In this article, Neitseizonuo Solo pursuing B.A. LL.B. (Hons.) from Hidayatullah National Law University, Raipur discusses the Different types of writs and writ jurisdiction of High Courts.

Introduction

A writ is an order by a court, directing lower courts to either do something or not do something. The concept of a writ was first developed by the Anglo-Saxons in England. The Monarch would issue letters which held orders and directions. Since then, writs have been incorporated by various countries into their legal systems. India has also done so, empowering the Supreme Court and the High Courts to issue such writs.

Prerogative writs under Indian law

Writs under Indian law are prerogative writs, a subset of writs, which are issued as an extraordinary remedy for aggrieved persons. The power to issue prerogative writs has been granted by the Constitution under Article 266 to the High Courts and to the Supreme Court under Article 32. It is a discretionary power which means that the High Court may or may not issue a writ.

Exhaustion of Alternative remedies before moving to High Court

A prerogative writ is also known as an extraordinary writ because it is only issued when alternative remedies have been exhausted. Although this restriction does not extend to the enforcement of Fundamental Rights. The court has laid down a precedent for the same.

This is known as the rule of exhaustion of remedies. The court has justified the same in the case of Union of India v. T.R. Varma AIR 1957 SC 882 and held that the rule of exhaustion exists so that a person is not allowed to circumvent existing statutory proceedings by approaching the High Court under Article 226

Further, the Supreme Court has provided in the cases of U.P. Jal Nigam v. Nareshwar Sahai Mathur 1 SCC 21 and Tigahur Paper Mills Co. Ltd v. State of Orissa 142 ITR 663, certain grounds on which the court may issue writs even if there are other remedies available. They are as follows:

1. When the remedies provided are not well suited to the situation at hand.
2. When the alternative remedy is inadequate to meet the needs of the case.
3. When there is an unreasonable amount of delay.
4. When there is complete lack of jurisdiction to try the case.

Jurisdiction of the High Court

The jurisdiction of the High Courts have also been provided in Article 226 of the Constitution, and they can be divided into two part:

Territorial

The High Courts have the right to issue writs within the territory of the state which the High Court is concerned with. Under Article 226(2) the court has been granted a certain degree of extra-territorial jurisdiction as well. High Courts are allowed to issue writs to any government, authority or person outside their territorial jurisdiction if the whole or part of the cause of action arises in their concerned state.

Subject matter

High Courts have been granted a large ambit to exercise this power. A High Court can issue writs not only for the enforcement of Fundamental Rights given in Part III of the Constitution but also non-Fundamental Rights for which the Constitution of India has used the words “for any other purpose” to widen the scope of High Court’s Jurisdiction.

Types of Writs

There are five types of writs which can be issued by the High Courts, but Article 226 has also given the power to issue other writs if they are of like nature to the five types of writs expressly spelled out in the Constitution. The types of writs are as follows:

Habeas Corpus

Habeas corpus is a Latin term which translate to “you have the body.” This type of writ is used in cases of illegal detainment and imprisonment. This writ allows the court to direct the detainer to appear before the court and give a valid reason for the imprisonment or detention. They must provide proof that it is legal, thus the onus of proof is on the detainer, and he must show proof of authority to do the same. If the court finds that the person has been illegally detained, it can order the detainee or prisoner to be set free.

Scope and Grounds

The court has greatly expanded the scope of this writ as it protects the right to life and liberty. In the case of Sheela Bharse v. State of Maharashtra AIR 1983 SC 378, the court expanded the scope of this writ by adjudging that it is not necessary that the detainee should be the petitioner. An interested party who has some connection with the case may also do so.

In the case of Kanu Sanyal v. District Magistrate AIR 1973, SC 2684 the court held that it is not necessary to produce before the court the detainee.

Prohibition

The writ of prohibition is issued by the High Court to judicial and quasi-judicial bodies, refraining the said bodies from continuing with any proceeding which is in excess of their jurisdictions. The writ of prohibition can be issued only when the case is continuing.

Scope and Grounds

In the case of Calcutta Discount Co. Ltd. v. ITO AIR 1961 SC372, the Supreme Court held that when a subordinate court or tribunal is shown decisively that they have acted in excess of their jurisdiction, the court will issue a writ of prohibition regardless of whether there exists an alternative remedy or not.

Mandamus

Mandamus is a Latin term meaning “to command,” and it is a writ which is issued to any person or authority who has been prescribed a duty by the law. Mandamus cannot be issued to a private person or company with private obligations. It also cannot be issued to enforce a private contract. This writ compels the authority to do this duty. Mandamus does not create a new duty instead it compels the performance of an already existing duty.

Scope and Grounds

Like the other prerogative writs, the court has taken on the burden of setting the parameters for the application of the writ of Mandamus.

In the case of, State of West Bengal v. Nuruddin(1998) 8 SCC 143, the Supreme Court held the writ of mandamus is a personal action where the respondent has not done the duty they were prescribed to do by law. The performance of the duty is the right of the applicant.

In Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust and Ors. v. V. R. R Udani and Ors. AIR 1989 SC 1607, the court held that it is not necessary that the duty is imposed by statute, mandamus may apply even in cases where the duty is imposed by common law or custom. The ambit of mandamus is very wide, and it must be available when an injustice has occurred. It should not be bogged down with too many technicalities.

Quo Warranto

Quo warranto is the Medieval Latin term for “by what warrant” and it is the writ which is issued directing subordinate authorities to show under what authority they are holding the office. The writ cannot be issued to a person working in a private field. This writ is issued to a person in an office, the legality of which is being questioned.

Scope and Grounds

In the case of Anand Bihari v. Ram Sahay AIR 1952 MB 31, the court held that the office in question must necessarily be one which is public.

In G. Venkateshwara Rao v. Government of Andhra Pradesh AIR 1966, SC 828, the court held that a private person may file an application for a writ of Quo Warranto. It is not required that this person is personally affected or interested in the case.

Certiorari

Certiorari means “to certify,” and it is a writ which is issued by the High Court to subordinate judicial or quasi-judicial bodies directing them to transfer the records of a particular case in order to ascertain whether the court has the jurisdiction to give the order or whether it is against the principles of natural justice. A writ of certiorari is corrective in nature.

Scope and Grounds

The scope of the writ of certiorari has been given in the case of Hari Vishnu Kamath v. Ahmad Ishaque AIR 1955 SC 233 as follows:

1. When there is an error of jurisdiction.
2. When the court has not given the proper time for both parties to be heard or has violated principles of natural justice.
3. This writ is supervisory in nature, and thus the High court cannot review the findings of the lower courts.
4. If the error is evident.

What are the different situations when writs can be issued?

Habeas Corpus

The writ of habeas corpus can be filed in the High Court when a person has been illegally detained by any public authority. For example, if a person has been detained for an unreasonable amount of time and without just cause, he may file a writ of habeas corpus.

Prohibition

A writ of prohibition can be filed when a court acts not within the limits of their jurisdiction but beyond its prescribed limitations. For example, if a trial is being heard without the court having the jurisdiction to do so, a writ of prohibition may be filed.

Mandamus

The writ of Mandamus can be filed in when a person does not do the duty that they are prescribed to do by a statute, common law or custom. For example, when police refuse to take any action against a criminal, for no reason, a writ of mandamus may be filed.

Quo Warranto

Writ of Quo Warranto can be applied for in situations where a person who has acquired a public office does not have the right to do so. For example, the writ can be filed if the person holding the post of Advocate General does not have a legitimate right to it.

Certiorari

Writ of certiorari can be applied in situations where a court, on passing an order, has gone beyond their jurisdiction in doing so. For example, when the court passes an order for a case which they had no power to do so, the aggrieved can apply for the writ of certiorari.

Difference between Certiorari and Prohibition

Both in case of certiorari and prohibition, the High Court passes an order directing judicial and quasi-judicial authorities when in excess of jurisdiction. The difference between the two is given below:

1. A writ of prohibition can only be issued when the case is pending before the court or tribunal.
2. A writ of certiorari is issued after the final order has been passed by the court or tribunal.

How to File a Writ in the Supreme Court?

For the purpose of filing a writ petition in the Supreme Court under Article 32, a format for the writ petition is provided by the Supreme Court which must be followed. The following documents need to be attached along with the writ petition:

1. An affidavit by the petitioner.
2. 1+5 copies of the writ petition.
3. It will also include a prescribed cover page, an index, annexures as may be required as well as a memo of appearance for which fees are to be paid.

The same procedure can be used to file a case in the High Court, the format for writ petition will be available on the concerned High Court’s website. For example, The format is available on the official website of M.P. High Court here.

Difference between Writ Jurisdiction of the High Court and the Supreme Court

The Constitution of India has given the power to issue writs to the Supreme Court in Article 32. This power is wider in case of High Courts as the Supreme Court has restricted powers when it comes to issuing writs. The difference is given below:

1. The Supreme Court can issue writs only in case there is a violation of Fundamental Rights.
2. The High Court has a wider scope to exercise this power. They can issue writs not only when there is a violation of Fundamental Rights but also in other cases.

Conclusion

The power to grant writs is one of the most important powers granted to the High Courts and the Supreme court. Writs protect the rights of the citizens by providing a faster remedy, thereby upholding the principles of democracy by providing quick justice. The importance of writs cannot be underestimated, and the courts must necessarily use this power judiciously as they have been given a very wide ambit to practice this power.

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The article is written by Lokesh Vyas, pursuing law from Institute of Law Nirma University. The article discusses the concept of Directive Principles of State Policy and its relevance and implementation in the current legal scenario. The article tries to answer that whether Non-Justiciability hampers the implementation.

Directive principles of state policy (DPSP) have been in vogue since India got independence. Its contravention with the Fundamental Rights (FR) has been the point of contention in the courts. The non-justiciability of DPSPs has always been a moot point in India legal system. DPSPs are the non-justiciable part of the Constitution which suggests that a person cannot enforce them in the Court.

DPSPs: Its Genesis, and its Meaning

The Concept of DPSP is not an indigenous one. Our Constitution makers borrowed this concept from Irish Constitution (Article 45), it has its genesis in Spanish Constitution. Part IV of the Constitution of India deals with Directive Principles of State Policies. To understand the meaning of the directive principle of state policy, we need to understand the meaning of each word i.e. Directive + principle + state + policy which suggest that these are the principles that direct the state when it makes policies for its people. These DPSPs act as a guideline for the state and are needed to be taken into consideration while coming up with any new law but a citizen cannot compel the state to follow DPSPs.

List of DPSPs under Indian Constitution

Reflection of Preamble

The Preamble of the Constitution is called the key to the mind of the drafters of the Constitution. It lays down the objectives that our Constitution seeks to achieve. Many scholars believe that DPSPs is the kernel of the Constitution. The Directive Principles of the State Policy (DPSPs) lay down the guidelines for the state and are reflections of the overall objectives laid down in the Preamble of Constitution. The expression “Justice- social, economic, political” is sought to be achieved through DPSPs. DPSPs are incorporated to attain the ultimate ideals of preamble i.e. Justice, Liberty, Equality and fraternity. Moreover, it also embodies the idea of the welfare state which India was deprived of under colonial rule.

DPSPs and its Intricacies

Constitution Drafters divided rights of the citizen into two parts i.e., Justiciable and Non Justiciable part. Part III of the Constitution was made Justiciable and the non-justiciable part was added in Part IV (Article 36 to Article 51) of the Indian Constitution. This part is called the Directive Principles of State Policy.

DPSPs are positive obligations on the state. DPSPs were not made justiciable because India did not have sufficient financial resources. Moreover, its backwardness and diversity were also a hindrance in implementing these principles at that time. At the time of the drafting of the Constitution, India was a newly born independent state and was struggling with other issues and making DPSPs justiciable would have put India in great difficulty.

Article 37 defines the nature of DPSP. It states that DPSPs are not enforceable in the courts but at the same time, it defines DPSPs as a duty of the state. Moreover, the same Article defines DPSPs as principles that are fundamental to the governance of any country. It shows the relevance and significance of DPSPs in the constitution and in the governance of a country.

Enforceability of DPSPs

Many times the question arises that whether an individual can sue the state government or the central government for not following the directive principles enumerated in Part IV. The answer to this question is in negative. The reason for the same lies in Article 37 which states that:

“The provisions contained in this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws.”

Therefore by the virtue of this Article no provision of this part can be made enforceable in the court of law thus these principles cannot be used against the central government or the state government. This non-justiciability of DPSPs make the state government or the central government immune from any action against them for not following these directives.

Another question arises that whether Supreme Court or High Court can issue the writ of mandamus if the state does not follow the directive principles. The literal meaning of mandamus is “to command.” It is a writ which is issued to any person or authority who has been prescribed a duty by the law.This writ compels the authority to do its duty.

The Writ of mandamus is generally issued in two situations. One is when a person files writ petition or when the Court issues it suo moto i.e. own motion. As per Constitutional Principles, a Court is not authorized to issue the writ of mandamus to the state when the Directive Principles are not followed because the Directive Principle is a yardstick in the hand of people to check the performance of government and not available for the courts. But the Court can take suo moto action when the matter is of utmost public importance and affect the large interest of the public.

Fundamental Rights are the legal obligation of the state to respect, whereas the DPSPs is the moral obligation of the state to follow. Article 38 lay down the broad ideals which a state should strive to achieve. Many of these Directive Principles have become enforceable by becoming a law. Some of the DPSPs have widened the scope of Fundamental Rights.

DPSPs and Fundamental Rights

The compatibility between Fundamental Rights and DPSPs have always been contentious. The applicability of both the concepts need to be understood because if the Constitution is a coin then Fundamental Rights and DPSPs are two facades of that coin.

On the one hand Part III i.e. Fundamental Rights limit the power of government and restrains the state from making any law which contravenes the interests of its people, on the other hand, Part IV helps the state in making a law which harmonizes the interest of its people. Both Fundamental rights and Directive Principles of State Policy hold equal relevance and significance in the current legal scenario and cannot overlook each other. Many people argue that DPSPs are useless because of its non-justiciability but we need to understand that these are not only the guiding principles but also lay down the broad objectives and ideals that India strives to achieve.

Judicial Pronouncements

The question that whether Fundamental Rights precedes DPSPs or latter takes precedence over former has been the subject of debate for years. There are judicial pronouncements which settle this dispute.

of Madras vs Champakan (AIR 1951 SC 226) (see here), the Apex Court was of the view that if a law contravenes a Fundamental right, it would be void but the same is not with the DPSPs. It shows that Fundamental rights are on a higher pedestal than DPSPs.

In Kerala Education Bill (1957) (1959 1 SCR 995) (see here) Court said that in case of conflict between Fundamental Right and DPSPs, the principle of harmonious construction should be applied. But still after applying the doctrines of interpretation, there is a conflict between fundamental right and DPSPs, then the former should be upheld.

In Venkataraman v. State of Madras (1966 AIR 1089) (see here), Court gave precedence to Fundamental rights over DPSPs.

In I. C. Golaknath & Ors vs State Of Punjab & Anr. (1967 AIR 1643), (see here) The Court was of the view that Fundamental rights cannot be curtailed by the law made by the parliament. In furtherance of the same the Court also said that if a law is made to give effect to Article 39(b) and Article 39(c) which come under the purview of DPSPs and in the process the law violates Article 14, Article 19 or Article 31, the law cannot be declared as unconstitutional and void merely on the ground of said contravention.

The 42nd Constitution Amendment widened the scope of Article 31C to cover all the directive principles laid down in the Constitution. Prior to the Amendment Article 31C saved only those laws which gave effect to the Directive Principles of State Policy specified in Article 39(b) and 39(c).

In Keshavnanda Bharati vs the State of Kerala (1973) 4 SCC 225), (see here) The Apex Court placed DPSPs on the higher pedestal than Fundamental Rights. Ultimately in the case of Minerva Mills vs Union of India (AIR 1980 SC 1789) (see here), the question before the court was whether the directive principles of State policy enshrined in Art IV can have primacy over the fundamental rights conferred by Part III of the Constitution. The court held that the doctrine of harmonious construction should be applied because neither of the two has precedence to each other. Both are complementary therefore they are needed to be balanced.

In Unnikrishnan vs State of Andhra Pradesh (1993 SCC (1) 645) (see here) The Court was of the view that Fundamental Rights and Directive Principles are not exclusive to each other therefore they should not be read in exclusion. Moreover, the Court said that the Fundamental Rights are the means through which the goals enumerated in Part IV are achieved.

DPSPs and Amendments

For amending the Directive Principles of State Policies, the Constitutional amendment is required. It has to be passed by the special majority of both the houses of the Parliament. Post-independence there have been number of amendments to the constitution and some of them are pertaining to DPSPs.

Beginning with the 42nd Constitutional Amendment 1976, it made four changes in DPSPs. Firstly, it amended Article 39 which obligates the state to secure a social order for the promotion of the welfare of the people. Moreover, it added Article 39-A which makes it the duty of the state to provide for equal justice and free legal aid. By the virtue of this Article, Parliament came up with the law called the Legal Services Authorities Act, 1987. It also added Article 48A which deals with the protection and improvement of environments. The Water Pollution, Air Pollution, Environmental Pollution Acts, The Forest Act etc demonstrate the application of the principles laid down in Article 48A.

44th Constitutional Amendment, 1978 added Article 38 clause (2) which directs the state to minimize inequalities in income, to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.

73rd Constitutional Amendment, 1992 which brought Panchayats in Part IX of the Constitution had its genesis in Article 40 of the constitution. It deals with the Organization of village Panchayats.

86th Constitutional Amendment, 2002 inserted Article 21-A in the Constitution of India. It provides Right to free and compulsory education of all children in the age group of six to fourteen years as a Fundamental Right. The roots of this amendment are in Article 41 which talks about Right to work, to education and to public assistance in certain cases.

97th Constitutional Amendment 2011 added Article 43-B it authorizes the state to promote voluntary formation, autonomous functioning, democratic control and professional management of the co-operative societies.

DPSP and its Implementation

Although the implementation of the principles laid down in Part IV are not directly visible yet there are a plethora of laws and government policies which reflect the application of the principle of Part IV. In the Judicial History of India, many laws and legal provisions were created by judicial reasoning. In such cases, DPSPs played a very vital role and the courts took the directive principles into consideration very cautiously.

Policies like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) get their authority from Article 39(a) which talks about the right to adequate means of livelihood. Laws such as the Child Labour (Prohibition and Regulation) Act 1986 bolster the canons of Article 39(g) which deals with the protection of children.

Laws pertaining to prohibition of slaughter of cows and bullocks get their sanctity from Article 48 which deals with the organization of agriculture and husbandry. Laws such as Workmen Compensation Act, Minimum Wages Act, Industrial Employment (Standing Orders) Act, The Factories Act, Maternity Benefit Act depict the implementation of Article 41, Article 42 and Article 43A.

Government Policies such as Integrated Rural Development Program (IRDP), Integrated Tribal Development Program (ITDP), and Pradhan Mantri Gram Sadak Yojana etc. are the reflections of the principle objectives enumerated in Article 47 which talks about raising the standard of living and to improve public health.

In the end, all these laws and policies try to achieve goals and principle given in Article 38 i.e. the creation of welfare state.

Importance of DPSPs for an Indian citizen

Regardless of the non-justiciable nature of DPSPs, a citizen should be aware of them. As the Article 37 itself describes these principles as fundamental in the governance of the country. The objective of the DPSPs is to better the social and economic conditions of society so people can live a good life. Knowledge of DPSPs helps a citizen to keep a check on the government.

A citizen can use DPSPs as a measure of the performance of the government and can identify the scope where it lacks. A person should know these provisions because ultimately these principles act as a yardstick to judge the law that governs them. Moreover, it also constrains the power of the state to make a draconian law. Through various judicial pronouncements, it is settled principle now that balancing DPSPs and Fundamental rights is as important as maintaining the sanctity of Fundamental Rights. Non following a directive principle would directly or indirectly affect the Fundamental Right which is considered as one of the most essential parts of the Constitution.

Conclusion

This Article tries to prove that the relevance and significance of DPSPs cannot be overlooked only on the basis of its non-justiciability. Our constitutional drafters did not add these provisions just for the sake of existence, rather they added these principles to facilitate the governance of the country. They added this part to meet the main objectives and the ultimate goal of a country. Moreover, after looking at the above-mentioned information, it would be wrong to say that DPSPs are not implemented. Every policy and law that the state comes up with has to meet the standards of Part IV. Thus, even after being non-justiciable, they hold equal relevance and significance as Fundamental rights or any other provision of the Constitution.

References

1. Articles Related to Directive Principles of State Policy by Hemant Pratap Singh. (https://www.jagranjosh.com/general-knowledge/articles-related-to-directive-principles-of-state-policy-1474442764-1) accessed 2 May 2018
2. Directive Principles of State Policy (DPSP), (http://www.iasscore.in/upsc-prelims/directive-principles-state-policy-fundamental-duties) accessed 2 May 2018
3. Directive Principles of State Policy (DPSP), (https://www.gktoday.in/academy/article/directive-principles-of-state-policy/#Sources_of_DPSP) accessed 2 May 2018
4. Directive Principles of State Policy (DPSP): Amendment, Sanctions, and Criticism, (https://aspirantforum.com/2016/06/27/directive-principles-of-state-policy-amendment-sanctions-criticism/) accessed 3 May 2018
5. Constituent assembly debate on Directive Principles of State Policy by Surabhi Rao,(http://logos.nationalinterest.in/2014/07/constituent-assembly-debate-on-directive-principles-of-state-policy/) accessed 2 May 2018
6. Scope of Enforcement of DPSPs by Aakanksha Bhola, (https://www.lawctopus.com/academike/scope-of-enforcement-of-dpsps/#_edn6) accessed 2 May 2018
7. Fundamental Rights and Directive Principles (https://www.lawteacher.net/free-law-essays/administrative-law/fundamental-rights-and-directive-principles-administrative-law-essay.php?vref=1) accessed 3 May 2018
8. Fundamental Rights vs Directive Principles: What If there is a conflict?, (https://www.clearias.com/fundamental-rights-vs-directive-principles-what-if-there-is-a-conflict/) accessed 3 May 2018
   

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In this article, Aditya Bhushan pursuing B.A.LL.B. (Hons.) from Hidayatullah National Law University discusses the Freedom of Religion Under Indian Constitution.

How Independent is a Person to Practice his Religion

The degree of independence to practice a religion cannot be scaled as such, but what our constitution provides is that we can practice any religion in any way or manner we want, till the time it does not disturbs the social order either morally or politically and does not hamper the smooth running of the society which means that he does not commit any act of social misconduct which may lead to any threat to the ongoing peace, any immoral act or any other activity banned by the state. Practices like sati, child marriages, dowry, various sacrificial offerings have been banned owing to the fact that it has been classed as immoral social practices.

Who can Exercise the Right Given Under Article 25?

The said freedom to practice any religion of a person is enshrined under Part III of the Constitution in Article 25 which governs all the persons residing in the country irrespective of their status of citizenship. Hence, no one can question the religious inclination of any person irrespective of whether he is a foreign national or any person residing in the territory of India.

Constitutional Safeguards for Freedom of Religion

Religion has been dealt with very carefully by our constitution makers in order to avoid any clash between the state and its subjects. Hence, under Part III which talks about fundamental rights of a citizen, there are several provisions which provide for the safe and healthy accommodation of religious matters into the society.

Is Right to Profess and Propagate a Religion an Absolute Right?

Article 25 gives to all persons the right to freely profess, practice and propagate religion. This right, however, is not absolute. The opening words of Article 25(1) make this right subject to public order, morality, and health. The same restriction also applies to the other provisions of Part III of the Constitution. This would mean that the right given to a person under 25(1) can be curtailed or regulated if the exercise of that right would violate other provisions of Part III of the Constitution, or if the exercise thereof is not in consonance with public order, morality and health and it cannot be violated by any person in exercise of his freedom of conscience or his freedom to profess his religion. For example, a person cannot profess his religion in such a manner as to denigrate another religion or bring about dissatisfaction amongst people.
The freedom to profess any religion is a fundamental right, but in cases where a particular community is kept under minority status, the shield of freedom of religion cannot be used for the purpose of claiming minority status so as to avail the benefits of Articles 29 And 30 of the Constitution of India. The same principle was upheld in the case of State Of Rajasthan And Ors. v. Vijay Shanti Educational Trust, RLW 2003 (4) Raj 2568.

The Freedom to Manage Religious Affairs

The freedom to manage religious affairs is provided by Article 26. This Article gives the right to every religious denomination, or any section thereof, to exercise the rights that it stipulates. However, this right has to be exercised in a manner that is in conformity with public order, morality, and health. Clause (a) of Article 26 gives a religious denomination the right to establish and maintain institutions for religious and charitable purposes. There is no dispute that the establishment of an educational institution comes within the meaning of the expression “charitable purpose”. Therefore, while Article 25(1) grants the freedom of conscience and the right to profess, practice and propagate religion. Article 26 can be said to be complementary to it.
Article 26 does not deal with the right of an individual but is confined to a religious denomination. Article 26 refers to a denomination of any religion, whether it is a majority or a minority religion, just as Article 25 refers to all persons, whether they belong to the majority or a minority religion.

To What Extent can the State Restrict One’s Right to Practice, Profess or Propagate Religion

Each time the state plans to introduce restrictions to curb religious dealings, it gets a wide array of reactions from the society.
A careful reading of Article 25(2)(a) indicates that it does not prevent the State from making any law in relation to the religious practice as such. The limited jurisdiction granted by Article 25(2) relates to the making of a law in relation to economic, financial, political or other secular activities associated with the religious practice. This means that the state can regulate affairs related to religion indirectly.
Apart from above mentioned regulations state can intervene for social welfare reforms which tend toward off social evils prevailing in the society having their origin from religious dealings.

Constitutionality of Endowment Acts Controlling Affairs of Worship Places and Other Charitable Trusts

Every religion, denomination or organization is free to manage its own affairs and is confined to ‘matters of religious nature’. The state cannot interfere in the exercise of this, unless they run counter to public order, health or morality.
The term ‘matters of religion’ includes religious practices, rites, and ceremonies considered essential for the practice of religion. The right is however subject to the regulatory power of the state under Clause (2) (b) of Article 25. This means that the secular activities connected with the religious institution can be regulated by the state under the law. First of such acts was Madras Religious & Charitable Endowments Act, 1925 which, after opposition by Muslim and Christians communities, was renamed as Madras Hindu Religious & Endowments Act, 1925. The condition is acute in 7 states namely, Tamil Nadu (worst hit), Andhra Pradesh, Karnataka, Kerala, Odisha, and Maharashtra.
In the case of Bira Kishore Devi v. State of Orissa, AIR 1964 SC 1501, the Shri Jagannath Temple Act took management of secular activity of the Temple from Raja of Puri and vested it in committee constituted under the Act. The court held the Act valid as it did not affect the religious aspect.
The government may exercise his power to administer the temple or audit its assets but what it cannot do is to exercise a right to sell or give a lease to others, and cannot use temple assets for the welfare of people of others faiths. Article 26 of the constitution gave the right to denominations of religion to manage matters of religion and Article 25 allowed State to make any law to regulate.
Apart from control and regulations of Hindu religious institutions, there are various regulatory bodies working both at central as well as local levels to regulate the affairs of Sikh Gurdwaras and Islamic establishments as well.

Sikh Gurudwaras: All historical gurudwaras are being administered under following bodies:

1. Delhi Sikh SGPC: Controls Gurudwara of Delhi.
2. Haryana SPGC: Controls Gurudwara of Haryana.
3. Hajur sahib SPGC: Controls Gurudwara in Maharashtra.
4. Shiromani Gurdwara Parbandhak Committee: Controlling gurudwaras in Punjab and Himachal Pradesh.

Muslim Places: All Kabristan, Mosque, and Dargahs are being governed by Wakf Boards. Wakf Boards are established by both state and central governments. There are 30 wakf boards in India. Central Wakf Council is an Indian statutory body established in 1964 under wakf act 1954. Wakf is a permanent dedication of movable or immovable properties for religious, pious or charitable purposes as recognized by Muslim Law, given by philanthropists.
As secular activities connected with religious institutions can be regulated by state under law, there has been a conflict among the provisions of the constitution where Clause 2 of Article 25 empowers the state to regulate matters relating to secular practices of the religion and on the other side Article 26 provides freedom to manage religious affairs to individuals. Hence the conflict arises due to uncertainty in authority to manage the religious institutions.

The Legality of Ghar Wapsi Movements: Fate of Anti-Conversion Laws

Ghar Wapsi means homecoming or reconversion of non-Hindus into Hinduism. There are no such cases which prove that these conversions are fraudulent. Had such an activity being a result of undue influence or by forceful means, it would have been an illegal activity.
One question of importance which emerged during the same time was whether the converted person will be put back to his initial caste or will he lose all his prior cast designations. It was in the case of K.P. Manu, Malabar Cements Ltd v. Chairman, Scrutiny Committee for Verification of Community Certificate Civil Appeal no. 7065 OF 2008, where the bench held that even after reconversion the person can avail the benefits of reserved categories provided the person must fulfill three mandatory conditions to avail such benefits after reconversion:

• There must be clear proof that he belongs to a caste duly recognised as a Scheduled Caste.

• He has “reconverted” to the original religion to which his parents or earlier generations belonged.

• That he has been accepted by the community.

Anti-Conversion Legislations

All of the anti-conversion laws at present seek to prevent any person from converting or attempting to convert, either directly or otherwise, any person through “forcible” or “fraudulent” means, or by “allurement” or “inducement.”
The Constitution of India guarantees the freedom to profess, practice, and propagate one’s religion under Article 25. The Supreme Court in the case of Ratilal Panachand Gandhi v. State of Bombay 1954 S.C.R. 1035, 1063 clarified this provision by holding that “every person has a fundamental right under our Constitution not merely to entertain such religious belief as may be approved of by his judgment or conscience but to exhibit his belief and ideas in such overt acts as are enjoined or sanctioned by his religion and further to propagate his religious views for edification of others.”
The Supreme Court in Rev Stanislaus v. State of Madhya Pradesh (1977) 1 SCC 677 examined whether the right to practice and propagate one’s religion also included the right to convert. The Court upheld the validity of the earliest anti-conversion statutes: the Madhya Pradesh Dharma Swatantraya Adhiniyam, 1968, and the Orissa Freedom of Religion Act, 1967. The Court held that propagation only indicated persuasion/exposition without coercion and that the right to propagate did not include the right to convert any person.

What Legal Actions to take when Someone Restricts you from Practising your Religion? How to Report? Which Court to Approach?

If your fundamental right to practice your religion has been restricted you can approach the High Court under Article 226 of the Constitution. You also have the right to approach the Supreme Court under Article 32 but the Supreme Court has advised that you approach the High Court of your State before approaching the Supreme Court.
Apart from Constitutional safeguards, Indian Penal Code has also provided safeguards have which been stated under Chapter 15 from Sections 295 to 298 classified as offence any act such as:

• Damaging or defiling a place of worship or a sacred object with intent to insult the religion of a class or a person.
• For disturbing any religious worship or ceremony.
• For trespassing into any place of sepulture or place where funeral ceremonies are proceeding.
• For utterances in the presence of another person with the intention of wounding the religious feelings of that person.
• For insulting the religion of any class of citizens by spoken or written publication.

Even though it’s an important statutory provision, it comes with many conditions to prove. The term such as malicious, deliberate intentions and state of mind becomes hard to prove in the court. The last point dealing with insulting any religion through published or spoken expression also poses a problem, it varied the material expression by using the term outraging rather than wounding the feelings of any person.

Is Demolition of a Worship Place by Public Authorities Valid – Is it Violative of my Fundamental Rights?

Fundamental rights are there for the protection of one’s right to practice religion but no right can exist in absolute independence without any condition. Same way Article 25 of the constitution which calls for one’s rights to freedom of religion but it is subject to public order.
While deciding what public order is, if the court has been given two situations to prioritize from, it will choose the situation which is for the greater good of the public. So given the fact that the presence of any shrine is detrimental to the expansion of a runway for an international airport the court can order for removal of such worship places. Hence even if the right to practice any religion is a right protected under the constitution, it’s still not absolute and is subject to various conditions.

Issue of Illegal Encroachment: Land Grabbing in God’s Name

There have been instances where land has been encroached upon illegally using the excuse of religion. For example, in 2006 after the Vadodara Municipal Corporation demolished shrine of Syed Rashiduddin Chishti owing to its illegal expansion, there were casualties leaving 8 injured and 4 dead. Each time public authorities tried to remove illegal possessions it has met with violent oppositions from the public.
In the case of Union of India v. State of Gujarat & Ors SLP (Civil) No(s).8519/2006, the Supreme Court directed state government not to grant any permission for installation of any statue or construction of any structure in public roads, pavements, sideways and other public utility places. Obviously, this order shall not apply to the installation of high mast lights, street lights or construction relating to electrification, traffic, toll or for development and beautification of the streets, highways, roads etc. and relating to public utility and facilities.

Conclusion

In the present scenario where India very closely observes the consequences of the communal clash, the sense of respect and accommodation for other sects and communities must be inculcated in the masses. The ambit of control exercised by the government over religious activities must be checked. A sense of inclusiveness must be provided to the people belonging to minority community. The idea of religion is very personal to individuals and it should be left personal only rather than bringing this topic on stage and deriving political gains out of it. This right has already been protected by the Constitution of India and it is the duty of the court to uphold and enforce these rights.

In this article, Neitseizonuo Solo pursuing B.A.LL.B. (Hons.) from Hidayatullah National Law University, Raipur discusses How a Law Student can Overcome the Fear of Public Speaking.

The fear of public speaking is an issue that many law students, as well as aspiring law students, struggle with it. In fact, the fear of public speaking is one of the most common fears that generally people experience. The feeling of dread and anxiety which overcomes a person as they approach a stage or even as they desperately try to fall asleep anticipating tomorrows public speech is something which we can all relate to.

Public Speaking: A Fear

Glossophobia, better known as speech anxiety, is the fear of public speaking which arises out of the fear of being evaluated negatively by a crowd and often leads to the inability to perform in front of people. There is a physical response to such a fear leading to increased heart rate, often times it also leads to sweating and deep anxiety.

Law requires a person to not only interact with clients and a variety of people but also to appear before the court and deliver arguments for their clients and it only means that a person has to persuasively and curtly deliver their arguments or speech. Public speaking is not to speak eloquently but who can put their point across efficiently and succinctly.

This very simple knowledge that public speaking is important in inculcating practice in order to overcome the fear of public speaking. To overcome does not mean to extinguish the fear but it means to do so in spite of the fear.

Public Speaking is not a Prerequisite of Law

Most aspiring students and present law students are often under the misconception that a lawyer has to be an expert orator, but this is not true. Most legal jobs do not need a lawyer to be good at public speaking and it is not required like in-house-counsels or corporate lawyers. Public speaking is mostly required in litigation where the lawyer has to present arguments in a court. Indeed, even the words an “expert orator” does not mean an eloquent and charismatic speaker but rather a speaker who can drive his point home briefly and with clarity. So it is unnecessary to let the fear of public speaking hold you back from becoming a lawyer as there are many other types of jobs available in the law which do not require a lawyer to address large amounts of people. Hence, fear of public speaking does not pose as an impediment for a successful law career.

How Law School Help Students Overcome the Fear of Public Speaking

Law school provides many opportunities to try public speaking on a small scale where students can practice for it in order to reduce their fears. Given below are a number of ways a law school student may do so:

Debating

Most colleges have a debating society. When you first enter the law school, one of the first activities you are introduced to is debating. Debating involves taking either side of a topic and arguing upon it. Debating allows students to interact with people from all batches. Presenting and defending your arguments in front of a small crowd and thinking under pressure are some of the characteristics of debating which help students to step out of their comfort zone and attempt to get comfortable with public speaking.

Mooting

Mooting introduces to a student the idea that preparation is a key in public speaking. It requires the student to form reasonable and well-researched arguments before a bench, similar to a real court. Moot courts give invaluable experience to a student in both, understanding how a real court works and also, putting them in a situation where good oratory skills can be improved upon in relation to the courts.

Mooting usually involves a lot of preparation before the actual mooting occurs. Being well prepared for giving any sort of public commencement helps to reduce fear and nervousness that comes with the fear of public speaking.

Mooting provides the opportunity to students to understand how to handle pressure and answering questions like whether they are able to answer questions and how much preparation is needed for them to actually remember and answer questions under stressful and nerve-wracking situations. It acclimatizes students to a situation where they will be put on the spot in front of crowds and allows to realize their limits.

Vivas

Vivas are part of the curriculum in law colleges. Before a viva in front of a teacher, students are often overcome with nervousness, which they must face and do well under the circumstances. This stands as good practice to get over the fear of public speaking.

Clubs and Societies

There are a number of different clubs and societies that are concerned with various activities and subject matters. Clubs like the poetry club where students are given the opportunity to stand before the other members and deliver their poem. It introduces to students to a substantial platform on which they may practice their orating skills and get them used to stand before a crowd.

Through non-profits like Increasing Diversity by Increasing Access to Legal Education (IDIA) which have cells in a couple of colleges throughout the India, where students provide legal education to underprivileged children and it allows students to not only increase their public speaking experience but also give back to the society.

Presentations

Often times, students are required to make presentations on certain topics and such presentations are a daunting task for students with a fear of public speaking. These presentations allow students to gain experience by standing before a group of people and presenting their topics. It also helps students to improve their oratory skills by giving them a chance to engage with an audience and to see what keeps a crowd engaged during a speech. Presentations basically improve your ability to express your ideas and opinions before the crowd by helping you understand what makes a good speech.

Internships

There are a variety of internships a law student can take up if they wish to do so. These internships often require a student to present topics which they work upon during the duration of their internship. Internships place students in a real working environment, thus, internship presentations are a good way to practice oratory skills in an environment outside of academic life.

Conferences

Colleges hold conferences on a particular legal subject where students can take up the relevant topic and write a paper on it. If the paper is selected by the host college then they will appear before the judges who will judge the quality of their papers and subsequently, the best papers are chosen for publishing. Students get a chance to stand before a crowd of strangers and practice their oratory skills.

Model United Nations

MUNs are popular in all over the country and they are held at different institutions which are open to all colleges. In MUNs, students are allowed countries and committees that make up the United Nations where a singular motion is discussed by the members of the MUN. Students can voluntarily choose to speak for the country or the committee that they make up. Model United Nations provides plenty of opportunities for students to speak up and participate in discussions thereby providing a stage for students to overcome their fear of public speaking through practice in front of students from all over the country as well as the judges who preside over the discussions.

Class Participation

Some students are unable to take part in classroom discussions with fellow classmates. By raising your voice in the class and taking an active role in expressing your opinions will help to build up the confidence as well as habituating yourself to public speaking.

Conclusion

Simply put, Public speaking is an objective which requires time and effort before it can be perfected. This is not an impossible task and through the above-mentioned ways, students can improve and overcome their fear.

In this article, Nritika Sangwan, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the Powers and Functions of Registrar of Companies.

Introduction

The Registrar of Companies (ROC) as defined under Sub-Section 75 of Section 2 of the Companies Act, 2013, is an appointment of the Ministry of Corporate Affairs which is responsible for the regulation of Indian enterprises in Industrial and Services Sector. At present, there are 22 Registrars of Companies holding offices in the major states of India. Vested with a number of functions and equipped with a wide range of powers under the Companies Act of 1956 and Companies Act of 2013, the ROC is responsible for fostering business ethics in the current paradigm and plays a dominant role in facilitating business culture.

Meaning and Scope of Registrar of Companies

According to Section 2(75), the term ‘Registrar’ means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant Registrar. ROCs as appointed under Section 396 of the Act primarily have the duty of registering companies incorporated in the respective States and the Union Territories. However, in addition to registration, there are the number of other responsibilities that the ROC is conferred with. The Central Government exercises administrative control over these offices through the respective Regional Directors (RD) who are in-charge of the respective regions, each region comprising a number of States and Union Territories.

Powers of the Registrar of Companies

Powers in Relation to Registration of Companies

Registration of a company formed under Section 3 of the Companies Act is obtained by filing an application with the ROC in whose jurisdiction the registered office of the company is situated under Section 7 of the Companies Act.

Section 7: Incorporation of Company and Certificate of Incorporation

The company is said to be born from the date mentioned in the certificate of incorporation and the date appearing on it is conclusive even if it is wrong. Not only does the certificate create the company, it also is “the conclusive evidence that all requirements of this act have been complied with in respect of registration and matters precedent and incidental thereto and that the association is a company authorized to be registered and duly registered under this act”.
In other words, the validity of the certificate cannot be disputed on any grounds whatsoever.
This is illustrated by the decision of the Judicial Committee of the Privy Council in Moosa Goolam Ariff v. Ebrahim Goolam Arif, in which Lord Macnaghten said:
“Their Lordships will assume that conditions of registration prescribed by the Indian Companies Act were not duly complied with; that there were not seven subscribers to the memorandum and that the registrar ought not to have granted the certificate, but the certificate is conclusive for all purposes”.

Powers in Relation to Mortgage and Charges

Section 83: Power of Registrar to make entries of satisfaction and release without intimation from company

By virtue of Section 83, the Registrar is allowed to make entries of satisfaction, etc, after receiving evidence that,

• The debt for which charge is given has been paid or satisfied in whole or in part; or
• That a part of the property or undertaking charged has been released from the charge or has ceased to form a part of the company’s property or undertaking.

The registrar may enter in the register, a memorandum of satisfaction in whole or in part of the property or undertaking from the charge or has ceased to form a part of the company’s property or undertaking even if no intimation to the effect has been received by him from the company. Within 30 days of making such entry, the registrar has to inform the affected parties.

Powers Related to Inspection, Inquiry, and Investigation

Section 206: Power to call for information, inspect books and conduct inquiries

As per the provisions of Section 206 of the Companies Act, 2013, the Registrar may require any company to furnish information or explanation or produce any document, if after scrutinizing any document or on receiving any information, he feels that such documents are necessary.
The Registrar may also inform the company of facts, seek its reply and order an inquiry if he has reason to believe that the business of the company is being carried out for a fraudulent purpose, or not in compliance with the Act, after giving the company a reasonable opportunity of being heard.

Section 209: Search and Seizure

The Registrar is empowered to obtain an order from the Special Court for the seizure of books and papers of the company if upon receiving information or otherwise, he has reason to believe that these books, papers of the company are likely to be altered, mutilated, falsified, secreted or destroyed. The Registrar or Inspector is further allowed to take copies and extracts of such documents.

Power of Registrar to Remove Name from Register of Companies

Section 248: Dissolved Companies

There may be a reasonable cause for the registrar to believe that:

• A company has failed to commence its business within one year of its incorporation;
• The subscribers to the memorandum have not paid the subscription money which they had undertaken to pay within 180 days from the date of incorporation and accordingly the declaration under Section 11(1) could not be filed within 180 days; or
• The company is not carrying on any business for 2 immediately preceding financial years and has not applied under Section 455 for obtaining the status of a dormant company.

In such a situation, the Registrar has to send a notice to the company and all its directors telling them that he has the intention to remove the name of the company from the register. They are accordingly called upon to send their representations along with copies of relevant documents within 30 days from the date of the notice.
Such removal can also be effected on the company’s own application. For this purpose, the company has first to extinguish all its liabilities. It then has to pass a special resolution or obtain the consent of 75% members in terms of the paid-up share capital. An application then has to be filed in a prescribed manner with the Registrars of Companies for removing the name of the Company on all or any of the grounds specified in sub-section (1).
After receiving such an application, the Registrar needs to issue a public notice in a prescribed manner and also in the Official Gazette for the knowledge of the general public. On the expiry of time mentioned in the notice, and if not cause to the contrary is shown by that time, the registrar has to strike off the name of the Company from the register. A notice of this fact needs to be published in the Official Gazette and on the date of such publication the company becomes dissolved.

Functions of the Registrar of Companies

Functions in Relation to Mortgage and Charges

The term ‘charge’ used in the instant section has been defined in Section 2(16) of the Companies Act, 2013. It refers to an interest or lien created on the property or assets of the company or on any of its undertaking or both as security and includes a mortgage. The Registrar of Companies is vested with certain functions in relation to the registration of such mortgage charges. These have been discussed section-wise as follows:

Section 77: Registration of Charges

According to Section 77, it is the duty of every company creating a charge to register the particulars of the charge with the Registrar of Companies. A charge on the property or assets of the company whether tangible or otherwise, situated in or outside India has to be registered. It is required that this instrument of charge be in the prescribed form and be filed with the prescribed fee within 30 days of its creation.
The Registrar can, however, permit for registration within the extended period of 300 days on the payment of the prescribed additional fee.
As per Section 77(2), the Registrar is required to issue a certificate of registration in the prescribed form and manner to the company as well as to the charge holder, as the case may be.

Section 78: Application for registration of charges

In case a company fails to register a charge, the charge-holder may apply to the Registrar of Companies for registration along with the instrument under which the charge is created. The Registrar is then required to give a notice to the company in order to enable it to inform whether the company has itself created a charge and if it has not, then inform about the reason for the same. Within 14 days, the Registrar is required to register the charge on payment of prescribed fee.

Section 81: Registrar to keep the register of charges in respect of every company

According to this Section, the Registrar has been required to keep a register in the prescribed manner, containing particulars of the charge registered under the Act, in respect of every company. This Register can be inspected by any person after the payment of a prescribed fee. The company is under a duty to forward to the registrar the necessary particulars in such form and on payment of such fee as may be prescribed. The Registrar’s register has to show the particulars relating to the charge such as the date of charge, the amount secured, the property covered and the persons entitled to the charge and if a property already under a charge has been purchased, the date of purchase. The same particulars have to be shown by the company’s register.

Functions in Relation to Compliance of Statutory Requirements Under the Companies Act

The ROC is entrusted with the duty to ensure that all statutory requirements under the Companies Act are complied with. These include the periodic filing of Annual Returns and Balance Sheets, Change of directorship of the company, registering companies incorporated in the respective states and the Union Territories, etc.

Section 93: Return to be filed with Registrar in case promoters’ stake changes

According to this Section, all listed companies are required to file a return in the prescribed form with the Registrar relating to change in the number of shares held by the promoters and top 10 shareholders of such company. This return needs to be filed within 15 days of the happening of such a change.

Section 137: Copy of Financial Statement to be filed with the Registrar

This section talks about the filing of accounts and penalty provisions. A financial statement in relation to companies comprises of the following:

• A balance sheet as at the end of the financial year.
• A profit and loss account, or in the case of a company carrying on any activity, not for profit, an income and expenditure account for the financial year.
• Cash flow statement for the financial year.
• A statement of changes in equity, if applicable, and
• Any explanatory note annexed to or forming part of any document referred to in sub-clause (i) and sub-clause(iv).
• A copy of the financial statement, etc, as adopted by the company in general meeting has to be filed with the Registrar within 30 days of the AGM in accordance with the prescribed manner.

Even where the requisite documents have not been adopted by the AGM, they have to be filed with the Registrar who is to record them as provisional till the duly adopted statements are filed with additional fees. In case of One Person Company, the statement adopted by its member has to be filed within 180 days from the closure of the financial year.
In case of one or more foreign subsidiaries which have not established a place of business in India, accounts of such companies also need to be attached to the financial statements. Where an AGM could not be held, the documents would have to be filed with the Registrar in the same manner as if the meeting was held but explaining the reasons why the meeting could not be held.

Section 157: Company to inform the Registrar of the Identification Number

Within 15 days of receipt of information from the director concerned of his Identification Number, the company has to furnish this information to the Registrar or any other officer or authority as may be specified by the Central Government.

Functions in Relation to Inspection, Inquiry, and Investigation

Section 208: Report on Inspection

On completion of inspection and inquiry under Section 206 and Section 207, the Registrar is required to submit a report in writing to the Central Government along with the necessary documents.

Conclusion

The office of the Registrar of Companies under the Ministry of Corporate Affairs has been vested with a large number of duties and is empowered to perform various functions by virtue of the provisions of the Companies Act, 2013.

In this article, Chowdhury pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses on whether a University comes under the ambit of Consumer Protection Law.

Introduction

It is a tremendous job to give protection to the right and interest of every citizen as a consumer in a country like India where the current population is almost 1.35 billion. In this regard, to safeguard the interest of consumers many laws have been enacted such as Drug Control Act, 1950, Agricultural Products (Grading and Marketing) Act, 1937, Industries (Development and Regulation) Act, 1951, Monopolies and Restrictive Trade Practices Act, 1969, etc. However, these aforementioned Acts are not effective enough to protect the interests of consumers from unethical business practices.

Consumer Protection Act, 1986

The Consumer Protection Act, 1986 in this respect was sufficient to fulfill the requirement of every consumer by providing various reliefs available in the Act. In India diverse groups of consumers are available. The consumer protection law protects the interest of every consumer irrespective of age, sex, caste, place etc., with respect to all kinds of goods defined under “Sale of Goods Act, 1930” and every kind of services possible to be contemplated as service under the Act 1986.

This Act extends protection against Government body, statutory institutions as well as corporate sectors. The most pragmatic feature of this Act is the recognition of consumers’ right to be informed about the quality, purity, standard and price of goods and services, which is a potential device to prevent exploitation.

Concept of Service and Consumer under the Act, 1986

Service

The term ‘service’ is defined in Section 2(1)(o) of the 1986 Act:

Therefore, it is clear from the preamble of the definition that service of any kind or nature that is rendered in exchange of consideration to direct or potential user comes within the definition of service. Some types of services even enumerated in an explicit manner within the definition but the definition of service is not limited to only those mentioned explicitly. As for example, medical service is not included directly in the definition. However, a series of judgments are available that identify medical treatment and the facility associated therewith is classifiable as service under the Consumer Protection Act.

Consumer

The term “consumer” as per Section 2(1)(d) of the 1986 Act:

Therefore, the term consumer is really broad and includes any beneficiary of service without differentiation with respect to the type of beneficiary or nature of goods or service he/she purchases. Interestingly, the scope of service in this definition also has no limit because of the term “any service”. Therefore, there is no bar in accommodating students into the definition of the consumer because “any person” connected as the purchaser to “any goods” or “any service” is the consumer as per the Act. It is, still, important to find a support, outside the consumer protection Act, in favour of the term consumer when it applies to the student in the affair of university-students relationship.

Do Educational Institutions Fall Under the Purview of the Act?

A considerable number of decisions delivered by State and National level Consumer Forums are available as of now which protects the right of students with regard to fees, wrong allotment of roll numbers, delay in declaration of results, admission in excess of the allotted quota, misrepresentation about affiliation by the educational institute to various universities etc. The judgments related to the above-mentioned cases clearly indicate that student is a consumer as per the Act and the universities or educational institutes fall within the category of service providers.

But the Supreme Court of India had a differing view. In the case of Maharshi Dayanand University v. Surjeet Kaur[1], relying upon all earlier judgments, the Supreme Court held that education is not a commodity. Educational institutions are not providing any kind of service, therefore, in the matter of admission, fees etc., there cannot be a question of deficiency of service. Such matters cannot be entertained by the Consumer Forum under the Consumer Protection Act, 1986.

Further Hon’ble Supreme Court in Bihar School Examination Board v. Suresh Prasad Sinha[2], Supreme Court observed that the Education Boards & Universities are not ‘Service Providers’ and the complaints against them are not maintainable.

The Hon’ble Apex Court in its latest judgment in P.T. Koshy & Anr. v. Ellen Charitable Trust & Ors.[3], has followed the above views.

Therefore, now the situation is complex and ambiguous. At this juncture, it is of vital importance to analyse the various functions of university/educational institutes to determine that whether the activities of university/educational institutes are classifiable under the conventional definition of service as per section 2(1)(o) of the Consumer Protection Act, 1986.

On the other hand, it is also necessary to assess the definition of the consumer under Section 2(1)(d) of the Act so as to check that the relationship between university and student fits with the conventional relationship of trader/service provider and consumer? If these two criteria are satisfied then it can be said that universities/educational institute come within the ambit of consumer protection law.

Assessment of Activities of University/Educational Institute

The functions of university/educational institutes can be divided into two main categories:

• Core function of the university/educational institution such as imparting education and advance knowledge by providing instructional and research facilities to educate and train manpower for the development of the country for the welfare of the people, their intellectual, academic and cultural development. Here the core functions and the activities associated with it are inseparable and this is the statutory duty of the university/educational institutes as defined in the Central University Act[4].
• Secondary/Ancillary services like providing hostel or accommodation facility, auditorium, library, laboratory, gymnasium, canteen, transport service to and from campus, internet service etc. In addition to the above, university supplies various goods to the students like textbooks, study materials, notes, video CD, other electronic material including software programmes etc.The ancillary services provided by the university, undoubtedly, falls within the category of those services and provision of goods as per the Act. As for example, the hostel or accommodation facility falls within the meaning of board and lodging, transport facility provided to the student is also within the scope of service. The foods and beverages provided to the students through canteen facility, the laboratory equipment, video CD, software programmes etc., obviously come within the purview of goods as per the Act.
• Commercial Activities such as consultancy, transfer of technology to company through patent right and thereby enjoying royalty, handling private projects, Entrepreneurship incubation are some of the commercial activities performed by the universities/educational institutes in order to earn the profit. It is clearly reflected from Central University Act, 2009 that university may enter into the partnership with industry and non-Government agencies and establish a corpus of funds out of the profits of such partnership.

The Hon’ble Supreme Court, in Bangalore Water Supply & Sewerage Board v. A. Rajappa[5] (Bangalore Water Supply), had considered among other things, that educational institutes are classifiable as ‘Industry’ as defined in Section 2(j) of the Industrial Disputes Act, 1947, while determining the import of the aforementioned term.

Reference of words like service, business, profit, industry-partnership is available within the Central University Act, 2009, itself which clearly proves that university is not a non-profit body rather it has some business characteristics inherent in the Statutes and Acts which govern the functions of the university.

Critical Analysis of University-Student Relationship in the Context of Consumer Protection

The students enjoy all kinds of facilities i.e. both core and ancillary services rendered by the university or educational institutes after paying the requisite fees. Therefore, the students are direct beneficiaries and consumer of the services rendered by the university. A student after paying the requisite tuition fees deserves a good quality education and facilities related thereto. Similarly, after accepting remuneration it should be the moral duty and obligation for a teacher and university to provide the adequate service in terms of good quality education.

If the teacher or university fails to comply with this requirement then it amounts to deficiency in service because universities/institutes are imparting education in exchange for consideration. But, it is also necessary to understand that the relationship between student and university is not an ordinary relation of buyer and seller in the true sense. The statutory duty of the university is fixed by certain Acts, rules and regulations. A student only after complying the requirements fixed by the university in terms of its rules and guidelines can claim his/her entitlement as a consumer of service rendered by the university under the Act, 1986.

In my opinion, the teacher-student relationship should not be the only deciding factor to decide whether the various facilities provided by the university/educational institute should fall under the term “service” as per the Act 1986 because the teacher-student relationship is totally subjective which will vary depends upon the character of an individual teacher.

In this respect three court decisions are available and those contradicting to each other. In Taneja v. Calcutta District Forum[6] it is held by Calcutta High Court that the relationship between teacher and student in an educational institute is not one of service-provider and consumer.

The same principle was almost followed in Central Academy Educational Society v. Gorav Kumar[7] where it was held by the court that teaching is not capable of marketization as opposed to the sale of books or provision of accommodation is marketable and can be considered as service as per the Act, 1986.

Whereas, in Oza Nirav Kanubhai v. Centre Head Apple Industries Ltd.[8], the National Commission held that private educational institutes (i.e. institutes that are not statutorily established) to be classifiable as service providers, and students enrolled therein, or their sponsors, as consumers.

Therefore, the student-university relationship although not equivalent to a relation of consumer & service-provider in the strict sense but complaints against the university/educational institutes are maintainable in consumer court on the ground that student is nothing but a consumer as long as the complaint is genuine. The student is a direct beneficiary or in other words, consumer of the service rendered by university is supported by the fact the provision for student’s engagement in the academic activity of university including evaluation of teacher is available in Central University Act, 2009 which implies that student is nothing but a direct consumer of education service.

Rights of the Student and Responsibility of University/Educational Institute

It is imperative to understand the various rights or entitlement of the students under university/educational institutes in absence of which the noble mission and objects of the university get defeated. The important rights of the students which are very essential to protect the interest of every student in the field of education are mentioned below:

1. Right to receive a good quality education.
2. Right to receive all benefits and services related to study like laboratory, library, good quality study materials etc.
3. Right to get proper and correct information related to terms and conditions of the university, disclosure of fees, affiliation, quality standard and facilities available in the university/institute etc.
4. Right against exploitation of any kind in the university/educational institute.
5. Right to care regarding the safety of students.
6. Protection from injury on campus.
7. Right to a grievance filing process.

It is the responsibility of the university/educational institutes to safeguard the rights of the student in order to fulfill its noble objects as enshrined in the statutes and Acts of the university. There are various provisions available in Central University Act, 2009 which empower university to frame rules, guidelines, ordinances with respect to:

• The condition of residence of the students to provide good quality accommodation,
• The condition of residence and teaching of women students,
• Specialised laboratory,
• Maintenance of discipline in order to prevent ragging and for the safety of students,
• Redressal of grievances,
• Right to appeal against arbitrary action of any officer or authority of the university etc., in order to safeguard the interest and betterment of the students.

However, there are lacunae in the Act with respect to two factors. An absence of redressal mechanism at the individual student level and no direct remedy is available for the university if found deficient in providing service or accused of unfair trade practice.

Support Available in Case Laws in Favour of Students as Consumer

The following court decisions have been quoted to substantiate the argument that student as consumer and university as the service provider.

Jai Kumar Mittal v. Brilliant Tutorials[9]

In this case, it was held that the supply of defective study materials by an institute can sustain a valid claim against it for deficiency of service.

In Bhupesh Khurana v. Vishwa Budha Parishad[10]

Due to misrepresentation about affiliation, the National Commission held, in respect of the recovery of the fees paid to the institute that the institute was liable to refund the fees, having lured the students to enroll in it through deceitful tactics.

Birla Institute of Technology & Science v. Abhishek Mengi[11]

The National Commission observed that forfeiture of fees by the educational institute without imparting education amounts to unfair trade practice.

Sonal Matapurkar v. S. Niglingappa Institute[12]

In this case, admissions were made by the dental institute over and above the sanctioned seats as a result of which the students were not allowed to appear in the examination by the university. Since the students had paid huge donations and had also made an investment of time and energy, the National Commission held that there was the deficiency in service and the complainants were entitled to refund of the donation and compensation with interest and cost of the proceedings.

Secretary, Board of School Education Haryana, Bhiwani v. Mukesh Chand of Palwal[13]

In this case, the respondents declared the results after a period of one year and eight months of the scheduled time. The Haryana State Commission held that there was erratic functioning on the part of the opposite party and it had a callous attitude towards its students, which is the deficiency in service on its part.

Therefore, the court decisions cited above clearly accepts that student is a consumer of the service provided by the university. Although, many judgments are also available where this consumer and service provider relationship is vehemently denied.

Critical Analysis of Three Decisions Delivered by Hon’ble Supreme Court to Restrict the Scope of Consumer Protection Act, 1986 with respect to Educational Activity

Bihar School Examination Board v. Suresh Prasad Sinha

The issue was raised regarding the issuance of the same roll number to three different candidates by the Bihar Board of Secondary Education and failure to declare the result of one of the candidates. In this case, it is held by the Hon’ble Supreme Court that, the Consumer Protection Act, 1986 is not applicable with respect to statutory functions statutory bodies. Here, the Board is a statutory body and conducting examination is in the exercise of discharging its statutory function.

Therefore, in this case, Bihar Board of Secondary Education is not providing any service. The examination fee paid by the candidates is also not considered as consideration. It is true that conducting examination is not a marketable service.

However, the findings in case of functions performed by statutory bodies outside the scope of service under the Act, 1986 is not supported by the earlier Supreme Court decision in the Lucknow Development Authority v. M.K. Gupta[14] where the Supreme Court held that the activity of statutory body is not exempted from the definition of service as per the Act, 1986.

Again, the Hon’ble Supreme Court, in Bangalore Water Supply & Sewerage Board v. A. Rajappa had considered among other things, that educational institutes are classifiable as ‘industry’ as defined in Section 2(j) of the Industrial Disputes Act, 1947 while determining the import of the aforementioned term.

Therefore, when there is negligence in performing the statutory duty it should not be exempted from the purview of the consumer law. When students pay the examination fee then he/she is entitled to get correct roll number, admit card, question paper, paper for writing the answer, the chance of scrutiny or review of the answer sheet being a candidate of examination and other facility provided by the examination board to every student. If there is any deficiency in the processing of the registration number, roll number, admit card, allotment of examination centre etc. it amounts to deficiency in service on the part of examination board because equal opportunity is the right of every candidate appearing in the examination.

Maharshi Dayanand University v. Surjeet Kaur

In this case, a student had enrolled in two courses simultaneously, one full-time course and one correspondence course. Such enrolment being in contravention of the rules, the university directed her to unenroll from one of the courses, pursuant to which she unenrolled from the correspondence course. However, she participated in the supplementary exam in respect of the correspondence course, despite having cancelled her enrolment therein, and passed it. However, her having taken the exam for the correspondence being in contravention of the university rules, the university refused to confer the degree on her.

University has the statutory power to enact laws, make ordinances in respect of functioning of the university. If any action taken by the student in contravention to the existing rules and regulation of the university enforced at the time of the action then the student is liable to face the consequences as per the existing rules. In that circumstances, the student cannot claim relief available in the Act 1986 as a consumer of service. It should be borne in mind that the statutory laws of the university and the rights provided in the consumer law should not contradict each other. Statutory laws of the university and consumer protection law both are enacted in order to make the functional activity of the university effective and at the same time to protect the right and interest of the student safe so these two laws should reinforce each other to protect the interest of both student and university.

P.T. Koshy & Anr. v. Ellen Charitable Trust & Ors.

Supreme Court held, in a brief order that educational institutes do not, through the performance of educational activities, render any service, in respect of which a complaint of deficiency could be maintained, and that consumer forums did not have the jurisdiction to adjudicate them. In view of the above discussions and explanations, it is found that the order in the matter of P.T. Koshy does not have support on legal and logical grounds.

Conclusion

In view of the above discussions, it is proved that with regard to application of Consumer Protection Act, 1986 is justified in case of educational activity or service rendered by the University/educational institutes. It is supported equally well on legal and logical grounds. Students are direct consumer or beneficiary of the service or facility provided by University/educational institutes. All kinds of activities performed by University/educational institutes may not be classifiable as marketable service because of the nature of those particular services but it does not support the complete exclusion of the University/educational institutes from the scope of Consumer Protection Laws.

In a country like India where scarcity of jobs and privatization of University/educational institutes is unavoidable so complete exemption of educational activity from the purview of the consumer protection law is not justified as long as the interest of students is concerned. The exemption of the University/educational institutes from the scope of the Act, 1986 will convert the educational into a business sector. The consumer protection law is a really good checkpoint to balance the business activity of University/educational institutes and make this sector more accountable for serving the interest of students and country at large. An activity explicitly mentioned in the statute of the university does not automatically exempt it from the purview of the Act, 1986.

At the same time, a student should not get the opportunity to get any undue privilege in contravention of the existing rules and regulations specifically mentioned in the statute and Acts of the university with illegitimate demands as a consumer of service. Therefore, in conclusion, University/educational institutes comes within the ambit of consumer protection law as long as the complaint is genuine on the ground that a legal right or interest of the student is prejudiced due to inefficient and deficient service or unethical trade practice by the University/educational institutes.

References

[1] Maharshi Dayanand University v. Surjeet Kaur, (2010) 11 SCC 159

[2] Bihar School Examination Board versus Suresh Prasad Sinha”, (2009) 8 SCC 483

[3] P.T. Koshy v. Ellen Charitable Trust, (2012) 3 CPC 615 (SC)

[4] Central University Act, 2009

[5] Bangalore Water Supply & Sewerage Board v. A. Rajappa

[6] N. Taneja v. Calcutta District Forum, 1991 SCC OnLine Cal 241: AIR 1992 Cal 95

[7] Central Academy Educational Society v. Gorav Kumar, (1996) 3 CPJ 230

[8] Oza Nirav Kanubhai v. Centre Head Apple Industries Ltd., (1992) 1 CPR 736.

[9] Jai Kumar Mittal v. Brilliant Tutorials, 2005 SCC OnLine NCDRC 23 : (2005) 4 CPJ 156 (NC): (2006) 1 UC 43.

[10] Bhupesh Khurana v. Vishwa Budha Parishad, (2001) 2 CPJ 74 (NC).

[11] Birla Institute of Technology & Science v. Abhishek Mengi, 2013 SCC OnLine NCDRC 394: (2013) 2 CPJ 681 (NC)

[12] Sonal Matapurkar v. S. Niglingappa Institute, 1997(2) CPJ 5 (NC)

[13] Secretary, Board of School Education Haryana, Bhiwani v. Mukesh Chand of Palwal, 1994 (1) CPR 269 (Har)

[14] Lucknow Development Authority v. M.K. Gupta, (1994) 1 SCC 243

In this article, Aarthi Sashi, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the Pendency of Proceedings Under COPRA in Regard to Initiation of Insolvency Proceedings.

Introduction

The Insolvency and Bankruptcy Code, 2016 (IBC or Code) which has been in existence for over a year lays down a comprehensive framework for conducting efficient insolvency and bankruptcy proceedings against corporate debtors. Of the several noteworthy provisions under the Code, an important aspect that cannot go unaddressed is, how proceedings under the IBC can be harmonized vis-à-vis proceedings under other legislation. This article seeks to do just that by highlighting the role that pending disputes under the Consumer Protection Act, 1986 (COPRA or the Act) would play in initiating a resolution proceeding under the IBC.

Nature of Consumer Claims: Whether It Is Financial or Operational Debt?

The first and foremost question to be determined for the purpose of maintainability of a Corporate Insolvency Resolution Process (CIRP) is whether the creditor filing one would be a financial creditor or an operational creditor.

Financial Creditor

A financial creditor has been defined to mean a person to whom a financial debt is owed[1]. A financial debt has been defined to include money borrowed against payment of interest, amount raised by an acceptance credit facility or by stocks, bonds, debentures or similar instruments, liability in respect of a hire purchase contract, receivables, amounts under other transactions having commercial effect of borrowing, counter indemnity obligation, liability in respect of a guarantee or indemnity and the like[2]. Therefore, by a bare perusal of the provisions, it can be inferred that a CIRP initiated pursuant to a debt in the nature of consumer-related aspects does not fall within the nature of claims encompassed in the definition above.

Operational Creditor

Another type of creditor who can initiate a CIRP under the IBC is an “operational creditor”. An operational creditor under the IBC is someone to whom an operation debt is owed[3]. Further, an operational debt has been defined to mean inter alia dues with regard to the provision of goods or services[4].

Distinction between a Financial Creditor and an Operational Creditor

The Final Report of the Bankruptcy Law Reforms Committee[5] (see here) in paragraph 5.2.1 drew out the distinction between an operational creditor and financial creditor.

A financial creditor is one whose relationship with the entity is a purely financial contract such as loans or debt security. The relationship of an operational creditor with the entity, however, is said to arise out of a transaction on operations. In the event that a creditor’s relationship with the entity stems from both i.e., a financial contract and a transaction on operations, the creditor would be a financial one to the extent of a financial debt and an operational one to the extent of an operational debt. This distinction was appreciated and applied by the National Company Law Tribunal (NCLT) Principal Bench, Delhi in the case of Col. Vinod Awasthy v. AMR Infrastructure Limited[6](see here).

Having laid down the contours differentiating an operational creditor from a financial creditor, it becomes essential to identify the nature of debt that consumer-related issues raise. The subject matter of consumer issues is essentially in the nature of goods and services. This can be evidenced by the application clause in the Consumer Protection Act, 1986 which provides that the Act applies to all goods and services[7]. Moreover, any relationship in consumer claims essentially arises out of a transaction on operations. Therefore, it is safe to conclude that consumer-related debts are in the nature of an operational debt and not a financial one.

Consumer Disputes vis-à-vis IBC Proceedings

Given that consumer disputes are in the nature of operational debts, an application for CIRP would lie under Section 9 in accordance with Section 8 of the Code. Section 8 unlike Section 7 (which applies to financial creditors) provides that within ten days of demand notice served upon the corporate debtor, the existence of a “pending dispute” must be brought to the notice of the operational creditor which would then serve as a bar to an institution of IBC proceedings[8].

Pursuantly, Section 9(1) provides that an application for CIRP can be filed within ten days of providing notice to the corporate debtor only if the notice of dispute has not been filed. Accordingly, Section 9(5)(ii)(d) provides that the application under Section 9 ought to be rejected if notice of dispute has been received by the operational creditor.

Definition of ‘Dispute’ under IBC

It now becomes pertinent to discuss what the term “dispute” encompasses to identify if consumer disputes can serve as a bar to the institution of CIRP. “Dispute” has been defined under the IBC inclusively to include a suit or arbitration proceeding pertaining to the quality of goods or services, existence of debt or breach of representation or warranty[9].

As discussed earlier, a dispute in the nature of quality of goods and services comes within the ambit of consumer protection laws. To substantiate the same, reference shall be made to the COPRA. Section 2(f) defines defect in goods and section 2(g) pertains to the deficiency in services, both of which include in its sweep any fault, imperfection or shortcoming in inter alia quality of the goods and services.

Further, “complaint” under the Act has been defined to include defects in goods[10] and deficiency in services[11]. The power to deal with such complaints has been bestowed upon the District Forum[12], State Commission[13] and National Commission[14] based on their respective pecuniary jurisdictions.

Therefore, COPRA provides a well-equipped mechanism to deal with issues that arise out of the quality of goods and services and if a claim so arises, can fall within the ambit of “dispute” under the IBC. The following section containing notable judgments further substantiate this point.

Notable Judgments: Judicial Conundrum

Several noteworthy judgments in the context of IBC vis-à-vis other laws including Consumer Protection Laws are to be discussed to holistically understand the concept.

• In Kirusa Softwares Pvt. Ltd. v. Mobilox Innovations Pvt. Ltd.[15] an important judgment warrants discussion in this regard (see here) where CIRP was sought by operational creditor Kirusa Software against corporate debtor Mobilox Innovations for a claim of debt which was disputed by the debtor on the ground that the creditor disclosed confidential information constituting the breach of trust. The application was dismissed by the NCLT. An appeal was filed to the National Company Law Appellate Tribunal (NCLAT) which was subsequently tasked with determining the scope of the terms “dispute” and “the existence of dispute”.
• The NCLAT observed that the intention of the Legislature was to raise a dispute only with sufficient particulars to that effect. Moreover, simply showing a record of the dispute would not be enough but the dispute must relate to matters enumerated in section 5(6) and the same must be pending prior to the service of notice on the corporate debtor[16].
• The NCLAT further unraveled the intention of the Legislature by reading the definition of “dispute” and “operational debt” together and holding that limiting the ambit of “dispute” to just a suit or arbitration proceeding would be inconsistent with it[17].
• Pursuantly, the NCLAT ruled that the terms “dispute” and “the existence of dispute” cannot be construed narrowly so as to be limited to pending proceedings within the ambit of suits or arbitral proceedings alone. The inclusive nature of the clause must be read as “means and includes” and must include proceedings pending before inter alia labour courts, tribunals, and consumer courts. This must be the meaning accorded while reading Section 5(6) with Section 8(2) of the IBC[18].
• The wide interpretation provided to the meaning of dispute to include disputes pending before every judicial authority is also to prevents the multiplicity of proceedings[19].
• An appeal filed to the Supreme Court further upheld the position taken by the NCLAT[20] (see here). This position was applied and upheld in the case of Philips India Limited v. Goodwill Hospital and Research Centre Ltd. and Ors[21] (see here).
• The judicial authorities have taken a step further in this regard. The NCLT, Principal Bench, New Delhi in Vinod Awasthy v. AMR Infrastructures Ltd.[21] (see here) and Mukesh Kumar and Ors. v. AMR Infrastructures Ltd.[22] (see here) has held that an application under section 9 and the definition of an operational debt cannot be interpreted so wide as to include those applicants who have a remedy available under COPRA and general law of the land.
• This principle was further applied and upheld in Satish Mittal v. Ozone Builders & Developers Pvt. Ltd.[23] (see here).

Judicial precedents taking a twist

• On the other end of the spectrum, providing a distinct view to the position of law elaborated above is the judgment of NCLT, New Delhi on February 16, 2018, in the case of Pawan Dubey and Ors. v. J.B.K. Developers Pvt. Ltd.[24] (see here).
• The factual matrix, in this case, pertains to a CIRP initiated by the Applicant against the Respondent in regard to alleged non-payment of assured returns on a commercial shop as against the builder-buyer agreement. One of the contentions raised by the Respondent was that the applicants had preferred two consumer complaints which were sub-judice and by filing a CIRP application, they were engaging in forum shopping.
• Negating this contention, the NCLT firstly held that when two remedies are available under law, one should not be taken as operating in derogation of another. Secondly, they held that it is a settled law that pendency of proceedings under the COPRA does not serve as a bar to the initiation of CIRP on account of the non-obstante clause contained in Section 238 of the IBC. The objection taken by the Respondent company on the existence of a “dispute” due to the pendency of complaints before the consumer forum was dismissed owing to the fact that the case had been filed under section 7 and not under section 9 to attract the defence of the existence of the dispute.
• Section 238 of the IBC provides that the provisions of the Code shall prevail over any other law in force in the event of an inconsistency. Inconsistency would mean mutual repugnancy where acceptance of one would imply abrogation or abundance of the other[25].
• Section 3 of the Consumer Protection Act provides that the provisions of the Act are in addition and not in derogation of any other law. Therefore, there exists no repugnancy or inconsistency between the two statutes. Moreover, it is the interpretation of the provisions of IBC [section 5(6) and section 8(2) in consonance with case laws] that provide that pendency of disputes before consumer courts serve as a bar to initiation of CIRP. Such an interpretation is not derived out of the COPRA and hence cannot be interpreted to lead to a repugnancy.
• Moreover, the presence of a provision holding that the existence of a dispute serves as a bar to the initiation of CIRP itself curbs the practices of forum shopping and multiplicity of proceedings in limine.

Conclusion

The presence of the terms “quality of goods and services” as a form of dispute that could serve as a restrict the initiation of CIRP by an operational creditor, has an inextricable link with COPRA as it predominantly deals with that as the subject matter. This, in addition to the fact that judicial authorities have interpreted the term “dispute” to be wide and inclusive as to include proceedings before consumer fora as well, only seeks to further reinforce this position. Although it has been held that forum shopping cannot be used as a defence against the initiation of CIRP, reading of section 5(6) with section 8(2) essentially curbs just that. Hence, consumer disputes do indeed serve as a bar to the initiation of CIRP.

References

[1] Insolvency and Bankruptcy Code 2016 s. 5(7)

[2] Insolvency and Bankruptcy Code 2016 s. 5(8)

[3] Insolvency and Bankruptcy Code 2016 s. 5(20)

[4] Insolvency and Bankruptcy Code 2016 s. 5(21)

[5] Insolvency and Bankruptcy Board of India, The report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design. Available from: http://ibbi.gov.in/BLRCReportVol1_04112015.pdf [29 April 2018]

[6] [2017] 141 SCL 70

[7] The Consumer Protection Act 1986 s. 1(4).

[8] Insolvency and Bankruptcy Code 2016 s. 8(2)

[9] Insolvency and Bankruptcy Code 2016 s. 5(6)

[10] The Consumer Protection Act 1986 s. 2(c)(ii)

[11] The Consumer Protection Act 1986 s. 2(c)(iii)

[12] The Consumer Protection Act 1986 s. 11

[13] The Consumer Protection Act 1986 s. 17

[14] The Consumer Protection Act 1986 s. 21

[15] [2017] 142 SCL 310

[16] Kirusa Softwares Pvt. Ltd v. Mobilox Innovations Pvt. Ltd., [2017] 142 SCL 310 (para. 25)

[17] Kirusa Softwares Pvt. Ltd v. Mobilox Innovations Pvt. Ltd., [2017] 142 SCL 310 (para. 29)

[18] Kirusa Softwares Pvt. Ltd v. Mobilox Innovations Pvt. Ltd., [2017] 142 SCL 310 (para. 35)

[19] Kirusa Softwares Pvt. Ltd v. Mobilox Innovations Pvt. Ltd., [2017] 142 SCL 310 (para. 26)

[20] Mobilox Innovations Pvt. Ltd. v. Kirusa Softwares Pvt. Ltd., [2017] SCC 1154

[21] MANU/NL/0030/2017

[22] [2017] 141 SCL 70

[23] [2017] 141 SCL 427

[24] [2017] 143 SCL 32

[25] MANU/NC/1403/2018

[26] Basti Sugar Mills Co. Ltd. v. State of U.P. & Anr., AIR [1979] SC 262

This article is written by Kashish Khattar from Amity Law School, Delhi (IPU), currently enrolled in the Ace your Internship course at Lawsikho. This article is about the mechanics of sharing Unpublished Price Sensitive Information (UPSI).

Introduction

Insider Trading, as may be familiar to a lot of us is principally the act of dealing in securities with the advantage of having asymmetrical access to unpublished information which when published would impact the price of securities in the market. Anybody who uses price sensitive information to make a profit either for themselves or a third party in the shares of a company is in breach of insider trading laws of the state.

What is Unpublished Price Sensitive Information?

Unpublished Price Sensitive Information (UPSI) means any information which relates to the internal matter of a company and is not disclosed by the company in the regular course of business. If such information is leaked, it affects the price of securities of the company in the stock market[1].

What is Insider Trading?

Insider trading refers to transactions in a company’s securities, such as stocks or options by corporate insiders or their associates based on information deriving within the firm that would once overtly disclosed, affect the prices of such securities. Corporate Insiders are individuals whose employment with the firm (as executives, directors, or sometimes rank-and-file employees) or whose privileged access to the firm’s internal affairs (as large shareholders, consultants, accountants, lawyers, etc.) gives them valuable information[2]. Trading by insiders is also not totally restricted. They can trade until the time they are not using the information that is not present in the public domain. This type of trading is also regulated through reporting and monitoring these trades closely.

Securities and Exchange Board of India

Securities and Exchange Board of India (SEBI) is the prime regulator of Stocks and Securities in the Indian Financial Market. The other regulators include the Central Electricity Regulatory Commission (CERC) and the Telecom Regulatory Authority of India (TRAI). The main functions of SEBI[3] include:

1. Development of Market
2. Protection of Investors
3. Proper Regulation of Securities Markets

Disclosure of Information

The guiding principle relating to Insider Trading or UPSI is that it should be announced and disclosed in a proper manner without any delay after it becomes known to the management of the company. Until any such disclosure is made, the management of the company should ensure that the information remains strictly confidential, and no insider of the company trades on the basis of such information. Insider Trading is regulated and governed by various legislation and regulations which are given as under:

1. By SEBI mainly through Regulation 8 contained in Chapter ‐ IV of SEBI (Prohibition  of Insider Trading) Regulation, 2015 (PIT Regulations) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 15G of the SEBI Act, 1992 which states the penalty for insider trading.
2. Section 195 of the Companies Act, 2013 prohibits insider trading by the director or key managerial person. Section 458 of the Companies Act delegates powers to SEBI to prosecute insider trading in securities of listed companies and companies which intend to get their securities listed.

Steps to Disclose UPSI

A draft copy of the Code that is to be drafted by a Company in consonance with the principles of fair disclosure specified in SEBI (Prohibition of Insider Trading) Regulations, 2015. The companies have to adhere to following practice and procedure for fair disclosures in respect of Unpublished Price Sensitive Information (UPSI) relating to the company and its securities:

1. Any information that could have a material impact on the price of shares/securities of the Company shall be promptly disclosed to Stock Exchanges where the shares/securities of the Company are listed. Such disclosure would subject to receipt of internal approvals and made through authorised personnel of the Company in accordance with applicable corporate and securities laws.
2. Uniform and universal dissemination of UPSI would be ensured by the Company by adopting a common platform i.e. Stock Exchanges for public disclosure. Once the UPSI is communicated to Stock Exchanges as aforesaid, then other medium of dissemination may also be used to ensure such information is made accessible to the public on a non-discriminatory basis.
3. The Head-Investor Relations of the Company would be the ‘Chief Investor Relations Officer’ of the Company for the purpose of this code and Insider Trading Regulations. He is authorized by the Company to ensure proper and timely dissemination of information in the ordinary course of the business of the Company and also to disclose UPSI relating to the Company and its securities to the investors/analysts, press, electronic/social media and other concerned members of the public.
4. In the unlikely event of any UPSI being disclosed selectively, inadvertently or otherwise, at any forum whether in India or abroad, the Chief Investor Relations Officer of the Company shall take effective steps to promptly disseminate such information to the Stock Exchanges for public disclosure.
5. The ‘Chief Investor Relations Officer’ of the Company is authorized to respond to any queries that may be received from stock exchanges, press, electronic/social media or investors of the Company for verification of any market rumors relating to the Company and any of its subsidiaries, subject to internal clearances.
6. In case any disclosure of UPSI is inadvertently made at a meeting with analysts or at any investors relation conference, which if made public could materially impact the price of the securities of the Company on the stock exchange(s) would be promptly communicated to the stock exchanges on which the securities of the Company are listed, so as to ensure such information is generally available to the public.
7. Any information that may be classified as UPSI would be dealt with by the Directors and Employees on ‘Need to Know’ basis only.

Kotak Committee Report

SEBI constituted a committee under the chairmanship of Mr. Uday Kotak (Kotak Committee) to propose changes to reforms related to regulations governing listed companies. The committee recently submitted its report[4]. The whole purpose of the report is to enhance the standards of Corporate Governance of listed companies in the country.

Need for Corporate Governance[5]

The focus of the companies is primarily to create long-term value for the protection of its stakeholders at large. It seems that it is not being achieved in the spirit given the recent event on boards of corporate not only in the nation but also internationally. Some of the issues recognised by the Committee are:

1. The pace of change of market conditions requiring companies and boards to quickly adapt to the technological and demographic changes and increasingly complex regulatory environment.
2. The focus of the board on short-term quarterly performance rather than the long-term performance of the company wherein the board is not far-sighted but is inclined to meeting short-term objectives than long-term strategies.
3. Increase in the number of passive institutional owners.
4. The outperformance of private equity-owned companies than the publicly listed ones because of the belief that directors in PE-Owned Companies are believed to spend far more time on strategy and risk management have deeper functional and industrial expertise and engage more actively in talent management.
5. Significant value erosion in several Public Sector Enterprises (PSEs).

The above factors, therefore, call for the need to review the Corporate Governance measures in the country by way of better board structures, rigorous checks and balances, and striking a balance between devotion of time to quarterly reviews, audit reports, budgets and matters crucial to the future direction of the business.

Recommendations of the Committee

The Committee has acknowledged that there are inevitable instances of flow of information to promoters/significant shareholders through informal channels. Given their importance as decision-makers, the Committee has recommended amendments to allow the flow of information to any counterparty who:

1. Is part of the promoter group;
2. Is in direct or indirect control of the persons under (1); or
3. Has a nominee director on the board.

The information should be pursuant to a formal agreement in accordance with the regulations. Such flow of Unpublished Price Sensitive Information (UPSI) shall be considered for ‘legitimate purpose’ and not an offence under the SEBI (Insider Trading) Regulations, 2015. Further, communication of information must comply with the Insider Trading Regulations[6].

The report proposes the following amendments:

1. Insertion of a New chapter IV-A in LODR Regulations;
2. Insertion of a new sub-regulation (2A) under Regulation 3 of the PIT Regulations.

Sharing of Information with the Promoters or Controlling Shareholders with Nominee Directors

• Current Provision: The PIT Regulations restrict communication/procurement of information of Unpublished Price Sensitive Information (UPSI) except for legitimate purpose etc. However, there is no provision enabling sharing information with the select group of shareholders either under the PIT Regulations or the Listing Regulations.
• Recommendation: A new chapter IV-A titled “Information Rights of certain Promoters and Significant Shareholders” is recommended to be added to the LODR Regulations, which mainly provides for enabling transparent framework regulating the information rights of certain promoters and significant shareholders to reduce subjectivity and provide clarity for ease of business. Amendments are also proposed by way of insertion of sub-regulation (2A) under Regulation 3 of the PIT Regulations.
• Rationale: The Committee has highlighted the need of flow of information to the ultimate controlling stakeholders being the promoters wherein the information flows from formal/informal channels and that while there is a substantive law for restriction on the flow of UPSI except for purposes mentioned, the ground reality is different from the legal framework.

The rationale provided in the Report indicates scenarios thought of by the Kotak Committee for the purpose of communication and use of UPSI by a listed entity:

• Information flow generally happens mainly through informal channels, matrix structures and through nominees. Generally, these are for genuine business reasons, such as strategic transactions, including acquisitions, mergers, divestments, financing, etc., which often need the help of the promoter to be successful.
• As there is no right way or to say a “green channel on information access” or an explicit framework recognizing a legitimate right to information of promoters and significant shareholders, all communication of UPSI to promoters and significant shareholders (even those for legitimate purposes and on a need-to-know basis) are open to regulatory checks on a post facto basis.
• The regulation white space has been filled in by virtue of legal interpretation. It may affect the companies, their time and money with so many checks introduced by SEBI.

The amendments proposed by the Kotak Committee about UPSI would aid in bringing about transparency in operation of the listed entities. All thanks to the presence of a green channel and a transparent framework for sharing of UPSI, the ‘information flow’ between the promoters or controlling shareholders and the listed entity would now be properly administered.

Conclusion

The panel has recommended the adoption of a transparent framework for exchanging UPSI with promoters or any significant entity not part of the board. It has called for the creation of special agreements enabling the management to share any UPSI with designated persons. Under the current framework, such information can be shared with members only if they are part of the decision-making process. This issue had assumed immense significance during the no-holds-barred tussle at Tata sons between their erstwhile chairman Ratan Tata and Cyrus Mistry and the latter had to quit under unrelenting pressure exerted on him by the former. Panel member Keki Mistry who is Vice Chairman and Chief Executive Officer HDFC said that, ‘These measures would bring clarity and create a pathway where promoters can access sensitive information, subject to certain restrictions’[7].

Unfortunately, SEBI did accept 40 recommendations out of the 80 recommendations proposed by the Kotak Committee[8]. The provisions related to UPSI were not one of them. The main reason behind this could be the proposals in the Report do not contain any restrictions on the use of the UPSI by the listed entity at all.

References

[1]S. Ramesh, S. Padmalata And Asis … vs Securities And Exchange Board Of India on 22 June 2004

[2]http://www.econlib.org/library/Enc/InsiderTrading.html

[3]https://www.lawctopus.com/academike/price-sensitive-information/#_ftn2

[4]https://www.sebi.gov.in/reports/reports/oct-2017/report-of-the-committee-on-corporate-governance_36177.html

[5]http://vinodkothari.com/wp-content/uploads/2017/10/highlights-of-the-corporate-governance-committee-report-SEBI.pdf

[6]http://www.mondaq.com/india/x/636080/Corporate+Governance/Kotak+Committee+Way+Forward+For+Corporate+Governance+In+India

[7]https://www.businesstoday.in/magazine/cover-story/best-indian-ceos-2014-keki-mistry-hdfc-financial-services/story/212785.html

[8]https://www.moneylife.in/article/sebi-accepts-40-out-of-80-recommendations-of-kotak-committee-allows-shared-co-location-facility-for-algo-trading/53554.html

Not all CSR reports are created equal. These days CSR reports are excessively resembling glossy marketing brochures with no credible impact assessment. Sarang Khanna, Researcher and Analyst at iPleaders, talks about the key areas of focus and important components of CSR reporting.

On 1st April, 2014, India became the first country to have a  legal requirement for companies to comply with CSR Rules. Since the new Companies Act of 2013 made the Companies (Corporate Social Responsibility Policy) Rules mandatory, there has been a growing interest among various stakeholders to see the progress and advancements in the scenario.

As per the Companies Act, companies with a net worth of INR 500 Crore or more, or a turnover of INR 1,000 Crore or more, or a net profit of INR 5 Crore or more in a given fiscal year, are required to spend 2 percent of their average net profit of the last three years towards (Corporate Social Responsibility) CSR. With strict and stringent compliance of CSR policies, companies are investing in various sectors to fulfil their obligations and contribute to the world as a result of it.

According to a recent survey report by KPMG, more than 90 per cent companies have spent the allocated funds towards health and education, followed by environment and rural development. Interestingly, chemicals, construction, services, mining, automobile, media, cement and energy and power sector companies have spent more than the prescribed 2 per cent CSR budget in the range of 101 per cent to 119 per cent, according to the same report.

To talk numbers, more than 16,000 companies in India are liable under law to spend 2% of their profits for CSR activities and a total of INR 6,337 crore was spent by Indian MNCs in 2014-15 for CSR activities.

It is clear from the above statistics that CSR is a huge responsibility and the compliance of these rules are of paramount importance for any business today. In fact, so much so, that this itself has given birth to a new industry altogether and teams are recruited for the sole purpose of fulfilling CSR obligations. However, due to a fairly new legislation, the thorough understanding of corporate social responsibility is absent and the demand for learned professionals in this field is shooting up to the skies. Executives rely on these sources to have in-depth understanding of the subject, as having practical knowledge of CSR dealings is undeniably crucial.

What exactly is CSR and what are its major areas and components?

Corporate Social Responsibility (CSR) in a layman’s term refers to a certain set of policies and practices of a company which in a way interlinks multiple stakeholders, which includes the environment and the communities involved. Also, another general interpretation of what would constitute a CSR would also include basically a commitment of the business towards sustainability and development in general. There are a lot of concepts and terms defining and clarifying what CSR is about. One of them is ‘corporate citizenship’, which explains the concept of a corporation or a firm as a citizen which helps in recognizing the rights and responsibilities of a corporation which go beyond their motto of profit maximization.

However, there still doesn’t exist a concrete and a proper definition of what CSR is or what constitutes as important components of CSR. Let us look at some commonly and generally used CSR components that are essential to be included in all reportings:

Environmental Preservation:

The emphasis of environmental preservation is on finding economical and sustainable answers for natural resources use to decrease organization’s impact on the environment. In the course of recent years, ecological obligation has extended to include significantly more than mere compliance of all applicable government regulations.

Numerous citizens, ecological associations and leadership organizations now characterize an environmental obligation as including and involving a complete and comprehensive way to deal with an organization’s operations. It incorporates surveying business items, procedures and administrations, wiping out waste and discharges, boosting the effectiveness and efficiency of all resources and assets, and minimizing practicing that may influence the usage and enjoyment in the planet’s assets by future stakeholders.

Human Rights:

Business practices can significantly impact the rights and respect of the work force and the communities. The fundamental focus is on creating work environments free from discrimination where imagination and creative learning can thrive within the decent codes of professional behaviour, and where an appropriate equality and balance can be maintained in between work and other aspects of life.

Not behaving responsibly on the issue of human rights could be highly costly in light of the fact that their reputation could be at risk. This is likewise identified and related to globalization and expanding universal trade. It is more like a test for discovering methods for working together worldwide that regards and respects human rights and social equity, and encourage the proper improvement and development of the rising economies. Nations are required to back the security of universal human rights inside their circle of impact and influence beyond any doubt to make sure that their own particular enterprises are not in contradiction to the universal declaration of human rights.

Paying laborers a living wage and shielding them from provocation and harassment of any sort might cost somewhat more in the short run, however in the event that it enhances spirit and diminishes turnover then it will be useful for benefits that follow a couple of years later. Therefore socially capable and stable administration practices might contribute straightforwardly to benefits and profits in the longer run.

Economic & Enterprise Growth:

This is a broader concept and it would include developing local SMEs, community economic development and micro financing. The drive of business visionaries in creating nations can actually be the requisite catalyst to lift up an economy onto an upward development spiral. However, by and large, the absence of an empowering business system and a lack of supporting structures for new organizations can work to undermine entrepreneurial endeavors and attempts.

Multinational organizations/MNCs with their abundance of monetary and administrative aptitude, are being called upon to give a point of convergence of backing and support for local businesses and organizations. In the meantime, MNCs can work to offer governments some assistance with understanding the courses and methods in which an empowering business structure can be produced to fuel household and domestic entrepreneurial endeavours.

Business associations should in general attempt for community economic development (CED)  and work towards common financial advantage of involved groups and organizations.

Employee Security:

It incorporates flexibility of affiliation and the viable acknowledgment of the right to collective bargaining; the eviction of all types of constrained and forced work; the nullification and eradication of child labor, and the elimination of discrimination in context of occupation and employment.

Employee security is also essential in addressing the issues of diversity, health, safety, training, mentoring, employee relations, wages and benefits in a corporation.

Community Participation:

Corporate community inclusion and participation is also another important aspect of CSR reporting. It includes and refers to an extensive variety of initiatives made by organizations and corporations to maximize the effect of their donated cash, time, products, services, administration learning and different assets and resources on the groups and communities in which they work.

When strategically composed and executed, these activities convey the worth to the beneficiaries, as well as improve the reputation of organizations and their brands, and adds values in neighborhood and local communities and as well as globally where they have critical business and commercial interests.

Promoting Better Health Standards:

The work environment is presently perceived as a vital setting for health advancement in the industrialized nations, and interest developing in the part that a business can play as a partner in promoting health development and improvement. Private sector businesses play a predominant part as the driver of the global economic development and globalization is bringing new social and monetary difficulties.

As seen from the statistics above, most companies are choosing to invest in the health sector for the obvious benefits that it has for the community in large and also in turn for their businesses. A healthy environment ensures more productive work culture, decreased wastage of capital, and better investment opportunities. All these CSR initiatives in one way or the other also bring more benefits to the corporations in the longer run.  

Additionally, global reporting initiative further suggest disclosures that are highly beneficial in drafting their CSR reports. The g4 guidelines in a way recommend what is to be disclosed in a CSR report. These disclosures might include the following:

Economic disclosure: this involves disclosing the impact the company has made on the economic situations of the stakeholders involved at local, national and international levels.

Ethical disclosure: involves disclosing the company’s code of conduct, values, standards and principles of the company.

Social impact disclosure: it discusses the impact and influence made by the company on the society and the system in which the company operates.

It is clear that the global scenario is that of taking CSR seriously. After India emerged as the first country to make it mandatory, many more countries have followed suit and recognized the need for money minting corporations to give back to the society. For you to be a part of this positive-change-oriented field, you must have practical knowledge that helps you stand out.

Auditing, fund raising, impact assessment, and subsequent increase in brand value due to CSR initiatives are issues that MNCs and other businesses care deeply about. Lawyers, CAs and other professionals have to quickly adapt to the demands of this sector, and we sure hope they do.

Till then, in the hope of a more just and equal world.

This article is written by Kashish Khattar, Amity Law School, Delhi [IPU], currently enrolled in the Ace your Internship course at Lawsikho.

Introduction

A subsidiary is a company that is wholly owned or majority controlled by another company, the “parent.” Subsidiaries are made to serve different business purposes starting from corporate structuring, to developing new products and services, regulatory compliance, tax efficiencies and mergers and acquisitions, to expanding into new geographical markets.

Subsidiary Governance

When it comes to governance of subsidiaries, the companies face a variety of challenges such as extending sound corporate governance practices and policies downstream to the subsidiaries and the appropriate governance structures of the subsidiaries which would lead to effective governance. Subsidiaries come with their own problems and dilemmas. One such dilemma is how the parent should control the subsidiaries and the level of independence that should be given to them.

There is the search for the classic balance between the degree of control that needs to be exercised by the parent over its subsidiaries and the degree of independence that needs to be provided to them and between standardisation of the systems and processes across the organisation and local adaptation at the subsidiary levels. On the other is the question how do the parent and the board place systems and processes which will assure them that “downstream governance” of the subsidiaries reflects the same values, ethics, controls and processes as at the parent board level.

Ineffective working of the subsidiary board can cause problems, they often relate to the role of the subsidiary board, the matters which the subsidiary board should discuss, extent to which a subsidiary board could take decisions independent of the parent board’s policy. There is no clear way that is to have effective solutions, subsidiary board in different jurisdictions must be objective about the management of the business of the subsidiary and be well versed with the business philosophy, culture and strategic direction of the parent.

Domestic v. Overseas Subsidiaries Governance

Culture and jurisdiction always influence the way a company is governed. Organisations have to recognise influence of culture and diversity while building systems of effective corporate governance. The parent board may often view the company as one organization and does not differentiate decision making based on a legal structure of a subsidiary, but overseas subsidiaries are distinct from domestic ones, due to a difference in language, a different legal and tax environment, cultural differences as well as time differences.

Overseas subsidiaries always carry greater risk, particularly those operating in developing countries such as India, where there is a greater emphasis on having parent management control the subsidiary, directly or indirectly through different ways. International subsidiaries mostly have a country controller’s office that can handle local issues and can coordinate with the parent company management in case of a crisis. The domestic subsidiaries are included in the parent governance practice principally because it simply resides in the same country. Most decisions can easily be made centrally under the same governance structure for domestic subsidiaries.

Subsidiary Governance Manual – A Checklist

The initial steps include:

• obtaining holding company and subsidiary boards, setting the tone from the top;
• Audit subsidiaries in the group and collate key information on them.
• Establish the team for the project;
• Setting key goals for the project;
• Communicating the rationale for the project with the key people to be involved in setting up the subsidiary governance framework.

The key considerations would include:

• implementing best practice corporate governance throughout the group bearing in mind the region’s best regulatory and legal practices impacting corporate governance;
• being mindful of the local laws and regulations, including customs. Involving subsidiary boards and management.

Key issues concerning documents, policies and procedures would be:

• to draft group wide policies, statements and procedures (eg. anti-bribery, ethics, health and safety and human rights.) and make them easily accessible;
• making terms of reference as to what is expected of the subsidiary company about their interaction with the parent company, mainly;
• ensuring delegation of authority is properly defined in the terms of reference;
• establishing clear reporting lines to the parent company and making a communications guide;
• drafting and implementing board meeting procedures for matters including circulation and form of agenda and board meetings and how to deal with the minutes of the meeting;
• drafting and implementing conflicts of interest policy and ensuring that the documents of subsidiary companies permit independent directors to authorize any conflicts.

Implementation and the ongoing procedure include:

• communicating best subsidiary practice to the staff of the said subsidiary;
• appointing the best people with a lot of corporate governance experience under their belt to subsidiary boards;
• maintaining close relationship with the board and inculcate regular review process on the operations of the subsidiary.

Software Systems – Legal Entity Management System

Corporate governance, compliance and legal departments have to be updated with all the complex due diligence, notifications and administrative maintenance data. Regulatory information reporting is significant in almost every part of the world. All major departments require some kind of access to corporate data for the conduct of daily business.

For basic entity management, these points should be kept in mind-

Be updated with the fiduciary, regulatory and statutory duties of the entity as a whole and the directors, officers, managers and partners etc.

Advising the board on management and committees on corporate governance and updating records to support all transactions, filings, reports and audits to fulfill responsibilities. Also giving secure access to support internal and external business requirements.

Reporting Structure

If a company holds an interest in a subsidiary company, this information must be consolidated into the parent’s annual report. Each company maintains its own records so typically subsidiaries maintain their own records and submit them to the parent company for review and consolidation.

Annual Reports – They are the key information to all the interested parties in a company. The parent’s report should basically include the percentage of stock and a list of all subsidiaries they hold interest in.

Consolidated Financial Statements – Heart of the annual report is the company’s financial information. They give the real picture of the enterprise. A complete set of financial statements consist of balance sheets, income statements, statement of cash flow and statement of equity. Correct consolidation method depends on the equity the parent holds in the subsidiary.

Disclosures and Footnotes – They should include any other information that may have an impact on company’s stability or future growth.

Conclusion

A subsidiary company is a company controlled by a holding company. Subsidiary basically means supplementary. It is not fundamental for groups to only focus on parent company governance. The risks attached to subsidiaries can be huge if there are loopholes in it’s governance. Some of the legal risks involved can be about regulatory compliance failure, personal exposure to directors and officers, potentially unauthorised commitments, and greater tax, commercial and operational risk etc.

Good subsidiary governance practice can include establishment of a subsidiary board, explicit group management philosophy, group decision making policies and guidelines and Central governance policy stipulating subsidiary framework governance. It can also include practices such as clearly defined relationship parents and subsidiary, Clear reporting structure between subsidiaries and parent company and an independent audit committee. Problems regarding subsidiaries can mainly revolve around regulatory conflicts, commercial and managerial conflicts, conflicts between different interests of subsidiaries and conflicts between the organisational and national cultures of the parents and the subsidiary.

Subsidiary is a separate legal entity. The primary aspects of subsidiary management are separate entities, management, liabilities and independence. Directors of the subsidiary are responsible for the affairs of a wholly-owned subsidiary. The directors must act in best interests of the subsidiary even when they are in the conflict of the parent company. The directors of a subsidiary are subject to statutory and regulatory duties under the applicable local laws. Governance practices for the subsidiary need to be consistent with the purpose for which the subsidiary was established.