is treated as against public policy and hence void.

Difference between with cause and without cause

The significant difference is that termination with cause has a reason to terminate the employee. If the employer terminates with cause, the employee is not entitled to get notice or pay for the notice period. On the other hand, when any employer terminates an employee without cause, the employee is usually entitled to have notice of his termination and be paid during the period. The obligations to pay the benefits will be ensured considering the terms and conditions set out for employee benefits. However, there are other related issues also taken into consideration, such as breach of either side or solely on the part of the employee or the employer who committed any breach.

When termination without cause becomes wrongful

A termination that is not done lawfully will be termed a wrongful termination. This can happen if the employee is terminated without proper notice, is not paid for the notice period or if the employer claims termination with cause but does not have just cause. In cases of wrongful termination, the employee is entitled to get paid and is entitled to the benefits the employee would have earned. But if it happens due to not putting a “termination without cause” clause in the employment contract, the employee will get benefits according to the various legal provisions that may apply appropriately and widely. So, to handle the employment issues and termination in a sound manner, the employment contract should have a “termination without cause” clause. Certainly, that will be beneficial for both parties involved in the employment contract.

Conclusion

An employment contract can be terminated with cause or without cause. In both cases, there are legal requirements that should be followed by the employer when terminating an employee. Termination with cause occurs when there are valid reasons on the part of the employer that the employee breaches the obligations that are contrary to the employment contract. But termination without cause may happen through either party with the delivery of notice and the employee has the right to get benefits for the notice period. Thus, the terms and conditions should be outlined in an employment contract that fulfils the legal requirements and consequences of the employment laws and regulations.

References

All about DU LLM 2024

By

Rachit Garg

-

January 31, 2024

0

This article is written by Tinkle Chawla. This article will present to the readers all the important facts regarding the CUET PG LLM 2024 vis-a-vis DU LLM 2024. This will include the important dates, steps to fill in the application fees, the procedure to submit the fees, eligibility criteria, syllabus, recommended books, and all the necessary guidelines in an exhaustive manner for the convenience of the candidates.

Table of Contents

CUET PG LLM 2024

Do you miss appearing for CLAT?

Didn’t get enough marks to grab a seat in any NLU?

Are you looking for another renowned college/university where you can fulfil your dream of Pursuing PG in law?

Would you like to study in one of the most esteemed institutes of law?

If yes, then you are at the right blog. Here’s a chance to register yourself for another great opportunity.

CUET PG 2024, a distinguished entrance exam designed for admission to various post graduate programmes, including LLM. Delhi University is one such esteemed university that accepts admission via marks scored in CUET PG.

In 2023, approximately 877,000 students participated in the CUET PG, and a similar amount is anticipated for the CUET LLM exam this year. Some also opt for traditional law PG exams like CLAT PG, LSAT India, AILET LLM, etc.

LLM, or Master of Laws, is a globally recognised postgraduate program. Students from LLB backgrounds are more suitable for this program, who are looking to develop their legal expertise in a particular component of law.

Master of Laws or LLM is a 2 years postgraduate degree in law. LLM helps to gain in-depth knowledge of a particular field of law through intensive research in that field of law. LLM has a comprehensive core curriculum of various subjects of law, such as Legal Research and Methodology, Constitutionalism, etc.

Why LLM

After graduating from a law college, it is recommended to pursue Master of Laws as well, for it prepares you to specialise in a particular field of law and may initiate your career in future. There are few top reasons to pursue LLM program, as mentioned below:

Specialisation in one subject
Narrowing down the interests
Most top firms require an LLM degree to be a partner
Makes one eligible to apply for a lectureship in law schools
Makes one eligible to apply for a Ph.D.
UGC-NET qualification will become invalid if, within 2 years of qualifying the same LLM is not completed.
Pursue a career in Legal Writing and Research
Prepares one for an international career
Also, it can get you a hike in salary and more opportunities will knock at your door.

LLM from Delhi University (DU)

The University of Delhi offers a full-time LLM program of two to three years duration at the postgraduate level. This course is offered by the Campus Law Centre under DU. For the selection of this course, candidates are required to appear for the entrance exam conducted by the university. LLM admissions are conducted online. The entrance exam is CUET PG which is conducted by the National Testing Agency (NTA) and considered by DU to grant admission to this course.

Detailed information about the LLM course, its admission, entrance exam, syllabus, eligibility criteria, and more such information is covered in this article along with certain important frequently asked questions (FAQs) to clear doubts (if any).

DU LLM program objectives

The LLM program at DU is aimed at achieving certain objectives. The program objectives are as follows:

Appraising students of the legal system, rule of law and administration of justice.
Familiarising students with laws and judicial interpretations at the national and international level.
Promoting interdisciplinary approach to the legal profession.
Promoting ethical practices in the profession of law.
Producing internationally competent litigating lawyers, corporate lawyers, judges, judicial officers, researchers, law teachers, etc.
Sensitising students towards the issues of access to justice for the deprived, marginalised, and weaker sections of the society.
Imparting skills of legal reasoning, problem solving, research, legal writing, communication skills, persuasion, leadership and teamwork.’

Eligibility for DU LLM program admissions

LLM is for Indian students.
There is no age limit as to who can pursue LLM. .
LLM (Two Year) is a full time course, and students seeking admission in this course are required to file an affidavit stating that they are not engaged in any trade, business, occupation, profession, or employment and will be studying the course on full time basis as per rules contained in the Delhi University Ordinances. LLM (Three Year) course is open to working persons also.
The admissions to LLM (Two and Three year program) are made strictly on the basis of merit in the LLM Entrance Exam.
EDUCATIONAL QUALIFICATION

A Three year/ Five year LLB Degree from the University of Delhi or any other Indian or foreign University recognized as equivalent by the University of Delhi is the qualifying degree for appearing on the LLM Entrance Exam.
Candidates appearing for the qualifying degree examination are also eligible to appear in the LLM Entrance Exam.
No candidate on the roll of LLM or ex-students of any University shall be allowed to take admission in the LLM course unless they get their admission cancelled.

MINIMUM QUALIFYING MARKS

For unreserved and EWS Category candidates, at least 50% marks or an equivalent grade point in the aggregate in the qualifying degree examination.
For SC/ST/OBC/CW/PwD Category candidates, at least 45% marks or an equivalent grade point in the aggregate in the qualifying degree examination.
Rounding of a fraction of marks is not allowed.

Fees for DU LLM program

DU remains one of the most reputed universities which offers affordable education regardless of any stream. The DU LLM fees include library fees (including e-resources), tuition fees, case material for various subjects of law revised by the faculty members, journal fees, development fees, etc.

The fees stands around 11-15k for the entire duration of the course.

DU LLM seat intake 2024

Delhi University offers a total of 125 seats for the LLM program. Candidates can check the seat allotment category wise distribution mentioned in the table below:

Serial No.	Category	2 Year LLM	3 Year LLM	Total
1	UR	27	24	51
2	OBC	18	16	34
3	SC	10	09	19
4	ST	05	04	09
5	EWS	07	05	12
	Total	67	58	125
Supernumerary seats	PwD	03	03	06
	CW	03	03	06
	FN	03	03	06
	Grand Total	76	67	143

Apart from the seats, there are few supernumerary seats also as given in the table above.

CUET PG LLM Entrance Examination 2024: Overview

The table below gives an overview on various particulars and details on the LLM course at Delhi University.

Particulars	Details
Name of the Examination	Common University Entrance Test (PG 2024)
Examination conducting body	National Testing Agency (NTA)
Frequency of exam	Once a year
Exam Level	National Level
List of Central and participating Universities	142
No. of colleges offering LLM	54
Mode of Examination	online
Exam Duration	2 hours (120 minutes)
Types of questions	Objective (MCQs)
Mode of Exam	Computer based exam (CBT)
Official Website	https://pgcuet.samarth.ac.in/
Exam Code	COQP14

CUET PG LLM Entrance Exam details

Syllabus for the Entrance exam 2024

The admissions to DU LLM (two-year and three-year) program are made strictly on the basis of merit in the LLM Entrance Exam, i.e., CUET PG LLM. The paper consists of one question paper containing 100 objective-type questions with multiple choice answers relating to the following subjects:

CONSTITUTIONAL LAW OF INDIA

UNIT I – Salient Features of the Indian Constitution, Preamble, Citizenship, and Fundamental Rights as contained in Part III of the Constitution.
UNIT II – Directive Principles of State Policy, Fundamental Duties, Parliamentary form of Government, Bicameralism, Legislative Process, Council of Ministers, President of India, Governor.
UNIT III – Judicial process under the Constitution, Process of Judicial Review, as under Arts. 32, 226 and 227, Court system in India, Judges‐ Appointments, conditions of service, salary, etc., Advisory Jurisdiction of the Supreme Court, Public Interest Litigation, comparison between Activism and Restraint.
UNIT IV – Federalism, Center‐State Relations, Freedom of Inter-State Trade, Methods and limitations on Constitutional Amendment.
UNIT V – Emergency provisions, Services under the State, Liability of the State.

JURISPRUDENCE

UNIT – I Meaning and nature of ‘Jurisprudence’ ‐ Purpose and value of Jurisprudence ‐schools of Jurisprudence: Natural law, Imperative theory, Legal Realism, Historical school, Sociological school.
UNIT – II Functions and purpose of law, Questions based upon law, fact and discretion, Justice and its types, Civil and Criminal administration of justice, theories of punishment, Functions of the court- primary and secondary.
UNIT– III A comparative study on sources of Law- Legislation, Precedent and Custom.
UNIT– IV Concepts of Right and Duty, Kinds and meaning of right in its wider sense, concept of Possession.
UNIT – V Conditions for imposing liability ‐ Wrongful act such as Damnum Sine Injuria, causation, concept of mens rea, intention, malice, negligence and recklessness, strict liability, vicarious liability.

GENERAL PRINCIPLES OF CONTRACT

UNIT I – History – Formation of Contract, Agreement and Contract, Definitions, Classification of contracts, Offer and Acceptance, Communication, Revocation, Essential elements, concept of Invitation to Offer, Tenders, Nudum Pactum, Privity of contract and consideration, Exceptions, Unlawful Consideration and its effect, Contractual ability, Electronic documents such as web pages, Digital Certificates, Time and place of contract, Secured custody of electronic records.
UNIT II – Capacity to Contract – Minor’s Agreements and its effects, Persons of unsound mind, Persons disqualified by Law, Free consent, Coercion, Undue influence, Misrepresentation, Fraud, Mistake, Legality of object, Void agreements, Agreements against public policy, Wagering agreements, Its exceptions, Contingent contracts.
UNIT III – Discharge of Contracts and its various Modes – by performance, by agreement and by operation of law, Time and place of performance, reciprocal promises, Appropriation of Payments, By frustration (Impossibility of Performance), By breach (Anticipatory and Actual).
UNIT IV – Remedies for Breach of Contracts – Damages, Remoteness of damages , Ascertainment of damages, Injunction, Restitution, Specific performance when granted, Quasi contracts.
UNIT V – The Specific Relief Act Nature of Specific Relief – Recovery of possession of movable and immovable property, Specific performance of contracts, Who may obtain specific performance and against whom, Discretionary remedy, Power of court to grant relief, Rectification of instruments, Cancellation, Declaratory decrees , Preventive relief, Temporary injunctions, Perpetual and Mandatory Injunctions, Government as a contracting party, Constitutional provisions, Government powers to contract, Procedural requirements, Kinds of Government contracts, performance of such contract, settlement of disputes and remedies.

ADMINISTRATIVE LAW

UNIT – Nature and scope of Administrative law, Relation with Constitutional law, concept of Separation of powers, Rule of law, Council d’Etat, Classification of administration action, its functions, Administrative direction and discretion.
UNIT –II Legislative power of the administration, Extent of delegation and control over delegated Legislation, Sub‐delegation, Judicial, Parliamentary control over delegated Legislation.
UNIT ‐III Judicial power of Administration, Principles of Natural justice, Effect of non‐compliance with principles of natural justice, exceptions.
UNIT – IV Judicial control of administrative action,Writs, Public and Private law review of administrative action, Liability of state, Torts, Contract, Promissory Estoppel‐Government privileges, Right of information, Doctrine of Legitimate expectation, Doctrine of Accountability, Doctrine of Proportionality.
UNIT –V Corporations and Public undertaking, Commission of enquiry, Ombudsman in India (Lokpal and Lokayuktha), Central Vigilance Commission, Parliamentary Committees Civil services in India, Accountability and responsibility, Administrative deviance, Corruption, concept of Mal‐ administration, Control mechanism of accountability.

Law of Torts

UNIT‐I Evolution of law of torts‐ Nature and scope of law of torts; Meaning; Torts distinguished from Contract; Crime‐ Development of Ubi jus ibis Remedios; Mental elements Intention, Motive, Malice in law and in fact.
UNIT‐II General Defense, Vicarious Liability.
UNIT‐III Negligence; Nuisance; Absolute and Strict liability. Legal Remedies, Awards, Remoteness of damage.
UNIT‐IV Torts against person, Assault, Battery, Mayhem and False Imprisonment; Torts affecting reputation‐Libel and Slander, Torts affecting freedom, Malicious prosecution, Malicious civil action and Abuse of Legal process, Torts affecting domestic and other rights‐Marital rights, Parental rights, Rights to Service, Intimidation and Conspiracy, Torts against property.
UNIT‐ V Consumer Protection Act, 1986

PROPERTY LAW

UNIT – I General principles of Transfer of Property by Act, Concept and meaning of immovable property, Transferable Immovable Property, competency of persons to transfer, method and effect of transfer, Conditions restraining alienation and restrictions repugnant to the interest created, rule against perpetuity, its exceptions, Vested and Contingent interest.
UNIT – II Doctrine of election, transfer by ostensible and co‐owner, Apportionment, Priority of rights, Rent paid to holder with defective title, Improvements made by bonafide holder, Doctrine of Lis pendens, Fraudulent transfer, concept of part‐performance.
UNIT – III concept of mortgage of immovable property, Kinds of mortgages and their features, Rights and liabilities of mortgagor and mortgagee, Priority of securities, concept of Marshalling and contribution, Charges.
UNIT – IV Sale of immovable property, Rights and liabilities of seller and buyer before and after completion of sale, Difference between sale and contract for sale, Leases of immovable property, definition and principle behind creation of lease, rights and liabilities of lessor and lessee, concept of holding over; Exchange- Definition and mode, Actionable Claims, Gifts- Scope, types of gifts- universal, onerous. Mode of transfer.
UNIT – V Law of Trusts with Fiduciary Relations: Definitions of Trust and its comparison with other relationships like Debt, Ownership, Bailment, Agency and Contract, types of Trusts, Creation of Trust, Appointment of Trustees, Duties and Liabilities of Trustees, Rights and Powers of Trustees, Disabilities of Trustee, Rights and Liabilities of the Beneficiary, Vacating the office of trustee and Extinction of Trusts.

CRIMINAL LAW, JUVENILE JUSTICE (CARE AND PROTECTION OF CHILDREN) ACT, 2000 AND PROBATION OF OFFENDERS ACT, 1958

UNIT – I Introductory and Pre‐trial process, Meaning, organisation and hierarchy of the functionaries under the Code, their duties, functions and powers, First Information Report, complaint, Arrest, Types of trials and features of a fair trial.
UNIT ‐II Trial Process‐I- Magisterial powers to take cognizance, Commencement of proceedings, Dismissal of complaints, Charge, Processes to compel appearance and production of things, Bail, Preliminary ways to bar trial.
UNIT ‐ III Trial Process‐II: Provisions as to Inquiries and Trials, Judgment, Appeals, Revision and Reference, Security for keeping peace and good behaviour, concept of Maintenance with relevant case studies.
UNIT ‐ IV Miscellaneous: Transfer of cases, Execution, suspension, remission and commutation of sentences, Disposal of property, Preventive action of the police, Irregular proceedings, Limitation of taking cognizance, Compounding of offences and plea bargaining, Criminal rules and implementation.
UNIT ‐ V 1. Salient features of the Juvenile Justice (Care & Protection of Children) Act, 2000.
2. Salient features of the Probation of Offenders Act, 1958.

FAMILY LAW I: HINDU LAW

UNIT – Introduction ‐ Concept of Dharma , Sources of Hindu law including both Modern and Ancient, Importance of Dharma Shastra on legislation, Two principal schools of Hindu Law, Application.
UNIT – II Evolution of the institution of Marriage and Family, Law Prior to Hindu Marriage Act, in depth study of Hindu Marriage Act, 1955 ‐Matrimonial Remedies ,Maintenance and Alimony, Customary Practices and law relating to dowry prohibition.
UNIT – III concept of Hindu undivided family , concept of Mitakshara joint family, Property under both Schools, who is a Karta, his position, Powers, Privileges and Obligations, concept of Debts –Doctrine of Pious Obligation, Partition, Religious and Charitable Endowment.
UNIT – IV Inheritance and Succession ‐ Historical perspective of Hindu Law relating to Inheritance, in depth study of Hindu Succession Act, 1956, principle behind Stridhana‐ Woman’s Property, Recent amendments to Hindu Succession Act by Centre and State, Gifts and Testamentary Succession, Wills.
UNIT – V Law relating to Hindu Minority and Guardianship: Kinds of Guardians, Duties & Powers of Guardians, Hindu Adoption and Maintenance Act, 1956, Maintenance, Rights under Hindu Adoption & Maintenance Act 1956.

FAMILY LAW II: MOHAMMEDAN LAW AND INDIAN SUCCESSION ACT

UNIT‐I Development and Advent of Islam, formation of Muslim Law, Schools of Islamic Law, the Shariat Act, 1937, Concept of Marriage: Definition, object, nature, essential requirements of a Muslim marriage, classification of marriage, Legal effects of valid, void and irregular marriage, Muta marriage, Sources of Islamic law, Customary practices and State regulation, Polygamy, Child marriage, Pre‐emption, Wakf Board, Dower.
UNIT‐II Conversion and its consequences on family, Marriage, Guardianship, Succession, Legitimacy, Custody, Guardianship, rights of parents, concept of maintenance.
UNIT‐III Matrimonial Remedies under Islamic Law and Indian Divorce Act, 1869(Amended Act), Nullity of marriage ‐ Bar to matrimonial relief, Alimony and Maintenance as an independent remedy‐ review under Muslim law, detailed study of Indian Divorce Act, 1869, provisions under the Criminal Procedure Code, 1973; Maintenance of divorced Muslim Women under the Muslim Women (Protection of Rights on Divorce) Act, 1986.
UNIT‐IV Will and Inheritance: Will‐ Meaning, difference between will and gift, Will made in death bed or during illness; Muslim law of Inheritance‐ Shia and Sunni schools; Distribution of property under Indian Succession Act of 1925(Of Christians, Parsis and Jews) ‐ Domicile ‐ Parsis Intestate succession and Non Parsis Intestate succession, Succession certificate, Probate and letters of administration, powers and duties of executor.
UNIT‐V Wills – Privileged and unprivileged wills ‐ Construction of Wills in brief ‐ Void bequests, void wills, kinds of legacies ‐ Protection of property of the deceased; Family Courts Act, 1984‐ Constitution, powers, and its functions; Need for Uniform Civil Code‐ Article 44 of Indian Constitution.

PUBLIC INTERNATIONAL LAW

UNIT‐I Nature, definition, origin and basis of International law; Sources of International law; Relationship between Municipal and International law; Subjects of International law.
UNIT‐ II States as subjects of International Law: States in general; Recognition; State territorial sovereignty.
UNIT –III State Jurisdiction: Law of the sea; State responsibility; Succession to rights and obligations.
UNIT – IV State and Individual ‐ Extradition, Asylum and Nationality; the agents of international business; diplomatic envoys, consuls and other representatives; the law and practice as to treaties.
UNIT – V United Nations Organization ‐ Principal organs and their functions; World Trade Organization‐ Main features; International Labor Organization.

INTELLECTUAL PROPERTY LAW

UNIT I Introductory Aspects: Overview of the concept of property; Industrial property and non‐industrial property; Historical background of IPR; Importance of human creativity in present scenario; Different forms of IP and its conceptual analysis. Patents: Introduction and overview of patent protection; History of Patent protections; What is patent and definition of patent; Object of patent; Scope and salient features of patent; How to obtain patent; Product patent and Process patent; Specification – Provisional and complete specification; Procedure for patent applications; Register of patents and Patent office; Rights and obligations of patentee; Transfer of Patent Rights; Government use of inventions; Biotech patents and patentability of life forms; Infringement of Patents; Offences and Penalties.
UNIT II Trade Marks: Introduction and overview of trade mark; Evolution of trade mark law; Object of trade mark; Features of good trade mark; Different forms of trade mark; Trade mark registry and register of trademarks; Property in a trade mark; Registrable and non-registrable marks; Basic principles of registration of trade mark; Deceptive similarity; Assignment and transmission; Rectification of register; Infringement of trade mark; Passing off; Domain name protection and registration; Offences and penalties.
UNIT III Introduction and overview of Cyber Intellectual Property; Intellectual property and cyberspace; Emergence of cyber-crime; Grant in software patent and Copyright in software; Software piracy. Trademarks issues related to Internet (Domain name); Data protection in cyberspace; E‐commerce and E‐ contract; Salient features of Information Technology Act; IPR provisions in IT Act; Internet policy of Government of India.
UNIT IV Geographical Indications: Introduction and overview of geographical indications; Meaning and scope of geographical indications; Important geographical indications of India and their features; Salient features of the Protection of Geographical Indications Act; Protection of geographical indications; Misleading use of geographical indications; Registration of geographical indications; Right to use geographical indications; Infringement; Remedies against infringement; Role and functions of Registrar of Geographical indication; Conflict between Trade mark and geographical indications.
UNIT V International Convention and Treaties: Paris Convention: Background; Salient features of Paris Convention; Governing rules of Paris Convention; Patent Cooperation Treaty: Background; Objectives of PCT; Salient features of PCT; Madrid Convention: Salient features; International registration of marks; World Intellectual Property Organization: Background; Salient features WIPO; Organization of WIPO.

PENOLOGY & VICTIMOLOGY

UNIT – I Introduction: Notion of punishment in law; Difference between crime prevention and control; Theories of punishments.
UNIT ‐ II Kinds of punishment; Sentencing policies and processes; the riddle of capital punishment.
UNIT ‐III Prison reforms; Alternatives to imprisonment; Victimology‐ Introduction, history and philosophy.
UNIT – IV Victimology‐ European experience; American experience; Victim witness assistance program; Restitution.
UNIT – V Victimology ‐ Indian experience; Legal framework; Role of Courts; Role of NHRC.

INTERPRETATION OF STATUTES & PRINCIPLES OF LEGISLATION

UNIT‐I Basic Principles; Guiding Rules; Internal aids to construction.
UNIT‐II External aids to construction.
UNIT‐III Subsidiary rules; Operation of statutes; Expiry and repeal of statutes.
UNIT‐IV Statutes affecting the state; Statutes affecting the jurisdiction of courts. Construction of taxing statutes and evasion of statutes; Remedial and penal statutes.
UNIT‐V Principles of Legislation.

ENVIRONMENTAL LAW

UNIT – I The Idea of Environment: Ancient and Mediaeval Writings, Traditions, Natural and Biological Sciences – Perspectives: Modern concept, Conflicting dimensions, recent issues ‐Environment and sustainable development ‐ National and International Perspectives ‐ Population and Development.
UNIT– II Environmental Policy and Law: Environmental Policy: Pre & Post Independence Period; From Stockholm to Johannesburg Declaration (Rio) and Role of Government ‐ Five year Plans ‐ Forest Policy ‐ Conservation strategy ‐ Water Policy; Conservation of Natural Resources and its Management; Constitution and Environment: Right to Environment ‐ Constitutional provisions on Environment and its Protection ‐ Role of Judiciary on Environmental issues ‐ Evolving of new Principles ‐ Polluter pays principle ‐ Precautionary principle ‐ Public trust doctrine.
UNIT ‐ III International Law and Environmental Protection: International conventions in the development of Environmental Laws and its Policy ‐ From Stockholm to recent conventions (Special Emphasis on Major Conventions & Protocols) ‐ Control on Marine Pollution; Common Law aspects of Environmental Protection; Remedies under other Laws (I.P.C., C.D.C., C.P.C.) ‐ Riparian rights and prior‐appropriation.
UNIT – IV Prevention and Control of Pollution: Pollution of Water, Sources, Legal Control, The Water Act,1974 ‐ Pollution of Air, Modalities of control, The Air Act, 1981 ‐ Noise Pollution and its control, Noise Pollution control order ‐ Disposal of Waste, laws on waste, disposal and its control ‐ Transboundary Pollution hazards & Regulation; Biological Diversity and Legal Order: Bio‐diversity and Legal regulation ‐ Utilisation of flora and fauna ‐ Experimentation on animals ‐ Legal and Ethical issues ‐ Genetic Engineering ‐ Wildlife Protection Act, 1972 ‐ Forest Conservation Act, 1980 ‐ Prevention of Cruelty against animals ‐ Problems in Legal regulation of medicinal plants ‐ The Plant Varieties Act ‐ Wetland Conservation.
UNIT ‐ V Environment Protection Act, 1986 including, Environment Protection Rules, Coastal Zone Regulation, ECO‐Mark, Environment Impact Assessment, Environmental Audit, Public Participation in Environmental decision-making, Environment information, public hearing, Regulation on Bio‐Medical Waste.

COMPANY LAW

UNIT – I The Companies Act, Corporate Personality and its kinds, Promoters – Registration and Incorporation, M O A
UNIT – II AOA, Prospectus, Directors, Meetings, Role of Company Secretary, Dividend, Brief analysis of corporate ethics.
UNIT – III Issue of shares, Types of shares, Debentures, Procedure for allotment of shares and debentures, share capital, Rights and privileges of shareholders, Preventions of Oppression and Mismanagement, Different modes of winding up of companies.
UNIT ‐ IV SEBI Act, 1992; Securities Contracts (Regulation) Act, 1956 and Rules.
UNIT ‐ V FEMA Act, 1999; Competition Act, 2002; Brief introduction to BPO & LPO

LABOUR LAW

UNIT‐ I Introduction to Law of Industrial Disputes Act, 1947: Historical Aspects‐Master and slave relationship‐Industrial revolution‐Laissez‐faire state‐Impact of Constitution on Labor provision; Definition and law relating to Appropriate Government‐ Award and settlement‐ Industry‐Industrial Dispute‐ Workman. Strikes and Lock‐out
UNIT –II Industrial Disputes Act, 1947: Lay‐off, Retrenchment, Closure, Unfair Labor Practices and Role Of Government; Authorities under the Act (Chapter II) to be read with chapters II B, III and IV Adjudication And Arbitration; Restrictions on the right of the employer‐ Chapter IIA‐Notice of change, section 11‐A and sections 33,33A, Recovery of money due from an employer. Industrial Employment (Standing Orders) Act,1946 and Disciplinary Enquiry
UNIT‐III Trade Unions Act, 1926: Salient features of the enactment and important definitions, Registration Of Unions, Amalgamation of Unions, Cancellation and Registration of Trade Unions, Funds of the Union, Immunity enjoyed by the Union. Workmen’s Compensation Act, 1923: Emergence of the legislation‐Total And partial disablement, Dependent‐Workman‐Wages‐Liability of the employer to pay compensation and right of the workman to receive compensation‐Accident “Arising out of and in the course of employment” ‐Occupational Disease‐Doctrine of ‘Added peril.’
UNIT –IV Labor Welfare Legislations: The Employees State Insurance Act, 1948: Corporation, Standing Committee and Medical Benefit Council; Contributions; Benefits; Adjudication of disputes and Claims; Penalties. The Employees Provident Fund Act, 1952: Employees Provident Fund Scheme and Authorities; Miscellaneous. The Maternity Benefit Act, 1961‐ object and its scope.
UNIT‐V Minimum Wages Act, 1948‐ Fixation of minimum rates of wages, working hours and determination of wages and claims The Factories Act‐ its essential features, Safety, Health and Welfare measures. The Contract Labor (Regulation and Abolition) Act, 1970 ‐ object and its essential features.

CLINICAL COURSE‐I: PROFESSIONAL ETHICS AND PROFESSIONAL ACCOUNTING SYSTEM

UNIT-I The legal profession and its responsibilities; The equipment of the lawyer; Conduct in court; Professional conduct in general, Privileges of a lawyer, Salient features of the Advocates Act, 1961.
UNIT-II Duty to the court, Duty to the profession, Duty to the opponent; Duty to the client, Duty to the self, Duty to the public and the state.
UNIT-III Contempt of Court Act, 1972 Selected major judgments of the Supreme Court:

1. In the matter of D, An Advocate, AIR 1956 SC 102.

2. P. J. Ratnam v. D. Kanikaram, AIR1964 SC 244.

3. N. B. Mirza v. Disciplinary committee of Bar Council of Maharashtra and Another, AIR 1972 SC

4. Bar Council of Maharashtra v. M. V. Dabholkar, etc., AIR 1976 SC 242.

5. V. C. Rangadurai v. D. Golan and others, AIR 1979 SC 201.

6. Chandra Shekhar Soni v. Bar Council of Rajasthan and Others, AIR 1983 SC 1012.

7. In Re an Advocate, AIR 1989 SC 245.

8. In Re Vinay Chandra Mishra, 1995 (Vol-I) IBR 118.

9. Supreme Court Bar Association v. Union of India, AIR 1998 SC 1895.

10. Ex-Capt. Harish Uppal v. Union of India, AIR 2003 SC 739.

UNIT-IV Selected opinions of the Bar Council of India
UNIT‐V Accountancy for lawyers: Need for maintenance of accounts‐ Books of accounts that need to be maintained‐ Cash Book, journal and ledger Elementary aspects of bookkeeping: Meaning, object, journal, double entry system, closing of accounts The cash and bulk transaction‐ The Cash book‐ Journal proper especially with reference to client’s accounts‐ Ledger, Trial balance and final accounts‐ Commercial mathematics. Mode of assessment: There shall be a written examination for this course for a maximum of 80 marks, and viva voce for 20 marks. The viva voce shall be conducted by the course teacher and the principal.

HUMAN RIGHTS LAW AND PRACTICE

UNIT – I Jurisprudence of Human Rights; Nature, definition, origin and theories of human rights.
UNIT – II Universal protection of human rights‐ United Nations and Human Rights‐ Universal Declaration of Human Rights, 1948; International Covenant on Civil and Political Rights, 1966; International CovenantEconomic, Social and Cultural Rights, 1966.
UNIT ‐ III Regional Protection of Human rights‐ European system‐ Inter-American System‐ African System
UNIT – IV Protection of Human Rights at national level; Human rights and the Constitution; The Protection Of Human rights Act, 1993.
UNIT ‐ V Human Rights and Vulnerable Groups: Rights of Women, Children, Disabled, Tribals, Aged and Minorities ‐ National and International legal developments

RIGHT TO INFORMATION

UNIT‐I Right to Information before Right to Information Act, 2005; Significance in democracy, Constitutional basis, Supreme Court on right to information.
UNIT‐II RTI Act‐ definitions, Right to information and obligations of public authorities.
UNIT‐III Central Information Commission, State Information Commission, Powers and functions of information commissions, Appeals and penalties.
UNIT‐IV Other related laws ‐ The Official Secrets Act, 1923, The Public Records Act, 1993, The Public Records Rules, 1997, The Freedom of Information Act, 2002, The Commission of Inquiry Act, 1952, The Commission of Inquiry (Central) Rules, 1972.
UNIT‐V Best practices‐ A study of decisions rendered by state commissions and central Commission in the following areas of – Police, Revenue, PWD, Irrigation, Secretariat, BSNL, Posts and Telegraphs, ScheduledBanks, CPWD, Income Tax Department, Central Excise Department, Local Authorities.

BANKING LAW

UNIT – I Indian Banking Structure ‐ Origin – Evolution of Banking Institutions – Types and functions of banks ‐ Commercial banks – Functions – Banking Companies in India – RBI ‐ Constitution, Management and Functions ‐ Banking Regulation Act, 1949 – State Bank of India‐ UTI, IDBI, RRBs’‐Local banks
UNIT ‐ II Employment of funds ‐ Loans and Advances‐ Guarantees‐ Advances secured by Collateral securities‐ Agency Services‐ Financing of Exports‐ Special Banking Services – Advances to Priority Sectors and Credit Guarantee schemes‐ Securitization Act, 2002.
UNIT ‐ III Law relating to Negotiable Instruments, 1881 Act (Read with the amended Act of 2002) ‐ Negotiable Instruments ‐ Kinds ‐ Holder and holder in due course – Parties – Negotiation‐ Assignment – Presentment – Endorsement – Liability of parties – Payment in due course – Special rules of evidence ‐ Material alteration – Noting and protest – Paying banker and collecting banker – Bills in sets – Penal provisions under NI Act ‐ Banker’s book Evidence Act.
UNIT – IV Banker and customer Relationship ‐ Definition of banker and customer – General relationship –Special relationship ‐ Banker’s duty of secrecy, banker’s duty to honour cheques, banker’s lien, and banker’s right to set off ‐ Appropriation of payments ‐ Garnishee order ‐ Customer’s duties towards his banker. Opening of New Accounts – Special types of customers ‐ Minor’s A/C, Joint A/C, Partnership A/C, Company’s A/C, Married women’s A/C, Trust A/C, Joint Hindu family A/C ‐ Illiterate persons, lunatics, executors ‐ Precautions required in case of administrators, clubs, societies and charitable institutions to open an account
UNIT – V Ancillary Services and E‐ Banking: Remittances ‐ General, DD, MT, TT, Traveler’s cheques, bank orders, credit card, debit/smart cards, safe deposit vaults, gift cheques, stock investment. E‐Banking ‐ Definition – E‐Banking includes ‐ Internet banking, mobile banking, ATM banking, computerised banking –E‐ banking services – retail services – wholesale services – E‐ Cheque‐ authentication‐Cyber Evidence‐ BankingOmbudsman.

INSURANCE LAW

UNIT – I Introduction: Nature‐ Definition‐ History of Insurance‐ History and development of Insurance in India‐ Insurance Act, 1938‐ (main sections) Insurance Regulatory Authority Act, 1999: Its role and functions.
UNIT – II Contract of Insurance: Classification of contract of Insurance‐ Nature of various Insurance Contracts‐ Parties there to‐ Principles of good faith – non-disclosure – Misrepresentation in Insurance Contract‐ Insurable Interest‐ Premium: Definition method of payment, days of grace, forfeiture, return of premium, Mortality; The risk – Meaning and scope of risk, Causa Proxima, Assignment of the subject matter.
UNIT – III Life Insurance: Nature and scope of Life Insurance‐ Kinds of Life Insurance. The policy and formation of a life insurance contract‐ Event insured against Life Insurance contract‐ Circumstance affecting the risk‐ Amount recoverable under the Life Policy‐ Persons entitled to payment‐ Settlement of claim and payment of money‐ Life Insurance Act, 1956‐ Insurance against third party rights‐ General Insurance Act, 1972‐ The Motor Vehicles Act, 1988 – Sec. (140‐176), Nature and scope‐ Absolute or no fault liabilities, Third party or compulsory insurance of motors vehicles‐ Claims Tribunal Public Liability Insurance –Legal aspects of Motor Insurance –Claims – Own Damages Claims – Third Party Liability Claims.
UNIT – IV Fire Insurance: Nature and scope of Fire Insurance –Basic Principles – Conditions & Warranties – Right & Duties of Parties – Claims – Some Legal Aspects. Introduction to Agriculture Insurance – History of Crop Insurance in India – Crop Insurance Underwriting, Claims, Problems associated with Crop Insurance – Cattle Insurance in India.
UNIT – V Marine Insurance: Nature and Scope‐ Classification of Marine policies‐ Insurable interest‐ Insurable values‐ Marine insurance and policy‐ Conditions and express warranties‐ Voyage deviation‐ Perils of sea‐ Loss‐ Kinds of Loss‐ The Marine Insurance Act, 1963 (Sections 1 to 91).

ALTERNATIVE DISPUTE RESOLUTION SYSTEMS

UNIT‐I General; Different methods of dispute resolution; Inquisitorial method; Adversarial method; Other methods‐ both formal and informal‐ like Arbitration, Conciliation, Negotiation, Mediation, etc.; Advantages and disadvantages of above methods; Need for ADRs; International commitments; Domestic needs; Suitability of ADRs to particular types of disputes; Civil Procedure Code and ADRs
UNIT‐II Arbitration: Meaning of arbitration; Attributes of arbitration; General principles of arbitration; Different kinds of arbitration; Qualities and qualifications of an arbitrator; Arbitration agreement and its drafting; Appointment of arbitrator; Principal steps in arbitration; Arbitral award; Arbitration under Arbitration and Conciliation Act, 1996.
UNIT‐III Conciliation: Meaning; Different kinds of conciliation‐ facilitative, evaluative, court annexed, voluntary and compulsory; Qualities of a conciliator; Duties of a conciliator; Role of a conciliator; Stages of conciliation; Procedure; Conciliation under statutes Industrial Disputes Act, 1947; Family Courts Act, 1984; Hindu Marriage Act, 1955; Arbitration and Conciliation Act, 1996.
UNIT‐IV Negotiation: Meaning; Different styles of negotiation; Different approaches to negotiation; Phases of negotiation; Qualities of a negotiator; Power to negotiate.
UNIT‐V Mediation: Meaning; Qualities of mediator; Role of mediator; Essential characteristics of the mediation process – voluntary, collaborative, controlled, confidential, informal, impartial & neutral, self-responsible; Different models of mediation; Code of conduct for mediators.

CIVIL PROCEDURE CODE AND LIMITATION ACT

UNIT – I Civil Procedure Code Introduction; Distinction between procedural law and substantive law‐ History of the code, extent and its application, definition; Suits: Jurisdiction of the civil courts‐ Kinds of jurisdiction‐Bar on suits‐ Suits of civil nature (Sec.9); Doctrine of Res sub judice and Res judicata (Sec. 10,11 and 12); Foreign Judgment (Sec. 13, 14); Place of Suits (Ss. 15 to 20); Transfer of Cases (Ss. 22 to 25).
UNIT – II Institution of suits and summons: (Sec. 26, 0.4 and Sec. 27, 28, 31 and O.5); Interest and Costs (Sec. 34, 35, 35A, B); Pleading: Fundamental rules of pleadings‐ Plaint and Written Statement‐ Return and rejection of plaint‐ Defences‐ Set off‐ Counterclaim; Parties to the suit (O. 1): Joinder, misjoinder and non‐ joinder of parties‐ Misjoinder of causes of action‐ Multifariousness.
UNIT – III Appearance and examination of parties (O.9, O.18) ‐ Discovery, inspection and production of documents (O.11 & O.13) ‐ First hearing and framing of issues (O.10 and O.14) ‐ Admission and affidavit (O.12 and O.19) ‐ Adjournment (O.17) ‐ Death, marriage‐Insolvency of the parties (O.22) ‐ Withdrawal and compromise of suits (O.23) ‐ Judgment and Decree (O.20); Execution (Sec. 30 to 74, O.21): General principle of execution‐ Power of executing court‐ Transfer of decrees for execution‐ Mode of execution‐ a) Arrest and detention, b) Attachment, c) Sale.
UNIT – IV Suits in particular cases; Suits by or against Governments (Sec. 79 to 82, O.27); Suits by aliens and by or against foreign rulers, ambassadors (Sec. 85 to 87); Suits relating to public matters (Sec. 91 to 93); Suits by or against firms (O.30); Suits by or against minors and unsound persons (O.32); Suits by indigent persons (O.33); Inter‐pleader suits (Sec. 88, O.35); Interim Orders; Commissions (Sec. 75, O.26); Arrest before judgement and attachments before judgement (O.38); Temporary injunctions (O.39); Appointment of receivers (O.40); Appeals (Ss. 90 to 109, O.41, 42, 43, 45); Reference‐ Review and Revision(Ss. 113, 114, 115, O.46, O.46); Caveat (Sec. 144.A)‐ Inherent powers of the court (Ss. 148, 149, 151).
UNIT –V Limitation Act

COMPETITION LAW

UNIT‐I Constitutional provisions regulating trade; Salient features of MRTP Act, 1986; Salient features of Consumer Protection Act, 1986.
UNIT‐II Sherman Antitrust Act, 1890; Relevant provisions of Clayton Act, 1914; Relevant provisions of the Federal Trade Commission Act; Salient features of U.K. Competition Act, 1998.
UNIT‐III Competition Act, 2002; Preliminary, Prohibition of certain agreements, abuse of dominant position and regulation of combinations.
UNIT‐IV Competition Commission of India; Duties, powers and functions.
UNIT‐V Duties of Director general; Penalties; Competition advocacy; Important judgments of the Supreme Court.

LAW OF EVIDENCE

UNIT‐I distinctive analysis between substantive and procedural law, proof evidences in Hindu and Islamic Jurisprudence, Evidence that existed during customary law systems, ‘Principles of Evidence’ during the British era, Legislations dealing with evidence (other than Indian Evidence Act) with special reference to CPC, Bankers Book Evidence Act, Commercial Document Evidence Act, Fiscal and revenue Laws, important features of the Indian Evidence Act, 1861, Application of the Indian Evidence Act. Concept of Facts ‐ Facts in issue and relevant fact, kinds of evidence- Circumstantial and direct evidence, Presumptions, proved, disproved, not proved, Appreciation of evidence. Relevancy of Facts (section 5), Doctrine of Res gestae, Sections 6, 7, 8 and 9 of Evidence Act, Evidence based upon concept of Common Intention (Section10), Relevancy or otherwise irrelevant facts‐ Facts to prove right or custom (Section13) Facts concerning state of mind/body or bodily feelings (Sections 14 and 15) , Relevancy and admissibility of admissions, evidentiary value of admissions (Sections 17 to 23).
UNIT‐II concept of Relevancy and admissibility of confessions, Admissibility of information received from an accused person in custody, Confession of co‐accused (Sections 24 to 30), Admitted facts need not be proved (Section 58), Dying declaration (section 32), Judicial standards for appreciation of evidentiary value‐Section 32 with reference to English Law, other statements by persons who cannot be called as witnesses‐ (Sections 32(2) to (8), 33)‐ Statement under special, circumstances (Sections 34 to 39), Relevance of judgments (Sections 40 to Sec. 44), General Principles of Expert testimony (Sections 45‐50), Types of expert evidence, Problems of judicial defence to expert testimony.
UNIT‐III Meaning and relevance of Character evidence in Civil and Criminal cases (Sections 52‐55), Oral And documentary Evidence (Sections 59‐60) , General principles concerning documentary evidence (Sections 61‐90), General principles regarding exclusion by evidence (Sections 91‐100).
UNIT‐IV general concept of onus probandi (Section 101), General and special exception to onus probandi (Sections 102‐106), The justification of presumption and burden of proof (Sections 107 to 114) with special reference to presumption to legitimacy of child and presumption as to dowry death‐ Doctrine of judicial notice and presumptions. Estoppel: Scope of Estoppel ‐ Introduction as to its rationale (Section 115) Estoppel distinguished from Res judicata ‐ Waiver and Presumption‐ Kinds ofEstoppel‐ Equitable and Promissory Estoppel‐ Tenancy Estoppel (Section 116).
UNIT‐V Witness, Examination and Cross Examination: Competence to testify (Sections 118 to 120) ‐ Privileged communications (Sections 121 to 128) ‐ General principles of examination and cross examination (Sections 135 to 166) ‐ Leading questions (Sections 141‐ 145) ‐ Approver’s testimony (Section133) ‐ Hostile witnesses (Section 154) ‐ Compulsion to answer questions (Sections 147, 153) ‐ Questions of corroboration (Sections 156‐157) ‐ Improper admission of evidence.

TAXATION

UNIT – Concept of Tax‐ Nature and characteristics of taxes‐ Distinction between tax and fee, tax and chess‐ Direct and Indirect taxes‐ Tax evasion and tax avoidance‐ Scope of taxing powers of Parliament, StateLegislatures and Local bodies. The Income Tax Act: Basis of taxation of Income‐ Incomes exempted from tax‐ Income from salaries‐ Income from house property‐ Income from business or profession and vocation‐ Income from other sources‐ Taxation of individuals, HUF, firms, association of persons, Co‐ operative Societies and Non‐ Residents.
UNIT‐II Income Tax Authorities‐ Their appointment‐ Jurisdiction‐ Powers and functions Provisions relating to collection and recovery of tax‐ Refund of tax, appeal and revision provisions, offences and penalties. Wealth Tax: Charge of Wealth tax, assets, deemed assets, and assets exempted from tax Wealth tax Authorities‐ Offences and penalties.
UNIT‐ III Central Excise Laws: Nature, scope and basis of levy of Central Excise duty‐ Meaning of goods‐ Manufacture and manufacturer‐ Classification and valuation of goods‐ Duty payment and exemption provisions‐ Provisions and procedure dealing with registration and clearance of goods‐ An overview of set‐off of duty scheme.
UNIT‐ IV Customs Laws: Legislative background of the levy‐ Appointment of Customs officers Ports‐ warehouses‐ Nature and restrictions on exports and imports‐ Levy, exemption and collection of customs duties, and overview of law and procedure ‐ Clearance of goods from the port, including baggage‐ Goods imported or exported by post, and stores and goods in transit‐ Duty drawback provisions.
UNIT V Central Sales Tax Laws: Evolution and scope of levy of Central Sales tax‐ Inter‐ State sale outside a State and sale in the course of import and export‐ Basic principles Registration of dealers and determination of taxable turnover; Service Tax – Main features of Service Tax; VAT‐ Introduction to ValueAdded Tax.

INTELLECTUAL PROPERTY RIGHTS‐II

UNIT I Indian Copyright Law: Introduction and overview of copyright: History of the concept of copyright and related rights; Nature of copyright: Salient features of Copyright Act; Subject matter of copyright; Literary work; Dramatic work; Musical works; Artistic works; Cinematographic films; Sound recordings; Term of copyright; Computer software and copyright protection; Author and ownership of copyright; Rights conferred by copyright; Assignment, transmission and relinquishment of copyright; Infringement of copyright; Remedies against infringement of copyright
UNIT II Biological Diversity Law: Introduction and overview of Biological Diversity; Meaning and scope of Biological Diversity; Biological resources and traditional knowledge; Salient features of Biological DiversityAct; Biological Diversity concerns and issues; Bio piracy; Regulation of access to Biological Diversity; National Biodiversity Authority; Functions and powers of Biodiversity Authority; State Biodiversity Board;Biodiversity Management Committee and its functions.
UNIT III Protection of Plant Varieties and Farmers Rights Law: Legal concepts relating to the protection of plant varieties rights; Legal concepts relating to the protection of plant breeders rights; IPR in new plant varieties; Policy and objectives of protection of plant varieties and farmers rights act; Plant varieties and Farmers rights protection authority; National register of plant varieties; Procedure for registration; Rights and privileges; Benefit sharing; Compensation to communities; Compulsory licence; Relief against infringement; National Gene Fund.
UNIT IV Designs Law: Introduction and overview of Designs Law; Salient features of Designs Law; Procedure for registration; Rights conferred by registration; Copyright in registered designs; Infringement; Powers and duties and Controller; Distinction between design, trade mark, copyright & patent.
UNIT V International Treaties / Conventions on IPR: TRIPS Agreement: Background; Salient Features of TRIPS; TRIPS and Indian IPR; Berne Convention: Background; Salient features of Paris Convention; Convention of Bio‐Diversity: Objectives of CBD; Salient features of CBD; International IPR agreements affecting protection of plant varieties: The WTO Doha round of trade negotiations; International Treaty on Plant Genetic Resources (“ITPGRFA”)

WHITE COLLAR CRIMES (PRIVILEGED CLASS DEVIANCE)

UNIT – I Introduction ‐ Concept of white-collar crime – Indian approaches to socio‐economic offences‐ forms of privileged class deviance – official deviance (Legislators, judges and bureaucrats), professional deviance, trade union deviants, land law deviance, upper class deviance, police deviance, gender-based deviance, deviance by religious leaders and organisations.
UNIT ‐ II Official deviance; Prevention of Corruption Act, 1988.
UNIT ‐ III Police and politicians’ deviance; N. N. Vohra Committee Report; Lokpal and Lokayukta institutions.
UNIT – IV Professional deviance; Medical profession ‐ The Lentin Commission Report; Legal profession – Opinions of Disciplinary Committee of Bar Council of India.
UNIT – V Gender based deviance – sexual harassment; Offences against scheduled castes and scheduled tribes

WOMEN AND CRIMINAL LAW & LAW RELATING TO CHILD

UNIT‐I Women in Pre‐Constitution Period: Social and Legal Inequality; Social Reform Movement in India;Legislative response in India. Women & children in the Post‐Constitution Period. Provisions of Constitution ofIndia Preamble, Art.14, 15, 23, and Part IV Legal Measures in relating to Child Labor Women and PoliticalRepresentation.
UNIT‐II Different Personal Laws‐ Unequal Position of Indian Women‐Uniform Civil Code; Sex Inequality inInheritance Rights: Right of Inheritance by birth for Sons and not for Daughters; Inheritance under Christian Law; Inheritance under Muslim Law; Matrimonial Property Law; Right of Women to be Guardian Of her minor sons and daughters.
UNIT‐III Law of Divorce ‐ Christian Law‐Discriminatory Provision; Muslim Law‐ Inheritance divorce. Women and Social Legislation: Dowry Prohibition Law; Sex Determination Test, Law relating to Prevention Of Immoral Trafficking in Women Act.
UNIT‐IV Women and Criminal Law: Adultery, Rape, Outraging the Modesty of Women; Kidnapping; Sati Prohibition Law; Law relating to Domestic Violence; Law relating Eve Teasing; Indecent Representation ofWomen Act.
UNIT‐V Women and Employment that included Factories Act, Provisions relating to women, Maternity Benefit Act, Equal Remuneration Act, Law Relating to Sexual Harassment at Working Place; , national Commission for Women- its functions and powers.

LAW RELATING TO INTERNATIONAL TRADE

UNIT I Historical background of International Trade, Institutions such as UNCTAD, UNCITRAL, GATT (1947‐ 1994), World Trade Organization, its objectives, Power and structure, treatment given to most Favoured Nation, Tariffs and Safeguard measures.
UNIT II Technical barriers to Trade, Sanitary and Phyto‐ sanitary measures, Trade Related Investment Measures (TRIMs), Anti‐ Dumping, Subsidies and Countervailing Measures, Dispute resolution mechanism.
UNIT III International Sales of Goods, Formation and Performance of International Contracts, Various Forms and Standardization of Terms, Acceptance and Rejection of Goods, Frustration of Contract, Invoices and packing, Product liability.
UNIT IV Exports – Insurance of Goods in Transit, Marine Insurance and its kinds, Law dealing with carrier of goods by sea, land and air, transport of container, Pre‐Shipment Inspection methods, Licensing of Export and Imports.
UNIT V Laws pertaining to Finance and Investments, Foreign Collaboration and Investment Policy, Foreign direct investment in Industries and Governing Policies, Foreign Institutional Investors (FIIs), Investment by Non‐resident Indians (NRIs) and Overseas Corporate Bodies (OCBs), Foreign collaboration Agreement, Foreign Technology Agreement, Foreign Companies and Nationals in India.

Language of the Entrance Exam

The language of the entrance exam shall be English.

Marking Scheme of the Entrance Exam

According to the official notification of CUET PG, 2024, the new exam pattern paper comprises 75 multiple choice questions and each question carries 4 marks.
For every correct answer, four marks will be awarded and for every incorrect answer, one mark will be deducted.
No marks will be awarded or deducted for any question which is left unanswered.
CUET PG 2024 Important Dates

Event	Date and Time
Release of CUET PG application form	December 26, 2023
Last date to apply for CUET PG	January 31, 2024 (up to 11.50 pm)
Successful final transaction of fee	December 26, 2023 to February 01, 2024 (11.50 pm)
CUET PG 2024 Application form correction window	February 02, 2024 to February 04, 2024 (up to 11.50 pm)
CUET LLM exam date	March 11 to 28, 2024
Declaration of Results	Last week of March 2024 (tentative)
Release of DU LLM application form	March 2024 (tentative)
Last date for application submission	April 2024 (tentative)
Release of first merit list	April 2024 (tentative)

Seat Reservation

Caste based reservation policy as laid down by the Central Government is followed. Here are the reservation policy norms as applied by NTA:

Category	Seat Reservation
category of Economically Weaker Section (GEN-EWS)	10% of seats in every course
category of Non Creamy Layer (OBC-NCL)	27% of seats in every course
category comprising of Scheduled Caste (SC)	15% of seats in every course
category of Scheduled Tribe (ST)	7.5% of seats in every course
category based upon Persons with Disability (PwD)	5% of seats in each of the allotted reservation category

DU LLM application form 2024

DU LLM has started online registrations on the CUET PG portal for admissions into the DU LLM course. However, for DU LLM, the application form will begin tentatively in March 2024.

Candidates who are interested in pursuing LLM from Delhi University should fill out the application form and submit the registration fee before the deadline as mentioned in the table above.

The DU LLM 2024 application form will be available online at CUET PG portal. Candidates will be required to enter their personal information, educational background, communication details and other relevant information on their application form.

Online registration for DU LLM 2024

Visit the official DU admission portal- pgadmission.ud.ac.in
Click on the ‘New Registration’ tab.
Enter the following details:

CUET Application number
full name
date of birth, DOB
email id
and mobile number.

The candidate must also specify the desired password.
Complete the Captcha.
Click on the Register button.

The candidate will find a screen somewhat of this kind as shown above.

Filling of application form

Login using your registered email id and password.
You have to fill in your details such as personal, academic and communication.
Selection of course will be asked where you have to fill the course as LLM.
Under college preference, you have to select your preferences.
After filling up the details, comes the documentation uploading step. Upload the necessary documents, such as scanned copies of photograph, signature, date of birth proof and caste certificate wherever applicable.
Pay the required one time CSAS PG 2024 application fee.
Please note that the fee is non refundable so try not to make any silly mistake while filling up the details.
Submit the application form once the payment is done, and take a printout of this form and keep it for future reference.

Documents specifications

Documents that need to be uploaded will include self-attested copies of Class 10 and Class 12 marksheets, caste certificates (if applicable), age certificate, scanned image of passport size photograph, signature, etc.
Always preview the application form and check the correctness of all the details as specified by you, for any change in them is not possible later on.
Size, resolution and such details of the uploaded documents are given in the table below:

Document	Size (maximum)	Resolution (minimum)	Format
Photograph	50 KB	100px X 130px	.JPG/JPEG/PNG
Signature	50KB	140px X 60px	.JPG/JPEG/PNG
Self-attested identity proof	100 KB	–	.JPG/JPEG/PNG
Self-attested Class Xth Certificate (For Date of birth)	100 KB	–	.JPG/JPEG/PNG
Caste/ Reservation Certificate, if applicable	100 KB	–	.JPG/JPEG/PNG
CW Certificate, if applicable	100 KB	–	.JPG/JPEG/PNG
PwD Certificate, if applicable	100 KB	–	.JPG/JPEG/PNG

CUET PG LLM 2024 application fee

Candidates can pay the application fee using Credit Card/ Debit Card, Internet Banking or Demand Draft.
Submit the application form after the payment is made.
The fees for different categories are shown below in the table

Category	Centres in India		Centers Outside of India
Category	Fees (for up to 2 papers)	Additional Fees (per paper)	Fees (for up to 2 papers)	Additional Fees (per paper)
General	₹ 1200	₹ 600	₹ 6000	Rs. 2000/-
General-EWS or OBC-NCL	₹ 1000	₹ 500
SC/ST/Third gender	₹ 900	₹ 500
PwBD	₹ 800	₹ 500

CUET PG LLM admission procedure 2024

The university prepares a Merit List based on the number of applicants and their scores in the Entrance Exam. Candidates included in the Merit List are invited for counselling and document verification.

Post Counselling, shortlisted candidates have to complete the admission process by submitting the admission and course fees.

DU LLM counselling 2024

The Faculty of Law, Delhi University, will publish the DU LLM 2024 counselling schedule. Last year, i.e., in 2023, candidates were invited for the counselling of DU LLM 2023 based on the Merit lists and were required to submit the necessary documents and pay the counselling fee to complete the admission process.

The documents which were necessary at the time of the counselling process are given below:

Certificates and mark sheets of qualifying examinations
CUET PG 2023 admit card
Character certificate
SC/ST/PwD/OBC certificate (if applicable)
Original photographs
Age Certificate
Print out of DU LLM 2023 registration form
Other necessary documents, as notified by the university

DU LLM cut off 2024

The cut off is the minimum marks that are necessary for admission to different LLM courses at Delhi University. The Candidates securing marks within the cut off for DU LLM 2024 will be eligible for admission.

Factors determining DU LLM cut off

The cut off is prepared category wise considering various factors such as

Total marks secured by candidates,
Number of seats offered by the University
Total number of applicants in the law entrance test
Category of the candidate
Reservations and category wise seats offered by the university
difficulty level of the exam and the category of the candidate.

Why to check previous years cut off

To get an idea about the possibility of getting admission in Delhi University LLM program, one should have a look at the previous year cut offs.
Candidates preparing for the DU LLM course would get a detailed insight into the difficulty level of the entrance exam, and that can help them align their preparation as per the requirement.
It also helps to prepare for that target source and put all their efforts to achieve the same.
It might also help the candidates realise how much competition there is for the test. This information proves useful in determining whether or not to take the examination.

Previous years cut offs

DU LLM cut off 2021

Category	Cut off Rank	Cut off Marks
Unreserved (UR)	37	228
Other Backward Classes (OBC)	84	180
Scheduled caste (SC)	150	114
Scheduled tribe (ST)	133	131
Economically weaker section (EWS)	188	76

DU LLM cut off 2020

Categories	Round I	Round II	Round III
	Cut off Marks, Combined Rank	Cut off Marks, Combined Rank	Cut off Marks, Combined Rank
Unreserved (UR)	223,26	210,38	204,44
Other Backward Classes (OBC)	181,67	170,78	168,80
Scheduled caste (SC)	151,97	146,102	141,107
Scheduled tribe (ST)	104,144	100,148	–
Economically weaker section (EWS)	183,65	164,84	162,86

DU LLM cut off 2019

Categories	Round I	Round II	Round III
	Cut off Marks, Combined Rank	Cut off Marks, Combined Rank	Cut off Marks, Combined Rank
Unreserved (UR)	240,31	236,35	235,36
Other Backward Classes (OBC)	207,64	203,68	202,69
Scheduled caste (SC)	187,84	181,90	180,91
Scheduled tribe (ST)	154,117	131,140	131,140
Economically weaker section (EWS)	205,66	200,71	200,71

Tips and tricks to prepare for CUET PG LLM 2024

Making an effective plan is always advisable whenever you want to achieve a particular goal.

The candidates must have a strategy to have an edge over the CUET PG LLM entrance exam 2024.

Some preparation tips and tricks are given below which the candidates can go for:

Difficulty level of subjects: Prepare a study plan according to the difficulty level of the subjects.
Know the syllabus well: Read the syllabus thoroughly, the exam pattern and go through the recommended books to increase the understanding and hence the effectiveness of the preparation.
Timeline: Give sufficient time to analyse all the subjects as per the syllabus and then proceed according to the strategy.
Understand the topics and the concepts underlying as mentioned in CUET PG LLM syllabus.
Note making: Make your own short notes and revise them regularly to memorise all the important facts.
Make use of practice papers: Practise previous years CUET PG LLM Entrance exam question papers and evaluate your score. Check previous years cut offs and compare where your preparation lies and proceed accordingly.
Stay updated: Read daily newspapers and stay updated with the latest legal scenarios across the nation.
Practising as many papers as you can, for it will help in reducing exam anxiety as well.

Books recommended for CUET PG LLM 2024 Entrance Exam preparation

Before we continue on to the preparation books, here are some helpful tips you should keep in mind while searching for the most effective CUET PG DU Entrance exam 2024.

Familiarise yourself with the summary of the book (which you may find online) before you plan to buy it.This will give you an idea of what the book entails and what you can expect from it once you have bought it.
Always go for the latest edition for law is a dynamic subject which requires amendments from time to time.
Try to buy books that contain previous years’ papers and a few sample papers too, for your practice.
Reading some reviews of the book is recommended before you buy it to know what to expect from it and make an informed decision about whether or not to purchase it.

Highly recommended books for CUET PG LLM 2024

Check the list of CUET PG LLM Entrance Exam Book 2024 below:

Book Name	Author/Publication
S.S. Handbook for LLM Entrance Exam	Singhal Law Publications
Universal Guide to LLM Entrance Exam	Gaurav Mehta
Ascent’s Law Guide for LLM Entrance Exam	Ashok. K Jain
Singhal’s Solved Papers of LLM	Singhal Law Publications
S.S. HandBook for LL.M. Entrance Exam (based on the new syllabus)	Vishal Singh
CUET PG LLM Guide (Paperback)	Arihant Experts
The Pearson Guide to the CUET PG LLM Entrance Exam ( Paperback)	Pearson India

General FAQs on DU LLM

What is the fee for LLM at DU?

The total fee of DU for the two and three year LLM program ranges between INR 10,038 and INR 14,837.

Which college under DU offers an LLM program?

DU offers an LLM program via the Campus Law Centre under the University.

Does the DU Law centre have a Moot Court Society and Legal Aid Society?

Yes, the Law centre has its own moot court society to develop mooting skills of its students. They also organise Moot Court competitions from time to time that are one of the best amongst all the moot courts in this country.

How to fill the DU LLM Application Form?

Aspirants will have to visit the official website and that is pgadmission.uod.ac,in order to apply for DU LLM 2024.

What is the fee for DU LLM application?

The DU LLM application fee for unreserved and OBC candidates is Rs. 250 and for the SC/ST/PwD candidates, it is Rs. 100.

What is the eligibility criteria for DU LLM admission?

Candidates must have cleared a 3 year or 5 year LLB degree from a recognized college/ university/ centre to be eligible for admission to DU LLM.

What is the age limit to apply for DU LLM?

There is no age limit to apply for this program provided the candidate fulfils all the other eligibility criteria as mentioned above.

How do the authorities determine the cut off?

The total number of seats that are being offered by the University, the number of applicants, the candidate’s category, the difficulty level of the exam and the reservation policy are all the elements that are considered while determining the Cut off.

Does the DU LLM Cut off remains the same for every year?

No, the minimum grade required for admission in the DU LLM program does not remain the same. It changes from year to year according to a variety of criteria as mentioned in the answer above.

Do minimum scores secured in school or college determine the admission in DU LLM program?

No, the grades in the school or college does not matter. They do not have any bearing on whether or not you will be admitted to law school. However other factors are considered such as character certificate, X class certificate and so on. Kindly check the documents required for admission as mentioned in the article above.

How many seats are offered by the Faculty of Law, University of Delhi for the LLM program?

A total of 125 seats are offered by the Faculty of Law, University of Delhi for the LLM program.

On the basis of which examination DU LLM 2024 admission will be given?

Delhi University will require the candidate’s score in CUET PG 2024 for admissions in LLM course in Delhi University.

Does DU offer a one year LLM?

No, DU does not offer a one year LLM. DU offers Masters in Law (LLM) as a two year and three year full time degree.

Can a candidate appear for DU LLM during his final year of LLB?

Yes, a candidate can appear for the DU LLM entrance exam if he/she is in the final semester of LLB (three year or five year integrated course).

However, the candidate must meet all the eligibility criteria at the time of admission in the DU LLM course.

What is the Contact Address of DU LLM Faculty of Law?

The address is as follows:

Campus Law Centre, Faculty of Law, University of Delhi

Chhatra Marg (North Campus), Delhi-110007, india

Ph: +91-11-27667895

What are the NTA DU LLM 2024 entrance Test Helpdesk details?

The details are as follows:

www.nta.ac.in/DuetExam

Helpdesk Numbers: 9453827203, 9455874491, 9455874492, 9455874494

Helpdesk Email: [email protected]

Role of corporate governance in sustainable tourism

By

Vanshika Kapoor

-

January 30, 2024

0

This article has been written by Narendra Kumar Chaurasia, head of sales and marketing.

Introduction

In the current scenario, sustainability has become strategically important, whether it comes in the context of economics or the environment. In simple words, we can understand sustainable as “able to continue over some time.”

Sustainability refers to initiatives and actions taken to protect a specific resource. It’s very important to understand the four pillars of sustainability – Human, social, economic, and environmental.

Three pillars of corporate sustainability

Social sustainability

Social sustainability is a process for creating sustainable, successful places that promote well-being, by understanding what people need from the places they live and work. Sustainable development focuses on economic and social development in order to improve the quality of life without disturbing the environment.

Economic sustainability

Economic sustainability refers to practices that support long-term economic growth without negatively impacting the social, environmental, and cultural aspects of the community. As social sustainability aims to improve social equality, similarly, economic sustainability aims to improve the standard of living. The main objective of sustainable economics is to maintain stable and high-level economic growth. The quality and quantity of growth both matter.

Environmental sustainability

Environmental sustainability is the responsibility to conserve natural resources and protect global ecosystems to support health and well-being, now and in the future. The objective of environmental sustainability is to protect our natural resources like air, water, land, forests, minerals, etc. Many decisions taken today may have an impact on the environment after many years.

According to Dunphy et al. (2000), an environmentally sustainable business seeks to integrate all four sustainability pillars, and to reach this aim, each one needs to be treated equally.

Tourism and its benefits

No one can ignore the importance of tourism, as it is one of the fastest-growing industries in the world. One of the most important sources of foreign exchange is the tourism industry. The tourism industry not only generates foreign exchange but also creates jobs and stimulates economic growth. Tourists spend money on hotels, restaurants, transportation, and entertainment, which encourages local businesses and earnings in particular areas. We can define the positive impact of tourism as follows.

Social benefits

Tourism offers many social benefits to the community. Mainly, it helps in cultural exchange not only at the domestic but also at the international level. Due to tourism, people from different cultures interact and exchange their thoughts, cultures, and beliefs. Therefore, tourism helps promote peace and harmony. Tourism also encourages the learning of new languages, as different countries have different languages. One of the most important benefits of tourism is that it preserves cultural heritage by supporting local craft, art and music.

Tourism may have some social costs as well. Sometimes there is conflict with local communities due to differences in ideas, views and lifestyles among tourists. In the long term, it may lead to a loss of traditional values and culture as there is a difference in the culture and value system of visitors.

Educational benefits

Tourism offers educational benefits as it promotes learning through understanding the new culture, history and geography of the local area. Due to tourism, not only the visitor but also the host benefit. One of the main educational benefits of tourism is that it promotes foreign language learning and also helps the local community improve communication skills.

Environmental benefits

When tourism is managed sustainably, it offers environmental benefits as well. The aim of sustainable tourism is to minimise the negative impact of tourism on the environment. Sustainable tourism also promotes the conservation of natural resources, such as water and energy, and reduces waste.

Economic benefits

Tourism offers economic benefits in two ways, i.e., direct and indirect. Tourism offers direct benefits through various transactions such as food and beverage, hotel accommodation, entertainment, travel, etc. Local areas mostly get direct economic benefits. On the other hand, indirect economic benefits take place due to the transaction of intermediary items.

How corporate governance fuels sustainable tourism

Corporate governance in sustainable tourism places more emphasis on the use of natural and cultural resources; the minimization of pollution and waste; the conservation of landscapes, biodiversity, and cultural heritage; the fair and responsible treatment of employees, suppliers, and guests; and the fair use of local products and services.

In a challenging world, good governance is extremely essential everywhere, either domestically or within corporations. Good governance means governing the people in a way that the interests of the people of all sections are preserved rightfully. All the individual’s rights are protected and they feel that they are not discriminated against on the grounds of caste, creed, sex, race and religion. Similarly, good governance is also required for the smooth functioning of a corporation. Enron, Cadbury, Wal-Mart, Satyam and Xerox are a few examples of bad corporate governance.

The term corporate governance refers to how companies are run and for what purpose. It defines an organisation’s power structure, accountability structure, and decision-making process. Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled.

Effective corporate governance empowers both management and the board to address the complexities of company operations. Corporate governance establishes robust decision-making protocols and controls and ensures a harmonious balance of interests among stakeholders, including employees, suppliers, customers, and the community.

Pillars of good corporate governance

Accountability

Accountability is about more than simply understanding where blame or praise lies once something happens. Proactively taking steps to own your decisions means discovering risks and creating solid internal control systems. Understanding and taking ownership of risks is very important for the success of an organisation in sustainable tourism.

Transparency

The companies must have a willingness to share clear information with all shareholders regarding performance. It plays an important role in decision-making. For good corporate governance, transparency is very important.

Fairness

For good corporate governance, fairness is very important. There must be clear information among all shareholders. Which helps us in effective decision-making.

Responsibility

The board is responsible for the oversight of corporate matters and management activities. The board must act in the best interests of a company and its investors.

Sustainable tourism

Sustainable tourism is a concept that covers the complete tourism experience, including concern for economic, social and environmental issues, as well as attention to improving tourists’ experiences and addressing the needs of host communities.

The World Tourism Organisation defines sustainable tourism as “tourism that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities.”

Based on General Assembly Resolution 70/193, 2017 was declared the International Year of Sustainable Tourism for Development.

Sustainable tourism can be divided into the following categories:

1-Responsible tourism: Tourism that minimises environmental damage and carbon footprint.

2-Solidarity tourism: Tourism that aims to develop territories and help local communities.

3-Fair tourism: Tourism based on the principle of fair trade.

Eight elements of sustainable tourism

The eight elements of sustainable tourism are as follows:

Energy efficiency

Energy efficiency is one of the most important elements of sustainable tourism. We should reduce our dependence on fossil fuels and use renewable sources of energy, such as electricity generated from solar panels or wind power.

Water conservation and waste management

Effective management of waste and water conservation is one of the important roles of corporate governance in sustainable tourism. ‘Reduce, reuse, recycle’ are the key activities in waste management, and the phrase is highly recognisable by people.

The Swachh Bharat Mission, Swachh Bharat Abhiyan, or Clean India Mission is a country-wide campaign initiated by the Government of India on October 2, 2014, by Prime Minister Mr. Narendra Modi. Water conservation involves using water more sparingly and reducing waste.

Greenhouse gas emissions and carbon offsetting schemes

Reducing carbon emissions is the most important factor in addressing climate change. Which is one of the most important factors in a sustainable tourism business. We should plant more trees or support projects that make our planet happy in order to take care of greenhouse gas emissions and carbon offsetting schemes.

Community relations labour practices and human rights

Community relations means making friends wherever we go. We must respect the people who live there and their traditions.

Labour practices are like teamwork. People who work in hotels, restaurants, or other places should be treated fairly and with respect. They deserve to have good working conditions and fair pay for their hard work. Employing local people in your business is very important for sustainable tourism. Sustainable tourism advocates for recruiting local people.

Human rights are all about treating everyone with kindness and fairness. No matter where we are, everyone should have the right to be safe, happy, and free. We need to make sure our travel choices don’t harm people but instead help them have better lives.

Maximising positive impact on local cultures

There must be good interaction between tourists and local cultures and communities. Community-based tourism (CBT) is a fast-growing niche market within the tourism industry. Tourism must have a positive impact on local culture. Tourists must be aware of local culture and tradition. Tourists must respect the traditions, culture and lifestyle of the communities they are visiting. Tourists can support the local economy by purchasing handmade crafts and other local articles.

Health and safety

Taking care of Health and safety is one of the important roles of corporate governance in sustainable tourism. We have to ensure clean hotels and hygienic food for tourists. Safety for tourists is of utmost concern. We should brief all tourists on the local rules and regulations of the country.

Animal welfare

Animal welfare in tourism is an emotional topic for travellers. Therefore, animal welfare is crucial for sustainable tourism. Animals should not be harmed for entertainment purposes. Activities must be designed for tourists that take care of the health and wellbeing of animals. To attract tourists, we must have a strict animal welfare policy. These policies ensure that wildlife tourism experiences are ethical, sustainable and meet high standards of animal welfare.

Responsibility statement

To communicate your commitment to sustainable tourism, you should write a responsibility statement for your business. This statement must reflect dedication to the environment as well as society.

Conclusion

The role of corporate governance is not only to create corporate value but also to work on the development of tourism in the country. Moreover, one of the important objectives of corporate governance is to enhance the financial performance of an organisation. No doubt, the role of corporate governance in sustainable tourism is slightly different from corporate governance.

References

Insider trading under SEBI (Prohibition of Insider Trading) Regulation Act

By

Vanshika Kapoor

-

January 30, 2024

0

This article has been written by Rohit Chakraborty pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho and edited by Shashwat Kaushik.

This article has been published by Shashwat Kaushik.

Table of Contents

An overview of insider trading

“Discipline is the long and arduous process of convincing the mind to abide by one’s conscience.”

Insider trading is trading in securities of publicly listed companies, stocks or otherwise based on any material information unavailable to the public at large. It is as old as trading securities on a stock exchange.

Section 11(2) of the Companies Act of 1956 prohibits insider trading. This was done to:

Ensure equal opportunities are present for every participant in the market.
Ensuring fairness and transparency in all transactions,
Offering a free flow of information,
Prevention of information symmetry.

Unpublished Price Sensitive Information (“UPSI”) has been defined by the Securities and Exchange Board of India (SEBI) in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations of 2015 in Regulation 2(1)(n) as:

Information relating to the company or its securities.
Such information is not generally available to the public.
If such information directly or indirectly becomes available, then it can materially affect the price of the securities, i.e., significantly affect the price of the share of the company.

Information may relate to:

financial results;
dividends;
any change in the capital structure of the company;
changes in key managerial personnel (“KMP”);
mergers, de-mergers, acquisitions, delistings, disposals, expansions and any such transactions; and
the list is not exhaustive.

Not every insider trade is illegal. If a person, after taking retirement from the company, wants the stocks of the company he owned to be sold for a specific period to earn returns, this is insider trading, but it is legal in this scenario. Therefore, even if later he comes into possession of UPSI, there is no charge of indulging in insider trading, as he had not offloaded the stocks based on such undisclosed information.

Insider trading is based on the principles of corporate governance – transparency, openness, and disclosure. Good corporate governance enhances faith in the company, managers, and other stakeholders. It also helps in gaining the trust of the investors. The Board of Directors makes the decisions for the day-to-day activities of the company; hence, such information from board meetings fits the definition of confidential information. Confidential information can only be shared for the benefit of the company.

Insiders include partners, directors, officers, employees, related companies, anyone having an official relationship with the company, any professional, any business, such as auditors, consultants, bankers, brokers, stockholders, government employees and officials, stock exchange employees, etc.

Insider trading is based on the principle of conflict of interest, wherein the person views his own self-interest over the company’s interest, which he is supposed to protect. Insider trading lowers the reputation of the financial market of the country, the company and the integrity of the market.

Insider trading is a financial crime. The aim of any securities market regulator is not to punish the real wrongdoers but rather to enforce disciplined trading and fair opportunity.

The jurisprudence on insider trading

Classical/Disclose/Abstain theory

According to this view, the insider should disclose the unpublished price sensitive information (UPSI) to the public before making a trade. Alternatively, the person can refrain from making a trade. This theory is applicable to directors, employees, officials, or other associated or connected persons.

Misappropriation theory

According to this view, insider trading regulations are designed to protect the integrity of the securities market against abuses by outsiders who have access to UPSI. There is otherwise no fiduciary or any other kind of duty owed to the shareholders of the company.

Evolution of the policy of insider trading in India

The first step towards restricting insider trading in India was taken in 1948 itself. A committee was formed for the same and recommended restrictions to impose short-swing profits. Section 195 of the Companies Act, 2013 has been enacted to prohibit insider trading.

Following the footsteps of the Thomas Committee of the US in 1948, Section 307 and Section 308 were added to the Companies Act of 1956 to declare insider trading an “undesirable practice.”

The Bhabha Committee in 1952 recommended maintaining a separate register by the company to keep track of the obligatory disclosure of the sale or purchase of shares. Section 307 of the Companies Act, 1956, provided for a register to maintain the shareholding of the directors in the company. Section 308 of the same statute says that directors or those deemed to be directors are to disclose their shareholdings in the company; a subsequent amendment in 1960 to this section added managers to the list.

The Sachar Committee was set up in 1978 to review the Monopolies and Restrictive Trade Practices (MRTP) Act of 1969. The intention was to curb insider trading. It said that there should be stringent laws to keep the details to identify the unfair gains with the details of such traders. The committee further recommended a prohibition on insider trading. If insider trading takes place before or after 2 months of the closing of the accounting year, it has to be notified, and the same was applied for rights issues. All such information was to be maintained in a separate register. They recommended provisions for compensation and civil remedies.

The G.S. Patel Committee was set up in 1984 to review stock exchange dealings. In 1986, the committee recommended amendments to the Securities Contract (Regulations) Act of 1956 (SCRA) to implement stringent policies on prohibiting insider trading for information. The committee further recommended separate legislation to curb the menace of insider trading and identified the absence of the same as a primary cause of insider trading.

In 1989, the Abid Hussain Committee said that insider trading can be both a civil and criminal offence simultaneously, with stricter regulations by SEBI to restrain amoral practices. Consequently, SEBI came up with the SEBI (PIT) Regulations of 1992, later amended in 2002. The SEBI (PIT) Regulations, 1992, defined insider trading as:

Breach of fiduciary responsibility towards shareholders.
To ensure a fairer trade in securities and transfer in the market.
Such information is ‘price sensitive’, given that it has the capability to influence company’s securities’ price in the market.

The PIT Regulations of 1992 had a few loopholes. The same were inserted after Hindustan Lever Ltd. and Ors. vs. Securities Exchange Borad of India and Ors. (2019) and Rakesh Agarwal vs. Securities Exchange Board of India (2003), particularly widening the definition of the term “deemed person.” In Samir C. Arora vs. Securities Exchange Board of India (2004), it was held that to attract the provisions of insider trading in the case of private, unpublished information, the information has to be true.

Role of SEBI in curbing the menace

The definition of unpublished price sensitive information (“UPSI”) provides for a test to identify the price sensitive information, aligning it with the Listing Agreement and providing a platform for disclosure. Previously, the responsibility of adhering to the insider trading norms was restricted to the listed securities only; however, now securities “proposed to be listed” have also been included.

According to the SEBI (PIT) Regulations, 2015, any individual or collective can be considered involved in insider trading. These include:

Immediate relatives of such insiders or connected individuals.
Any holding or associate company directly linked with other corporations.
High-level executives belonging to the holding firm of the parent company.
Officials working at a stock exchange or at a clearing house.
Trustees of mutual fund management companies and board members of asset management companies.
Chairperson or any board member of a public financial organisation.

Regulation 5(1) of the PIT Regulations deals with ‘Trading Plans’. An insider is allowed to formulate his trading plan. He shall have to present the trading plan to the compliance officer for approval of the same. The insider shall also have to make a public disclosure of the trades he wishes to carry out according to the plan. This is to enable the insider to take trades since he is perpetually in possession of UPSI; since he has already declared his trading plans, all his trades are legitimate and cannot be charged with violating the PIT regulations.

The term “insider” has been defined in Regulation 2(1) (g) of the PIT Regulations. It defines an insider as:

a connected person, or
in possession of UPSI, or
have access to UPSI.

The idea is, as SEBI defines in the note pertaining to this regulation, that the process by which the information reached the person is irrelevant, and such a person can be an insider for the purpose of insider trading. The one alleging has to prove that the other person against whom such allegations are being hurled fulfils the criteria of being an insider. The one against whom such allegations were present after the trade has to show that he/she:

was not in possession of such information, or
he has not traded based on that information, or
he could not access such information, or
that the circumstances so present do not provide enough material on him/her, hence exonerates him.

The compliance officer of the company determines the “trading window,” the period where such trades can be taken. The time period during which trading in a company’s securities is limited is called the “closing of the trading window.” During this period, the designated persons and their family members are restricted from dealing with the company’s stocks, except:

legitimate goals,
execution of obligations,
compliance with any legal obligations.

Such a designated person engaged in trading shall not engage for 6 months in a contrary transaction. This restriction is present irrespective of the number of shares that have been traded. When the trading window is open for trading, both the value and quantity of shares specified have to be complied with.

In the PIT regulations of 2015, the companies were supposed to set up countermeasures to prevent leakage of sensitive information. An amendment in 2018, which came into effect in 2019, stated that public companies are required to have a plan in place to deal with such leakage of information and lapses in security.

Provisions of Insider Trading under the Companies Act: Insider trading is also prohibited by the Companies Act, 2013. Under the SEBI Act, it is an offence for 10 years of imprisonment or a fine of Rs. 25 crores, whichever is higher. Under Section 24 of the SEBI Act, the adjudicating officer, on contravention or attempting to contravene or abets contravention of the provisions of the Act or of any rules or regulations made the same.

Section 24(2) says that if any person fails to pay the penalty imposed by the adjudicating officer or SEBI or fails to comply with any such directions or orders, he or she is punishable with an imprisonment term of at least a month, extendable up to ten years, or with twenty-five crores.

SEBI has been given the power to investigate matters related to insider trading and matters related to it since:

SEBI can investigate all sorts of complaints received from investors, intermediaries, etc. who are alleged to carry on insider allegations.
SEBI can carry out such investigations based on their own awareness, knowledge, or information in possession to fulfil SEBI’s motto of protecting investors.

SEBI has its own “insider trading surveillance” mechanism to monitor trading activities and identify suspicious activities. Based on these parameters, further investigation is taken up. SEBI has a whistle-blower mechanism for reporting anonymously, whereby SEBI investigates and takes appropriate action. SEBI conducts regular inspections and audits to ensure compliance with regulations.

On being appointed as a KMP or a director, or as a promoter or a member of the promoter group, they will have to disclose their holdings in the company within 7 days of being appointed as the same.

Off-market trades executed by insiders have to be reported within 2 days to the stock exchange upon receipt. If any promoter, member of any promoter group, or designated person executes a trade exceeding Rs 10 lakh over a quarter, it has to be reported within 2 days of receipt of the information or when he becomes aware of the trade.

Allegations against insider trading have been treated by SEBI as a measure to ensure confidence in the market rather than a retributive action. There are many cases where no penalty has been levied and cases have been dismissed, most of which included cases related to trading while possessing UPSI. SEBI PIT Regulations are focused more on ensuring a pro-active approach.

Every provision in the regulations has specific notes stating the legislative intent for the provision. This is an example of moving from the ‘form approach’ to the ‘substance approach’. The notes are keys to the mind of the regulator.

Structured Digital Database: Structured Digital Database (“SDD”) is one of the most potent tools in SEBI’s arsenal to curb malpractices in the securities market. SDD was added by an amendment to the regulations in 2018, which came into effect on April 1, 2019. SDD has been mentioned in Regulation 3(5) of the SEBI (PIT) Regulations.

The entities handling such UPSI have to maintain a digital database under the SEBI (PIT) Regulations. SDD mandatorily:

must contain details of persons or groups,
one who is sharing the information,
the person to whom such information is being shared, and
the nature of the UPSI shared.

The database should include the names of listed companies and intermediaries, such as merchant bankers, stockbrokers, asset management companies, etc. The database is to be maintained by auditors, advisors to transactions, and other consultants. SDD is envisaged as a tool to trace back the information trail legitimately shared, as stated in the Report of the Committee on Fair Market Conduct (“Report”).

The report said that UPSI, once shared, loses control over such information, irrespective of its legitimacy. It is very difficult to prove the connection between the persons who shared UPSI and the ones who legitimately should not have been parties to the information in cases of insider trading. SDD is therefore a tool to aid SEBI and stock exchanges in investigating insider trading matters.

SDD has to be maintained internally; outsourcing is forbidden. The present legal position is that external servers can be used to store data. However, the responsibility for security logs lies with the board of directors and the compliance officer.

Entries are to be made in SDD with a time-stamp containing the details of the particular person who has first received access to UPSI. There are controls with audit trails to prevent tampering with databases, hence the chain of information sharing. Any change or modification can only be made in a separate entry. The software being used by the companies can be an external one or developed in-house. Compliance with the same is part of the annual compliance report for listed companies and is provided by a practicing company secretary. The report is submitted to stock exchanges.

Interlinking of provisions other than the PIT Regulations: Section 12A of the SEBI Act deals with insider trading. The section states that no person, directly or otherwise:

Should not, in reference to listed securities or securities proposed to be listed on a recognised stock exchange.
- employ or use any manipulative or deceptive device.
- plan any activity that is not permissible under the SEBI Act or the rules and regulations made under the SEBI Act.
Employ any device, scheme, etc. for defrauding of issue of dealings in securities of listed or to be listed companies.
Engage in insider trading.
Deal in securities with possession of any UPSI, communicate any information or material to others, which is illegal under the Act, and follow the rules and regulations under the SEBI Act.
To not acquire control of company or securities for more than the amount prescribed under the Act and its regulations.
In the course of business, engage in acts, practices, etc. that can be considered fraud or deceit regarding the issue of securities.

There are discretionary powers given to the Board of Directors and Compliance Officers to decide on matters related to insider trading. Regulation 3(3) says that communication or procurement of UPSI is not a violation if the information is to make an open offer under the SEBI (Substantial Acquisition and Takeover) Regulations, 2011 (SEBI (SAST) Regulations), provided that the Board of Directors of the company are convinced that the decision is taken in the best interest of the company. Under Regulation 8(1), listed entities have to bring about and publish on their official website a “code of practices and procedures for fair disclosure of unpublished price sensitive information” to adhere to the principles of the regulations. A few of such principles are provided in the note to the regulation:

equity of access to information
publication of policies, for example, dividend
inorganic growth pursuits
calls and meetings with analysts, and transcripts of the same, etc.

All such principles have been detailed in Schedule A of the SEBI (PIT) Regulations. Amendments to the code are to be promptly made to the stock exchange where the securities are listed, as provided under Regulation 8(2). This is following the principle of transparency in disclosure.

Regulation 5(2) says that no one is permitted to procure or communicate any UPSI related to:

company or securities listed or proposed to be listed,
except for legitimate purposes,
performing duties,
discharging legal obligations, or
any other reason is considered not legitimate.

These checks are present such that there is no discrimination when it comes to trading on the stock exchange and that any additional UPSI does not affect the trading plan of the insider disproportionately.

In October 2022, a consultation paper was brought about by SEBI to include mutual funds under the SEBI (PIT) Regulations. The paper was published based on the reactions of fund management entities winding up their operations during the pandemic, affecting people invested in them. Around a reasonable time before the announcement of winding was made public, the major investors withdrew from them. This indicates that there was probably insider information.

The note to Regulation 2(1)(g) on who can be considered an insider is enough, covering all possible instances. This is to avoid any market asymmetry. Regulation 4 is based on the principle of parity of information; therefore, intention becomes irrelevant and compliance is put on a higher pedestal. Also, it does not matter whether the benefit of the transaction is for the company or its shareholders. In the PIT regulations, ‘immediate relatives’ are presumed to be a connected person, legal fiction, rebuttable presumption. Rebutting the same depends on the facts and circumstances of the case.

Regulation 9(4)(iii) of the PIT Regulations says that promoters of all listed companies are designated persons. The shareholding pattern of the promoters has to be pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR) Regulations). The promoters must also adhere to the code of conduct, as mentioned in the SEBI (PIT) Regulations.

Regulation 6(4) says that disclosures received by any company have to be maintained for a minimum period of 5 years. In case a fire breaks out, the company shall immediately inform the recognised stock exchanges where the company is listed. This is present under Regulation 30 of the SEBI (LODR) Regulations. The company will also have to provide proof, such as a copy of the FIR, insurance, survey report, etc., to prove the damages caused.

Regulation 7 is titled ‘Disclosures by Certain Persons’, further classified as initial disclosures, continual disclosures and disclosures by other connected persons. Regulation 7(2)(a) requires promoters to disclose the number of securities acquired or disposed of where the traded value exceeds Rs 10 lakh presently. In an informal guidance note in another matter, SEBI said that in cases where the persons acquiring the securities have no role in the transaction or relevant disclosures for such transactions are already in the public domain, such as bonus issuance or shares received in pursuance of a scheme, separate internal disclosures to the company may not be necessary.

Relevance of “mens rea” – A study based on the case laws

A significant component in determining insider trading is dependent on establishing “mens rea.” In V.K. Kaul vs. Securities Exchange Board of India (2012), the Court used circumstantial evidence to determine the violations of the regulation:

Since it is difficult to get direct evidence due to the multiplicity of transactions,
The steps in the procedure may be unrecorded or unofficial.

The relationship between the parties, the sources of receiving information, the involvement of corporate entities with each other (holding companies, subsidiaries, etc.), the control and management of the company, the Articles of Association (AOA), and the frequency of communication (for example, call data records) are all important sources of evidence. Therefore, determining whether insider trading has taken place depends on a preponderance of probabilities.

In Samir C. Arora vs. Securities Exchange Board of India (2004), it was held that to hold anyone liable for insider trading:

the UPSI has to be true,
only then can such information come under the PIT regulations, and
one of the criteria is that such information should affect the price of the securities.

In Cyrus Investments Pvt. Ltd. and Anr. vs. Tata Sons Ltd. and Ors. (2019), the National Companies Law Tribunal (NCLT) refused to take into account allegations of insider trading due to a lack of direct evidence on the same. In the case of Rakesh Agarwal vs. Securities Exchange Board of India (2003), the Court said that motive is an important element to determining guilt in insider trading cases. This becomes very problematic. Reg 4 allows off-market trading of securities between ones in possession of the same UPSI; this affects market situations too, along with other investors who may have a high influence in the market or belong to different corporate entities when they are about to merge or demerge. Under the garb of “best interest of the company,” any person can get away without any motive for profit maximisation.

In Rakesh Agarwal vs. SEBI, the MD of ABS Company Pvt. Ltd., Mr. Rakesh Agarwal, was accused of insider trading. He was accused of insider trading even on previous occasions, but it was later held that the decisions were taken “in the best interest of the company.” The verdict shows the importance of mens rea in insider trading cases.

A section of experts insists on the strict interpretation of the law; others say that KMPs and other persons who hold significant positions in the company must disclose certain insider information for the best interest of the company. This interpretation of how insider information should be perceived puts in the spotlight the importance of mens rea as an element in deciding the necessary components of the best interest of the company.

In the Sahara case, more than 3 crore people invested due to the allurement of returns in multiples of the amount invested. The money was embezzled in different businesses, such as airlines, resorts, hotels, engaging in foreign investments, investing in foreign exchange markets, etc. These dubious activities stayed under cover until two different companies in the Sahara got listed as public companies. This is an example of a private individual or a private company with celebrity status influencing the market. The present set of regulations does not cover such entities and individuals.

Section 24 of the SEBI Act, 1992, empowers SEBI to proceed against the accused in criminal courts if the facts prima facie indicate criminal activity. Further, in the case of The Chairman, SEBI vs. Shriram Mutual Funds and Anr. (2006), it was held that unless the language of the statute indicates the presence of mens rea in the statute, it is not necessary for the court to determine whether the violation was an intentional one or not. This ambiguity was further clarified in the 2018 amendment to Regulation 4 of the SEBI (PIT) Regulations, 2015, in the explanation.

In the case of Balram Garg vs. Securities Exchange Board of India (2022) the SC discussed the importance of proving intent in proving insider trading. In this case, SEBI held the accused guilty based on circumstantial evidence, while SC set aside the decision. In Securities Exchange Board of India vs. Abhijit Rajan (2020), the Supreme Court said that since there was no intention to make profits with the UPSI in possession, the accused is not guilty. SC further observed that the motive to make a gain is essential, while the actual gain or loss in a transaction is immaterial. This observation shows the importance of the provision of a detailed trading plan as mentioned in Regulation 5 and the necessity to monitor the actions of such connected persons.

In the case of Pan Asia Advisory and Andr. vs. Securities Exchange Board of India (2013), the SC said that SEBI has the power to proceed against non-citizens of India if the allegations are connected in relation to the securities market of India. In Hindustan Lever Ltd. and Ors. vs. Securities Exchange Board of India and Ors. (2019), the Securities Appellate Tribunal (SAT) held that under Reg 3(1), there is no requirement of profit or loss for the charge of insider trading.

Therefore, judicial pronouncements show that the courts are interpreting the regulations as grammatically as possible, even if the conclusion is a harsh one. Therefore, the argument that Regulation 4 of the SEBI (PIT) Regulations, which deals with trading while in possession of UPSI, disproportionately targets individuals lacking any motive, holds no ground. The Indian courts have employed the ‘mischief’ rule of interpretation while assessing the scope of Regulation 4. This has effectively widened the scope beyond what the legislature had envisioned. It was possible because the PIT regulations of 1992 had no provision for an explicit presumption for trading with or without knowledge of UPSI.

SC has further observed that an independent quasi-judicial authority must abide by the established principles of law and not adopt a mechanical procedure.

Comparison with other jurisdictions

The United States of America

The USA was the first country to enact legislation to regulate insider trading. The Securities and Exchange Act, 1934, is an outcome of the same. The background for the enactment of the statute was the Great Depression of 1929.

The Securities Exchange Commission (SEC) Rule 10b-5 of the USA looks at the motive of insider trading in foreign jurisdictions, prohibiting insider trading in foreign jurisdictions. The rule is that any person:

if directly or indirectly using any means, mails, or any other instrument that facilitates interstate commerce, or
any other facility of national securities exchange,
employs any device or scheme,
omits any ‘material fact’ necessary to make statements that are not misleading based on the circumstances under which such statements were made, or
engaged in acts, practices, etc. that, in a normal course of business, could be fraud or deceit upon those engaged in the purchase or sale of any securities.

In the case of USA v. Newman (2014), the US Supreme Court said that in cases of securities fraud, it is important to prove that the act was knowingly or deliberately done. The scientist is determined by their mental state to manipulate, deceive, and defraud. The government must be able to prove its willingness to defraud.

The US Sanction Act deals with penalties for insider trading. The amount is three times the net profit gained or loss avoided by the materials considered UPSI. All the directors and beneficial owners with more than 10% of registered equity securities have to mandatorily file an initial statement with the SEC and the stock exchange where the stock may be listed. Enforcement, keeping pace with technology, has included IT professionals, hackers, etc., who misappropriate sensitive corporate data or are providers of political intelligence.

United Kingdom

The Financial Services and Markets Act, 2000 (FSMA) and the Criminal Justice Act, 1993 provide the statutory framework for the trading regime. Neither of the two regulations defines insider trading. The FSMA empowers the UK Financial Services Authority to sanction anyone emerging from market abuse. Market abuse in the statute is defined as an insider dealing or attempting to deal in a qualifying or related investment based on any insider information related to the investment in question. The provisions apply to those who encourage others to engage in conduct amounting to market abuse. Market abuse is a civil offence.

The Criminal Justice Act deals with price-effected securities on the basis of insider information, or such encouragement, or knowing disclosure of insider information to one another. Section 53 of the Criminal Justice Act, 1993, deals with the defence of a person accused of insider trading. Clause 1 of the section states that if the individual is able to:

Show that at the time he did not expect that the information in question was price sensitive information which would result in profit, or
that he widely believed that the information has been disseminated enough such that the ones not possessing the information are not in any disadvantage by not having the information, or,
he would have carried out the same transaction irrespective of the information he alleged to have gained.

The punishment is limited to up to 7 years, with unlimited fines. Both the UK and India have similar definitions of “price sensitive information” and insider.

Singapore

Section 220 of the Securities and Futures Act, 2001, sidesteps ‘mens rea’ as a component to determine insider trading. The section says that it is not necessary for the prosecution or claimant to prove that there was an intention on the part of the accused to use the information or the absence of facts or circumstances.

Extending the ambit of insider trading

Private companies are excluded from the purview of the regulations; therefore, only a minuscule portion of insider trading gets tracked. Influential individual decisions of private companies or foreign nationals can also be involved in market decisions that can have a price-sensitive effect. A good example of this is Sahara. Reg 2(1)(d)(ii), being not inclusive in nature, is a hindrance to deciding who is a connected person but remains outside the purview of the regulations.

With outsourcing and technological advancements gaining steam, the PIT regulations should further be amended to bring such professionals under the ambit of the PIT regulations. The term “best interest of the company” remains undefined, taking up a lot of time and energy to get clearance from the compliance officer. This will ensure that the decisions taken by the Board of Directors are not in violation of the regulations and provide for the necessary clearance. This will further ensure that Section 166(15) of the Companies Act, 2013 is upheld. The legislature should bring about an amendment on the applicability of mens rea and the admissibility of necessary evidence to determine cases of insider trading. A provision of strict liability might also be necessary.

There is confusion on the interpretation of “mutual funds” under the PIT regulations. There are issues related to the definition of designated persons since, in mutual funds, the investments are pooled. The investors rarely get to say anything in the decision-making processes, even after being in possession of any UPSI related to the fund. Besides, such information might not add anything to the NAV of the scheme. The definition of connected persons in the case of a mutual fund is much wider, which makes it uncertain. Therefore, it only increases compliance requirements and disclosure.

The motive now essentially is to establish uniform compliance standards, linking material events under the SEBI (LODR) Regulations to the definition of UPSI as present under the SEBI (PIT) Regulations, 2015. Matters of divestment, or in the normal course of business operations of the company, having no effect on the price of securities, are to be disclosed to the stock exchanges under the SEBI (LODR) Regulations, but such information is not UPSI under the SEBI (PIT) Regulations.

SEBI’s consultation paper (as mentioned above) said that the non-categorization of material information by UPSI effectively means that the surveillance system mounted cannot be further examined. SEBI’s analysis shows that presently, companies categorise UPSI based on the enumerations listed in the PIT regulations. In thousands of instances of top 100 companies making announcements through various press releases, there was a price movement of 20% of such companies. The movement of the scrip exceeded 2% adjusted to the index, but companies categorised only 8% as UPSI.

All such analysis and observations by SEBI further led SEBI to conclude in the consultation paper that the definition of material events has to be in line with Regulation 30 of the SEBI (LODR) Regulations. Regulation 30 of the SEBI (LODR) Regulations presently defines material events as ones that are determined by the Board of Directors of a listed entity. This has a significant effect on the company. The companies formulated their own policy on material information based on revenue operations, etc.

Further in the consultation paper, SEBI notes that insiders argue that since the company has not classified a certain piece of information as UPSI, the insider cannot determine the same. The amendments, therefore, if carried out, will shift the focus from price sensitivity to the materiality of the information. In another consultation paper, materiality was proposed to be defined as 2% of turnover, or a net worth of 5% of a 3-year average profit/loss after tax, the basis being audited standalone financial statements. These amendments blur the line between UPSI and material non-public information (MNPI), a distinction made in the SEBI Act, 1992. Sec 12A(e) of the SEBI Act refers to MNPI, while Sec 15G refers to UPSI, with compliance measures like closing trading windows and obtaining pre-clearances under the SEBI (PIT) Regulations to make disclosures under Regulation 30 of the SEBI (LODR) Regulations. To sum it up, the intent is to curb the arbitrage present in the regulations.

Conclusion

Most of the allegations are based on circumstantial evidence; there is nothing concrete to prove the allegation. SEBI is said to lack the required technological expertise to perform investigations, coupled with an acute shortage of resources and manpower. Indian laws do not cover cases where such violations have been committed by foreign nationals. There are even no provisions for a penalty in this scenario.

Capping the maximum amount is more of a cost than a penalty, since people make much more through insider trading. Besides, the penalty mechanism of this nature is not uniform. There are standalone firms, business groups, and high market power firms in both emerging and developed markets. All these make it essential to incorporate provisions beyond simply monetary penalties.

Although the Indian market is said to lack depth, there has been a significant increase in the number of investors in recent years. More and more companies are participating in our markets. Economic reforms are driving the development of the capital market. There has been an increase in volume, operations are more transparent, and investment holding methods are now by way of depositories.

iPleaders

IPR and biodiversity

Introduction

Relationship between Intellectual Property Rights (IPR) and biodiversity

Biopiracy

Bioprospecting

Traditional knowledge

International frameworks – TRIPS and CBD

Indian legislations surrounding IPR and biodiversity

Case studies on biopiracy

Neem (2000) and Turmeric (1993) Patents case

Basmati Rice case (2000)

Wheat Varieties case (2003)

Aloe Vera case

Case studies on access and benefit sharing

Kani Tribe case (1987)

Tea Board of India v. ITC Ltd. (2011)

Red Sanders Auction case study (2015)

Novozymes Biologicals case 2004

Role of the National Biodiversity Authority

Role of State Biodiversity Authority

Conclusion

Frequently Asked Questions

How do patents contribute towards the conservation of biodiversity?

How can traditional knowledge be protected?

How can IPR impact access to genetic resources?

Can legislations be made to regulate biopiracy and bioprospecting?

References

All about the Doctrine of harmonious construction

Introduction

History behind the doctrine of harmonious construction

What is the doctrine of harmonious construction

Scope and objective of the doctrine of harmonious construction

Latin maxims related to the doctrine of harmonious construction

Generalia specialibus non derogant

Generalibus specialia derogant

Principles that govern the doctrine of harmonious construction

Importance of the doctrine of harmonious construction

Application of the doctrine of harmonious construction

Applicability of the doctrine of harmonious construction on foreign conventions

Doctrine of harmonious construction in comparison with literal interpretation

Sri Jagannath Temple Managing Committee v. Siddha Math and Others (2015)

Venkataramana Devaru v. State of Mysore (1957)

State of Rajasthan v. Gopi Kishan Sen (1992)

Unni Krishnan, J.P., etc. v. State of Andhra Pradesh and Others (1993)

Sirsilk v. Government of Andhra Pradesh (1963)

K.M. Nanavati v. The State of Maharashtra, (1961)

Calcutta Gas Company Private Limited v. State of West Bengal (1962)

Sales Tax Officer, Banaras v. Kanhaiya Lal Mukund Lal Saraf (1958)

Raj Krushna Bose v. Binod Kanunga and others (1954)

R.K Garg v. Union of India (1981)

Conclusion

Frequently Asked Questions (FAQs)

Why is harmonious construction important in legal interpretation?

When should harmonious construction be applied?

Are there any limitations to the doctrine of harmonious construction?

What role does legislative intent play in the doctrine of harmonious construction?

What is the difference between literal and harmonious interpretation?

How does harmonious construction help to avoid legal confusion and conflicts?

References

Collateral agreements : an overview

Introduction

Understanding collateral agreements

Nature of collateral agreements

Essential elements of collateral agreements

Collateral agreement with a third person

Legal framework

Common examples of collateral contracts

Cases and precedents

Remedies for breach

Conclusion

References

Oral contracts vs. written contracts : an overview

Introduction

Essential elements of a contract

Offer

Acceptance

Legal validity

Consideration

Types of contract