In this article, Aditya Shrivastava, Manager Content Marketing at iPeaders talks about the 3 family business legal challenges and what can one do to ensure that their business does not meet a bad fate. Read out this crisp article to know is your family business safe?

On 2nd November 2015, President Pranab Mukherjee applauded family businesses for playing a key role in India’s economic growth, as reported by The Hindu. This was an attempt to appreciate the fact that India’s family businesses have substantially contributed to India’s economic output and employment generation. In his speech, Mr. Mukherjee stressed on how family businesses contribute 60 to 70 percent to the GDP and 40 to 50 percent of the employment.

An article by Business Line reported that “India has the third highest number of family-owned business in the world.” With 108 publicly listed family businesses, India lands on the 5th position in the Asia Pacific in terms of market capitalization. Globally, the number goes further below with India at the 22nd position. In addition to this, if one looks globally, India’s family businesses have matured over a period with nearly 60 percent of family businesses in their third generation.

These numbers indicate that family businesses are widespread and extremely important for the Indian economy, however, given that our motherland’s trajectory is growth-oriented, there is a need to address the elephant in the room and take steps to ensure that it is taken care of.

As per a report by Credit Suisse Research Institute (CSRI), India most prominently perceives succession planning, followed by a greater competition, and talent retention as the biggest challenge. However, what family businesses fail to understand is that they can turn into a nightmare if not taken care of.

What if I told you that succession could be planned beforehand if it is well documented? What if there was a way to retain talent? In my last article, I had written about how you can grow your family business to reach the next level. Most of the issues that family businesses in India perceive as a threat can be easily taken care of through legal means. In fact, legal help can not only help you overcome such issues but also help you grow further.

If you remember the case of Mafatlal and Mafatlal, you would agree that it set a precedent of what could go wrong in a family business. This is why there is a need to ensure that the rights of shareholders in a family business are required to be set in writing.

What could possibly happen if you were about to restructure your organization and a family member who represents a distinct class of equity shareholders calls the scheme unfair and protests in the AGM? The consequences of such omissions can be fatal. No amount of reading on the internet can possibly list out what could be the potential challenges unless it’s a comprehensive course on business laws. You need to ensure that your business is free from risks and ready for any future challenges.

Most legal issues that emerge in a family business are out of informal family relationships. The complex nature of such decisions taken out of love and affection are often problematic and lead to disputes.

Here are top 3 legal issues that you can take care of, if you are running a family business:

1. Business Structure

Most family businesses are in existence because of either the bond that exists between the family or to gain certain benefits under the law. For example, a HUF Deed is generally created with a view to getting tax exemption. Once created, it is fairly difficult to opt out.  

It is undeniable that certain family businesses generally start out of a side business and once it sees success, they are formally conceptualized into bigger entities. It gives all the more reason for them to ensure that there is a proper structure in place. The issue is greater than this. Any business, at its inception, is often in a dilemma about which ownership structure to choose. The situation worsens in case of a family business as the rights and responsibilities are decided on one’s position in the family and not the contribution.

How can one bring in a structure at a place which is being run through hierarchy?

Any structure that is put in place must be well-deliberated and implemented. There could be an effective shareholder or partnership agreement in place.

Here are some of the points that ought to be put into the contract:

1. Each family member’s contribution/investment
2. Well-defined role of the family member in the business
3. Stake in the family estate
4. Credible succession

2. Employment Policies

While most of the companies have employee policies which broadly define what the role, responsibilities, and liabilities of the employees are, however, there are times when family businesses avoid having contractual agreements signed by the family members.

In future, if there’s ever a conflict, there is no actionable claim one can file against the other because there exists no contract to prove it. It is one of the major mistakes that these businesses generally make. There is nothing wrong in ensuring that there exist agreements between the family members to ensure proper functioning of the business.

A contract shall also mean equal treatment of the family members and divided job responsibilities. Further, it will ensure that there is a basic expectation setting for all the family members and no-one has any contractual issues that could eventually lead to a fallout.

3. Licenses and Permits

Are you running a family business without a tax professional, CA or a lawyer? Do you have any member in your family who is qualified to do so?

Every business, big or small, is required to be compliant with several laws, rules, and regulations which ensure that there is no legal intervention in the future. They are the most important aspect of any business. However, lack of such knowledge in a family business often turns troublesome.

For instance, If you have watched the movie Guru, you would know that the protagonist had figured out a loophole in the system of exporting and in no time he reached the pinnacle of success. However, once the journalist figured out the mischief, the protagonists business was affected majorly. Would you want to be in the protagonist’s shoes?

Let’s take another example. A friend whose father was running a chain of business was applying for various tenders. Unfortunately, he was not able to secure even one of them. Every time they applied for the tender, it leaked. They could not do anything about it. This is when my friend decided to understand the dynamics of business laws to gain a better understanding. After taking a course, he realized that he could perhaps draft a contract with the vendors and ensure that the business expanded hassle-free. Today, his family business is one of the biggest in the state of Rajasthan.

How would you want your family business to progress? The answer lies with you.

Preparing beforehand for any challenge or issue that may occur possibly in the future is smart business planning.

A famous professor by the name Rodney E. Evans once said, “Family business is a fertile ground for conflicts. If you can avoid it, there is nothing better, if you cannot, there is nothing worse.”

I will leave you with that thought.

 

In this article Sarang Khanna, Content Marketing Executive at iPleaders, writes about the 4 most important things to consider when setting up your own law firm. 

Opening their own business is everybody’s dream in today’s date. No matter what profession you come from, what education you have had, or what your family background is; the thought of conceiving a money-minting baby in the form of a business must have definitely crossed your mind.

In the legal world, what do you think is the most popular form of a startup? Yes, law firms. Just as individual legal practice can be considered a self-sufficient business in itself, similarly, law firms have become its startup equivalent. Most lawyers wish to work for one, and more importantly, wish to own one sometime down the line.

To help you realize this dream, we bring to you this article discussing the important things to consider before opening your own law firm.

Do you wish to open your own law firm? Have you figured out what it takes apart from the money?

Work in litigation and law firms can sometimes be completely contrasting. In my opinion, it is imperative to have an experience of both if one plans to start their own firm. This is not to say that you cannot open your law firm right out of law school or after just one or two years of experience

But, is it easy? Of course not. You have to put in long man-hours. “We work 24/7” says Animesh Singh in this interview, while talking about his initial years of building his own firm A&S Law Chambers. This is as close to the truth as it gets.So if the entrepreneurial bug is your only reason, you should certainly reconsider the idea

Ranjeetsinh Pawar, a graduate of ILS Law College Pune, is also one of those very few who decided to open their own law firm right after graduation. Now doing brilliantly for itself, his firm, co-founded with two other friends, was also not independent from the various obstacles in its initial years. “The challenging part of being a start up law firm is acquiring and executing work when your failure is a bigger possibility. Not many freshers want to work with you because you’re new, and since you’re new, you can’t pay them enough.” he said in his interview on SuperLawyer.

Can you imagine other early struggles that might come during the stage of trying to establishing your new law firm? Share with us in the comments.

1) Your area(s) of practice:

This is crucial. Trust me, you don’t want to start a “whatever-comes-in-the-door” kind of law firm. Consider it the recipe for disaster. Having one or maximum two areas to focus on your practice is the ideal way to start. If you try to do everything at one go you won’t be good at anything. It also saves you from being a competitor to everyone, which makes it difficult to build a referral network.

It also goes without saying that adequate experience and your excellence in the area you choose to practice in cannot be substituted. Some areas are easier to penetrate for a young law firm, than others. For instance, no client wants the new kid in the court, who’s yet to fit in his suit, to handle a matter with his life at stake. You know what I’m saying?

The moral of this story is that you need to know what your strengths and weaknesses are and whether or not the clients in your chosen area of practice will identify and choose you in that particular field.

2) Costs and expenditures:

Admit it. You need the money. The firm won’t run itself. Setting up a firm requires huge funds for infrastructure, team salaries, books, library, etc. While litigation does not have much of a financial burden, firms need to tread extremely carefully and burn their money with caution.

The classic example of Dewey and LeBoeuf of when it filed for bankruptcy in 2012 is still fresh as new in the minds of all. A law firm with 2500 employee and operations all over the world went bankrupt. It had over $400 million worth of debt and liabilities. Reports show that it was a case of clear financial mismanagement.

I am guessing you don’t want to set a similar example? This is why financial planning is crucial especially for law firms. Clients come and go but expenditures are constant. You can read to know more about financial projections and how can they save your firm’s life, if done right.

3) Financial Projections:

Simply put, financial projection is the prediction of a company’s financial health. A strong and credible financial projection is a powerful representation of the firm’s stature. It makes it easier to raise loans, if required, and also further attracts other employees to work with you. They are also important to break down bigger goals into achievable targets and help in maintaining a regular track.

So, what are some ways to correctly project your financial numbers?

a) Monthly balance sheets

b) Cash flow predictions

c) Client and sales forecast

d) Assigning a monthly budget

These are some approaches one can take to build a healthy firm that evolves according to it potential. Although, it is arguable that predictions of this nature require the firm to be running for over at least a year before one can correctly predict, but this is not necessarily true. Financial predictions can be anticipated for a firm that is yet to begin its practice. They can flow from the firm’s mission and goals ahead in time, and help in effectively reaching the same.

4) Ownership and registrations:

Of course, the first thing you require to set up a law firm in India is a law degree. If you are over the age of 21 and possess a law degree from an Indian university or a foreign university recognized by the Bar Council of India, you are good to get a law firm registered in your name. You must also be a part of a bar council in the country.

What is important for you to decide is the type of structure and registration that is best for you. Did you know that Khaitan & Co. is separately registered in Delhi and Mumbai as a partnership firm so that it can promote its associates to partners effectively?

Management, finances, tax and other liabilities can vary depending upon the kind of ownership structure you choose for your firm. Want to be the single owner? Go for the sole proprietorship. Or do you want to have shared accountability? Go for the Limited Liability Partnership (LLP) structure. You can learn about how to build up the underlying organisation of your practice here.

There are three major types of legal structures and their registration, which are –

a) Sole Proprietorship

b) Partnership

c) Limited Liability Partnership

To know more about which design will suit best for you, read this in-depth article on law firm registrations written by Nikieta here.

So, have you finally decided to go ahead with opening a law firm of your own? You must have hopefully pondered over all these discussions, among others. From initial branding, managing cash flow, to acquiring your customers and then retaining them, firm building is a tricky trade.

All in all, building a law firm from the scratch is like starting any other business. Some considerations are definitely more specific to the legal field but mostly all good law firms operate in accordance with the basic principles of business. Running a law firm is very different from working in one. Say what you might about law being a profession, at the end of the day, you will be in charge of a business, and one that must sustain.

Don’t you think it would be great if, in addition to knowing all about the law, you also knew the fundamentals of setting up a business? This has been the reason behind several such success stories who made it big in their entrepreneurial ventures. Designed by the top minds of one of the most respected institutions in the country, this course is a must for anyone who’s taking a stroll in the park full of the you-know-which bug.

Here’s to learning, and growing, and enterprising together!

In this article Sarang Khanna, Content Marketing Executive at iPleaders, talks about a day in the life of a lawyer. Read this interesting piece through the eyes of an intern for a smile-worthy experience.

“I see you have brought the entire library with you, Mr. Advocate”, remarked the Judge noticing the excess of books and manuals. “Indeed I have, My Lord”, said the lawyer, “I have brought all these books to teach you a little about the law.”

Arguments are the fuel that drives the legal profession. It would be appropriate to say that a healthy argument is an art which is practiced on a daily basis in all courtrooms across the country. Yes, advocacy is perhaps the only profession where you can reply in the above manner to your superior, and still get to keep your job. From the rush of the heated arguments one after another, to taking subtle digs at each other, lawyers are a breed that continuously feed on an intoxicating and almost addictive urge to outsmart each other. The sense of power that comes with the black robe and the stiff collar band, is known only to the ones who wear it.

Coming from a generation that has been largely awestruck by the charm and wit depicted in the courtroom dramas on television, I always wanted to have the lawyer’s way of life for myself. Choosing law school was the obvious choice for anyone who considered their tongues to be sharper than the shredding machine. But I always knew it wasn’t going to be as fancy all the time, not at least in college.

Life at law school can be extremely demanding, and rightly so. I knew internships were the best way to get on the ground and start learning from the horses. Well, many might assume that internships are an easy time before their yet-to-commence law career, but no. The experiences that you have during them, give you an opportunity to direct your professional training in one serious direction. Litigation or Corporate? – I think it is a cusp every law student finds themselves at. For me, I knew this question was best dealt with as quickly as possible.

Practicing lawyers and corporate lawyers are like flipsides of a single coin. The Yin and Yang; the same, yet so different. While the early years in litigation are a constant hustle, corporate counterparts can enjoy the glorified and well-cushioned desk jobs. For some, the vast difference in initial earnings itself gives them a clear winner, but I knew I was in it for the arguing, for the intoxication. And hence, litigation it was for me.

I figured early on, that internships are a time to perform and figure what’s working out and what is not. Most will give you only a glimpse of what it is going to be like, but the true story still remains behind the curtains. Of course, you have to lift the curtain for yourself and find out the reality.

For example, while interning at a big law firm, one might feel that the job profile will be about research work, and making notes to present to the partner. But alas! This is not even a percent of what these dexterous associates are required to do. One might think the practice of criminal law is fancy, and just because the subjects are interesting they are good to go. Though you probably have no idea of what it takes to build a stable clientele or how to deal with court-room politics.

Which is why, internships are a beautiful way to get some real world insights, but yes, your entire decision to choose your path cannot be completely based on that.

Personally, what I didn’t realize during previous internships were the challenges that were in field of litigation. There are times when you are put in situations you did not imagine could exist; right from appearing for cases you do not know anything about, to advising clients on laws which you didn’t know existed. From appearing in the courts prepared (or unprepared), to struggling to put a case file in order, a litigating advocate’s life is anything but about arguing in the court and wearing the glorious black robe. It is struggle, struggle and some more struggle.

However, what was it that made it so intoxicating, so addictive and so worthy?

Unlike the popular belief, litigation can be extremely rewarding. There is just one challenge when it comes to litigation – lack of knowledge, whether procedural or substantial. Everyday you will need to know about something you never really knew about before. What can you do about it? Earlier, I would have asked you to do nothing. Learn how to swim by jumping into the waters. There are two possibilities to that. Either you learn how to swim through the currents, or you drown. But of course, drowning is not a good feeling.

To save myself from drowning, I naturally started looking around as hard as I could. What if I could find a rope to help me climb up? Thankfully, I did. I increased my reading, indulged in extensive researching, and found whatever ways that could add to my knowledge. It was during my research that I learnt of online studying, and I found these online courses covered everything I possibly needed to know, even the insights that only practical court-room experience could get. I could learn on the go, without having to feel embarrassed everytime I made a mistake. It was a boost to my knowledge, my confidence and my career.

Let us fast forward to the present day where ‘Mr. Advocate’, with whom yours truly is interning, continues to flip through his plethora of books and documents, and makes his case invincible in a soft but assertive exchange of expressions. A few jibes here and there at his not so ‘learned’ friend as the opposing counsel, and he walks out of the courtroom with an aura like no other. “Surely, there’s no paycheck bigger than multiple such ego boosts throughout the day”, I thought to myself.

Next up on the task list was the big one. A matter listed in the Chief’s court, Courtroom No. 1. Mr. Advocate needs a mandatory coffee after almost every hearing, especially before the big ones.

Walking past the several greetings and salutations he makes his way to the coffee shop where strategy is discussed for the next hearing, while work for the evening flows through texts and emails which are constantly being swiped up and down the mobile on the side. I was amazed by the amount of effortless multi-tasking all lawyers around me were accustomed at doing. The energy of the High Court premises can only be felt, not described. Apart from the quite apparent task of trying cases in the courts of law, a lawyer certainly has exponentially more to do. I soon realized, the job is certainly not restricted to just arguing and polite exchanging of subtle one liners. It differs from case to case and client to client. To cope with this dilemma, this is what came to my rescue.

While corporate lawyers are mostly drawing documents for businesses, a litigating lawyer represents interest for both individuals and businesses which may fairly complicate things. Corporate offices often have teams working on a single project, whereas a litigator is, more often than not, a one man army.

But wait, how did the big one go? Things took the usual route at the Chief’s court as well. The classic my-interpretation-is-better-than-yours debate, until it is mutually agreed to commence arguments at a later date. This is followed by some out of court chit-chatting, networking and some business card exchanging, and all that important stuff. Somehow, conversations with the clients and especially prospective clients is very amusing to me. To me, how a lawyer deals with his client is an instant tell about his stature in the profession. Never mind, moving on!

A typical day in a lawyer’s life is never restricted to just one courtroom or even to the one High Court premises, for that matter. In the capital city, a lawyer must know exactly when to wrap things up in one matter, to be able to reach in time for the other – which might sometimes even be at the other end of the city. And if this was not all, the real preparation for the next day begins in the evening back at the chambers, where plans for the next day are laid out; strategies are discussed, documents are drafted, and arguments are framed. Do you think you are ready to take such challenges?

Definitely, the captivating portrayal of a lawyer’s life on TV is the mere tip of the iceberg. But in all those things, what the TV courtroom dramas do manage to get right, in my opinion, are the long working hours, the stressed personal and social relationships, the overwhelming office hubbub, and the sly “greasing” and “string-pulling” to get things done. So well, after a long night of lengthy researching, lengthier drafting, and adjusting fonts, numberings and footnotes, we finally call it a day; only to experience another unknown adrenaline rush the next day. You never know what you get to see in the courtroom tomorrow.

I have often wondered, though I can only imagine, what a successful lawyer’s mornings must feel like. Would they be anxious, excited, or just indifferent (having experienced both of the other emotions way too often)? I frequently wish to take a trip inside a lawyer’s head to know what the world can’t really see. What is the real emotion of a lawyer when they casually sip their morning tea accompanied by a mass of opened files before them.

This philosophical approach – because the one thing that lawyers are often restricted to bring along with them to the courtroom are their emotions. Of course, there is always the good fight once in a while – for the right, for the poor, for the unrepresented, for change; but the moral flexibility that the legal profession demands is almost perplexing. The job requires you to be only analytical, persevering, and also justful, in your own right.

The room for emotional over-thinking is minimal in a profession so black and white. It is a consuming job, but you never come out of it empty. You either come with a burden or with a baggage full of learnings; but always stronger, always mightier. In law, your challenges are your rewards, for they seek your steadfast involvement and that is what keeps a lawyer going.

I quickly sip my thoughts down my throat with my morning intern-tea and get ready for the first matter of the new day. We reach the courtroom almost in time, while another matter is going on. The atmosphere seems intense, I can sense a certain chill on everyone’s faces. When suddenly, “You think we are fools?”, asks the angry judge, to the lawyer, who seems to have had enough already. There is a brief pause and the ambiance intensifies further. “My Lords have put me in a rather tricky situation here. If I agree, I am in contempt; and I commit perjury, if I don’t”. The light courtroom humor gets everyone including the judge to share a little laugh.

Surely, there’s no other profession as intense and simultaneously entertaining as the legal one.

In this article, Nikita Sukhathankar pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the power of police to detain and arrest people.

Introduction

For decades, across the globe, there has been an ongoing debate on the validity of preventive arrest by the law enforcement. Preventive arrest simply put, is detaining a person who is likely to commit a cognizable offence in the future. A number of statutes and a variety of provisions have been passed by the legislation in order to prevent such occurrences. Two of the most frequently used pieces of legislation in India are Sections 107 and 151 of Code of Criminal Procedure, 1973.

What is an arrest?

The Code of Criminal Procedure fails to define the term ‘arrest’. Arrest in a general sense has always been associated with taking someone into police custody. In criminal law, it means apprehending someone who has committed an offence or is likely to commit an offence by taking them into custody by an authority, more often than not, by the police through the cessation of liberty, in order to put a criminal charge against that offender. Subsequently, preventive arrest is depriving someone of their liberty by taking them into police custody before the commission of the offence.

Code of Criminal Procedure and the relevant chapters

Historically, preventive arrest was notoriously used in India during the British rule under the Bengal Regulation— III of 1818 (the Bengal State Prisoners Regulation) which empowered the government to detain or arrest anybody on mere suspicion. Various other such statutes were enacted since then and until now such regulations exist. However, these regulations have been criticized by Human Rights activists since these provisions seldom lead to illegal arrests.

The Code of Criminal Procedure is a procedural statute that acts as a mechanism to punish the offenders under the substantive criminal law like the Indian Penal Code. Preventive arrest comes under Chapter VIII and Chapter XI.

Chapter VIII of Code of Criminal Procedure deals with ‘Security for keeping the peace and for good behaviour’ and particularly section 107 purports the power of the Executive Magistrate who has received information that a person is likely to commit breach of peace or disturb public tranquility in any way, to show cause why he should not be ordered to execute a bond with or without sureties for keeping the peace for such period, not exceeding one year, as the Magistrate thinks fit.

Subsequently, Chapter XI of Code of Criminal Procedure deals with ‘Preventive Action of the police’ and the objective of Section 151 is to vest power in the hands of the police to arrest a person without a warrant or an order from the Magistrate, in cases where they have knowledge of that person designing to commit a cognizable offence and there is a sufficient cause to believe that the commission of such offence cannot be otherwise prevented.

It is clear that the object of Sections 107 and 151 is to avert the commission of an undesirable offence and not punish for a certain crime committed.

Power of Police under Sections 107 and 151 of Code of Criminal Procedure

To understand the power of police under these statutes, it is imperative to examine what the sections exactly convey.

Section 107, Code of Criminal Procedure

(1) When an Executive Magistrate receives information that any person is likely to commit a breach of the peace or disturb the public tranquility or to do any wrongful act that may probably occasion a breach of the peace or disturb the public tranquility and is of opinion that there is sufficient ground for proceeding, he may, in the manner hereinafter provided, require such person to show cause why he should not be ordered to execute a bond 1 [with or without sureties,] for keeping the peace for such period, not exceeding one year, as the Magistrate thinks fit. (2) Proceedings under this section may be taken before any Executive Magistrate when either the place where the breach of the peace or disturbance is apprehended is within his local jurisdiction or there is within such jurisdiction a person who is likely to commit a breach of the peace or disturb the public tranquility or to do any wrongful act as aforesaid beyond such jurisdiction.

In Madhu Limaye and Anr. v. SDM Monghyr and Ors. 1971, Supreme Court has explained the terms public tranquility and public order so that there are no grounds for confusion; the court held that public tranquility and public order partially overlap each other. While a person playing loud music may disturb public tranquility but not the order. The expression public order although includes tranquility, it also presupposes the absence of insurrection, riot or crimes of violence.

The executive magistrate mentioned in Section 107 is a part of the executive wing of the government and not the judiciary. This section has specifically vested powers in the hands of an Executive magistrate to show cause such person about whom s(he) may have received information as stated above. Such information may be received by a police who has witnessed the said person regarding whom the police may have an apprehension of committing a breach of peace or public tranquility. It is to be noted that section 107 does not vest any power in the hands of the police to arrest. However, according to a consultation paper on the law relating to arrest written in 1999, by the then chairman of law commission Justice B.P. Jeevan Redd, it was found that

“this provision (Section 107) does not empower a police officer to arrest such persons. Yet, the fact remains that a large number of persons are arrested under this provision as well.”

Simply put, Section 107 of the Criminal Procedure Code states that the executive magistrate has the power to apprehend any individual for not more than a year on information that a person is likely to disturb peace and public tranquility

Section 151, Code of Criminal Procedure

(1) A police officer knowing of a design to commit any cognizable offence may arrest, without orders from a Magistrate and without a warrant, the person so designing, if it appears to such officer that the commission of the offence cannot be otherwise prevented. (2) No person arrested under sub-section (1) shall be detained in custody for a period exceeding twenty-four hours from the time of his arrest unless his further detention is required or authorised under any other provisions of this Code or of any other law for the time being in force.

Section 151 empowers the police to arrest a person, without a warrant, whom they believe, may commit a cognizable offence. There are certain conditions laid down under Section 151 with regard to the arrest, like

• the commission of an offence that is anticipated by the police must be a cognizable one and
• it appears that the anticipated offence shall only be prevented by arrest.

Consequently, while Sections 107 and 151 may vest certain discretionary powers in the hands of the Executive Magistrate and the police respectively, it does not vest wide arbitrary powers.

Constitutional validity of sections 107 and 151 of Code of Criminal Procedure.

Numerous petitions have been filed questioning the constitutional validity with regard to the powers vested in the hands of the magistrate and the police under these sections.

Medha Patkar v. State (2007)

In this case, certain landowners of Madhya Pradesh and other persons affected by Sardar Sarovar Project gathered on the road, shouting slogans, demanding land for land and other rehabilitation measures. They raised no apprehension of committing a cognizable offence or disturbing public order or tranquility. Despite that, the police beat up the protestors along with women and children and arrested all of them under Section 151 of the Code of Criminal Procedure and were summoned by the Magistrate under Section 107. It was held that sending them to jail on the failure of furnishing personal bond was a violation of Article 21 of the Constitution of India.

Grounds to prove Section 107 and 151 to be intra-vires of the Constitution of India

The above case serves enough grounds for apprehension in people’s minds regarding preventive arrest laws in India. However technically, Sections 107 and 151 have been proven to be intra-vires to the Constitution of India on the following grounds:

1. Firstly, Section 151 provides for grounds of arrest thereby ruling out the argument of vesting wide discretionary and ‘arbitrary’ powers in the hands of the police which may be contrary to the principles of a democratic government.
2. Moreover, in Section 107, it is clearly mentioned that the Executive Magistrate must have information for a certain person potentially disturbing public tranquility or breach of peace. The Magistrate must be satisfied by such information about the said person and consequently, (s)he must issue a notice to show cause under Section 111 Code of Criminal Procedure.
3. The notice must contain specific details of the information received and the consequent reasons for show cause. The Magistrates do not only rely on the information received, but also inquire into the matter themselves or by some other agency or may call for a detailed report from the police.
4. Besides the provisions of sections 107 and 151, Article 22 of the Constitution of India gives a legal recognition to the laws in pursuance of preventive detention/arrest.

Ahmed Noormohmed Bhatti vs State Of Gujarat And Ors, 16 March, 2005

In this case, the bench comprising of N. Santosh Hegde J., B.P. Singh J. and S.B. Sinha held that

“The provision (Section 151) by no stretch of imagination can be said to be either arbitrary or unreasonable or infringing upon the fundamental rights of a citizen under Articles 21 and 22 of the Constitution of India.”

Abuse of power under Sections 107 and 151 of the Code of Criminal Procedure

It is no surprise that, though laws may technically satisfy the provisions of the Constitution of India, they still violate rights of the individual by the arbitrary use of such powers.

In Ahmed Noormohmed Bhatti vs State Of Gujarat And Ors, 16 March, 2005, when the counsel for the petitioner contended that the guidelines given by Supreme Court in the case of D.K. Basu v. State of West Bengal, [1997] 1 SCC 416 with regard to preventive detention should be applicable for provisions like Section 151, the court held it was unnecessary since the limitations and guidelines in the statute itself were deemed enough. The bench further clarified that

“A provision cannot be held to be unreasonable or arbitrary and, therefore, unconstitutional, merely because the authority vested with the power may abuse his authority.”

While the order of the High Court seemed theoretically sound, they have failed to take a pragmatic view of the issue. Although revocation of a statute for preventive justice does not practically seem appropriate, denial of the application of guidelines afforded by the Supreme Court in the case of D.K. Basu v. State of West Bengal regarding preventive detention for this provision did not seem justifiable either.

The statue may be intra-vires to the Constitution but it does lack specificity in terms of remedies available against illegal arrest under the said section and the possibility of the same cannot be denied. For instance, the arrest of Anna Hazare on August 2011 under Sections 107 and 151 was viewed as unconstitutional, against democratic principles and similar to the situation during National Emergency, by the retired IPS Officer- Kiran Bedi.

Section 107 is preventive section and not punitive, hence there will be no strong and legal grounds for incarcerating a person unless there has been an in-depth scrutiny of facts presented to the Executive Magistrate on the basis of which he decides the case. Time and again the higher courts have reiterated that the Executive Magistrates cannot exercise this power according to their whims and fancies, yet there have been cases of illegal arrest.

Sathi Sundaresh v. The State P.S.I. Of Moodigere

In this case, the Magistrate under the Sections 107 and 111 of the Code of Criminal Procedure detained the petitioners who were arrested under section 151 of Code of Criminal Procedure, in judicial custody for 6 days without offering them a chance to be heard. This case was tried without scrutiny into the issue and there was no order issued under the provisions of Section 111 of the Code of Criminal Procedure. Ideally, when the alleged offender is present in the court, an order under section 111 should be issued. If the offender is not present, section 112 of Code of Criminal Procedure is invoked. However, none of these sections were invoked and the order of detention was arbitrarily given. In this case, the High Court of Karnataka held that

“Provisions of the chapter(VIII) may be easily made an engine of injustice and oppression and the High court will exercise the closest scrutiny to prevent the same”.

Suggestions

The author would like to further make a few suggestions on how to combat such arbitrary and irresponsible use of the said provisions:

Implementation of guidelines provided by the Supreme Court for cases of preventive detention in D.K. Basu v. State of West Bengal.

It is understood that the guidelines that were issued by the Supreme Court in the case of D.K. Basu are pertaining to preventive detention under the preventive detention law. However, the motive behind giving these guidelines was to curb the arbitrary use of power by the law enforcement and it can be inferred by this article that the guidelines specified in the sections 107 and 151 have been time and again proven to be inefficient to curb control the misuse of the same.

Making inquiries by the authorized Magistrate.

Order of detention under section 107 should be substantiated by the Executive Magistrate by making inquiries as well as with the help of other agencies so that fundamental rights of the person so detained must not be compromised.

Strict penal charges for persons involved in the misuse of these provisions.

The author believes that strict penal charges for the people that themselves misuse or even abet such misuse of these provisions are pertinent. The concept of preventive arrest is comprehensible for the people who are studying the law or any individual who is in some way connected to the legal fraternity. They understand the repercussions of lack of such preventive arrest laws and perhaps do not believe that the need to make any changes in the same is necessary. However, the law is made for the people of this land, India is a democratic country and the welfare of the people is of the utmost importance to the State, hence, it is important for people to believe in preventive arrest laws in India and not think of it as a tool of a totalitarian regime.

Conclusion

It is understandable that the state needs to develop a mechanism to prevent crime from happening. It is clever to be able to stop crime even before it happened, however, a state that goes by the principle of letting 10 guilty persons escape but not 1 innocent incriminated, such measures of preventive arrest must be exercised with great caution. Every mistake under these sections of falsely incriminating an innocent contravenes the principles of natural justice and rule of law, the two legal principles that the Constitution of India finds its basis on.

It can be inferred hitherto, that a statutory provision which abides by the Constitution of India can be used to the detriment of an individual’s constitutional rights. The author believes that measures could be taken to abolish the abuse of power under Section 107 and 151 of Code of Criminal Procedure, if not abolish but reasonably controlled by the abovementioned suggestions.

Lastly, the author likes to conclude by making a general observation that, many times Sections 107 and 151 have been invoked against people that participate in protests, although there may be no substantial grounds to invoke them. However, during the violent protests of the Dalit groups in Maharashtra with regard to the ‘Bhima-Koregaon battle’, an official number of merely 300 protesters were arrested in Mumbai while there were infinitely more protesters violently vandalizing people’s property, threatening people to go home by pelting stones and the like. Police seemed to have no more authority than to stand helplessly while the city was under a state of terror. It is indispensable that power of the police under these sections must be used as a tool of preventing crime while also protecting the fundamental rights of the people and not of satisfying political exigencies or using it as a tool of oppression.

 

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In this article, Umang Tyagi, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses Equity Compensation under Companies Act.

Introduction

A noteworthy suggestion of the organization hypothesis is that the irreconcilable circumstance between a specialist and a primary is lessened when the operator’s riches and remuneration are attached to the execution of the firm. Aside from the direct anticipated connection to corporate execution, remunerating chiefs with value instruments has suggestions for corporate hazard taking and payout arrangement decisions.

Furthermore, value-based pay rehearses are to a huge degree moulded by institutional factors, for example, bookkeeping directions. This exposition tries to upgrade our comprehension of the determinants and ramifications of value based pay and value-based responsibility for organizations’ administrators through four interrelated expositions. The exposition rethinks the execution and hazard taking outcomes of official value based pay and value possession utilizing novel approaches. The exact aftereffects of the principal article demonstrate that CEO’s value impetuses are financially more huge when estimated in respect to her outside non-firm riches as opposed to with respect to the add up to showcase estimation of the firm. These outcomes additionally recommend that there is a positive connection between Chief’s value motivating forces estimated in respect to her outside riches and future bookkeeping execution.

Background

• Senior officials of open organizations are in charge of corporate vital operational, venture and financing choices, which eventually influence investor esteem. Be that as it may since the chiefs are not the sole proprietors and their exertion is imperceptible in running an organization, they may seek after individual interests, what’s more, embrace activities conceivably impeding to investors.
• Such crafty conduct is alluded to as good peril and give the issues encompassing official value based remuneration is most certainly not uncontroversial.
• Albeit very much proposed, share-based pay may likewise have a dim side, for instance, by making unreasonable motivators to influence the offer cost on the value to concede, exercise and deal dates (Yermack 1997, Heron and Lie Philippon 2006).
• Moreover, colossal official pay bundles, and particularly the offer based segments, constantly pull out in the open consideration as they are generally seen as extreme. Regardless of whether directors are genuinely adjusted for their execution is a theme of a warmed level-headed discussion.
• The majority of the feedback leveled at official offer based pay, nonetheless, neglects to value the unpredictability of the issue and, particularly, no accord exists on the most proficient method to gauge official pay and motivating forces in a specific setting. Besides, while scholarly scientists and professionals regularly concentrate on the unveiled parts of official pay, they come up short to see that formally revealed remuneration does not generally incorporate all the parts of official firm-related salary.
• Disregarding this undisclosed firm related official salary may also contort correlations of official remuneration bundles and motivations.
• Since corporate basic leadership specialist is packed in the hands of top officials, understanding the immediate results and the symptoms of official value based remuneration is essential in the contemporary business world.
• The exploration around there progresses our comprehension on the channels through which it is conceivable to improve investor esteem and anticipate sharp activities with respect to the administrators.

Purpose of exposition

The reason for this exposition is to research the impact of official equity-based pay and value possession on corporate results and administrators’ activities, and further to give experiences on official pay and possession estimation issues.

In particular, two expositions research whether value impetuses urge chiefs to take activities which influence corporate firm execution and hazard profile.

The exploration questions are:

1. How does CEO’s value proprietorship influence firm execution?
2. How should CEO’s value possession be estimated with regards to surveying an impact of CEO’s value proprietorship on firm execution?
3. Do chance taking motivators from investment opportunities propel corporate officials to attempt higher working danger regarding choosing less financially sound clients?
4. Do firms assign vast stipends of investment opportunities and limited stock to time periods when the stock is underestimated so as to give higher pay to administrators and representatives at bringing down cost?
5. Do sheets of executives consider CEOs’ profit pay when setting the levels of pay?
6. Do CEOs get extra pay premium for the absence of profit assurance of choices?

Value Compensation and Incentives

Compensation and Incentives

As examined in Antle and Smith (1986) and Jensen and Murphy (1990), administrators are given variable pay and motivations through three essential instruments:

1. Stream remuneration, which is the aggregate of the CEO’s yearly compensation, reward, new value awards, and other remuneration.
2. Changes in the estimation of the CEO’s arrangement of stock and choices.
3. The likelihood that the market’s evaluation of the President’s human capital will diminish the following end because of poor execution or a change-in-charge. For officials underneath the CEO, the potential for promotion.

The characterize motivators as variety in official riches identified with the stock cost, and we concentrate on the motivators to expand the stock cost given by the supervisor’s responsibility for (e.g., stock and investment opportunities). Steady with the larger part of research that analyzes the motivating forces gave by value property, in this review, we utilize the expression “value motivating forces” to mean the motivators made by value securities that spur an administrator to build stock cost.

The different motivating forces emerge in light of the fact that the estimation of stock and alternatives is additionally delicate to different snapshots of the stock cost.

• In characterizing motivations as the affectability of the chief’s riches to stock cost transforms, we likewise overlook the motivating forces gave by the end danger and from the variety in the stream of yearly pay, and we overlook variety in motivating forces from execution measures other than the stock cost.
• For most CEOs, the presumption that the dominant part of motivating forces is driven by variety in the estimation of valuable possessions is realistic.
• As one moves further into the association to workers beneath the CEO and underneath top administration, value constructs motivating forces take in light of a moderately less vital part.
• For bringing down level administrators the stock cost is less enlightening about activities, and nearby measures of execution (such as division benefits) are more pertinent and helpful for giving impetuses (Bushman, Indjejikian and Smith, 1995; Ittner, Larcker, and Rajan, 1997).
• Likewise, the motivators identified with potential advancement turn out to be more essential. Notwithstanding, in cross-segment, firms shift generously in their utilization of value impetuses for bringing down level workers.
• A considerable collection of hypothetical and experimental work bolsters stock cost as an applicable execution measure for evaluating official activity decision. Be that as it may, similar to any execution measure, the stock cost is a loud measure of the official’s execution.
• The supposition that the dominant part of a CEO’s motivators is driven by variety in value portfolio esteems does not infer that bookkeeping or non-money related execution measures (e.g., advancement, client unwaveringly, and so on.) are not utilized as a part of contracting with CEOs.
• Accordingly, value motivating forces force chance on the official and the official must be paid a premium over a satisfactory level of settled money pay to make up for this hazard. Obviously, there are costs to the firm to provide “excessively” or “too little” value motivating forces.

Measurement of Equity Incentives

• A crucial inquiry for the remuneration writing is the estimation of motivations when all is said in done, and value motivators specifically. A key point in breaking down official motivations is that an official’s impetuses from stock and alternatives are appropriately estimated by their portfolio motivations.
• As stressed by Yermack (1995), one can’t decide regardless of whether an official has a suitable level of motivating forces by looking at recently conceded confined stock and alternatives remuneration in a given year. Confirmation in Core and Guay (2001) shows that the connection between recently allowed motivating forces and previously held portfolio motivating forces is low.
• Systems for making exact intermediaries for value motivating forces were begun by Jensen and Murphy (1990). These systems are costly, be that as it may, in light of the fact that entire information about the qualities of an official’s alternative property isn’t openly accessible.
• Center and Guay (2001a) create and approve an economical and precise technique for assessing alternative portfolio esteem and the sensitivities of choice portfolio incentive to stock cost and stock-return instability that is effortlessly executed utilizing information from just the current year’s intermediary explanation or yearly report.
• This strategy can be connected to either official investment opportunity portfolios or to broad choice designs. In expansive examples of genuine furthermore, mimicked CEO choice portfolios, they demonstrate that these intermediaries catch more than 99% of the variety in choice portfolio esteem and sensitivities.
• A potential constraint of their examination is that they expect, reliable with most earlier writing start with Jensen and Murphy (1990), that adjustments operating at a profit Scholes estimation of an alternative portfolio is a proper measure of a worker’s motivations to expand the stock value.

Conclusion

Despite the fact that assessing these intermediaries is clear, as of late, a verbal confrontation has resulted over how to change the intermediary into a measure of value motivating forces. Most specialists, starting with Jensen and Murphy (1990), utilize the Black and Scholes (1973) strategy to esteem an official’s alternative portfolio, and measure the official’s motivating forces to increment the stock cost by how much the aggregate estimation of the official’s stock and operation. Therefore, it can be very well concluded so as to how equity compensation is the best way to compensate executives.

 

In this article, Shreya Mazumdar, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the possible red flags during a legal due diligence exercise.

Introduction

The term due diligence is closely related to the doctrine of notice. Section 3(6) of Transfer of Property Act, 1882 states that a person is said to have notice of a fact when he actually knows the fact, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it.

It means a person shall be deemed to have a notice of any fact if his agent acquires notice to act on his behalf in the course of business.

Due diligence came into the limelight in the case of Mergers & Acquisitions. It means whenever there is a merger or acquisition, the buyer should always take proper care and find out all the legal the other details of the company. In the said case the host company before entering into the contract or agreement with the other company must find out the detailed information about it.

Due Diligence

• Due Diligence refers to precautions or reasonable verifications taken by a company to identify and prevent foreseeable risks. Due diligence is a part of the merger and acquisition, mainly the buyer does a due diligence to check whether the target company will give him a profit or not.
• It is a part of the acquisition or the merger where the buyer company goes on a detailed investigation or research to identify that they can get good valuable returns on this deal.
• In this process, the buyer’s company will come to know about the details of accounts, debts, sales, profit margin, leases, pending or past legal suits, compensation agreements, distributions agreement of the target company.

R v Steinberg

In the above case the Ontario judge Harris said that to require the steps taken by the company to absolutely prevent these occurrences under any circumstances whatsoever would go beyond due diligence and would make the company a virtual insurer against any error, I do not think that was the intention of the legislation; the words all due diligence import an area of precaution sufficient to prevent the foreseeable, but not the unforeseen, unexpected, unknown, or unintended.

Legal due diligence exercise

• Legal due diligence exercises can identify issues which affect the structuring of transactions, disclose weaknesses, or risks in the underlying business. Identifying those issues give a chance to the interested parties to fix any issues discovered before they cause problems in:
  • Price according to the perceived risk
  • Seek additional contractual
  • Insurance protection, or
  • In extreme cases decide to walk away.
• Legal due diligence is a set of checks, usually done by the advocate or lawyer who represents the buyer. This is done to satisfy the lawyer of the buyer that the business is not experiencing any litigation cases or legal charges.
• The lawyer reviews the contract with:
  • Customers
  • Suppliers, and
  • Employees to uncover any potential or immediate risks to the smooth operation of the business.

Example of legal due diligence

An American client wants to acquire six companies (hereinafter known as the target company) for this purpose he has to enter into the contracts with all the companies. The legal due diligence cannot be done by him alone, he will give his documents for review to a company who handle such documents. The company will summarize all the documents, arrange it in a systematic way and after the due diligence report has been made they can ultimately make the purchase decision.

Red Flags during legal due diligence

Red flags refer to the problems, difficulties or issues.

A buyer with legal due diligence faces a lot of problems. The are various red flags during this process are given below:

No Contracts

If there is no contract between the business and its staff, clients or suppliers then there will be no legal or formal obligation on the other party to perform the said promise or agreement.

Company- Middle of a Litigation

During a Merger or Acquisition, it is very necessary to check whether the company is in middle of any litigation case or not. If it is in the middle of any litigation then the buyer may pay only the cost of litigation personally.

Void management team

Many buyers prefer acquisitions with experienced management teams that can help the buyer’s business to grow after the deal is closed. In due diligence process, some buyers may discover that a company’s leadership or management team isn’t prepared to manage the business in the previous owner’s absence.

Before marketing the company for sale, the seller may realize that his business management team is weak which may not attract or impress the buyers. It becomes a void management team when a seller appoints wrong persons in the management team.

Losing customers

When a buyer wishes to purchase a company he may do the following things:

• Asses or interview the clients
• Asses or interview the customers of the company.

It was done to know the vendor-customer relationship, interviewing the client can also help in knowing the reaction of the client when there is a change of ownership.

There are many clients who back out when there is a change in ownership may be because of the trust issue. This is one of the most important red flags during the legal due diligence exercise as a company run only because of its customers.

If while assessing, the buyer finds that the customer may withdraw due to the change in the ownership and has even informed about the same to the owner or seller and the owner did not disclose this fact to the buyer then in such case the buyer can finish the contract due to the dishonest behaviour of the owner.

Labour Law Violations

The buyer before mergers and acquisitions should review the seller’s employee benefit plans as well as he should ensure his own current and past personnel policies. This means the buyer has to take care of both the employees of the company he is acquiring and the policies he is following in his own company, e has to keep the balance between the both.

A buyer may discover potential liabilities that are due to the employee rights violations by the owner. A certain violation can result in penalties that can amount to several millions of dollars. A buyer needs to protect himself from such a huge debt, especially if it is due to the negligence of the previous owner.

Troubling legal past

This is basically related to the second point which discusses the situation when a company is in middle of any litigation. The difference between the two is that the second point talks about the present scenario but this point emphasizes on the past cases of the company.

The manager at the company or even the owner could have a hidden criminal past or have faced allegations of fraudulent behavior before joining the business. Such findings can make a buyer question the integrity of the company and its leadership.

Governing Documents

Review of Target Company’s governing or constitutional documents like:

• Article of Association
• Memorandum of Association
• Charter
• Shareholders Agreement, etc.

Review these documents. Governing documents is one of the most difficult red flags during the exercise of legal due diligence.

Conclusion

Due diligence can uncover a wide variety of potentially damaging issues. It is important for buyers to work with their legal and financial advisors to assess each due diligence concern and evaluate their impact. Due diligence is an important factor in merger and acquisition as it has a lot of significance. One should always try to overcome the red flags or the difficulties faced during the legal due diligence exercise and carry on the work.

In this article, Zahid Maqbool Khan, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses key considerations in a Joint Venture Agreement.

Introduction

In this world of globalization, Dubai’s economic and cultural growth is underpinned by a legal and regulatory framework, which has developed sufficiently to encourage significant local and international enterprise in Dubai and is continuing to develop. The willingness of international businesses to set up and operate in Dubai, and the success of local Dubai businesses, is the clear testament to Dubai’s robust and dynamic legal and regulatory framework.

Dubai is one of the seven states of United Arab Emirates (the UAE) a federation formed between these seven states in the year 1971 and the capital of UAE is Abu-Dhabi. Other states of this federation are Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. Prior to 1971, what is now the United Arab Emirates was a British protectorate – the British Residency of the Persian Gulf. In 1971, a temporary constitution was formed which enshrined the legal and political framework of the United Arab Emirates, also referred to as ‘The Union’ of these tiny small seven states.

Dubai Legal System

Inspired by the vision of its ruler, the glittering metropolis of Dubai is moving ahead in dizzying pace to clinch the top position among other global destinations, ahead of other traditional favorites like Hong Kong, Paris, and Singapore. Although the Federation of UAE with the seat of Supreme court situated at Abu-Dhabi due to differences prevailing at that time and having a complete set of circumstances prevailing in Dubai at that time, thus Dubai retained its own Judicial system. Dubai courts have three layers Court:

1. Court of Appeal
2. Court of cassation
3. Ruler’s court

Ruler’s Court is being headed by the Ruler of Dubai and mostly hears the Pardon appeals in death execution cases and long terms of imprisonments.

Dubai in Recent Years

In recent years Dubai being developed as a cosmopolitan city of the world wherein nationals from 160 countries live and work and exceeds the local Dubai population legal system has also been redefined to meet the requirements of the city accordingly Dubai International Financial Centre Arbitration Centre was developed which to the date is being compared with the best arbitration centre’s of the world resolving the commercial disputes of the giant corporation and individuals. Parallel to that system of court Dubai has also developed specialized court to deal with the specific issues like Labour courts which deal with labour cases between employer and employee also Rent Courts to deal with the disputes between the landlord and tenant in a very time-bound manner.

Property Market in Dubai

Since early 2000, Dubai has witnessed a phenomenal growth in residential, commercial, industrial and service real estate. This growth has been fuelled by the economic boom in the region which is mainly driven by the rising world oil prices. Rents and selling prices of all types of real estate have been skyrocketing as a result of a relatively higher demand which is not met by the supply. Consequently, huge investments by real estate developers, both government and private, have been put in place with the view of reaping the benefits of this seemingly unending boom. Transaction worth approximately USD 1.3 Billion Dollars were recorded in Dubai for the year 2017 which includes residential and office space sales.

Property Rights of Investors in Dubai

Property ownership rights of Dubai are entrenched under the UAE Civil Code which provides different types of real property rights. Property rights include:

Freehold

Freehold title is the most superior right of property available in Dubai, it simply means having 100% ownership of the property held by natural or Legal Person in perpetuity and provides owners a full right to occupy and use the land.

Usufruct

Article 1333 of UAE Civil code defines usufruct as a right in rem given to the usufructuary in order to use a real estate owned by another and exploit it as long as it remains as it is. So a person is entitled to use the property as long as it remains in its original shape subject to the normal wear tear. Thus we can say it’s like Leaseholds type. A usufruct terminates upon the expiry of 99 years unless agreed by the parties.

Musataha

Musataha is a right in rem which provides an owner the right to build on a land and enjoy that property. The musataha agreements may not exceed a period of 50 years at a time. This right is governed by the UAE Civil Code, articles 1353-1360 which provides a general framework of musataha rights. Musataha differs from leasehold or usufruct rights since it specifically grants the user a right to construct or build on the land (as well as the plant), whereas leasehold or usufruct rights are recognized as real property rights giving only the simple enjoyment over the property without any construction rights whatsoever.

Long-term leases

The Dubai Land Department has adopted the view that leases with a term of more than 5 years maximum 10 years, known as long-term lease contracts, amount to Real Property Rights (similar to rights of musataha and usufruct, which are in rem rights).

Short-term leases

Leases with a term of less than 5 years, known as short-term lease contracts, do not require registration with the Dubai Land Department. However, short-term lease contracts must be registered with RERA. To facilitate this, RERA has an online registration portal called Ejari.

As per the Dubai Laws Individuals are categorized into three with respect to the property investment sale and purchase and these are:

1. Citizens of the United Arab Emirates which includes Dubai as well.
2. Citizens of GCC Countries (Nationals of Saudi Arabia, Qatar, Bahrain, Kuwait & Oman)
3. Residents of Dubai.(Which includes all Expats living and working in Dubai including Indians)

Citizens of UAE and Citizens of GCC are given priority to retain any form of land and property ownership throughout UAE without any restrictions whatsoever, but the Foreign Residents living and working in Dubai have been given the limited right to own land and properties in Dubai. Dubai government has specified some area called as Designated Areas wherein foreign nationals can own land or other properties with all rights available, but with respect to the short-term leases Foreign Residents are treated at par with Citizens of Dubai thus having the right to lease out property on short-term basis anywhere in Dubai.

Thus Category 1&2 as listed above has absolute rights to deal with all property rights anywhere in Dubai, but Category 3 individuals have rights to deal with property rights limited to certain specified areas called as Designated Areas, which are being demarcated by Government of time from Time to time.

Financing Real Estate Investments in Dubai

As per the rules framed by the Dubai Land Department finance options for the purchase or mortgage over the real-estate shall be done by the authorized banks only thus there is no concept of private financing option available, although parties can go for private financing options but it’s done on the basis of friendship or where the parties know each other because such types of transactions are not being recognized thus being inherently dangerous I character as it does not give any type of the legal cover to the financer.

Dubai Real Estate Court

Dubai Real Estate Court (part of the Dubai Courts) is a specialized court that has jurisdiction over all disputes resulting from transactions and contracts relating to real estate in the resolution of all disputes relating to real estate (excluding rental disputes). Judgments of the Court of First Instance may be appealed before the Court of Appeal and the parties may further appeal on points of law to the Court of Cassation in Dubai.

The fees to register a case with the Dubai Real Estate Court range between AED 20,000 and AED 40,000. Real estate cases generally take 12 – 18 months to resolve, depending on the circumstances of each case.

Rental Dispute Centre

Dubai has set-up a special court to deal with the Short-term Lease contracts and it’s known as Rent Dispute Settlement Centre. This centre has two layers:

1. First court
2. Court of Appeal

Judgments passed by the court of Appeal has final authority and cannot further be adjudicated anywhere in the Dubai. Filling a case before this centre till its disposal takes maximum 6 months time in case court finds the dispute very technical in nature or of if finds that facts of the case are not clearly submitted court appoints an expert to investigate the matter and submit the report and on the basis of that report court delivers its verdict. 90% of the cases are being referred to the expert for his report and opinion as it facilitates the court process and ensures judgments is delivered on time.

The Centre does not have jurisdiction over financial leasing and long-term lease contracts and rental disputes arising inside free zones that have their own committees or special courts such as the Dubai International Financial Centre (DIFC). The fees to register a case with the Centre are 3.5% of the annual rent capped at AED 15,000 for financial claims and AED 20,000 for eviction or lease renewal claims. For a hybrid claim comprising both a financial claim and an eviction claim, the fees would be capped at AED 35,000.

Ownership Title proof

The lands register is being maintained by the Land Department and records every transaction of the property situated in Dubai, as per the communication by Dubai Land department its registry will be put online via blockchain system in 2018 and thus will be the world’s first public register which is being the maintained by the respective authorized set of people bringing the 100% transparent and foolproof system by recording the minutest details of land in public register .

 

In this article, Shreya Mazumdar, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses key considerations in a Joint Venture Agreement.

Introduction

This article only analyses the important clauses in the Joint Venture Agreement as well as the importance of Joint Venture Agreement, it reflects the clauses that is required during the time of drafting the agreement, in order to prepare for client consultation. Importance and the change of situation when there is a presence of Joint Venture Agreement. This may help in the due diligence exercise of the company.

The process of establishment can be relatively simplified if a proper planning, market research, and partner assessment are complied with. In order to have a successful Joint Venture, there has to be a specific and measurable objective, identifying and critically assessing potential partner as well as a target market and a channelled and proper format of Joint Venture.

Joint Ventures Agreement

Joint Venture Agreements is believed to have a major priority in a company and such document is supreme. The Article of Association and Memorandum of Association change according to the Joint Venture Agreement, if the Joint Venture Agreement provides such clause.

While drafting the agreement the parties should clearly mention their intention as Joint Venture Agreements are mostly drafted to attain a purpose. In order to achieve the true purpose of the Joint Venture Agreement, it has to be properly drafted by the parties.

Research Methodology

The methodology used is doctrinal by analytical research. The researcher has analyzed the existing laws and regulation with respect to the Joint Ventures in India. The researcher has analyzed various documents reflecting the scope of the company through the Memorandum of Association, Article of Association as well as Joint Venture agreement on the ministry of corporate affairs website.

The analytical approach is used as the research involves a careful examination of the effect of Joint Venture agreement on the company. The analysis and conclusion are drawn after studying the company documents as well as the procedure for drafting.

This research is best for due diligence and corporate consultations exercise as it relates to the study of requirements or essence of Joint Ventures.

For the present research various tools of data collection are through:

• Primary sources
  • It includes MOA, AOA as well as Joint Ventures.
• Secondary sources
  • It includes various authors, articles in journal, and websites.

Joint Venture

It is an arrangement where two or more parties cooperate in order to run a business. There are various forms of this co-operation such as equity-based or contractual Joint Ventures. This may be on a long-term basis involving the running of the business in perpetuity or on a limited basis involving the realization of a particular project. This may involve an entirely new business or an existing business that is expected to provide benefit from the introduction of the new participant.

It is considered to be a highly flexible concept. The nature of any particular Joint Venture will depend on the specific underlying facts and characteristics and on the resources and wishes of the involved parties. Joint Venture can be epitomized as a symbiotic business alliance between two or more companies where the complementary resources of the partners are mutually shared and put to use.

The purpose of Establishing a Joint Venture

Forming a Joint Venture with an ideal business partner provides a fast way to influence complementary resources that are available with the other partner, share each other’s skills, access new market or diversify into new business. There are disadvantages when it comes to Indian global expansion where the Indian Companies find it had to achieve the expectation in the global market in terms of:

• Product quality
• Technology
• Infrastructure,
• The management process.

These difficulties can be superseded by way of an alliance with a foreign counterpart who is a strategic fit. The alliance between those possessing varying expertise and capabilities in technology, marketing and distribution etc., are necessary to encounter the growing needs of modern business.

Advantages of Joint Venture

1. Cross-border business is more demanding and beneficial either it is outright acquired or shared through Joint Venture. Cooperation is a great way of reducing research as well as manufacturing cost without limiting exposure. This process reduces research and manufacturing costs while limiting exposure.
2. There is a chance of risk reduction as the business activities of the Joint Venture can be expanded with smaller investment outlays independent.
3. It is a mode of gaining good market access. Joint Venture agreements expand their business into other areas of the world as well as consumer segments and product markets. In the case of cross-border, the involvement of a local business party may be necessary or is desirable in countries in cases where the local laws limit the ownership structure by foreigners.
4. There is the joint management of the risk associated with new ventures which Joint Ventures can offer. In Joint Venture when the liabilities and risks are shared the pressure on each individual partner is drastically reduced.
5. There are many flexible business diversification opportunities to the partners. It provides full freedom to involve with the other company for a full merger or only for a part of the business. Companies can also choose Joint Ventures as a method to gradually dispersed a business from the rest of the organization and ultimately sell it further.

Forms of Joint Ventures

Joint Ventures are different kinds which depend on the requirements of the parties. It can be either contractual or structural or both. For incorporation of the company, Joint Venture came into existence which is very rampant among foreign investors. In order to constitute a Joint Venture the most common structures employed is as follows:

Company Joint Venture

Under the Companies Act, 2013 Joint Venture would hold the share of such company in an

agreed proportion. This agreement can be termed as Equity or Corporate Joint Venture.

In this case, the Joint Venture Company is universally recognized medium which gives an independent legal identity to the Joint Venture. It is believed to place a better management and employee structure and participants have the benefit of limited liability and the flexibility to raise finance. The company will survive the same entity despite a change in its ownership. The three most prominent way to describe Joint Venture Companies are as follows:

Transfer of Business by one Party and Share Subscription by the Other

Parties to the Joint Venture incorporate a new company where parties transfer their business or technology to the newly incorporated company in exchange for shares issued by the company. The other party subscribes to the shares of the company for cash consideration.

Collaboration with the Promoters of an Existing company

The Joint Venture partner can acquire shares of the existing company by way of subscribing to new shares or acquiring shares of the existing shareholders.

Limited Liability Partnership

The Limited Liability Partnership Act, 2008. It is only under the government approval route Foreign Direct Investment (FDI) is permitted in LLPs. Only downstream investment is allowed when it comes to Indian Company having an LLP, which operates in a sector where 100% FDI is allowed through the automatic route.

LLPs can receive FDI only by cash consideration through inward payment and the banking channels or by debit to Non-Resident External account/ Foreign Currency Non-Resident accounts of the individual concerned, maintained with an authorized dealer or an authorized bank.

Unincorporated Joint Ventures

This kind of agreement is perfect in the situation where the parties intend not to be bound by the formalities and permanence of corporate vehicle. Such agreements are highly functional constructs that allow companies to acquire products, technology, and working capital in order to increase production capacity and improve productivity. This kind of agreement is suitable for the business activities that include:

• Technology transfer
• Joint product development
• Purchasing
• Distribution
• Marketing, and
• Promotional collaboration, or
• Intellectual advice.

There might be tax issues if the unincorporated Joint Venture does not have significant tax issues if not structured properly as the Indian tax authorities may qualify such contractual arrangements as an association of persons.

Joint Venture Agreement

Agreement of following companies:

1. BAeHal Software Ltd
2. Indo Russian Aviation Ltd.
3. Snecma HAL Aerospace Pvt. Ltd.
4. Infotech HAL Ltd

From the above agreements following can be concluded:

• Joint Venture Agreement is considered for the working of the company, the Article of Association and Memorandum of Association should be at par with the Joint Venture Agreement. Every Joint Venture company will have a Joint Venture Agreement which governs the working of such Companies, Article of Association may or may not be present.
• If there is an Article of Association, the clause is put in Joint Venture agreement that if Article of Association is inconsistent with the provision of the Joint Venture Agreement, then the parties will amend the Memorandum of Association and Article of Association accordingly.
• Whereas in other Companies Article of Association and Memorandum of Association manages the working of the company. The members of the Joint Venture are bound by a legal agreement that specifies the degree of control the parties enjoy and the extent of profit or loss that is shared.
• The other companies are governed by its Article of Association or MOA and the Companies Act 2013, the statute being the supreme document.
• Joint Venture may be for specific purposes or for specific period whereas the other companies exist until they are legally dissolved.

Clauses in a Joint Venture Agreement

In order to enter into a Joint Venture with the prospective business partner, a Memorandum of Understanding (Hereinafter known as MoU), as well as letter of intent, is signed by the parties that clarify the basis of the future Joint Venture agreement. This also includes understanding the culture as well as the legal background of the parties. While signing a Joint Venture agreement the following clauses must be properly examined:

• Object and scope of the Joint Venture
• Equity participation by local and foreign investors and agreement to a future issue of capital
• Management Committee
• Financial arrangements
• The composition of the board and management agreements
• Specific obligations
• Provisions for distribution of profits
• Transferability of shares in different circumstances
• Remedying a deadlock
• Termination
• Restrictive covenants on the company and the participants
• Casting vote provisions
• Appointment of CEO/MD
• Change of control/exit clauses
• Anti-compete clause
• Confidentiality
• Indemnity Clause
• Assignment
• Dispute Resolution
• Applicable law
• Force Majeure etc.

Management

It is essential that the consent is for that same opinion over the proposed management structure and to categorize the party that has to organize early in the Joint Venture procedure. Thus, the parties should be vigilant while preparing the memorandum of understanding and the Joint Venture agreement.

The Board of Directors of the Company is also mentioned in the Joint Venture Agreement and the corresponding necessities can be mentioned in the Article of Association of the Company.

The parties to the Joint Venture can choose on the matters which is a number of Directors and number of directors that is required to sign the Joint Venture agreement, the appointment of Managing Director, Chairman.

Royalty

The paid royalty is paid is restricted up to 5% for the local sales and for exports up to 8% without any constraints on the period of the royalty payment. The royalty limits are net of taxes and are calculated as per the standard of consideration. Reimbursements are made through RBI.

This is another aspect that should be factored into the Joint Venture agreement. This clause should also mention the issue of equity shares against lump sum fee and royalty fees that are allowed.

Exit Strategy

There is a particular period planned for a particular period of time. Joint Venture falls short of funds or there could be many more reasons to exit the Joint Venture. The general options are buy-sell agreement, unilateral sale rights and pull/call rights. The termination clause may also provide the termination of operations and liquidation and closure of the venture. This clause can be independent or in collaboration with each other.

Tax Consideration

Tax situations are complicated to understand for the foreigners and foreign firms that are investing in India. Thus a consultation is required while drafting such clauses it differs from one country to another as it is based on tax treaties are signed with different countries.

Intellectual Property Rights

Situations wherein Indian market does not cover certain Intellectual Property Rights, the foreign investors have to examine such situations and act accordingly. In such cases, a detailed provision of Joint Venture agreement is suggested in order to protect Intellectual Property Rights that includes registration and making of detailed provisions.

Analysis

Joint Venture agreements have to be properly drafted by the lawyer and perused by the parties when it comes to execution of such drafts. There are basic clauses that have to be examined and has been mentioned in this article. There are also special clauses that can be added in order to achieve the various purpose.

References

[1] Legal Website Samratdu, Joint Venture Agreement, (06.12.2012),

http://www.legalservicesindia.com/article/article/general-format-of-the-joint-venture-agreement-1371-1.html

[2] Establishing a Joint Venture in India, India Briefing http://www.india-briefing.com/news/establishing-joint-venture-india-4833.html/ (last updated on 12.05.2011).

[3] Law Firm Websites

Establishing a Joint Venture in India, DEZAN SHIRA & ASSOCIATES, file:///C:/Users/Mazumdar/Downloads/Establishing_a_Joint_Venture_in_India.pdf visited on 15.01.2018 at 19:56 IST.

[6]Joint Venture in India, NISHIT DESAI ASSOCIATES, http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Joint_Ventures_in_India.pdf (last updated November 2014).

[7] Other Research Links

http://www.hal-india.com/Joint%20Venture%20Companies/M__29

visited on 15/01/2018 at 19:48 IST.

http://www.mca.gov.in/mcafoportal/viewCompanyMasterData.do

visited o 15/01/2018 at 10:40 IST.

In this article Sarang Khanna, Content Marketing Executive at iPleaders, talks about the increasing scope and opportunities in the billion dollar gambling industry in India.

The word “Gambler” first came into popular usage in 1700’s as a slang that referred to cheats and reckless humans. “Gaming”, meanwhile, was meant to sport or play games that usually involved physical exertion and skill. Then came “Gambling” – which today means to wager money in games or sports by predicting the results of events.

In today’s times, the society and psychologists have added other dimensions to this definition and gambling is now seen primarily to be risky, uncertain and, hence, unethical.

Has this stopped India from indulging in this uncertain and unethical practice?

The revenues that are already touching a billion dollars should give you the answer. In fact, in a research undertaken in 2010 by Playwin (the lottery owned by the State of Sikkim), it was estimated that online gambling itself would be worth $5 billion had it been regulated in India. That was 2010, and we can imagine in which direction online gambling must have ascended ever since.

Online legends like Guruprasad Gupta have made it second nature to make millions of rupees every week just by online gaming. This Math teacher turned full-time poker-pro in his interview to India Poker News said, “It’s great to have poker as a fulltime career.”

To put it simply, there is a wealth of opportunities for anyone trying to establish a footing in this new and upcoming sector, and it is high time we explored this potential.

Here are avenues in various fields of gambling that you can make a career in (if you wish to):

Traditional Live Gambling

Live gambling in India is fairly popular and includes activities like lotteries, betting, various casino games, etc. Legality of these games in India varies from state to state and proper framework is put in every state with regards to operations in these businesses.

Not only do these businesses usually have the tendency of being around exotic holiday locations, but they also provide lucrative career opportunities for people with inclination towards the industry. Let’s take Goa for an example. A city quite popular as a holiday destination not only amongst indians but also foreigners has a number of offshore casinos frequented by anyone willing to bet.

Casinos are always looking for new and interesting games for its customers, and game developers are recruited at high frequency for these jobs. This is a fun and equally high paying job, with the added potential to fetch heavy royalties for someone who develops the most popular game. Did you know gaming surveillance officers, unfair means supervisors are some other noteworthy jobs in the industry?

 

Bookmarkers

Betting is a multi-billion dollar industry around the world and even India could soon see the regulation and legalization of the same. The Law Commission of India proposed to legalize sport betting in the country as early as May 2017.

Did you know bookmarkers or odd traders are the most crucial people in the betting business?

Their job is to play with numbers and create odds that encourage people to place wagers. Have you ever noticed the number that frequently pop up next to the scores while watching a football match on TV? They are odds that help people place bets and make profitable decisions while betting on the match.

These odds that you see are the work of an intelligent bookmarker. This is a unique work profile and betting companies pay handsome amounts to bookmarkers as huge profits are yielded as a result of their calculations.

With the legalization of betting in India, which seems to be on the cards, there is going to be ample of such exclusive job roles in the country.

Legal Compliance

Both traditional and online gaming are heavily regulated in India, with excess laws specific to each state in the country. India has also witnessed a steep rise in online gambling markets in the past few years. Land-based and online casinos both need to operate legally and the compliance with all these laws is a tedious job. This is where lawyers with knowledge in gambling laws come in and save the day. Their primary focus is to ensure that security and legal protocols are satisfied and all gambling activity taking place is transparent and legit. This is a position of high responsibility that requires much deliberation.

Those lawyers wanting to work in this area obviously require tremendous legal knowledge. India has very few experts on gambling laws, Jay Sayta being one of them. If you google any query related to gambling law you are bound to land up on his blog – www.glaws.in. Gambling related laws are distinct and extensive in India, and better understanding for all the laws governing this industry can be achieved through online courses here.

Poker

The booming popularity of poker in India cannot be doubted. Although there is a deficiency of a uniform legal jurisprudence on the matter, but more and more states through the medium of their high courts are conferring the ‘game of skill’ distinction on poker.

The Supreme Court of India in its judgment in State of Bombay v. RMD Chamarvaugwala has put games predominantly of skill outside the bracket of gambling, and the words “mere skill” have been interpreted to include – (i) the competitions where success depends on substantial degree of skill will not fall into category of ‘gambling’; and (ii) despite there being an element of chance, if a game is preponderantly a game of skill, it would nevertheless be a game of “mere skill”.

Due to this increased acceptance and recognition Texas Hold’em Poker has seen the mushrooming of various professions around it. From turning a full time professional poker player, to being mentors to wanna-be pros, the interest and opportunities around this one single game is only set to increase.

Offline and online poker portals constantly require big teams to smoothen their large scale functionings. More about licenses related to poker, implications of the recently hiked fees, and fundamentals related to setting up a poker business can be learnt here.

Business and Sports Entrepreneurship

Entrepreneurship and sports management are two disciplines that have witnessed significant growth during the last decade. Change and innovation are key to both, and for all reasons discussed above, the gaming industry in the country is set to undergo a paradigm shift rather soon.

Due to the same, this time has been identified by many as the perfect time to set up sporting, especially gambling, related business ventures. If you closely follow the poker circuit in the country, you must surely be already surprised by the number of new ventures. That is because this is a fairly new trade, and one with immense potential.

Entrepreneurship possibilities in the gaming sphere are immense in India. Like most online operated gambling companies are registered in Sikkim or West Bengal which make it possible for them to register and obtain licenses for online games. Likewise, Nagaland also facilitates setting up of online gambling companies and is the new hub for the same.

But is this all so easy? Have you wondered what all does it take to successfully run a business of this sort and make it grow?

With both sports laws and entrepreneurship being modern disciplines, their understanding is limited and even renowned names in the industry go through great problems in running ventures efficiently. Highly recognized courses have created many success stories of people who developed their new enterprises swiftly and effectively.

To tread on this unconventional path is still difficult and often criticized but it is unique and definitely fruitful.

We are working hard in making this ‘gamble’ safer, recognized, and more acceptable. Good luck us!

In this article, Vartika Tiwari, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the Impact of Environmental Law on Corporate Governance.

Introduction

Industrialisation, apart from being conducive to economic development, has also created problems in the environmental realm. Thus, while the dependence of modern economies on companies can hardly be questioned, it is also an established fact that companies are responsible for damaging the environment by depleting natural resources. Consequently, the legislature has made several attempts to ensure that companies behave in a manner so that the environment does not get adversely affected.

Legislative Enactments made by the Government

The Environment (Protection) Act, 1986

The legislature enacted the Environment (Protection) Act, 1986 under Article 253 of the Constitution of India after the Bhopal gas tragedy.[1] This was done to implement the decisions that were taken in the United Nations (UN) Conference on the Human Environment, 1972 regarding protection and betterment of the environment and to suggest ways to prevent hazards to all living organisms.[2]

Purpose of this Act

• The act is an umbrella legislation and enabling law that provides a framework for the Government to coordinate activities between central and state authorities established through various ancillary provisions.[3]
• The act also prohibits the companies from emitting any environmental pollutants more than the standards that have been prescribed in the act.[4]
• Consequently, the Central Government has framed the Environment (Protection) Rules of 1986 that lay down various standards that the industries are expected to follow.
• This includes emission standards, noise standards and other such standards, such as national ambient air quality standards.
• This act also confers powers upon State and Central Pollution Control Boards to enforce these standards.

Corporate Social Responsibility (CSR)

The environmental aspect of CSR is the duty of the corporate to cover the environmental effects of the company\’s products operations and facilities; remove waste and emissions; increase the productivity and efficiency of its resources, and decrease practices that may adversely affect the enjoyment of resources by future generations.

Voluntary Guidelines

While the Corporate Social Responsibility Voluntary Guidelines provide for guidelines for several core elements, one of these is the respect for the environment. These guidelines urge the company to prevent:

• Pollution,
• Recycle waste,
• manage natural resources, and
• Adopt environment-friendly technology

Absolute Liability

This doctrine has evolved from the case of M.C. Mehta v. Union of India[5] and according to this doctrine, industries engaged in hazardous and inherently dangerous activities do not enjoy the exceptions of strict liability rule and are to be made absolutely liable in cases of default.

Environmental Clearance

There are certain rules that have been framed in pursuance of the Environment (Protection) Act, 1986, in order to ensure environmental protection, these rules are:

Environmental Impact Assessment

Since every human activity affects the environment, it is important to synchronize the activities imperative for development with the ever increasing environmental concerns. Environmental Impact Assessment (EIA) is a tool that ensures the same. It began in India in the late 1970’s and aims to detect the environmental problems that are likely to arise out of a project that is proposed and tries to settle those problems in the initial stages itself, thereby preventing future liabilities and expensive alterations in project design.

Environment (Siting for Industrial Projects) Rules, 1999

The said rules mainly provide for precautionary measures to be taken for site selecting, areas to be avoided for siting of industries and certain environmental protection measures that need to be kept in mind while developmental projects are implemented.[6]

The Wild Life (Protection) Act, 1972

This act provides for protection of wild animals and lays down a special provision for offences committed by companies, that makes the companies vicariously liable for the offences committed by the people who are responsible for its functioning.

The Forest (Conservation) Act, 1980

These guidelines were enacted with the aim of conserving the country’s forests. It restricts and regulates deforestation without the approval of the central government and lays down the penalty for projects that have not obtained forest clearance.[7]

The Biological Diversity Act, 2002

Section 3 of the aforementioned act prohibits people from obtaining any biological resource without the approval of national biodiversity authority. Such persons include a body corporate, association or organization either not incorporated or registered in India; or incorporated or registered in India having any non-Indian participation in its share capital or management.[8]

Bio-Medical Waste (Management and Handling) Rules, 1998

These rules provide for management of biomedical waste. They “apply to all persons who generate, receive, collect, transport, store, treat, dispose, or handle bio-medical waste in any form”[9] There are provisions making it mandatory such institutions to submit an annual report[10] and lay down guidelines in case there is an accident.[11]

Chemical Accidents (Emergency Planning, Preparedness, and Response) Rules,1996

These rules have also been framed for management and handling of biomedical waste and provide for setting up of crises groups at Central[12], State[13] and District levels[14], to provide expert guidance in cases of accidents. Further, there are provisions that make it possible for the public to obtain information about potential accidents at an industrial site.

Manufacture, Storage, and Import of Hazardous Chemical Rules, 1989

According to the said rules, the occupier who has control of a said industrial activity is responsible for providing evidence showing that he has identified the major accidents and taken adequate steps to prevent such accidents and that he has provided the workers with information and training for their safety.[15]

Hazardous Wastes (Management and Handling) Rules, 1989

These rules lay down the responsibility of the occupier while handling hazardous wastes. It entails that the occupier generating hazardous wastes in quantities equal to or exceeding the given limits shall take all practical steps to ensure proper handling and disposal of such wastes without any adverse effects.[16] The said occupier is also supposed to maintain records regarding the same[17] and is obliged to report any accident that occurs in the course of events.[18]

Rules for the Manufacture, Use, Import, Export, and Storage of Hazardous Microorganisms, Genetically Engineered Organisms or Cells, 1989

These are the rules notified by the central government for the protection of the environment, nature, and health, in connection with the application of gene technology and micro-organisms.[19]

Hazardous Wastes (Management, Handling and Trans-Boundary Movement) Rules, 2008

These rules provide for immediate reporting of accidents relating to hazardous wastes and lay down the guidelines for handling hazardous wastes.

Batteries (Management and Handling) Rules, 2001

These rules were notified by the Central Government to impose responsibility upon the manufacturer, importer, assembler, re-conditioner, and recycler to create public awareness regarding the hazards of lead and the responsibility of consumers to return their used batteries only to the dealers or designated collection centres.[20]

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

This act prohibits entry of any poisonous, noxious or polluting matter into any stream, well, sewer or on land for disposal determined in accordance with such standards as laid down by the State Board.[21] Thereby making the companies responsible for whatever they are discharging in water bodies.

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

This act provides that persons operating any industrial plant, in any air pollution control area shall not discharge or cause or permit the discharge of the emission of any air pollutant exceeding the standard laid down by State Board.[22]

Self-Regulation Measures

Environmental Management System (EMS)

EMS is the “the organizational structure, responsibilities, practices, procedures, processes, and resources for determining and implementing environmental policy”.[23] This framework helps the companies in achieving environmental goals. EMS requires the organization to identify its significant aspects and their impact, and in turn, develops policies according to the legal requirements.

ISO 14004:2004 provides guidelines for maintenance, improvement, and implementation of EMS.

National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business, 2011

The Ministry of Corporate Affairs incorporated the advices given by stakeholders and released a new set of CSR guidelines for corporations. These guidelines encourage businesses to be accountable for the environmental impacts of their operations and products and to constantly strive to make them environment-friendly.

The Companies Act, 2013

The act provides that every company having the net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of INR 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board.[24] In common parlance, Corporate Social Responsibility and Corporate Environmental Responsibility mean the same thing and thus, companies are obliged to conform to certain environmental standards.

Criminal Liability of Companies

Section 47 of the Water (Prevention and Control of Pollution) Act, 1974, Section 40 of the Air (Prevention and Control of Pollution) Act, 1981 and Section 16 of The Environment (Protection) Act, 1986 provide for Criminal Liability in case of offences committed by the companies.

Case Laws

Uttar Pradesh Pollution Control Board v. Mohan Meakins Ltd.[25]

The matter was related to the discharge of trade effluents by an industrial unit in river Gomathi, and the directors of that company were accused of an offence under section 43 of the Water (Prevention and Control of Pollution) Act, 1974. The Supreme Court held that lapse of a long period of time cannot be reason enough to absolve the directors from the trial.

Mahmud Ali v. State of Bihar and anr. [26]

It was held that under Section 319 of the Cr.P.C. 1973 a criminal court can add a person against whom evidence comes forth during the trial showing his involvement in the offence, not being the accused before it and, as an accused and try him along with those that are being tried.

Haryana State Board v. Jai Bharat Woollen Finishing Works [27]

The Court held that Section 47 of the Water Act relating to offences by companies which includes a partnership firm, lays down that, where an offence under the Act is committed by any company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Conclusion

It can be concluded that the growth of environmental law has greatly impacted corporate governance in the present day since companies are now expected to live up to the standards that have been laid down by the aforementioned legislation. The legislation have put a check on the companies and made it mandatory for them to abide by certain guidelines, which is the need of the hour, considering the importance of both – industrialisation and preservation of environment.

References

[1]https://www.thestatesman.com/features/environmental-legislation-1484784315.html

[2]Ibid.

[3]Ibid.

[4]Section 7, The Environment (Protection) Act, 1986.

[5]AIR 1987 SC 1086.

[6]S.O. 470(E), [21/0/1999] – Environment (Siting for Industrial Projects) Rules, 1999.

[7]http://envfor.nic.in/division/forest-conservation

[8]Section 3(2), ibid.

[9]Rule 2, Bio-Medical Waste (Management and Handling) Rules, 1998.

[10]Rule 10, ibid.

[11]Rule, 12, ibid.

[12]Rule 3, Chemical Accidents (Emergency Planning, Preparedness, and Response) Rules, 1996.

[13]Rule 6, ibid.

[14]Rule 8, ibid.

[15]Rule 4, Manufacture, Storage and Import of Hazardous Chemical Rules, 1989.

[16]Rule 4, Hazardous Wastes (Management and Handling) Rules, 1989.

[17]Rule 9, ibid.

[18]Rule 10, ibid.

[19]K.D. Raju, Genetically Modified Organisms: emerging law and policy in India (2007).

[20]Rule 4(viii) and Rule 8(vi), Batteries (Management and Handling) Rules, 2001.

[21]Section 24, The Water (Prevention and Control of Pollution) Act, 1974.

[22]Section 22, The Air (Prevention And Control of Pollution) Act, 1981.

[23]https://www.winchesterva.gov/sites/default/files/documents/engineering/EMS.pdf

[24]Section 135, The Companies Act, 2013

[25]https://indiankanoon.org/doc/885425/

[26]https://indiankanoon.org/doc/1439296/

[27]https://indiankanoon.org/doc/966727/