In this article, Shubham Kumar discusses the concept of the socialist state as enshrined in our Indian Constitution and does an analysis of whether India practically follows the socialist model or not.

INTRODUCTION

Socialist: A socialist is someone who supports the political philosophy of socialism, which is governmental system that advocates community ownership and control of all lands and businesses rather than individual ownership. The word ‘Socialist’, added in the Preamble by 42nd Amendment Act, 1976 indicates the incorporation of the philosophy of “socialism” which aims to eliminate inequality in income, status and standard of living.

Capitalism: An economic system in which investment and ownership of the means of production, distribution and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively and state-owned means of wealth.

The adoption of New Economic Policy in 1991 is oriented towards free market and privatization. Before 2015 India grew at slower pace than China which has been liberalizing since 1978. But in year 2015 India outpaced China in terms of GDP growth rate.

When privatization was adopted by the government, doubts were raised that the word ‘Socialist’ in the Preamble, which gave power to the state owned industries, was being diluted. On the other hand, by adopting New Economic Policies in 1991 through privatization, free market was welcomed. The adoption of New Economic Policy raised concerns in the root of the Basic Structure i.e. it seemed to contravene the objective of the word ‘Socialist’ in the Preamble. Even the Supreme Court upheld the privatization of several enterprises without going into the question whether that conflicts with the word ‘Socialist’ in the Preamble.

Cases to support the above argument which changed the scenario of privatization post- liberalization in India are:

• DELHI SCIENCE FORUM V/S UNION OF INDIA, (1996) SCC 405:

In this case, the petitioners in different writ petitions have questioned the power of the Central Government to grant licenses to different non-Government Companies to establish and maintain Telecommunications System in the country and the validity of the procedure adopted by the Central Government for the said grant. In February 1993, the Finance Minister in his Budget Speech announced Government’s intention to encourage private-sector involvement and participation in Telecom to supplement efforts of Department of Telecommunications especially in creation of internationally competitive industry. On May 13, 1994, National Telecom policy was announced which was placed in the Parliament saying that the aim of the policy was to supplement the effort of the Department of Telecommunications in providing telecommunications services. Later, guidelines for induction of private-sector into basic telephone services were announced and a Committee was set up to draft the tender documents for basic telephone services under the Chairmanship of G.S.S. Murthy. Ministry of Communications published the ‘Tender Documents for Provision of Telephone Service’. It specified and prescribed the terms and conditions for the basic services and also conceived foreign participation but as a joint venture prescribing a ceiling on total foreign equity which, so far the Indian Company was concerned, was not to exceed 49% of the total equity apart from other conditions.

• BALCO Employees Union vs Union of India ( 2002) SCC 333

In this case, the decision of the Government to the aforesaid strategic sale was challenged by the BALCO employee union by filing Writ Petition No. 2249 of 1999 in the High Court of Delhi. This petition was disposed of by the High Court vide its order dated 3rd August, 1999.

On 3rd March, 2000, the Union Cabinet approved the Ministry of Mines’ proposal to reduce the share capital of BALCO from Rs. 488.8 crores to Rs. 244.4 crores. This resulted in cash flow of Rs. 244.4 crores to the Union Government in the Financial Year 1999- 2000.

“(h) It shall vote all the voting equity shares of the Company, directly or indirectly, held by it to ensure that all provisions of this Agreement, to the extent required, are incorporated in the Company’s articles of association.”

With the filing of the writ petitions in the High Court of Delhi and in the High Court of Chhattisgarh, an application for transfer of the petitions was filed by the Union of India in this Court. After the notices were issued, the company received various notices from the authorities in Chhattisgarh for alleged breach of various provisions of the M.P. Land Revenue Code and the Mining Concession Rules. Some of the notices were not only addressed to the company but also to individuals alleging violation of the provisions of the code and the rules as also encroachment having taken place on Government land by BALCO. This led to the filing of the Writ Petition No. 194 by BALCO in this Court, inter alia, challenging the validity of the said notices. During the pendency of the writ petition, the workers of the company went on strike on 3rd March, 2001. Some interim orders were passed in the transfer petition and subsequently on 9th May, 2001 the strike was called off.

By Order dated 9th April, 2001, the writ petitions which were pending, in the High Court of Delhi and Chhattisgarh, were transferred to this Court being Transfer Case No. 8 of 2001 which pertains to the writ petition filed by BALCO Employees’ Union; transfer Case No. 9 of 2001 pertains to the writ petition filed by Dr. B.L. Wadhera in the Delhi High Court and Transfer Case No. 10 of 2001 is the writ petition filed by Mr. Samund Singh Kanwar in the High Court of Chhattisgarh.

• Narmada Bachao Andolan vs Union of India (2000) SCC 664

Narmada is the fifth largest river in India and largest West flowing river of the Indian Peninsula. Its annual flow approximates to the combined flow of the rivers Sutlej, Beas and Ravi. Originating from the Maikala ranges at Amarkantak in Madhya Pradesh, it flows Westwards over a length of about 1312 km before draining into the Gulf of Cambay which is 50 kilometers west of Bharuch city. The first 1077 km stretch is in Madhya Pradesh and the next 35 km stretch of the river forms the boundary between the States of Madhya Pradesh and Maharashtra. Again, the next 39 km forms the boundary between Maharashtra and Gujarat and the last stretch of 161 km lies in Gujarat.

The basin area of this river is about 1 lakh sq km. The utilisation of this river basin, however, is hardly about 4%. Most of the water of this peninsula river goes into the sea. In spite of the huge potential, there was hardly any development of the Narmada water resources prior to the Independence.

In 1946, the then Government of Central Provinces and Berar and the then Government of Bombay requested the Central Waterways, Irrigation and Navigation Commission (CWINC) to take up investigations on the Narmada river system for basin-wise development of the river with flood control, irrigation, power and extension of navigation as the objectives in view. The study commenced in 1947 and most of the sites were inspected by engineers and geologists who recommended detailed investigation for seven projects. Thereafter in 1948, the Central Ministry of Works, Mines & Power appointed an Ad-hoc Committee headed by Shri A.N. Khosla, Chairman, CWINC to study the projects and to recommend the priorities. This Ad-hoc Committee recommended as an initial step detailed investigations for the following projects keeping in view the availability of men, materials and resources.

• Center for Public Interest Litigation vs Union of India (2003) SCC 532

In these two writ petitions filed in public interest, the petitioners are calling in question the decision of the Government to sell majority of shares in Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) to private parties without Parliamentary approval or sanction as being contrary to and violative of the provisions of the ESSO (Acquisition of Undertaking in India) Act, 1974, the Burma Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Limited and all the Undertakings in India for Caltex India Limited) Act, 1977.The petitioners contended that in the Preamble to these enactments it is provided that the oil distribution business be vested in the State so that the distribution subserves the common general good; that, further, the enactments mandate that the assets and the oil distribution business must vest in the State or in Government companies; that, they are not opposed to the policy of disinvestment but they are only challenging the manner in which the policy of disinvestment is being given effect to in respect of HPCL and BPCL; that, unless the enactments are repealed or amended appropriately, the Government should be restrained from proceeding with the disinvestment resulting in HPCL and BPCL ceasing to be Government companies. It is further submitted that disinvestment in HPCL and BPCL could result in the State losing control over their assets and oil distribution business and, therefore it is contrary to the object of enactments.

The argument till now raises a question in the mind of a reader that whether the diversion from the basic structure, which is taking place gradually under the garb of post-liberalization era is appropriate or not? It could be understood by an in-depth understanding of two important considerations :

Whether we support that economic policy must adhere to the ‘Doctrine of Basic Structure’ by relying on the fact that it should not be altered as decided in the landmark case of Keshavananda Bharti.

Another consideration is whether we should support the alteration of the Basic Structure Theory in the name of development, which is nevertheless supported by Supreme Court where it upheld the privatization of several enterprises without going into the question if that conflicts with the word ‘Socialist’ that shows the diversion from the Basic Structure theory in the name of development.

Now if we support the first consideration, it will force our economy to follow the socialistic pattern and again create the situation where governmental system will advocate community ownership and control of all lands and business rather than individual ownership. In this technological era where development is happening rapidly all across the globe, it is not practically possible to go back where we totally depend on socialist pattern of development. So it could not be justified to be a part of society where we totally depend upon state-owned means of wealth. i.e. following ‘Philosophy of Socialism’. An example to justify the same is-

“Education is governed by the Constitution of India. In terms of enrollment, India is the third largest higher education system in the world after China and the USA. The quality of human resources of a country normally depends upon the quality of the education of the country. After Independence, it has been the vision of Indian government to adopt some economic reforms. So, in 1991 our government adopted “LPG” that connotes Liberalization, Privatization, Globalization and opportunities in higher education. Higher education drives, and is driven by, globalization, a phenomenon of increasing worldwide inter-connectedness that combines economic, cultural and social changes. Globalization and liberalization put tremendous effect on higher education and this paper explores the impact of globalization on higher education with regard to SWOT (strengths, weaknesses, opportunities and threats) analysis and liberalization with its positive and negative effects”. This example shows that if we were to stick to the Doctrine of Basic Structure theory then we cannot see the changes that we are witnessing today.

Now if we support the second consequence, where in the name of development, the government will continue its activity of privatizing each and every sector ,then the day is not far when the economic development of our country will be totally dependent on the private sector and it will directly or indirectly cause a great impact, i.e., on the one side, we have to face the situation where there is a state with power in the hand of individual ownership which further creates a situation where the consumer will be no less than a puppet in the hands of those who are having total command or control over each and every sector and on the other side, if the government supports complete privatization that is complete transformation from ‘Socialistic’ pattern to the ‘Capitalistic’ pattern of development, then it will cause ‘Damage, Destruction, Change or Alteration in the Basic Structure or Framework of the Constitution’. So it is crystal clear that, if government will follow such policy where the country has to face the complete transformation of socialism to the capitalism in the name of development then it will lead to the destruction of the Basic Structure of our Constitution.

The latest example nowadays is the concept of Reliance Jio to justify the above analysis:

RELIANCE JIO: A telecommunication leg of Reliance Industries Limited owned by Mukesh Ambani; it was incorporated in 2007. It is a Mumbai-based provider of 4G internet, mobile, telephone, broadband services and digital services in India, formerly known as Infotel Broadband Service Limited. It provides 4G services on a pan-India level using LTE technology which is attracting more and more consumers by promising to provide unlimited 4G network, free voice calls, free SMS and also has officially announced the ‘world’s cheapest tariff packs for internet and voice calls’. It may happen that by providing this dream offer, a day will come when all the other telecom companies like Aircel, Airtel, Idea etc. along with state owned telecom companies, who will not be able to provide such facilities, will collapse and this will lead to creation of a situation where there will be no competitor telecom company because people will only become the consumer of Reliance Jio.

Now if we try to figure out the negative impact of becoming the consumer of only one telecom company in the market is that, it will create its unbeatable monopoly in this sector and the question which will then arise would be that what if a day will come with the same ‘world’s cheapest tariff pack for internet and free voice calls provider’ will start charging unnecessarily higher amount opposite to that of what they are providing today? Then even though it would create extra monetary burden on the common man’s pocket, everyone will have to pay whatever they charge, willingly or unwillingly; we are bound to suffer inconvenience because till that time we will not have any alternatives left. In that scenario no one can help even the government to overcome the situation. And it is just one example to show the negative impact of concentration of power in one hand. So, if any practice which evolves in the name of development under post-liberalization era, which brings the founding stone of complete destruction of the basic structure of the constitution, is logically unreasonable.

Now after doing critical analysis of both the situation, it paints a clear picture in the mind that in the practical scenario it is neither possible to completely stick on to the Basic Structure of the Constitution nor does the complete diversion from the Basic Structure holds good. Because on one hand, our economic policies cannot follow the old socialistic pattern of development in order to completely follow the Basic Structure theory and on the other hand government can’t take such steps in the name of development whose end will be the destruction or alteration in the Basic Structure of the Constitution.

So in light of the present situation of our country, it’s high time to accept the truth that there is need to make strategies where both should go hand in hand, that means the need of the time is that there must be some flexibility which should be maintained, while making any policy regarding trade and commerce in order to see the economic development.

Now I want to take everyone’s attention on the issue of ‘Right to Property’ just to show how the decision had been taken in the past in which the Government comes forward with the solution of neither to set aside the rights of the citizens nor to hinder or affect the development process of the State.

“Article 19 and 31 of Part III of the Constitution Of India which deals with the fundamental rights, originally provided for the right to property, where Article 19 guaranteed to all citizens the right to acquire, hold and dispose of property and

Article 31 provided that “no person shall be deprived of his property save by authority of law”; it also provided that compensation would be paid to a person whose property has been taken for public purposes.

The provision relating to right to property were changed a number of times. The 44th Amendment of 1978 deleted the right to property from the list of Fundamental Rights and Article 300-A was added to the constitution which provides no person shall be deprived of his property save by authority of law.

Addition of citizens Right to Property in the Article 300-A and making it as the constitutional right can be considered as one of the best examples which can be correlated with the current topic, because it is one of the cases in which the lawmakers neither kept right to property as the fundamental right nor declared it as unconstitutional because if the right to property is kept as a fundamental right of the citizen, then it will never be possible for the State to take away the land from citizens even if that piece of land is required for the welfare as well as development of the society and which could benefit the society as a whole. Then this right to property as a fundamental right will be no less than an obstacle in the path of development. So, there was the need of time to take it out from the part 3 of the Constitution. In short, lawmakers could not stick to the old law where Right to Property was a Fundamental Right. On the other hand, the same lawmakers cannot declare it unconstitutional because then the citizens are not left with any means to protect their land, and even this situation was not acceptable. So the lawmakers instead of leaving right to property as a fundamental right or instead of making it unconstitutional, chose to make it a constitutional right of the citizen, according to which, if needed, the government can take the right over property from its legal owner by paying adequate compensation or if the owner of the property is deprived of his property unreasonably or unlawfully then they can knock the door of the court for justice because it is their constitutional right to enjoy their right to property provided under article 300 A by the Constitution Of India. This leads to a conclusion that sometimes there are situations where neither the lawmaker can stick to the law nor make it unconstitutional.

So it is one of the best examples where the situation resembles to the current topic where I am trying to prove that it is the flexibility which is the need of the hour and which should be maintained while making any policies regarding trade and commerce in order to see economic development because in today’s advanced and technological era neither can we go back, as we cannot imagine in the practical scenario to be a part of situation where our Indian economy has to be totally dependent upon the socialistic pattern of development just because we have to stick anyhow to the doctrine of Basic Structure theory, nor can the government take such steps which destroy, change, or alter the Basic Structure or framework of the Constitution in the name of development under the roof of post- liberalization era.

CONCLUSION:

In order to overcome the dilemma of choices so as to understand the requirements of changing times, there is a need to move towards a comprehensive doctrine which encompasses the complexity of policy making and respects the mandate of the Basic Structure, thereby upholding the supremacy of the Constitution. And, it is possible only when the guardians of law and the custodians of the Constitution strive to strike a fine balance between the legitimacy of Development as well as Basic Structure theory. This is the pressing demand of the era.

In this article, Dileep Krishnan N, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the relaxations available to an OPC under Companies Act.

Introduction

Law relating to the companies in India has shown an unprecedented development in the past decade. In the year 2013, the new piece of legislation arrived and the Companies Act 1956 was replaced by a more contemporary, simplified and rationalized Companies Act, 2013. The primary objective of this legislation was to bring our company law at par with recognized global practices. Thus the new legislation in 2013 introduced a number of new concepts and one of the most important amongst them was the concept of the ‘One Person Companies’.

Evolution of One Person Company

Historically, United Kingdom is the first country to pave way for the concept of One Person Company through the precedent set in the landmark judgment of Saloman v. Saloman & Co. In India, the concept was introduced for the first time in the report of Dr. J.J Irani Committee. The committee suggested multiple classifications of companies and expressed an opinion that the law should acknowledge the potential for diversity in the forms of companies. As an aftermath of this report, the Companies Bill, 2009 included the concept of One Person Company. However, it remained dormant until the new Companies Act was introduced in 2013.

What is a One Person Company?

The Companies Act, 1956 mandated that there must be at least two members in order for a Company to be constituted. One of the reasons for this was to clearly distinguish between the corporate structures of a ‘Sole Proprietorship’ from that of a ‘Company’ and it categorically excluded ‘Sole Proprietorship’ from the ambit of the Act. However, the inherent irrationality of the provision became evident when people resorted to the practice of forming companies by adding nominal members/ directors, allotting them single shares and retaining the rest with themselves.

Thus the concept of One Person Company was introduced to remove this blatant irrationality and to give more clarity and logic by leaving an option whereby a person can form a company as a single person entity.  

According to Section 2(62) of the Companies Act, 2013, a One Person Company is a company with only one person as its member. It is a type of private company with only one member. For a broader understanding, one can term it to be a mixture of sole proprietorship and a private company in the sense that it enjoys the complete ownership like that of a sole proprietorship but with a limited liability like that of a private company.

A one-person company may be either a company limited by shares or a company limited by guarantee or an unlimited company. The memorandum of the ‘one person company’ has to indicate the name of some other person, with his prior written consent in the prescribed form. Such person is to become the member of the company in the event of the subscriber’s death or his incapacity to contract. Such person’s written consent must be filed with the Registrar at the time of incorporation of ‘one person company’ along with the memorandum and articles. Such person may withdraw his consent in the prescribed manner. The member of such company can also change the name of such person by following the procedure prescribed under the Act. It is the duty of the member of one person company to inform the company of the change of the other person nominated by him. The company has to then inform the Registrar of any such change in the prescribed time and manner. Any such change will not amount to an alteration of the memorandum.

Relaxations Available to a One Person Company

A One Person Company has been provided with significantly relaxed requirements under the Act.

One director

As per Section 149(1)(a), only one director is required for a One Person Company. This relaxation is available only to One Person Company since every other type of companies requires a minimum number of two directors.  

Filing of Annual Returns

Usually, the annual returns of the company has to be signed by the Director and the Company Secretary whereas for a One Person Company, it shall be signed by the Company Secretary and if there is no Company Secretary, then by the Director alone.  

Holding of Meetings

By virtue of Section 96(1), a One Person Company is exempted from holding the Annual General Meeting of the company. Section 122 of the Companies Act, 2013 is very important with respect to One Person Company. According to Section 122, the provisions of Section 98 and Sections 100 to 111 which talks about the procedural aspects of General Meeting and voting at the General Meeting are not applicable to One Person Companies.

Further in respect of businesses which can be transacted only through general meetings of the company by means of an ordinary or special resolution, for a One Person Company, such a meeting will be deemed to have done if the member of the company has communicated the resolution to the company and entered it in the minutes book with sign and date. As there is only one director for a One Person Company, compliance with the provisions of conducting the board meetings are impossible and is therefore granted an exemption. Therefore any business which can only be transacted at a Board of Directors meeting of the company, for a One Person Company, it is sufficient that the resolution by the director is entered in the minutes book as per the Act.

Reports and Disclosures

Section 134 of the Companies Act, 2013 mandates every company to place financial statements along with the Director’s and Auditor’s reports before the members in the general meeting of the Company. The Director’s report so prescribed must have all the necessities mentioned under Section 134(3) of the Act.  However, for a One Person Company, this report shall include only the explanations on qualification, reservation, disclaimers or adverse remarks of the auditors if any.

A One Person Company is granted relaxations in preparing Cash Flow Statements of the company. Further by virtue of Section 137(1) of the Companies Act, 2013, a time limit of 180 days from the closure of financial statement has been granted to One Person Company to file the financial statement with Registrar.

Number of Board Meetings

The minimum number of Board Meetings which needs to be conducted in a particular year and the quorum of such meetings as prescribed in Sections 173 and 174 respectively are not applicable to One Person Companies having only one director. Further, if such a company have more than one directors, then a Board of Directors meeting must be conducted in each half of the calendar year and the time gap between two consecutive meetings must be at least 90 days.  

Regulating One Person Companies

Rule 3 of Companies (Incorporation) Rules, 2014 is very significant in regulating the incorporation of the One Person Company. As per the rules, only a natural person who is a citizen and a resident of India (a person who had stayed in India for not less than 182 days during the immediately preceding financial year) is eligible for incorporating or becoming a nominee of a One Person Company. A person cannot incorporate or become a nominee of more than one ‘One Person Company’. A minor is barred from becoming a member or nominee, nor can he hold shares with beneficial interest in a One Person Company. One Person Company cannot be incorporated or converted as a ‘non-profit company’ under section 8 of the Act. Further, it cannot carry out non-banking financial investment activities.

Conclusion

The most important feature of One Person Company is that while the characteristics regarding the ownership and control predominately resemble that of a proprietorship, the risks are limited to the value of shares held by such person in the company. The Company has a separate legal identity and existence from its shareholders. This would encourage entrepreneurial persons to take the challenge of doing business without bothering about liabilities getting to the personal assets.

The introduction of the concept of One Person Company to the corporate sphere itself was a move to promote and encourage the corporatization of small businesses with simpler legal compliances. Undoubtedly the concept opened up new horizons of business opportunities and created spectacular possibilities particularly to sole proprietors and entrepreneurs who can now enjoy the privilege of limited liability and the advantages of a separate legal entity which was earlier available only to the companies.

It is a fact that the concept of One Person Company is still in its inceptive stage in India and it will get accepted amongst the business community only with the passage of time. But there can be little doubt that with the passage of time, the One Person Company will be the most preferred mode of business structuring especially for micro-businesses and small entrepreneurs.      

In this article, Om Shivam discusses the Legal framework regulating self-driven cars under the Indian Law.

Due to the recent incident killing of 49-year-old Elaine Herzberg by  Self-driving car, it has brought attention to Self-driving car. So let us understand what Self-driving car is and the legal framework which regulates it around the world.

What is Self Driving Cars?

Self-driving Cars which are commonly known as Autonomous Vehicle are the cars which can drive themselves without any human effort. The trials for the Self-driving cars had begun in 1920s but the Autonomous Vehicle appeared in the 1980s, with Carnegie Mellon University’s Navlab and ALV project in 1984 and Mercedes-Benz and Bundeswehr University Munich’s Eureka Prometheus Project in 1987, thereafter, numerous research has been done by various automobiles companies on the subject of Autonomous Vehicle.

How do these vehicle work?

The Autonomous vehicle uses sensors to perceive the environment and it uses various techniques to perceive the surroundings like GPS, laser light, odometry and computer vision. All the information which is collected from the sensors or the techniques is used for navigation of vehicle or prevention of collision from any obstacle on the path.

What Technology they use?

Self-driving Car uses the Bayesian Simultaneous Localization and Mapping (SLAM) algorithm which uses various sensors for current location estimate and offline map updates. Nowadays, these vehicles are being developed with deep learning or neural networks wherein Neural Network, Neurons are simulated from the environment and which activates the network. These networks make a decision in accordance to the huge amount of data extracted from the real-life driving scenarios; these Networks are activated and learn to perform the best course of action, whereas deep learning is used to for programming these vehicles as well to make a decision in the real-life Scenario.

What are the Regulations on these vehicles?

There are a number of legislations that have been passed in the states of the USA for which in 2016 the online database has been made.

1. Nevada

• The State of Nevada became the first state to authorize the operation of the autonomous vehicle in the year 2011, directed the State Department of Motor Vehicles (DMV) to adopt rules for license endorsement and for operation including a safety standard, testing, insurance.
• In 2011 another bill in Nevada with name SB 140 was brought which prohibit the use of cell phone while driving but it allows the user to use the cell phone that is legally operating the autonomous vehicle.
• In the same year, another bill with the name in SB 313 which was regarding autonomous vehicle states that autonomous vehicle should meet a certain condition of the human operator, which requires proof of insurance. It also prohibits the registration of the autonomous vehicles, tested or operated in state until it meets certain conditions.
• The bill with name SB 313 also provides the immunity to the manufacturer of the car whose vehicle has been converted into an autonomous vehicle from any liability.
• Another bill with the name AB 69 was introduced in year 2017 which defines the term “driver-assistive platooning technology”, “fully autonomous vehicle” and “automated driving system” which allows the driver-assistive platooning technology on the highway in the state, platooning technology is the method of increasing the capacity of the roads so here by using this technology the distance between the vehicle is reduced. This bill also protects the manufacturer of the vehicle from any liability, it also requires the reporting of any crash to the department of motor vehicle within 10 days if the crash result in personal injury or property damage greater than $750 and it also allow the fine of $2,500 to be imposed for violations of laws and regulation relating to autonomous vehicle, further it allow DMV (Department of Motor Vehicles) to adopt rules regarding the autonomous vehicles, it also defines the ‘driver’ in case of autonomous vehicle, which is the person who causes automated driving system to engage. It also clarifies that the distance requirement between vehicles is not applied to the vehicle which uses the platooning technology.

2. Florida

• In 2012 legislation passed in Florida regarding an autonomous vehicle, the prime motive of legislator behind the legislation was to promote and encourage the safe development, testing and operation of motor vehicle with autonomous technology on a public road of the state. In the year 2016, Florida through legislation allowed the operation of an autonomous vehicle on public roads and eliminates requirement relating to testing of autonomous vehicle and presence of a driver in the vehicle.
• In Florida bill of the year 2016 with name HB 7027, it allows the use of an autonomous vehicle on public roads by an individual with a valid driver licence, and it eliminates the number of provisions required for testing purpose and also the requirement of driver in the vehicle to meet applicable federal safety standards and regulations.
• In the same year bill with HB 7061 defined the autonomous technology and driver assistive truck platooning technology.

3. California

• In California the bill with name AB 1592 (2016), it authorizes the transport authority to conduct the pilot project for the testing of autonomous vehicle which is not equipped with steering wheel, brake pedal, accelerator, or an operator inside the vehicle, these are to be conducted at specified locations and at specified vehicle.
• In 2017 the bill with name SB 1, encourage the California Department of transportation and cities and counties to use their fund for developing the infrastructure which supports the modern technologies like Autonomous Vehicle System.

4. Georgia

• In Georgia, in the year 2017 bill with name HB472 defines the coordinated platoon as a group of motor vehicles traveling in the same lane utilizing vehicle-vehicle communication technology to automatically coordinate the movement of the vehicles.
• In the same year bill with name SB 219 exempt a person operating an automated motor vehicle with the automated driving system engaged from the requirement to hold a driver licence and it also specifies the condition of insurance and registration requirements to be met for a vehicle to operate without a human driver.

5. New York

• In New York bill with name SB 2005 in 2017 allows the commissioner of a motor vehicle to approve autonomous vehicle test and demonstrations. It also requires the supervision from the state police for testing including the insurance of five million dollars.

6. Pennsylvania

• In Pennsylvania bill with name SB 1267 allows the fund of $40,000,000 for intelligent transportation system applications such as autonomous and connected vehicle-related technology.

7. South Carolina

• In South Carolina bill with name HB 3289, specifies that minimum following distance laws for vehicles does not apply to the operator of a non-leading vehicle traveling in a platoon.

8. Wisconsin

• In Wisconsin bill with name SB 695 defines ‘platoon’ as a group of an individual motor vehicle traveling in a unified manner at electronically coordinated speeds.

And in other states like Ohio, Minnesota, Massachusetts, Maine, Idaho, Hawai, Arizona, Delaware governor have issued the executive order regarding the autonomous vehicle.

9. Europe

If we look on European countries for the legal regulations regarding the autonomous vehicles, the situation is shocking despite having the countries which are major automotive industry partners like France, Germany, Spain, Sweden and the United Kingdom, they do not have any appropriate legislation regarding the autonomous vehicle.

However, the test is been carried on the basis of the Ad-hoc legal permits. But these European member countries except UK and Spain have ratified the Vienna Convention which is a multilateral treaty of the United Nations dealing with general traffic law and until 23 March 2016 any member who is a signatory to the convention required a human driver in control of the car at all times details of which can be read in Article 8 par. 1.5 and Article 13 par.1.In same year paragraph which is called ‘5bis’ was added to Article 8 of the convention which states that system can be overridden by the driver or should fulfill the requirements of ECE regulations. As far as the development pace of the automotive industry is concerned, in Europe it is fast but now there is a great challenge for the insurance companies, manufacture, and lawmaker to address the issue of regulation of autonomous vehicle.

10. India

In India, the main regulations which are been used in case of Motor Vehicle are the Motor Vehicle Act, 1939 and the Consumer Protection Act, 1986. Motor Vehicle Act, 1939, which talks about the mandatory age required for driving car, responsibility of the vehicle, registration of the car etc. Whereas liability which arises due to the negligence, manufacturing defects, design defects, unfair trade practice are dealt with the provision of Consumer Protection Act, 1986.

What is the present scenario of law in India?

Currently there is no as such legislation which deals with the Autonomous Vehicle. It is not like that the concept of Autonomous Vehicle is foreign to India, the work has already been started in Indian Automobile industry, even the research group of 30 from IIT Kharagpur launched a start-up for an ambitious project known as Auro, there mission is to replace the ‘manually driven’ cart and buses to ‘driverless shuttle’ which will be used in university and company campuses etc.

How to address the issue of Autonomous Vehicle?

For addressing the issue of Autonomous vehicle in relation to the Indian Scenario, there is necessity to address the others law which are also going to play their role. Like In case of Privacy & Confidentiality, which also involve the sensitive personal data so the role of Information Technology Act, 2000, is needed to address and also as this technology is prone to hacking so Section 66 of the Information Technology Act, 2000, is needed to be addressed. Other law which also holds importance is Geospatial Information Regulation Bill, 2016, the purpose of this bill is to introduce regulation, acquisition, dissemination, publication, and distribution of geospatial information; this bill is still in the discussion stage but the issue of driverless car is  to be addressed by this bill also.

The other major challenges would be to deal with the issue of existing applicable provision of the Motor Vehicle Act and Consumer Protection Act, by bringing the autonomous vehicle under the legal framework there would be necessity to also amend these two laws so that it can be applied properly.

Conclusion

Development is an essential part of the society, and in this era where transformation by the technology in every field is at a very fast pace, a much-needed effort is required for the development of the law of the country. There is an exponential growth in the technology but when we look at the legal regulation, it is much slower as required. The effort is needed from the lawyers who are having knowledge of technology as well law for collaboration with the government in making the regulation for all these technologies. Hence, there should be a legal regulation regarding the technology and its nature should be such that it can evolve with the development of technology and it should not hamper the technological advancement in the country.

In this article, Bhaskar Kumar discusses Joint Venture Agreements in India.

INTRODUCTION

The emergence of joint ventures in business associations has caused endless perplexity in legal arena. The changing panorama of industrial world has impacted law and legal system in a surprising manner. The law of contract which has the basic purpose of serving and ensuring the rights and duties of a commercial relationship and to ensure that no one should get benefitted by unscrupulous act of other.

Principle of equity and Principle of unjust enrichment are the basic principles around which the whole contractual legislation revolves. In the present paper, the researcher has navigated through the concept of joint venture agreements. Joint venture agreements are a recent and celebrated phenomenon in the contractual world. A massive number of joint venture agreements are being entered into by the parties in the day to day business transactions.

In the present context, when the whole globe is looking at India as an attractive destination for investment, for India poses itself as an investment-friendly place filled with lucrative commercial incentives and strategic advantages. The Indian economy is preparing itself for a new avenue in terms of growth and soon it is going to be a leading player in the international economics.

So, in the case of foreign investment, when a company is not able to employ all the requisite resources and also lacks information about the nature of Indian economy and other considerations, it is left with the only choice to enter into a joint venture agreement to carry out the commercial purpose it intends to achieve. The case with India is that even though it provides opportunities in terms of expansion of market but it lacks expertise in technical know-how and other nuances. In that case a joint venture is plausible option for both the parties, wherein, one party is trying to tap into the potential offered by the Indian market and other party is trying to expose India with latest technological developments.

In the present paper, the researcher has attempted to explore the legislations and laws regarding the supervision of joint venture agreements. While researching the aspect of joint venture agreements in India, the researcher has completely focused at the contractual aspect of joint ventures. As the ambit of joint venture agreements is very wide and it is not possible to look at every legal aspect such as corporate law, competition law, intellectual property rights, etc., hence, the researcher has to restrict himself to the contractual aspect of joint ventures.

What is Joint Venture Agreements?

Joint venture agreements are termed as an agreement entered into by parties for a particular period or for a particular purpose. It can also be said that joint venture agreements are said to be concluded when two parties enter into an agreement to share their resources to achieve a certain commercial purpose. In case of a contractual joint venture, the contract is entered into to carry out a particular purpose and this kind of joint venture does not assume the status of separate entity. These agreements are entered into to tackle certain market by deploying the resources of both the parties. Contract is an essential prerequisite for the existence of a joint venture which is fulfilling every condition which concludes a contract and must not be contrary to basic provisions of the law of contract. The most common examples are franchisee arrangements, licensing agreements, and purchasing and distribution agreements.

“Black’s Law Dictionary defines `joint venture’ as: A business undertaking by two or more persons engaged in a single defined project. The necessary elements are : (1) an express or implied agreement; (2) a common purpose that the group intends to carry out; (3) shared profits and losses; and (4) each member’s equal voice in controlling the project.”

The concept of joint venture is a frequent phenomenon of the United States of America’s Courts and it finds its jurisprudential origin in United States of America’s courts. It means a legal entity or enterprise in nature of partnership engaged in a joint undertaking entered into for the purpose of mutual profit. It also connotes an association of persons or companies jointly taking any commercial entity where each party contributes assets and risks. “It requires a community of interest in performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses, (Black’s Law Dictionary, 6th Edn., page 839).” According to Words and Phrases Permanent Edn., “a joint venture is entered into by two parties to carry out a single business enterprise for the purpose of profit”. (p. 117. Vol. 23). “A joint venture can take the form of a corporation wherein two or more persons or companies may join together. A joint venture corporation has been defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking commonly found in oil, chemicals, electronic, atomic fields.” (Black’s Law Dictionary, 6th Edn., P. 342).”

The joint venture is an association of two or more persons based on contract who combine their money, property, knowledge, skills, experience, time or other resources in the furtherance of a particular project or undertaking, usually agreeing to share the profits and the losses and each having some degree of control over the venture.

Some examples of joint ventures are Mahindra and Mahindra, Kawasaki and Bajaj, Hero Honda etc.

Relationship between joint adventurers

The relationship of joint adventurers is fiduciary in character and imposes upon all of the participants utmost good faith, fairness and honesty in dealing with each other with respect to the functioning of the enterprise. It forbids one joint adventurer from acquiring solely for himself any profit or secret advantage in connection with the common enterprise. This is particularly true in the case of the one to whom the conduct of the enterprise is entrusted.

Now the question arises as to what legislations and provision do these joint venture agreements are subject to? Why the joint venture agreement is not a partnership agreement or merely a simple agreement? There are questions such as how the joint venture agreements are different from partnership? The researcher has attempted to answer the question that whether the joint venture agreements are governed by separate legislations.

In the later parts of the paper the researcher has endeavored to give the paper a practical and relevant aspect by including the analysis of clauses vis-à-vis the joint venture agreements. The researcher has tried to find answers to the question that in case of joint venture agreements how the clauses such as Force majeure, Non-competition, Confidentiality, etc., would work. The researcher has attempted to find the specific provisions regarding the clauses in joint venture agreements with the help of a number of case laws as well.

In the last part of the paper, the researcher has enclosed a sample agreement which is joint venture agreement to analyze how a joint venture agreement is drafted in India. The researcher has analyzed the agreement keeping in view the practicality and touched upon the aspect of clause analysis, as, in recent times a lot of cases in joint venture agreements are based on terms and conditions of the clauses of the corresponding agreement.

LEGAL REGULATION OF JOINT VENTURES

When it comes to rules for joint Ventures, then, there are no separate provisions for joint ventures in India. However, the rules regarding FDI and FEMA and other general contractual principles are applied in India along with the choice of law and dispute resolution mechanism agreed upon by the parties of the agreement.

In India in general the joint venture agreements are basically governed by the principles of Indian Contract Act, 1872, but in special cases they attract other statutory provisions of corporate laws too.

How is a joint venture different from a partnership?

The rights and duties of joint venture agreement is decided by terms and conditions of the agreement whereas there is statutory provisions for the partnerships because of the absence of any legislation.

The essential difference between the joint venture and partnership is that a partnership can be entered into only by natural persons whereas there is no such restriction in joint ventures.

Clauses in Joint Venture Agreements

• Force Majeure

According to section 56 of the Indian Contract Act, 1872, if an agreement becomes impossible to perform in later phase of time and such impossibility could not have been foreseen, then, such agreements become void. In case of joint venture agreements, the clause of force majeure means any event or circumstance which is beyond the control of the party which is claiming the force majeure and that particular event must have rendered the parts of it impossible. The party claiming the force majeure will be excused from the performance of the agreement to the extent it is affected by the force majeure event and will not be liable for any loss, damage or compensation to that extent.

• Restrictive covenants

1. Non-Competition

By this clause the duty of good faith is restored. The non-compete clause stipulates a restriction on conducting business which is of the similar kind of one party by the other party for a given time and within a prescribed geographical limit. So, by default this clause attracts section 27 of the Indian Contract Act, 1872, and also article 19 of Constitution of India.

“A negative covenant that the employee would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform similar or substantially similar duties is not, therefore, a restraint on trade unless the contract as aforesaid is unconscionable or expressly harsh or unreasonable or one sided as in the case of W.H. Milsted and Son Ltd. 1927 WN 233.”

In M/s Gujarat bottling Company Ltd. v. Coca Cola Company 1995 SCC (5) 545, the supreme court held that restrictive covenants which operate during the period of the continuance of the contract of employment when the employee is bound to serve his employer exclusively are generally not regarded as restraint on trade, and therefore, do not attract Section 27 of the Indian Contract Act, 1872.

In Percept D’Markr (India) Pvt. Ltd vs. Zaheer Khan & Anr CASE NO.:
Appeal (civil) 5573-5574 of 2004, the supreme court noting the settled law in above-mentioned case held that under Section 27 of the Indian Contract Act, 1872, (a) a restrictive covenant which extends beyond the term of the contract is void and not enforceable. (b) The doctrine of restraint on trade does not apply during the continuance of the contract for employment and it is applied only when the contract comes to an end. (c) As held by this Court in Gujarat Bottling vs. Coca Cola, this doctrine is not confined only to contracts of employment, but is also applicable to all other contracts. This clause is not allowed in case on foreign investment in pharmaceutical sector. However, the sale of goodwill is an exception to this law under Indian Contract Act, 1872.

In case of United States vs. Penn-olin Chemical Company 378 U.S. 158 [1964], two companies Penn Salt Chemical Corporation and Olin Mathieson Company signed a joint venture agreement each acquiring 50% of the newly formed Penn-olin Chemical Company which began producing sodium chlorate in southeastern united states. The government sought to dissolve the joint venture as being violative of some anti-trust laws to prevent anti-competitive practices. The parties agree that they have same line of commerce. The only thing to look here is whether the joint venture has substantially lessened the competition which might have existed in absence of this joint venture. For determining this, the court can take into account the factors such as the power of joint venturers, the competition existing between them, the reasons and necessities for its existence as a joint venture.

2. Confidentiality

The confidentiality clauses are put into a contract to make clear the terms and conditions regarding the confidential information and specifies certain information should not be shared by any party.

In Centaur Mining and Exploration Ltd. [Recs & Mgrs Apptd.] [Administrators Apptd.] vs. Anaconda Nickel Ltd (2002) 21 AMPLJ, the parties concerned had entered into a preliminary agreement to facilitate the negotiation of a joint venture agreement. As is often the case with preliminary agreements, the confidentiality clause was brief and wholly inadequate, merely stating that the subject matter of the preliminary agreement and the studies [in terms of the preliminary agreement] were to be kept confidential.

Recently, the common law courts as well as Indian courts have started treating the confidentiality clause in the line of non-compete clause. In Stellar Information Technology Private Ltd. v. Rakesh Kumar and Ors. 234 (2016) DLT 114, the court of law held that once it is obvious that under the name of clause of confidentiality, one of the parties is secretly trying to attempt to enforce a covenant in restraint of trade which shall eventually render it void.

• Indemnity

Section 124 of Indian Contract Act, 1872, defines the contract of indemnity as contract by which one party guarantees to save the other person from loss caused to him due to the guarantor itself or by the act of a third party. In India there is a clear law about both implied and express indemnity.

The Bombay High Court in Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri (1942) 44 BOMLR 703 while interpreting the provisions of indemnity clearly held that the Contract Act is not exhaustive and doesn’t cover all the nuances of the indemnity clause and in such a case common law principles are to be relied upon. Hence, if there is no conflict with the Indian Contract Act,1872, and any other judicial decisions, then, the common law principles related to interpretation of contracts will continue to be applicable to the provisions of indemnity.

• Choice of law and jurisdiction

In case of choice of law and jurisdiction it is the discretion of parties to agree upon as to which law and jurisdiction to choose for their contract. However, some basic principles of contract law will still be applicable for the joint venture agreements. Other laws related to company law, FEMA and laws pertaining to taxation will be applicable to joint venture agreements in India.

In National Thermal Power Corporation v. Singer Company Leave Application No. 8199 of 1989, the court of law held that the court would try to find and identify the legal system with which the transaction has its most closest and real connection. In Rabindra N. Maitra v. Life Insurance Corporation of India AIR 1964 Cal 141, the Supreme Court further delves into the localization theory. The court opined that while looking into the question of choice of law, several factors are needed to be discussed such as the place where contract was made, the place of performance, place of domicile, place of residence of business partners, nationality of character of contract, subject matter of contract and other factors which help to localize the contract in question.

• Clause of Termination

In Turnaround Logistics (Pvt.) Ltd v. Jet Airways (India) Ltd application no. IA 3848 of 2006, the Delhi high court held that the term “determinable contract” means a contract which can be put to an end and, thus, all revocable deeds and voidable contracts would fall within this term.

In Crompton Greaves Limited v. Hyundai Electronics Industries 1 (1999) CLT 25, the court held that if in the aforesaid time the government approval could not be obtained then in such a case the agreement is of determinable nature. As the agreement provided the termination clause which shows the clear intention of parties to terminate the agreement if in the aforesaid time the government approval could not be obtained. But a notice is required to be sent to the party informing about the reasons for the termination.

In Indian Oil Corporation Ltd v. Amritsar Gas Service and Ors (1991) SCC (1) 533. The Supreme Court held that an agreement which contained a clause that gave power to either party to terminate the agreement with 30 days prior notice, and without specifying any reason, was “determinable” in nature and, hence, the enforcement is specifically not possible. The relief for the losses of earnings would be the compensation for that loss during the notice period. There is no possibility of party getting specific performance when the nature of contract is determinable.

Remedies for breach of terms of joint venture agreements

In Gammon India Limited v. Commissioner of Customs, Mumbai CIVIL APPEAL NO. 5166 OF 2003, the court held that if some transaction is not done for the purpose of joint venture, then, the venture would not be liable for the transaction and whoever has transacted would be liable in personal capacity.

In the present scenario, the contracts having termination clause for specified events don’t have any recourse in law. Even if there is no such clause which authorizes and enables either party to terminate the contract in the occasion of happening of event specified therein, the agreement can be terminated by giving reasonable notice and it would be determined by very nature of agreement. In case if it is ultimately found that termination was bad in law or contrary to the terms of the agreement or of any understanding between the parties or for any other reason, the remedy of the appellants would be to seek compensation for the wrongful termination but not a claim for specific performance of the agreements. The doctrine of good faith is adopted by the US courts in these scenarios.

In Asia Foundations and Constructions Limited vs. State of Gujarat AIR 1986 Guj 185, the court of law held that there must be a clause which makes the joint venture jointly and severally liable for all transactions as the third party thinks that he is transacting with a single entity.

CASE LAWS

In Bunga Daniel Babu vs. Sri Vasudeva Constructions and Ors CIVIL APPEAL NO. 944  OF 2016, the court reaffirmed that the agreement entered to build a house on plot is not a joint venture agreement as there is no control exercised by the plot owner on construction of the building.

In Asia Foundations and Constructions Limited vs. State of Gujarat AIR 1986 Guj 185, the court held that limited liability partnership are limited by liability whereas joint ventures are limited by scope and time.

In Dulichand Laxminarayan v. CIT [1956] 29 ITR 535, the court held that the essential difference between the joint venture and partnership is that a partnership can be entered into only by natural persons whereas there is no such restriction in joint ventures.

In GVPREL-MEE (J.V.) vs. Government of Andhra Pradesh and Anr AIR 2006 AP 169, the supreme court held that agreements entered between the owner of land and a builder to construct a building on his plot is not a joint venture agreement.

Judicial decisions have delineated certain principles as a sine qua non for the creation of joint venture agreement, joint interest, sharing of profits and losses, control, fiduciary relationship and right to an accounting unless the account is stated or simple. The supreme court of India holds the view that joint ventures are a legal entity in nature of partnership. It is a Quasi Partnership.

The Supreme Court laid down that certain essential ingredient of joint venture agreements which are:

1. joint control and ownership of property;
2. sharing of expenses, profits and losses, and having and exercising some voice in determining division of net earnings;
3. community of control over, and active participation in, management and direction of business enterprise;
4. intention of parties, express or implied; and
5. fixing of salaries by joint agreement.

Analysis of a Sample Joint venture agreement

This agreement was entered into by Project Company and Forest Development Corporation Limited of Maharashtra on behalf of Government of Maharashtra. And this agreement was of character of joint venture agreement as it was entered for a specific purpose.

While analyzing this agreement the researcher has not gone into the broader aspects of a contractual analysis but restricted himself to a limited aspect of analysis of clause contained in the contract. The clauses in the contract are very practical in aspect of that contract and most of the times they are disputed in a court of law. So to give the project work a practical and relevant color, the researcher has included a substantial portion to analyze various clauses and in this sample agreement the same methodology will be followed.

So, at the outset, I would like to start with the clause of Force Majeure. In the present agreement, this clause states that if either party is prevented from performing its obligations in case of causes which is beyond its reasonable control then the parties affected by such force majeure event will be exempted from performance till the continuance of such events and if such event continues more than 12 months then the other party shall have right to terminate the agreement. While discussing the clause of force Majeure, we come up with a conclusion that the clause of Force Majeure is inserted in an agreement to exempt a party from performance in a situation where the performance is not possible in and such situations are not a normal course of happening. There are sometimes events and incidents which no one can anticipate so to provide a just and fair treatment in such case the clause of force majeure has come into existence in contractual relations. Section 56 of Indian Contract Act, 1872, provides for the validity of this clause.

The next in this sequence is clause of Confidentiality. Under the head of restrictive covenants which is covered under Section 27 of Indian Contract Act, 1872, clause of confidentiality provides for the secrecy of certain terms and conditions which are used in this agreement lest other person or third party may not use the information for the profit of their own. In this present sample agreement, the clause of confidentiality stipulates that every party will keep confidential any such information which any such persons specified in this agreement shall acquire in relation to the transactions contemplated by this agreement or in relation to the employees, clients’ business or affairs of any other party and shall not use or disclose such information except with the consent of the other party. The only thing to look at while analyzing the confidentiality clause in an agreement is whether the clause is in restraint of trade or not, if it is not then there is no issue. If it is found that in the guise of the clause of confidentiality, a party tries to restrain the freedom of trade of another party, then, it is against the provision of Section 27 of Indian Contract Act, 1872. In the present clause, there is a restriction in sharing of confidential information, hence, it cannot be said in violation of Section 27 of Indian Contract Act, 1872.

Now the clause to be discussed is Dispute resolution and Choice of law and jurisdiction which would be employed in case of dispute related to performance of this agreement. The dispute resolution mechanism agreed upon by parties is Arbitration and have decided to settle their disputes by the method of arbitration. The law related to this agreement is Indian Arbitration and Conciliation Act, 1996, and the jurisdiction is conferred to Nagpur. Regarding law and jurisdiction I have discussed that the basic principles of law of contract will be applicable to any contract which at that time is related to India in any context. Despite basic contractual principles, the parties decide other rules and legislations under which they agree to be governed. Other laws regarding the taxation will still be applicable wherever necessary according to the other laws in force in India.

The next clause in sequence is clause of Indemnity. In the given sample agreement, the clause stipulates that “If, for any reason or resulting from any cause whatsoever, any statement, representation or warranty set forth herein is found to have been materially incorrect, untrue when made, in breach or fails to prove to be true, and if any debt, liability or other obligation of any kind is found to exist, the party making such representation or warranty shall be fully liable to the other Party for any and all liability, damage, costs and expenses, including attorney fees, arising from such misrepresentation, breach or incorrect statement”. The clause is clearly stipulating the case in which one party will indemnify other against losses or damages incurred. In case of indemnity the promise to compensate for any kind of losses incurred by the party in relation to specified sectors of the project is well stipulated in this contract.

At last the clause to be discussed is clause of Termination. The clause of termination in agreements is provided in order to delineate the conditions and circumstances under which a contract can be put to an end. The reason for insertion of such a clause is to provide a clear picture regarding the continuance of the contract. In the present sample agreement, the parties have agreed upon the five conditions, as mentioned above, when they can put an end to their contacts and also specified procedure for the termination. These conditions are to be satisfied by giving to the other party a written notice of 60 days prior to the real termination date and the termination can be done in case other party becomes insolvent, bankrupt, in case of government expropriation, nationalization or condemnation of all asset of the party, in case of some government policy which prevents the implementation of agreement directly or indirectly.

So, after the analysis of the sample joint venture agreement it can be said that the clauses are soul of any agreement and joint venture is not an exception to it.

Conclusion

By attempting to go into the topic of legal analysis of joint venture, the researcher has come across a conclusion that joint venture agreements are a recent phenomenon in Indian context and will take some time to get crystalized in Indian legal and judicial arena. Till date there is no separate legislation to regulate the joint venture agreements. The joint venture agreements are governed by the basic contractual principles and the provisions of law as agreed upon by the parties in agreement itself. The jurisdiction is also chosen by parties and in case of any dispute the case is filed into that particular jurisdiction and the most preferred way of dispute settlement is arbitration.

Within two months of choosing Commerce as my specialization in the 11th standard, for want of an off-beat path, or maybe it was a late onset of teen rebellion (who knows), I wanted to become a practising lawyer.

As I come from a business family with siblings who are engineers and PR professionals, there were no restrictions regarding my choice of career. None of us really stayed the same course anyway, so it seemed natural for me to stray further from the off-beat path.

But, no one in my family knew a lawyer, so there was literally no guidance for me to seek from them. I tried making my own way and learnt as I went along ever since I can remember.

Most law students, including me, have at some point shared a dream, of standing before an esteemed bench and arguing their case before them. The law school gives us a taste of the courtroom experience through moot-courts. Although, it was a part of the law curriculum in the final year, most of the law schools also have a moot court society which conducts both inter and intra-moot court competitions throughout the year.

The idea of moot courts or mock court trials is simple: inculcating the wholesome approach towards a case in the law students.

The students are usually given a fact-sheet which gives a brief background of the dispute in question between two or more parties and are allotted sides for the Plaintiff or Defendants. There are usually teams allotted to work on a fact sheet which includes two speakers and couple of researchers. Within a stipulated time the law students have to research their cases, frame their arguments, prepare their responses to the dispute in the form of plaint/petitions and affidavits in opposition/replies. Then on the day of competition, the participants have to argue their respective sides before a panel of judges, who scores them on different aspects of their performance. It could be drafting, researching, oral submissions, etc.

I started mooting as soon as I could, i.e., from my first year itself and I scrambled to get my draft prepared and plead before the intra-school judges! It was like an audition to represent my college in inter-college moot courts in national law schools.

I had no idea how to analyse a fact sheet or how to even begin my research in the first place. So, I hung around the library and sought help from my seniors! They told me to start with the bare act. I did not know what a bare act was! I had to figure out that it was simply the bare provisions of laws. This was just the beginning. I had to frame my arguments and find case laws and legal provisions to support my arguments.  After everything, I came to know that there is some specific format of font, spacing, footnotes, etc. that has to be maintained to get a higher score in the competition. This gave me a glimpse of the amount of work it takes for a single case and it was a lot! I scored an average score and could not qualify for the national moots that year.

However, I kept at it and got my first national moot in my second year of law school. It was an exciting process. We had two sets of facts – criminal and civil. I was part of a three-member team and was one of the speakers. Soon I realized that I had more inclination towards criminal law than the civil law. To each his own, right? Anyway, after multiple rounds, we won the moot competition. What a rush it was!

After that, I continued mooting in intra-school competitions as it was highly competitive and extremely value adding to my development as a lawyer. It resulted in scoring higher marks in my final year moot competition thereby improving my overall scores.

There are several things that one can learn on their own and peers. You can even go for online courses on mooting which can be extremely helpful for any mooter or aspirant, to ward off the anxiety of speaking or the preparation.

Let me give you five mooting tips on how to moot which are extremely useful if you are just starting out:

TEAMWORK

If you think you can work alone, think again. We all need help to overcome our gaps in learning and performance. To realize the importance of teamwork just remember that Nick Fury had to assemble the Avengers and even Deadpool held an audition for the X-Force, to fight off the villains, when needed.

I remember having constant arguments with my team regarding one approach I’d taken. They kept refuting and questioning my stance. Although, it irritated me to the core it made go back and research each time to make my arguments more sound.

It is always better to work with a team or with people. Use people as soundboards to brainstorm your ideas and come up with stronger arguments. Set aside your ego or fear, whichever is the case, and seek help from your teammates, seniors, friends, even professors if need be. Remember you are arguing opposite someone, so it is better to have the kinks in your research or arguments sorted by discussion and practising your arguments multiple times with your team beforehand. There is strength in numbers.

KNOW YOUR LAWS

Being law students you have to know the relevant laws – you cannot walk into a courtroom – even a mock one – without knowledge or preparation. So you always start with the bare acts. Think of the applicable laws to your set of facts and read the bare legal provisions first. You have to build your understanding and interpretation of the law and then you can go ahead and consult case laws and conceptual articles or books around the subject matter. Build your own approach to arguments accordingly.

For instance, if you have a dispute on data protection and data privacy, you cannot rely on the specific law, as there is no specific legislation in place. So, the next best approach is to come at it from the constitutional right to privacy and support with provisions of the Information Technology Act.

The knowledge of various rules and different approaches to the interpretation of laws is crucial. You can start with the interpretation of an ordinary statutory law, the relevant constitutional provisions and then the executive rules or by-laws. Simply put, learn the law and then see how you can use it to support your arguments and try various approaches towards the same.

TAKE YOUR TIME WHILE FRAMING THE ARGUMENTS

The best of articles and stories have a natural flow, a clear beginning, a middle and an end. Story-telling should be organic in nature, so should your arguments. The framing of arguments is crucial to your oral submissions as well. It has to be constructed with patience and sufficient thought process.

So let’s say you have three main arguments in place. The best approach would to be to slowly build the intensity of the case and keep the strongest argument in the end. However, one should not waste the time in getting to the strongest point. So the sequencing of arguments should have correlation and built up to the strongest point instead of abruptly presenting an argument.

In both moot courts and actual practice, the sequencing of arguments makes a significant difference. Not only should it flow naturally but also the strongest ones should be addressed in a timely manner, so as to capture the judges’ attention. This also helps the bench to take one seriously.

PLAY DEVIL’S ADVOCATE

The best of lawyers can argue any side of a given dispute. So, during research be prepared for different approaches to your argument, in case the opposing party may find a weakness in your main approach.

Once, a judge on the moot court panel was adamant in a murder case that as per facts the accused had confessed and hence he had to be held guilty. Instead of merely stating that the confession was coerced by the police, I had to quickly change my approach by adding that the discovery of the alleged weapon did not follow the proper chain of evidence and therefore was inadmissible as evidence in the matter. That satisfied the judge just enough to allow me to move on to my next argument.

Also, be prepared with alternative arguments in oral rounds. Due to time constraints, even if a judge is adamant on a particular position, then one can present alternative argument supported by law and precedents.

SIMPLIFY

The moot court judges, as well the actual judges, have to be appeased with one’s arguments. Throughout the day listening to multiple rounds of arguments can affect the temperament. So one has to be extremely well prepared as to not waste the time by dilly-dallying in the oral round.

During the oral rounds, start by giving a broad structure of your proposed arguments. The bench should know the components of your argument and their sequence. This is most helpful in moots as each argument has sub-arguments. It helps to give the judges a clarity about the broad picture of one’s arguments and approach. It also adds to the flow of the narration of one’s side of the dispute in a clear manner which helps both the speaker and listener. Keep things simple.

So does mooting add value to one’s career in the long run?

An actual courtroom experience differs significantly from the moot courts because the stakes are different. You’re representing a client for money or a cause instead of mere points now.

I know of a few friends from my batch who found mooting intimidating and too time-consuming. They stayed away from it. Some of them even went into litigation as professionals. However, the mooters go into litigation, definitely feel more at home in their profession right in the beginning as compared to the non-mooters. It eases some of the anxiety and pressure, just to be a little prepared. These mooters have been practicing analyzing, researching, drafting from college days, after all!

I’d suggest that you do not be the ‘few-friends-from-my-batch’ and go ahead and do that moot. Don’t be afraid of public speaking or, for that matter humiliation due to being unprepared. In fact, take this as a learning experience. It takes 3 things to be a champion mooter: preparation, hard work and determination. These three coupled with guidance and resources to do well in mooting can make a remarkable difference in your mooting career!

In this article, Samanna Gaffoor, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata analyses the time period for CIRP under IBC

Introduction

The Insolvency and Bankruptcy Code, 2016 (the “Code”) was finally given the presidential assent on 28th May 2016 and few of the provisions of the Act came into force in August 2016. The Act came at a time when the banks in India were facing a huge backlash due to non performing assets(NPA).

The main objective of this enactment is to provide a time bound and cost effective solution to insolvency and bankruptcy of corporates, individuals and firms thereby protecting the interest of all stakeholders and promoting entrepreneurship and ease of doing business. It has also proved beneficial to banks with a stressed account to recover at least the principal portion from the defaulting borrowers, as is evident from the acquisition of debt-ridden  Bhushan steel by TATA steel. The bankrupt firm was among the 12 stressed assets that the RBI had referred to the NCLT proceedings last year. By virtue of the Insolvency and Bankruptcy Code, the lenders of the bankrupt firm were able to recover the principal amount. This was hailed as a historic breakthrough in resolving legacy issues in banks.

Corporate Insolvency Resolution Process

The IBC provides insolvency and bankruptcy solution to both corporate debtors and individuals/firms. Corporate Insolvency resolution process (CIRP)  is the process of resolution of insolvency of a corporate debtor as provided under this code. Part II of the Insolvency and Bankruptcy Code, 2016 deals with insolvency resolution and liquidation for corporate persons. Corporate debtor means a corporate person who owes a debt to any person. Corporate debtor includes a company, a limited liability partnership firm or any other person incorporated with Limited Liability under any law, but does not include a financial service provider

Definition of Corporate Debtor

Section 3(7) of the Insolvency and Bankruptcy Code, 2016 defines a Corporate person to mean

‘a company as defined in clause (20) of section 2 of Companies Act ,2013 (18 of 2013), a Limited liability partnership ,as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act,2008 (6 0f 2009) or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider.’

Procedure involved in Corporate Insolvency under the code

The procedure for insolvency resolution of a corporate debtor is dealt in Chapter II to part II of the code.

1. Where any corporate debtor commits default, financial creditor, an operational creditor or the corporate debtor itself may initiate the Corporate Insolvency Resolution process.
2. The Adjudicating Authority (AA) will declare a moratorium. The adjudicating Authority for the insolvency of  a Corporate Debtor is the National Company Law Tribunal
3.  The AA will appoint an Interim Resolution Professional.
4.  Immediately after the appointment of the Interim Resolution Professional, the AA will cause a public announcement of the initiation of the resolution process of the corporate debtor and also will call for submission of claims by the creditors.
5.  The affairs of the Corporate Debtor against whom the insolvency procedure is initiated shall be managed by the Interim Resolution Professional from the date of his appointment. He has to manage the operations of a corporate debtor as a going concern and strive to protect and preserve the property of the corporate debtor.
6. The Interim professional shall constitute the committee of creditors on the basis of the claims submitted during the Public Announcement.
7.  The Committee of Creditors on their first meeting has to appoint a Resolution professional. In most of the cases, the interim profession itself shall be the resolution professional. The committee of creditors has to make an application to the AA who in turn shall forward the same to the Insolvency and Bankruptcy Board of India.
8. The resolution professional shall prepare an Information Memorandum to enable the resolution applicant to prepare a resolution plan as a solution for resolving the insolvency of the corporate Debtor.
9. The Adjudicating authority  may approve /reject the resolution plan which is approved by the committee of creditors
10. The resolution plan is approved if it fulfils the requirements as provided in subsection 2 of Section 30 of the Insolvency and Bankruptcy Code,2016.
11. In case the resolution plan is rejected, the AA will initiate Liquidation process which is dealt in Chapter III of the Insolvency and Bankruptcy code, 2016.

Time limit for completion of Corporate Insolvency Resolution Process

As per the code, the procedure involved in the Corporate Insolvency Resolution Procedure should be completed within 180 days or within the extended period of 90 days. In short, the resolution procedure should be completed within 270 days, failing which the Adjudicating Authority will initiate Liquidation procedure under Chapter III of the Code.

The request for extending the Corporate resolution process beyond 180 days shall be made by the resolution professional on passing of a resolution by at least 75% of the voting shares of the Committee of creditors. The resolution professional will file an application with the Adjudicating Authority who if satisfied that the corporate insolvency resolution process cannot be completed within the period of 180 days, may extend the time period but the same shall not exceed 90 days.

Time period of 180 days – Mandatory or not?

If the Resolution professional fails to submit the resolution plan within 180 days or within the extended period of 90 days the Adjudicating Authority may initiate Liquidation procedure. Once the liquidation procedure is initiated the Company will be wound up and the steps will be taken for distribution of proceeds to creditors as per the provisions of the code. It will also result in the discharge of the officers, workmen and employees of the Corporate Debtor.

The Supreme Court gave a significant judgement under the insolvency and Bankruptcy Code, 2016 in  M/s Surendra Trading Co. v. JK Jute Mills Co. Ltd (here) wherein it was held that ‘Time is the essence of Insolvency and Bankruptcy code’.It was observed by the supreme court that non-completion of the [proceedings within the stipulated time given under section 12 of the Code will result in liquidation proceedings under section 33 of the said act

In view of the above provisions of the Code, it can be said that the resolution procedure has to be completed within 180 days. It is mandatory and only on a approval from the adjudicating Authority can the time period be extended upto 90 days.

Merits and Demerits of shorter periods for completion of insolvency procedures

Merits

• The lower time limit will help in achieving the goal of ease of business and providing a quick and viable solution to commercially unviable corporates.
• It will also help in garnering more financial support to corporates as the creditors will have an assurance of recovery of their debts.
• One of the serious bottleneck in the Sick Industrial Companies( Special Provisions) Act,1985 was the long time period of an average of 4 years for completion of the insolvency procedure.
• The stakeholders had to wait for quite long to recover their dues from the sick companies
• The long drawn procedures spread over long period entails a cost to the creditors as well as to the corporate debtor who has become commercially unviable.
• A shorter period will help in finding a better feasible solution for reviving the corporate debtor which is on the brink of financial collapse.

Demerits

The very limited deadline may ultimately force Company into liquidation without serving the main objective of the revival of the financial health of the corporate debtor.

Conclusion

In the United States and United Kingdom Bankruptcy procedure, the time period for completion of the insolvency procedure is one year and one and half years respectively. The Insolvency and bankruptcy code has almost provided the time limit in tune with the international standards

The Insolvency and Bankruptcy code in India is however used as a tool for recovering the loans rather than as revival and rehabilitation tool. This mindset should change for the overall development of the economy and divert the resources of the sick company to a more viable and feasible organisation.

In this article, Aman Naqvi, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses 5 key clauses of an Apprenticeship Contract

Introduction

In 1961, the government felt the need for regulation of the training provided to the apprentices. Thus, came into force the Apprentices Act 1961. The objective of this Act is for apprentices to learn and train with the facilities with which the employees work. It laid down certain guidelines in regard to the training of apprentices. As per the Apprentice Act 1961, it was applicable for the industries and trades which were authorised by the Central Government in the Official Gazette. Almost all the industries fall under the purview of the Act.

Importance of the Apprenticeship Act

The primary objective of the Act was to train people as apprentices and give them an exposure to the employee work culture. The government felt the need that such apprentices if given proper training with proper amenities, they will have an insight to the real life working of employees which will give them an unparalleled exposure which would help them to excel in the field in the future. The Act makes it obligatory for the designated trades to impart training to the apprentices. Apprentices are also divided into four types:

• graduate
• technician and
• trade apprentice
• Vocational technician apprentices.

A person receiving an apprentice training should have attained an age of 14 years and for the trades where safety issues are concerned to the apprentice should have attained 18 years. An apprentice takes training or masters the competencies and masters the certain craft.

Contract of Apprenticeship

For an apprenticeship contract to be executed, an apprentice and an employer need to sign an agreement in which for a particular duration, an apprentice will be trained under an employee in which he will be imparted education in relation to a particular skill and will be trained with the same benefits and services as given to the employees. At the end of the apprenticeship, the employer will issue a certificate of apprenticeship to the apprentice mentioning the duration certifying the successful completion of the apprenticeship complied with the terms and conditions and under the provisions of the Act.

The terms and conditions which are mentioned in the contract should be mutually agreed between both the parties. If an apprentice is minor, an agreement has to be signed via his father or mother. In apprenticeship schemes, the apprentice gets skilled and trained by the employer, which makes them an asset. Employer’s participation in apprenticeship programs aids the organization in attracting top talent. Being a part of the apprenticeship programs the employer makes sure that the training standards are met regularly. According to Section 4 of the Apprenticeship Act, the apprentice and the employer need come to a contract with the apprentice which needs to be executed by the apprentice advisor. In an apprenticeship contract there are several important clauses which need to be complied with:

• Duration of the Apprenticeship

According to Section 6 of the Apprenticeship Act,  the period of an apprenticeship will be deemed to have commenced on that day on which the contract of apprenticeship has been entered. Duration of the apprenticeship period has also been prescribed in Apprenticeship Rules, 1991. Duration of Apprenticeship may be from six months to four years depending on the alternate, as prescribed in Rules and decided via National Council for Education in Vocational Trades.

• Failure to finish apprenticeship program

Illness/Circumstances beyond control

If a  trade apprentice fails to finish the apprenticeship within the prescribed durations mentioned in the contract or fails to appear in the final test due to illness or any other circumstances beyond his control, the establishment concerned shall extend the period of his apprenticeship until he completes the full apprenticeship course.

Fail in Test

Extension of the apprenticeship tenure will also be allowed in the case where trade apprentices who have completed their course but are unable to pass in the final test. A   trade apprentice who fails in the second test shall not be allowed any extension of the period of training.

Strike or Lockout or Layoff

If a  trade  apprentice  is  unable  to   complete  the  period  of apprenticeship training due to strike, lockout or  layoff  in  an  establishment  where  he is undergoing training the period of his apprenticeship training shall be extended for  a  period equal  to the period of strike, lockout or layoff as the case may be, and he shall be paid stipend during the  period of  such  strike  or  lockout  or layoff or for a maximum period of six months, whichever is less. If it layoff is likely to continue for a longer period, the employer shall follow the procedure for novation of contract of apprenticeship of a trade apprentice with the other employer as specified in section 5 of the Act. In the case of trade apprentices, the first six months of the period of training shall be treated as a period of probation.

• Registration of Apprenticeship contract

Each and every contract of apprenticeship shall be sent to the Apprenticeship advisor for registration. The apprenticeship advisor needs to be fully satisfied whether such apprentice qualifies to be an apprentice in the designated trade as per the Apprenticeship Act 1961. Once the apprenticeship advisor is fully satisfied that then it is a valid apprenticeship under the Act then he will register the contract of apprenticeship. If the Central Government makes any rules or law in relation to the apprenticeship scheme then such changes are expected to modify the contract according to such changes.

• Terms and conditions

Each contract of the apprenticeship will have certain terms and conditions which need to be mutually agreed between both the employer and the apprentice. These conditions need to be fulfilled by both the parties and in any case, those phrases and conditions can’t be detracted under this Act or be varying with the provisions of this Act. The apprentices need to be provided with sufficient training in lines with the provisions of the Act and by the terms of the apprenticeship agreement. For this purpose, an employer must make good enough preparations for the cause of providing practical schooling. The employer needs to specify the type of training which will be provided to the apprentice, what facilities and amenities will be provided to the apprentice, the amount of stipend to be provided to him and the duration of the apprenticeship. The employer is under an obligation to execute the contract in compliance with the terms and conditions specified in the contract. Most of the times in litigation related to the apprenticeship act are mainly because the employers are unable to fulfil the promises made by them while signing the terms and conditions of the contract.

• Termination of a contract

Section 6 specifies when a contract of apprenticeship is terminated. A contract is terminated either when the contract is fulfilled or when the apprenticeship advisor terminates it or when the any of the parties do not comply with the contract.

By the contract

The date on which the apprenticeship contract is finished, the same day the contract of the apprenticeship comes to an end and stands terminated. Once the apprenticeship is finished the apprentice can send an application to the apprenticeship advisor specifying the duration of the apprenticeship and the date on which It is ended, a copy of this should also be sent to the employer. If the apprenticeship advisor is convinced and satisfied that the contract of apprenticeship has been carried out as per the terms and agreement of the apprenticeship contract then such certificate certifying that the person has done under such employer for specific duration should be given.

By the Apprenticeship Advisor

If after the apprenticeship contract is signed and before the termination of the contract the apprenticeship advisor is satisfied that both the parties are not executing the apprenticeship contract as per the provisions of the act or as per the terms and conditions specified in the Act then also the apprenticeship advisor has the power under this act to terminate the contract of apprenticeship. He needs to inform both the parties on such termination. If the contract is not fulfilled by the employer then he will have to compensate to the apprentice for not providing the training and amenities mentioned in the contract.

By the Apprentice

If the apprentice leaves the apprenticeship in the middle way or doesn’t comply with the terms and conditions of the contract then the apprenticeship contract will be terminated by the apprenticeship advisor after consulting the employer under who he was an apprentice and the guardian will have to give a refund of amount spent in the training of such apprentice.

Conclusion

These are the important clauses of the apprenticeship contract as mentioned in the Apprenticeship Act 1961. They need to be complied with while fulfilling an apprenticeship contract. Failure to fulfil the apprenticeship contract will directly lead to the termination of the apprenticeship.

In this article, Sahali Manna, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the role of depositories in the Indian Economy

Introduction

In the twenty-first century, many aspects of technology have become a blessing. One such blessing is the ‘depository’ system which is the electronic mode of holding securities. There was a time when Companies used to issue share certificates in physical form.  The investors were supposed to keep the certificate safe and forward it to the buyer once the share is sold. Now, with the introduction of Depositories Act 1996, there is no paperwork involved and in this procedure, all the entries are done electronically. The introduction of depositories system also gave rise to a new type of stock trade called as ‘dematerialization’.

What is Dematerialization?

Dematerialization or Demat is also called as ‘scripless trade’ or ‘scripless transfer’. It is basically the conversion of physical certificates into electronic records. Under dematerialization, physical transfer of shares is avoided and transaction only takes place through an electronic medium. This is the most significant step taken for achieving a paper-free securities market. Share transfer in dematerialized form takes place freely through the electronic book-entry system.

Depositories registered with SEBI

In India, various entities can provide a depository system. A depository must be formed under the Companies Act and must obtain a certificate from the Securities and Exchange Board of India. Two depositories which are already registered under SEBI are:

1. National Securities Depositories Limited (NSDL): NSDL was set up in 1996 by the NSE (National Stock Exchange). IDBI and UTI helped to promote NSDL.
2. Central Depository Service Limited (CDSL): Like NSE promoted NSDL, BSE (Bombay Stock Exchange) promoted CDSL.

NSE introduced the rolling system in India for the first time. This helped the investors get payment within 5 days of the sale. Previously, before this system was introduced the investors used to get their payment on the eighth to the twelfth day from when the trading was done.

And, after promoting CDSL, the annual turnover in BSE also increased and the Badla system also got abolished which increased the scope of depositories in India.

Important Concepts

• Depository participant or a DP is an agent of the depositories which provides depository services to the investors. Any foreign bank, public financial institution, a commercial institution with the approval of the Reserve Bank of India( RBI), state financial corporation, stock brokers, clearing houses, NBFCs that are complying with the rules prescribed with SEBI can be registered as DP.
• Securities eligible for demat shares, stock, debentures, bonds, debenture stock, any other marketable security, any incorporated company, units of the mutual fund, unlisted security, commercial paper are some of the examples.
• BO or Beneficial owner – The benefits from the dematerialized securities are derived by the actual investor of the shares, so they are the beneficial owner (BO) as the depositories hold the security on behalf of the investor and in a fiduciary capacity.

Advantages of the Depository system

The first and the most important advantage of the depository is it eliminates the risk of holding physical securities. Previously, the buyers had to keep checking if the shares had been transferred or not. But since the depository system came about such risks had been reduced to a great extent as everything is now done through electronic mode. Huge paperwork which was related with the same also got reduced and from 1998 demat trading was also made compulsory. This also makes the foreign investor confident to invest in the Indian market as it fewer the chances of any kind of forgery and delay.  

Other advantages of depository system are as follows:

• The transfers take place immediately unlike physical transfer. The beneficial owner also transfers as soon as the shares are transferred from one account to the other.
• It only holds the security listed in particular stock exchange.
• The issue of fake certificates, the problem-related to bad delivery or any kind of issue related to signature are also reduced.
• Now there is no need to fill a transfer form and affix share transfer form in order to transfer share.
• The electronic system is time-saving.
• The fear of losing the certificate or issue of fraud certificates are also eliminated.
• Transfer of benami properties is also restricted.

Steps to dematerialize share certificate

In order to dematerialize the share certificate the investor must:

• Open a Demat account with a DP.
• Then the Demat Request Form (DRF) is to be filled and along with it, the share certificate must be submitted to the DP.
• After this, the DP will send this certificates to the registrar who will issue the equivalent number of securities.
• DP after receiving the share certificate in physical form and the duly filed DRF must give the counter acknowledgement to the BO.
• The DP will capture all the detail from the DRF and certificate and then generate a DRN.
• If the securities are in ‘lock-in’ status then it must specify the ‘Lock –in-Reason’ and ‘Lock-in-Release date’.
• The DP while affixing rubber stamp on the DRF must take care of the material information such as – distinctive number or the folio numbers does not get smudged.
• Next, the  DP will give a “system generated acknowledgement” to the BO.
• After the DRN is generated the CDSL must send the DRF data to the issuer. This process is automatically done by the system.
• The DP must capture all the dispatch detail and must dispatch the physical document within two days from the date of DRN generation.
• The process of dematerialization must be completed within 15 days as specified by the CDSL.

Role of SEBI

Apart from regulating the business in the stock exchanges and any other securities market and protecting the investor’s interest SEBI also regulates the depositories. SEBI (Depositories and participant) Regulations 1996 act is there to regulate the investor accounts in demat form.

In India, the entire depository system is governed by the Securities Exchange Board of India (SEBI). The main aim of SEBI is investor protection. The Depositories Act 1996 ensures free transferability of securities with proper accuracy, speed, and security.

• It makes the securities of public limited company freely transferable
• It dematerializes the securities in depository mode
• It maintains the ownership records in a book-entry form.

Before this act came up there was a settlement risk in the transaction. This was basically for the time taken for such matter. The SEBI Act 1992 provides SEBI with statutory power to protect investor’s interest, promotes the development of the securities market or regulate the securities market. It has full autonomy to conduct inspection and inquiry over any offence or violation of any provision under the act.

Krishanamurthy, R. (1996) in his paper “Depositories for Securities Transaction: An Overview of the Depositories Act and Responsibilities of the Auditing Profession”, has stated that the act being a strict rule-based approach seeks to ensure that investors opting for the Depository Model will at all times be protected from any abuse of the system.

Indian Economy and the Depository system

Investment plays a very important role in shaping an underdeveloped or a developing country. And developing countries find it really hard to get sufficient capital for developments. India needs a high level of saving and investment to leap forward and attain the majority of growth. There is a lot of risk factor related to investment. Hence, market efficiency and investor protection is a need for India to attract investors.  A well-functioning securities market can lead to a stable economic growth. There was always a need for fully developed securities depository system to enhance market efficiency. The settlement system also developed with the Depositories Act 1996. Apart from holding securities, it provides services related to transactions in securities. This system eliminates paperwork and promotes transparent trading. It also contributes to the liquidity of an investment in securities. The stock exchanges too play an important role in the capital market and these are the platforms to trade in securities. Our economy is rapidly growing and modernizing. Over the years the Indian economy has transformed and as a developing economy, it comes in relation to several foreign and domestic factor.  

The capital market must provide some excellent investment opportunities to the investor and must take care of their interest and security. The demat account opening and opening a bank account is almost same.

Concluding Comments

The discussion with regard to depository’s role in Indian economy does not end here. There is lot more about it. SEBI is taking care of investor protection and introduction of the Depositories Act 1996 made the share transfer easy and safe with other advantages added. But the practical issues are not looked upon by the authorities. It may be the case that an investor is now getting paid within five days of transferring his share but it is also true that transfer of funds still takes 2 or 3 days as all the banks are not electronically connected. Another problem is the depository participant debit their clients as they hold their account and as a result of the investor’s faces price hike, Even today general public lacks knowledge about depository system in India. These problems can be overcome if a single depository system is established rather than having multiple depository systems and depository charges must be reduced.

REFERENCES:

1. Mr.B.Hari Babu, Prof.B.K.Surya Prakasha Rao, Dr.B.Srinivasa Rao, ”Role of Depositories in Indian Capital Market – A Comparative Study between NSDL and CDSL”, International Journal of Scientific and Research Publications, Volume 6, Issue 12, December 2016 135.
2. https://www.indianeconomy.net/lms/glossary/depository/
3. https://www.livemint.com/Money/j4wMyH7iKlKynLEipKXMqL/Sahoo-panel-bats-for-liberal-regime-for-Indian-depository-re.html
4. https://accountlearning.com/depository-system-in-india-disadvantages-remedial-measures/
5. Sangeetha D., Investment and its Role in Economic Development, International Journal of Science and Research (IJSR).
6. The Securities and Exchange Board of India: Its establishment and performance. (shodhganga.inflibnet.ac.in/bitstream/10603/8963/14/14_chapter%205.pdf)

This article is written by Snigdha Pandey, Marketing Associate at iPleaders.

Law is an ever-evolving organism, albeit it is seemingly slow sometimes. With changing times, law should and does evolve to accommodate the changing trends in technology, society, politics and economy.

The changing trends like startups, entrepreneurship, government reforms necessitate the need for specialised laws to provide for a more nuanced outlook. For instance, earlier there was litigation to handle all kinds of disputes. However, the sheer number of such disputes created a backlog and it also became more expensive to litigate. Then the alternative dispute resolution mechanisms like mediation, arbitration and negotiation came into the picture. It was economical and convenient to resort to these mechanisms and they grew popular.

In the decade or so, technology has revolutionised the economy. The applications and websites based companies are ruling the market with products and services like Google, Uber, Flipkart, etc.

Recently, the news of India’s largest internet company – Flipkart’s majority stakes being acquired by the global giant Walmart Inc., through foreign direct investment (FDI) captured everyone’s attention. The regulations for FDI in India are outdated and complicated which deters the investors. The restrictive regulatory framework does not allow Walmart to run an e-commerce retail venture in India on its own. Therefore, in spite of having an offer from Amazon, Flipkart went with the Walmart deal simply because it was structured to most likely appease and circumvent the regulatory complications. Legal experts and advisors in FDI are expected to come up with a specific plan of action for an optimal deal to ensure a successful transition by the end of 2018.

So how does one acquire such niche expertise in FDI and its regulations?

Well, while the hands-on experience of such transactions and deals are essential, there are online courses available on FDI and its regulations, commercial contract drafting which aids in gaining the much-needed knowledge of such specialised fields of law.

Thanks to the internet companies and innovations, the commercial law has branched out significantly, resulting in specialised fields like these:

Media and Entertainment Law

From our newspapers to our music, even our movies and shows, have all moved to our phones and computers. YouTube, Amazon Prime, Netflix, Hotstar, etc. have revolutionised how we get our entertainment – we simply stream it!

Almost all the prominent news publications have an online presence through social media and websites. The news, streaming services, advertising, social media are online now. This is the age of instant information and access. So the need of the hour has changed as well.

Lawyers are needed specifically with expertise in this niche field. They need to be equipped to aid an author to protect the copyright in his book and the royalties thereof as well as manage the celebrity agreements with giant motion picture media houses. From obtaining the design patent and word trademark for a new product to litigating against representative bodies like the Indian Performing Right Society Limited (IPRS) on behalf of performers, is a daily activity for these lawyers.

Any new product/service requires to procure a trademark of its name, patent the uniqueness of their product/service by searching the product/service by filing the correct applications before the Office of the Registrar of Trademarks and Patent Office respectively. Thereafter, the branding and marketing of the product may begin. The commercial agreements like master service agreements are entered thereafter for manufacturing of said product/service and the licensing agreements etc. are done so on and so forth. This is where the expert lawyers in media and entertainment law come in.

Media and entertainment lawyers are much in demand for talent acquisition and management, IP protection and monetisation, merger and acquisitions, etc. The skills required for a media and entertainment lawyer is significantly unique based on the industry and requires experience and knowledge. While the skills can be acquired through field experience, the specialised knowledge has to be attained through a constant learning regimen.

Data Protection and Privacy Laws

We are living in the era of information and access. Our dependence on technology is a daily affair and it ranges from Alexa, Siri, Google Assistants to GPS navigation, Uber, Facebook, Amazon and the likes. Technology is no longer invading our lives, it is a part of it. We rely on applications and websites for our basic information, news, groceries, clothes, socialising, navigation and everything in between!

This has resulted in an accumulation of data for the individuals which comprises of our personal information like address, interests, images, banking information, etc. In cumulation, our data can be studied for analysing our behaviour, tendencies, inclinations and the likes. This information can be in turn utilised for marketing, branding, advertising and maybe more.

Recently, the Facebook-Cambridge Analytica controversy, raised the red-flag on such information accumulation and privacy-related issues. The allegations included using millions of Facebook users’ data to sway the US Presidential Elections 2016!

This led to the much-needed discussion on data protection and privacy issues.

It even stemmed out a controversy in India, when it came out during one of the congressional hearings in Cambridge Analytica that it had used similar research and reports to influence the Indian elections in the past!

Unlike the European countries, there is no express legislation on data protection or privacy laws in India! They have been recently been a pertaining issue before the Supreme Court of India in the Aadhar Case, but there is a lack of a structured regulation and redressal system.

Presently the lawyers are working within the scope of the constitutional right to privacy in order to accommodate their clients’ interests. Even if the data protection and privacy law are not there at present, the legal issues persist, so the lawyers have to work within the constitutional law, information technology laws, etc. to make their case.

While the Indian legislation catches up to it, there is a lot of scope and need for legal experts and lawyers in the field of data protection and privacy laws from a global perspective.

Cyber Law and Technology Law

With an increase in digitisation and online activities like online banking, e-commerce, advertising, social networking comes the hacking of account, privacy issues, infringements, commercial transactions, cyber frauds, etc. The cyber laws in India are evolving steadily.

The innovation in technology products like Amazon Echo, applications for gaming, music, apparels, etc. need relevant intellectual property protection under design laws, patent laws, copyrights laws, etc. These product and services require policies, terms and conditions, technology contracts and overall protection for both the companies and the customers or audience.

Google, Facebook and other tech giants have recently modified their privacy policies after the Cambridge Analytica controversy in order to gain the trust of their users as well as adhere to the General Data Protection Regulation (GDPR) guidelines which came into effect on 25th May 2018 in all 28 European Union member countries.

Back in India, according to the National Crime Bureau, there has been a surge in cyber crimes in India between 2009-2016 from 636 (2009) to 12,317 (2016)! But there is a dearth of expert lawyers and consultants in cyber laws. So, there are plenty of opportunities in the legal-technological space and need for knowledgeable and experienced consultants, advisors and experts.

There are various full-time and online courses available for lawyers who are looking to gain the specialised knowledge of the different kinds of technology contracts (like software license and ownership agreements, IT services agreements, cloud services agreements, technology license, video game development agreement, etc.), cyber crimes, cryptocurrencies, payment banks (such Airtel, PayTM).

These specialised fields have a lot of potential for lawyers and legal consultants in the near future. The area may get more streamlined or branch out more to make room for newer specialised fields. However, at present, these areas of law are in dire need of technically sound experts. Considering the time it takes to gain industry knowledge, only the early birds will gain the most by starting their training in these upcoming fields of laws.