This article is written by Shristi Borthakur, of Symbiosis Law School, NOIDA, where she discusses the procedure to report a missing person and the various laws and guidelines relating to filing a missing person report.  

The filing of a missing person’s report starts off with the same procedure and technicalities as that of any other offense/ information. The initial method of reporting a missing person may be by a phone call to the police station, by way of communicating on the 24-hour helpline number, or by going in person to the police station to complain. The most common apprehension that people harbor in this context, fueled by pop culture, is that there needs to be a mandatory waiting period for 24-hours or 48-hours before approaching the police to file the case. There is no such requirement, and a person can contact the police if he/ she has reasonable apprehension regarding the possibility of someone being missing, or serious concerns about their safety and do not possess any idea about their whereabouts. The police may, however, ask you to make another attempt to search that person at home or nearby, before filing a formal complaint. Otherwise, the police cannot refuse to file a complaint if the statements made appear to be genuine. Concerning the mode of complaint used, the police may duly file the complaint and begin with the necessary investigation process.

How to file a missing person report

Here it is necessary to understand the difference between FIR and a general police complaint. The reason behind a person missing may not always be of a criminal nature. An FIR is a serious registration related only to cognizable (criminal) offense, while other police complaints do not necessarily need to follow this norm. A police complaint thus can be both related to a cognizable or non-cognizable offense. As mentioned earlier, it is possible that a lost person may be so even on his/her own accord, while on the other hand there may be accidental or other criminal reasons, such as kidnapping or abduction, behind a lost person. Taking these factors into consideration, it is common to see that the police generally show a lack of interest in filing an FIR when a case of missing person is reported. Even though this discretion is well-grounded, there can be no denying that this leads to certain difficulties during later stages.

• Order by Madras HC – It has been observed in a case wherein a body recovered was disposed of as unidentified, even though the father of the deceased had complained earlier about the person has gone missing. This proves to be an evident example where the discretion of the police may have possibly led to heinous consequences. In view of such cases, the courts have felt the need for the immediate registration of FIR when a missing person complaint has been made. In the case mentioned, the Madras High Court accordingly was of the opinion that police should file FIR in missing person cases immediately.

• Later on, the Karnataka HC took this view a step ahead to go on to state that there needs to be a standard procedure for police to probe complaints of missing persons, and failure to adhere to the procedure should result in disciplinary action against the police officers concerned. This is a growing concern in the context of increasing instances of trafficking of women and children due to a lack of effective procedure to deal with them. It also emphasized on the need for incorporating information technology into the machinery.

• This opinion has been manifested in different ways, wherein some states have tried to ease down on the need to register an FIR, but at the same time ensure that efforts are being taken to track down such people. For example, in the state of Jharkhand, to begin with, the process without the hassle of FIR, a departmental procedure was introduced by way of a form that was to be filled along with the details and photograph of the missing person.

What are the particulars to be followed in a missing person report?

In order to successfully file the complaint that will help locate the said missing person, it is important that certain particulars are stated to the police. The description and particulars that are given in the complaint go a long way in tracking down the missing person. Refer to the checklist to help identify and track a missing person.

What is the next step after a missing person report is filed?

Once the complaint has been registered, the police goes ahead with tracking down the missing person, taking reliance on the network of counterparts, which is a slow process. To ensure that the matter is taken up effectively, there is a secondary remedy that is available to the person filing a missing person complaint. This is commonly by way of RTI.

• First, the person making the complaint may file another application, in addition to the complaint, in the concerned police station asking for further developments in the case.
• Secondly, he may also file a formal RTI in this regard, as it will enable him to keep a check on the efforts being made to find the missing person, and also to exercise his right to information. Since the Police come under such category, application of RTI against it is a strong approach to ensure that the police are taking the matter into serious cognizance.

Use the link to help understand the scope of RTI and how to file one.

Thus, the procedure for filing a missing person’s complaint can be summed up in the following steps-

1. If there is reasonable doubt regarding the safety of a certain individual whose whereabouts are unknown, you can make a call or go to the nearest police station to file the complaint.
2. Give the necessary details of such missing person along with a recent photograph to facilitate the investigation. Fill the missing person form if the departmental procedure so asks for.
3. As a secondary remedy, you can further as for relevant developments in the case by filing applications. You can also formally file an RTI in this regard.

Is there any separate provision for dealing with missing children?

The need for giving special importance to cases of missing children was felt in the light of the grave incidents of the Nithari Case, which brought about a deep concern regarding the manner in which children had gone missing from the Nithari Village, in NOIDA, UP. “It sparked off nationwide indignation on the abuse to which the victims were subjected and gross violations of their human rights. In order to put an end to the callous attitude and insecurity, which regard to the protection of children and also to prevent more lives from being lost in similar crimes, the National Human Rights constituted a Committee on February 12, 2007, to look into the issue of missing children in depth. The Committee was to examine the problem of missing children and bring this issue to the forefront as a National Priority. The Commission felt that missing children remains a neglected, low-priority intervention area for everyone other than those who have lost their children. The Committee was also assigned the task to evolve simple and practical guidelines so that the Commission can come up with appropriate recommendations.” The efforts of this Committee was, to begin with, deal with cases of missing children as a “priority issue” and an important issue while dealing with human rights. Based on the recommendation of this Committee, certain new procedures in the investigation of missing persons were suggested. The recommendations are as follows-

• ‘Missing Children’ as Priority Issue
• Missing persons squad/desk in police stations
• Adherence to Supreme Court guidelines in Horilal vs. Commissioner of Police, Delhi & Ors.
• Role of district administration
• Mandatory reporting system
• Involving Panchayati Raj institutions
• Involving NGOs
• National database and monitoring
• Revival of State/Centre Crime Records Bureau
• Helpline numbers
• Outsourcing preliminary inquiry to NGOs
• Cognizance of offense
• Sensitization of stakeholders
• Rescue of children in need of care and attention
• I-card for children
• Poverty alleviation measures
• Role of State Commissions
• Role of media
• Attention to transit points of trafficking
• Addressing the issue of missing children from across borders
• Survey and research

Is there any guideline laid down on the filing of missing person report?

In the case of Horilal v. Commissioner of Police, Delhi, and Ors, the following guidelines were laid down for kidnapped minors, especially girls, which was binding on Investigating Officers in all states.

• Publish photographs of the missing persons in the Newspaper, telecast them on television promptly, and in case not later than one week of the receipt of the complaint. But in case of a minor/major girl such photographs shall not be published without the written consent of the parents /guardians.
• Make inquiries in the neighbourhood, the place of work/study of the missing girl from friends, colleagues, acquaintance, relatives etc. immediately. All the clues from the papers and belongings of the missing person should be promptly investigated equally.
• To contact the Principal, Class teacher and Students at the missing person’s most recent school /educational institutions. If the missing girl or woman is employed somewhere, then to contact the most recent employer and her colleagues at the place of employment.

• Conduct an inquiry into the whereabouts of the missing person from the extended family of relatives, neighbours, school teachers including school friends of the missing girl or woman.
• Make necessary inquiries whether there have been past incidents or reports of violence in the family.

Thereafter the investigation officer/agency shall:

• Diligently follow up to ensure that the records requested from the parents are obtained and examine them for clues.
• Hospitals and Mortuaries to be searched immediately after receiving the complaint.
• The reward for furnishing clues about missing person should be announced within a month of her disappearance.
• The Investigation should be made by women police officers as far as possible.
• The concerned police commissioner or the DIG/IG of the State Police would find out the feasibility of establishing a multitask force for locating minors, especially girls.

It also adds on to the duties of IO in metropolitan areas, to conduct immediate verification of red light areas, rescue any minor girl found therein, as per the procedure laid down in the Juvenile Justice (Care and Protection of Children) Act.

General pattern of investigation followed in cases of missing person report

• In the absence of any standard procedure established to lodge FIR in cases of missing persons, the fact of a missing person is considered to be non-cognizable offense. Therefore, only an entry is made in the General Station Diary (GD) and is followed by an inquiry.
• At the field level, local police officials publicize the person to gather information, while the SHO forwards the information to the Superintendent of Police, or Deputy Commissioner of Police, and all other concerned persons.
• Registration of information is done in the Missing Persons Bureau, then in the State Crime Records Bureau, and finally transferred to the Missing Persons Wing at the National Crime Records Bureau (NCRB) in New Delhi, which operates under the Ministry of Home Affairs.
• The NCRB, under the TALASH Information System, maintains a national level database of missing persons under different categories. The NCRB functions as a ‘Documentation Centre’ or at best a ‘Transfer Desk’ because the NCRB neither investigates nor does it monitor or facilitates the recovery of missing children as a proactive organization.

What are the other reforms/policies that have been taken up by the government?

Delhi Police Orders for Registration of all missing cases as FIR

The Court stated that since in most of the cases of missing children the parents cannot pursue the case, the court issued orders to the Delhi Police to promptly, without any delay register all complaints of missing children as FIRs.

• The information with regard to missing children shall be immediately uploaded on Delhi Police’s web bases of Zonal Integrated Police Network (ZIPNET) program. The Home Ministry is directed to issue appropriate directions to the neighboring States of Delhi to adopt web-based ZIPNET program with regard to missing children.
• It shall be mandatory for Delhi Police to forward both by e-mail and by post a copy of each FIR registered with regard to missing children to Delhi Legal Services Authority (DLSA) along with addresses and contact phone numbers of parents of the missing children.
• DLSA will, in turn, constitute a team comprising a lawyer and a social worker to follow up the case with the Delhi Police. The said team will not only provide all possible legal aid to the parents and families of the missing children but shall also act as an interface between the parents of the missing children and the Delhi Police. DLSA will maintain a record of all cases of missing children.
• Both DLSA and the Delhi Police shall ensure that the Supreme Court interim directions/guidelines pertaining to missing/kidnapped children passed Horilal vs. Commissioner of Police, Delhi and in the case of Lalita Kumari vs. State of U.P. & Ors. are strictly complied with.
• Whenever a missing child is traced or he/she comes back on his/her own, the Investigating Officer will examine all relevant angles such as involvement of organized gangs, application of provisions of Bonded Labour Act and such other relevant Acts.
• Whenever the involvement of an organized gang is found, it shall be the responsibility of the Investigating Officer to refer the matter to the Crime Branch of Delhi Police or the Special Cell constituted in the CBI.

Standard Operating Procedure laid down in Bachpan Bachao Andolan Case

Another recent development regarding cases of missing children can be understood through the judgment in the case of Bachpan Bachao Andolan Vs. Union of India & Ors, which has been developed by the Ministry of Women and Children.

• The Standard Operating Procedure (SOP) that was implemented in compliance with this order aimed to expand the mode of filing a complaint. Apart from other modes of communication, it laid down that complaint can also be filed with the help of an SMS as well. Once this is done, preliminary verification of the caller will be done, and the information will be added to the general diary and FIR.
• Another new element in this is the stipulation of risk. The SHO in such cases will have to evaluate the urgency of the case and eventually determine the areas of inquiry to proceed with. This included the mandate for filling up a “Risk Assessment Form.”
• The third feature is incorporating an organized crime approach. The procedure here states that the investigation is transferred to the Anti-Human Trafficking Unit in the district if the child is not found within four months.

Read the judgment of the said case to understand better.

Advisory on Missing Children (Ministry of Home Affairs)

• Implementation of the guidelines of Honourable Supreme Court in Horilal vs Commissioner of Police Delhi and court orders issued in Sampurna Behrua case. These instructions need to be compiled and monitoring ensured.
• Implementation and Monitoring of NHRC guidelines on Missing Children.
• An officer of the rank of DIG should be declared Nodal Officer in each State.
• Supervision of investigation of cases by senior police officials of the rank of Addl. SP /Dy. SP.
• Heinous offenses related to organized crime should be transferred to the State CID.
• Convergence between District Missing Children Unit and Missing Person squad needs to ensure.
• All cases of trafficking should be treated as an organized crime and real-time data and profile of the gang members need to be maintained.
• Police officials need to be sensitized and trained on Procedural laws, Investigation techniques and data collection and compilation.
• AHTU should be involved in the Missing persons work at the district level.
• SP should review all cases of missing children in the Monthly District Review.
• In International trafficking, investigators can network with Interpol for the search of the missing child.
• All missing cases should be uploaded at the District level and data disseminated and the same needs to be updated.
• At the Police Station level, SHO should ensure that the data on missing children is shared with DCRB and SCRB.
• Integration of Childline in the search and recovery of missing children needs to be ensured.
• Police should be trained to take preventive steps.
• Involvement of Community/Panchayats/Resident Welfare Association needs to be ensured for prevention and protection measures.
• Community awareness of missing children needs to be ensured at District level. School level sensitization should also be ensured.
• Appointment of Nodal NGOs at the state level needs to be ensured. Wherever possible NGOs partnership should be evolved for counseling and awareness raising activities.
• The protocols and SOPs developed by MHA-UNODC project including protocols on interstate transfer of rescued victims should be effectively utilized.

Apart from a police complaint, what other measures can you take to track a missing person?

Filing a police complaint is the formal step you take when someone goes missing, and wait for the police to do their jobs. This doesn’t mean that there is nothing else you can do to track such missing person.

Advertisements in Newspapers

Print media continues to be an immensely popular source of information for people around the world. It is also accessible by most. You can publish an advertisement in a local newspaper about such person mentioning his particulars and identification marks, along with his/her photograph.

Use of social media, radio

Apart from newspapers, social media platforms and radio can also be useful to find such person. Draft an effective message that will help reach people at large, and in return can help your case.

Issue of public notice

A public notice is issued by a government agency or legislative body for certain proceeding. When a missing person complaint is filed, the police also issue a public notice in the newspaper, and other platforms depending on the gravity of the case. Also, another option is available to you, on a larger platform. When a loved one goes missing, you can enter his/ her information on a tracking platform known as missingpeopleinfo.com. If someone comes across such person anywhere, they can post their information on the said website, and action will be taken accordingly.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:  

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

This article is written by Shristi Borthakur, a second-year student of Symbiosis Law School NOIDA, where she discusses the legal implications of wife denying conjugal rights to the husband. Know all about Restitution of Conjugal Rights.

The Merriam-Webster Dictionary defines conjugal rights as “the sexual rights or privileges implied by, and involved in, the marriage relationship; the right of sexual intercourse between husband and wife.” It can also be implied as a right to stay together, the right of one spouse to the companionship of the other.

What are the legal provisions on restitution of conjugal rights in India?

The different personal laws in India contain the provision of restitution of conjugal rights. The general wording in all these acts provides that if either the husband or the wife withdraws from the society of the other, without reasonable excuse, the aggrieved party may approach the Court for restitution of conjugal rights. Provisions for restitution of conjugal as per different personal laws are as follows-

• S.9, Hindu Marriage Act, 1955
• S. 22, Special Marriage Act, 1954
• S. 32, Indian Divorce Act, 1869
• S. 36, The Parsi Marriage and Divorce Act, 1936

What is the provision under Muslim law?

The concept of restitution of conjugal rights is conceptualized in the form of a civil suit, under general law, as opposed to a separate petition in other laws, as follows-

“Where either the husband or wife has, without lawful ground withdrawn from the society of the other, or neglected to perform the obligations imposed by law or by the contract of the marriage, the court may decree restitution of conjugal rights, and may put either part securing to the other the enjoyment of his or her rights.”

What are the rights available to the husband in this regard?

Customary practice prevalent in Indian society denotes that the wife stays with the husband post-marriage. The husband has the right to require his wife to live with him, and the corresponding duty of the wife to live with her husband. However, this cannot always be the case, and under such circumstances, conjugal rights accrue. Upon such withdrawal from the society of the husband, without any reasonable cause, the husband can file a petition for restitution of conjugal rights. Where the court is satisfied with the statements made and there is no other legal bar to such decree, the petition may be granted.

What does ‘withdrawal from society’ mean?

To proceed with establishing the area wherein the conjugal rights accrue, it is essential to draw a boundary on such area. ‘Withdrawal from society’ does not necessarily have to mean complete desertion or living separately. It can also mean-

• Withdrawal from sexual intercourse,
• Non-cooperation in the performance of marital obligations,
• Intention to abandon indefinitely
• Cessation of cohabitation by voluntary act of the Respondent-wife

Reasonable Cause

The burden of proof in matters of conjugal rights is two-fold. First, the petitioner-husband need to prove that the wife has withdrawn from his society. It shifts to the respondent-wife to show reasonable cause for doing so. A reasonable cause may include any matrimonial misconduct or any act or omission that makes it impossible for the Respondent-wife to live with the Petitioner-husband. Where the wife fails to prove reasonable cause, a decree of restitution can be passed in favor of the husband stating the wife to resume cohabitation with the husband. Where it is proven that the wife has reasonable and valid grounds for doing so, the petition will be dismissed. Moreover, this will also be the case where the husband himself has caused a situation that debars the husband from seeking the relief. One cannot take advantage of his own wrong.

Under what circumstances is the wife’s withdrawal from the society of the husband justified?

• When husband remarries

All the personal laws, except that in case of Muslims, hold bigamy to be to be void. The conjugal rights are available only in a subsisting valid marriage. Thus, if a man takes on another wife while his marriage with the first wife is subsisting, he loses the right to file a petition for restitution of conjugal rights against such second wife. Also, if upon such act of the husband, the first wife withdraws such matrimonial society, it would amount to a reasonable cause to do so, as such action amounts to cruelty, and also a violation of marital duties. Here, in fact, the first wife has the right to file for restitution of conjugal rights.

Even in the case of Muslim Law, where the law allows polygamy to the husband, it should be done in compliance with provisions of the Sharia. The idea here is that where the husband remarries, he should equitably maintain the first/ existing wife(s). Where such equity and duty is violated by the husband, the wife has a reasonable case. Under such circumstances, the act of marrying another can also amount to cruelty if the husband falters on his matrimonial obligations.

In Kothar Beevi v. Aminuddin, the Madras High Court denied the relief of restitution of conjugal rights to a husband who remarried during the pendency of the suit. The relevant part of the judgment is as follows-

“Under the circumstances, it could not be unreasonable to hold that after the plaintiff-husband contracted a second marriage, the appellant wife is reasonable and justifiable in staying away from her husband. This Court while bearing in mind, the right of the Muslim husband as to contract of marriage more than once, however, it has to be borne in mind that the decision in a suit for restitution of conjugal rights does not entirely depend upon the right of the Muslim husband. The Court should also consider whether it makes it inequitable for it to compel the wife to live with her husband. Our notions of law in that regard have to be held in such a way so as to bring them in conformity with modern social conditions.”

• When conduct of husband makes it impossible for the wife to live with the husband.

The law on restitution of conjugal rights is not born out of any existing custom. It came into the legal picture during the British Raj having its roots in feudal England, where marriage was considered as a property deal and wife was part of man’s possession like other chattels. However, in the earliest and landmark case of Moonshi Buzloor Ruheem v. Shamsonnissa Begum, the absoluteness of this right was curtailed. In the relevant part of the judgment, it was held that-

“If there be cruelty to a degree rendering it unsafe for the wife to return to her husband’s dominion, the Court will refuse to send her back to his House ; so also, if there be a gross failure by the Husband of the performance of obligations which the marriage contract imposes on him for the benefit of the wife, it affords sufficient ground for refusing him relief in such a suit.”(1)

What right accrues if the wife is living separately due to a different place of work?

Development of social norms has witnessed that more women are coming out to take up jobs and move ahead on the path of economic independence. This is not just an ideal, but a right of the woman, or every other individual for that matter. In this regard, where the wife is posted at a different place than that of the husband, and consequently leaving the husband to live separately, “the question arises whether taking up a job by the wife at a place other than the husband’s amounts to desertion and her withdrawal from the society of the husband without reasonable cause, and can the husband sue her for the restitution of conjugal rights.” What will be the final decision when conjugal rights have come into open conflict with the women’s right to equality in the opportunity of employment?

• When economic considerations require the wife to take up the job

Earlier, even economic consideration did not allow the wife to virtually withdraw from the society of the husband unless it was done by mutual consent of both the parties. However, this seems to be unreasonable keeping in mind the present society and modern living conditions. Later on, a liberal approach was taken by the Allahabad High Court in the case of Shanti Nigam v. R. C. Nigam(2). The relevant part of the judgment held that “women can no longer be confined to the house. In the view of altered social conditions, both husband and wife may think it necessary to work and contribute equally to the family chest…….. It is one thing for a wife to say that she will not go to her husband and will not cohabit with him nor will she allow him to come to her. It is different if she says that it is necessary for the upkeep of the family that she should also work and she would go to her husband whenever it is possible for her to do so, and the husband could also come to her at his own convenience…… In such a situation it cannot be said that she has withdrawn herself from the society of her husband.”

The court emphasizes the modern outlook of marital relations and also the economic aspect of living, and opines that such separation will be a reasonable cause for the wife. There is stress on the economic necessity of the wife to take up a job.

• When there is no economic necessity for the wife to take a job and live separately.

In the case of Smt. Kailash Wati v. Ayodhia Prakash (3), this question was broken down into three parts and dealt with each part separately.

1. When the wife is already working before and at the time of marriage
2. When the husband encourages/allows his wife to take up employment after marriage
3. When the wife accepts employment away from the matrimonial home, against the wishes of the husband.

In the first instance, it was held that marrying an already working wife does not by implication mean that the husband gives up his claim to share a matrimonial house with his wife. Similarly, even in the second instance, the husband does not abandon his right to live with his wife. In these cases, the court, thus, has to look deeper into the facts and circumstances of the case to determine and enforce the rights of the parties. However, in the third instance, the court held that it was an “obvious case of unilateral and unreasonable withdrawal from the society of the husband and thus a patent violation of the mutual obligation of the husband and wife to live together.”

Is the right to determine the place of matrimonial home only available to the husband?

The above premise that states that the wife taking up employment away from the husband, without his consent is not a reasonable cause to withdraw, implies that it is the husband who has the right to determine the place of the matrimonial home in which the wife is to fulfill her conjugal duties and other marital obligation. The court was of the opinion that since the (Hindu) law binds the husband to maintain his wife and minor children, irrespective of the fact whether or not he possesses any property, it co-relates to the right of the husband to determine the matrimonial home. Since no such duty is imposed on the wife, even if she is financially independent, the corresponding right is not available to her. Thus, the husband has the right to claim his wife to live with him in the matrimonial home of his choice. In the above case, the wife’s appeal was dismissed as she had retransferred to her natal home (she was working even before marriage) and did not give a reason for doing so, which was viewed as deliberately leaving the matrimonial home.

This view faces criticism in the face of modern developing society, and the right of the wife, or any woman for that matter, to work, not necessarily to help the economic condition at home. It is also a deterrent to marriage, especially for women who are already working, as it shows that women are to be treated as a mere appendage. The question still hangs whether the capabilities of a wife are to be merely used as an instrument when the need arises.

Is There Any Effect Of Prenuptial Agreement?

A prenuptial agreement is entered into by a couple about to tie the knot — it is a signed, registered and notarized document that usually outlines the distribution of assets, liabilities, and issues relating to the custody of children if the marriage falls apart in the future. The content of a prenuptial agreement may vary. However, prenuptial agreements are strictly financial in nature. They are contracted, if both the parties to agree to do so, for the purpose of protection of financial assets of both spouse, and determination of alimony and maintenance. In India, prenuptial agreements are neither legal nor valid under the marriage laws because they do not consider marriage as a contract. A marriage is treated as a religious bond between husband and wife and prenuptial agreements don’t find social acceptance. However, they may be used for the purpose of evidence and reference. If entered into, they are taken as ordinary agreements. These are governed by the Indian Contract Act and have as much sanctity as any other contract, oral or written.

Personal issues do not form a part of prenuptial agreements. This brings about the issue of prenuptial agreements that deal with conjugal rights and residential status of both the spouses. By the laid down premise, such agreements cannot be enforced in a court of law. In the case of Hamidunnessa Biwi v. Zohiruddin Sheikh (4), in a suit by husband for restitution of conjugal rights, the wife relied on a prenuptial agreement, executed by the guardians of the husband, then a minor, and also by the husband, stating that the husband would always live at his mother-in-law’s house and the wife would never be required to leave her parental home or reside somewhere else; the court refused to uphold the agreement. To put this into perspective, we can clarify that this was in consonance with Muslim law that allows for marriage contracts ‘nikah-nama’, wherein guardians can enter into such valid contracts on behalf of a spouse who is minor at the time of marriage. However, such clauses will not hold, for being in violation of public policy. It is also in violation of the mutual rights and obligation that arise upon marriage between the spouses.

Similarly, a case under Hindu law, Krishan Iyer v Ballamal(5) dealt with the question, whether an agreement between husband and wife to live apart from each other is valid or not said: Even apart from the Hindu Law the agreement, we think, must be regarded as opposed to public policy and therefore not enforceable. It may well be deemed to be forbidden by the Hindu Law.

What Is The Case Procedure When a decree of restitution of conjugal rights Is Filed?

• If you are the aggrieved party, in this case, the husband, file a petition in the district court. The format of such petition is available on the internet. This can be transferred by application to the High Court or Supreme Court as well.
• Upon such filing, a copy of the petition should be sent to the respondent- wife along with the date of hearing from the district court. The date is generally after 3 months of filing the petition.
• Both parties are to be present at the date of hearing. If both parties are not present, the court gives another date.
• The next step is that of counseling/mediation sent by the court-It is done by the family court, as provided for in the Family Courts Act. This takes approximately 4 months.

What happens in Counseling?

Once the parties are sent to counseling, they need to appear before a counselor. This may be someone who has volunteered or has been appointed by the court, generally a female junior advocate. Counseling takes place on 2-3 dates with a gap of 2-3 weeks between two dates. Here, both the parties are given a chance to present their versions of the facts, and the counselor tries to come to an understanding. In the end, the counselor offers and advice. This may be amicably sorting out the difference and go back to the husband, or to go for a divorce by mutual consent. If the parties agree, it will imply that the purpose of counseling/ mediation has succeeded, and the suit can be dropped. However, if the parties refuse to proceed according to the suggestions of the counselor, the counselor will forward the application back to court on grounds that mediation has failed.

• Once the application is back in court, the suit will continue, and the respondent-wife is required to give her ‘counter’ to the husband’s application. Oral arguments will proceed to dispose of the interim petitions first and pass the interim order.
• Once this is done with, the proceedings for restitution of conjugal rights begin. The husband has to file a Chief Examination Affidavit for producing evidence that the wife has left him, which will result in cross-examination.
• Final arguments take place next, where both the parties represent their version of facts, cite any relevant judgments, and ultimately pray for relief from the Judge.

• Based on the counseling, statements made and the conduct of the parties, the judge accordingly grants the decree.

Non – Resumption Of Cohabitation As A Ground For Divorce

The idea behind restitution of conjugal rights is to avail a milder path towards divorce, or avoid it altogether, which is the final matrimonial remedy. However, restitution of conjugal rights is a paper decree and is not binding on either spouse. Therefore, to ensure execution, there is an attachment of the Respondent’s property to it, as per Order21 Rule 32 of the Code of Civil Procedure. The rule says that where the party against whom a decree for restitution of conjugal rights, has been passed, and has had an opportunity of obeying the decree and has willfully failed to obey it the decree may be enforced by attachment of his property. Upon passing of such decree, the law provides for a minimum of one year beyond which other remedies lie. The husband has to wait for a period of one year to enforce the decree. Thus, various personal laws also hold that where there is no restitution of conjugal rights or resumption of cohabitation between the parties for a period of one year or above after the passing of the decree for restitution of conjugal rights in a proceeding to which they were parties; it can become a ground for divorce. Here it is necessary to note, that this ground is available to both parties.

Can Husband Seek Divorce For Denial Of Conjugal Rights Without Filing For Restitution of Conjugal Rights?

In light of the above question, the Bombay High Court has held that denying intercourse to the spouse for a long period of time will amount to cruelty, and will be ground for divorce. Similarly, the Supreme Court has also said that if a spouse does not allow the partner to have intercourse for a long time, without sufficient reason, it amounts to mental cruelty, upholding a verdict of the Madras High Court to grant a divorce to a man. Thus, a husband, wherein is denied conjugal rights by the wife, can file for divorce, without the remedy of restitution of rights. The procedure of the case will then proceed on the lines of a divorce proceeding.

How Can Judicial Separation Be Used In Such Cases?

What is judicial separation?

Judicial separation is an instrument devised under the law to afford some time for introspection to both the parties to a troubled marriage. Law allows an opportunity to both the husband and the wife to think about the continuance of their relationship while at the same time directing them to live separate, thus allowing them the much-needed space and independence to choose their path. Judicial separation is a sort of a last resort before the actual legal breakup of marriage i.e. divorce.

When can you file for judicial separation?

It can be filed either by the husband or wife and can be sought on all those ground on which decree for dissolution of marriage, i.e. divorce can be sought. Thus, where there is a chance of reconciliation between the spouses, either of them can opt for the remedy of judicial separation before filing for divorce. The nature of this remedy has aptly led to it being termed as a ‘trial divorce’.

Can judicial separation be filed on the grounds of non-compliance with the decree of restitution of conjugal rights?

The grounds for filing for judicial separation are similar to the grounds for divorce, not same. As per all the personal laws, they, however, do not include non-compliance with the decree of restitution of conjugal rights or non-resumption of cohabitation after such decree has been passed as a ground. However, a husband can file for it under the ground of desertion, if the time lapse is satisfied, and there is a reason to believe that the spouses may reconcile.

Right To Maintenance Of Wife?

The right to maintenance is conferred upon the spouses in order to see that if there is a spouse who is not independent financially than the other spouse should help him/her in order to make the living of the other person possible and independent. It is common to see maintenance being discussed in the context of the wife with the aim that, considering the gender balance in the society, the wife should not be left destitute during the subsistence of marriage or upon divorce or separation.

1. Section 18 of the Maintenance as per Hindu Adoption and Maintenance Act, lays down the grounds when maintenance can be granted to the wife while the marriage is subsisting. Here it also adds where the wife will not be entitled to maintenance, as when the wife is unchaste to be one of the factors. Similarly, no maintenance will be given to the wife who deserts husband without reasonable cause. Thus, where the wife fails to prove reasonable cause for withdrawing from the society of the husband or deserting the husband, a ground for maintenance will not lie later on. (6)

Also, if there is non-compliance of the decree by the wife, it may be presumed that the wife has a reasonable cause to live separately from the husband, which may also hamper her claim for maintenance. The wife’s right to maintenance is also hampered where the relief of restitution of conjugal rights is successfully granted to the husband. (7)

Prenuptial Agreement On Residential Status Of Spouses V. Right To Maintenance

Tekait Mon Mohini Jemadai v Basant Kumar Singh (8) is considered one of the important judgments dealing with the aspects of prenuptial agreement among Hindus. In this case, a suit for the restitution of conjugal rights was filed by Hindu husband. The wife relied on an agreement executed at the time of marriage by their guardians, according to which, the husband would always live with his wife at his mother-in-law’s house and would not be entitled to take her away. It was held that, under Hindu law, marriage besides being a contract is a sacrament. It is more religious than secular in character and it is the bounden duty of the wife to live with her husband wherever the latter may choose to reside and to submit obediently to the authority of the husband. It was also held that his agreement relied on by the wife, if permitted, would defeat a rule of Hindu law and is opposed to public policy. Placing reliance on this principle, the court in the case of Sri Bataha Barik v Musammat Padma (9), which had similar facts, wherein the husband left the place of his father-law after living there for some time. The court set aside the order of the lower court directing the husband to succumb to such an agreement, and pay maintenance to wife, and ordered that petitioner (husband) is liable to pay only for the maintenance of his child.

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1) Moonshee Buzloor Ruheem and Jodonath Bose vs. Shumsoonnissa Begum (16.02.1867 – PRIVY COUNCIL): MANU/PR/0018/1867

2)1971 A. L. J. 67; AIR 1971 All. 567

3) LXXIX P. L. R. 216. (1977)

4) (1890) 17 Cal 670

5) (1911) 34 Mad 398.

6)http://www.vakilno1.com/legal-news/maintenance-wife-deserts-husband-without-just-cause.html

Anil v. Sunita,2016 SCC OnLine MP 6368, decided on 11.11. 2016

http://blog.scconline.com/post/2016/12/14/wife-is-not-entitled-to-maintenance-if-living-separately-without-any-sufficient-reason/

7) Satish vs. Smt.Yoglata & Anr S.B. Criminal Misc. Petition No. 1347/2008

8) (1901) 23 Cal 751

9) AIR 1969 Ori 112

In this article, Ayushi Sunder of NALSAR discusses the licensing and registration for opening a pet shop in India.

BASIC INFORMATION

PET SHOP RULES, 2010

Pet shop rules are legalised standards enshrined to ensure humane handling of animals and to regulate these commercialised establishments. These rules are drafted in accordance with section 38 of Prevention of Cruelty to Animals Act, 1960. It is for such regulation that calls for operational parameters such as licenses and registration of pet shops.

OBJECTIVES OF THE POLICY

The primary objectives of the policy regulations standardised by the Pet shop rules are to:

• Ensure that sale of a tender-aged animal is avoided.
• Ensure that reasonable precautions are taken to avoid untimely deaths and spread of contagious diseases.
• Ensure animals/birds are provided with adequate and appropriate food and water that is essential for the breed of such species.
• Keep sale of potential pet animals under check and under-regulated limits.
• Ensure initiation of appropriate action against the policy defaulters and for non-compliance with terms and conditions.
• Regulate individual/privately operating groups (falling within the jurisdiction of Municipal Corporations of the State) conducting sale and purchase business of animals.

RELEVANT DEFINITIONS

The pet shop rules lay down certain definitions that cater to the subject-matter of this theme:

• Section 2(b) of the rules tend to elaborate the term “Animal”. It declares that the term refers to any alive being apart from plant and human.
• Section 2(h) states “license” shall mean a legal approval granted under these rules.
• Section 2(k) takes into its ambit all shops, premises and markets that are involved in sale/exhibition/wholesale business of animals (in form of pets) and demarcate them as “Pet Shops”.
• Section 2(m) defines any person with legal ownership of a shop that is licensed to conduct trade/sale of animals as a “Pet Shopkeeper” or “Pet Shop owner”.

REGISTRATION OF PET SHOP

Section 3 of Prevention of Cruelty to Animals (Pet Shop) Rules, 2016 lays down a prohibition on the operation of a pet shop or any other commercial establishment dealing with same without a registration certificate. This provision not only emphasises the obtaining of registration certificate but also mandates the prominent display of the certificate in the shops.

ELIGIBILITY FOR REGISTRATION

Individual attempting to get his/her pet shop registered shall be:

• A major (aged 18 or above)
• Of Sound Mind
• Not disqualified by law from entering into a contract

In case person refers to association/corporation/company, such association/corporation/company shall be duly registered with the law.

APPLICATION FORM

For the purposes of registration, an application in the form appended to First scheduled along with a non-refundable fee of Rs 5,000/- has to be made to the state board. A separate application has to be made for every distinct premise to be registered. (Click here to access the form- http://111.93.47.72/csbsdmc/vtl/vtlregistration.php)

INSPECTION

1. After receiving the application, the State board directs a team comprising of a veterinary practitioner, representative of State Board and authorised representative of the Society for Prevention of Cruelty to Animals to conduct an inspection of the mentioned shop.
2. The team is to submit a report, to the state board, based on its findings in the inspection.
3. The state board may, after considering the report submitted by the team, and satisfying itself that the shop fulfils the requirements, register the shop by:

• Issuing a registration certificate
• Recording the details of the shop in the register maintained for the same purpose.

CERTIFICATE OF REGISTRATION

The validity period of a certificate of registration, as issued by State Board extends up to 2 years and is subject to renewal on payment of a fee of five thousand rupees. Such a certificate is non-transferable in nature.

RENEWAL OF REGISTRATION

In order to effect a renewal of registration, an application for the same shall be made 30 days before the date of expiry of registration. The application shall be made to the state board, in the format provided in the Form appended to First Schedule.

DENIAL OF REGISTRATION

The State Board reserves the authority to deny an application for registration of pet shop under following circumstances:

(a) Falsified information or manipulated accounts and instances of deliberate misrepresentation is detected in the application product by the applicant.

(b) The applicant, prior to the submission of application and been convicted of any offence relating to animals.

(c) Applicant denies permitting the inspector free access to his premises of pet shop.

(d) The applicant was operating a shop with possessing a license that led to seizure a dealing of the same.

The State Board is required to record its reasons in the event of denying an application for registration.

LICENSING OF PET SHOPS

Step 1 : TERMS & CONDITIONS

Section 3 of Pet Shop Rules, 2010 draft and lay down the terms & conditions that are to be followed while applying for licensing of a pet shop.

• No person/entity is permitted to establish and operate any commercial establishment/pet shop without obtaining a license.
• License for establishing and operating pet shop shall be granted only upon an application submitted, in prescribed format, to Animal Welfare Board of India.
• Those individuals/entities that are already carrying out the operation of pet shops prior the introduction of these rules shall obtain a license by applying within 60 days from the commencement of the rules.
• To be eligible to apply for a license, the individual should be a major (aged 18 or above). In case the person refers to corporation/company/legal association, the same shall be duly registered with the law.
• Every applicant is required to get his facilities inspected both by local authority and board. This inspection is required to ensure that facilities offered by applicant comply with the regulations, before the grant of license.
• Grant of the license will be denied under following circumstances:
• In event of the applicant failing to fulfil the requirements set up under the labels of ‘Accommodation, Infrastructure, and Housing’, ‘Minimum Space Requirements’, and, ‘General Care of Animals, Veterinary Care, and Other Operational Requirements’.
• Falsified information or manipulated accounts and instances of deliberate misrepresentation is detected in the application product by the applicant.
• The applicant, prior to the submission of application and been convicted of any offence relating to animals.
• Applicant denies permitting the inspector free access to his premises of pet shop.
• The applicant was operating a shop with possessing a license that led to seizure a dealing of the same.

The below-mentioned entities do not need a license to operate:

• A veterinary clinic/hospital
• An establishment that undertakes tasks for the betterment of animals and not engages in commercial animal trade.
• A shelter for animals operated by Animal Welfare Organisation

Step II – PROCEDURE FOLLOWED TO OBTAIN LICENSE

SUBMISSION OF APPLICATION

The applicant in order to acquire/renew a license has to submit an application for the same to the Animal Welfare Board of India, in the format prescribed in schedule I.

GRANT OF LICENSE

• When both representatives of board and local authority are satisfied with facilities offered by applicant they may sanction the grant of license to applicant for period of two years, on payment of a license fee of Rs 5,000/-
• The inspection report submitted by the inspection team needs to be duly signed by the inspector and accompanied by the application. True copy needs to be sent to Animal Welfare Board of India whereas the original is to retained by the local authority.

REJECTION & APPEAL

• In case the local authority/representative of the board is of the opinion that facilities of the applicant are not satisfactory for the purposes of awarding a license, then application requesting of grant of the license will be rejected.
• The applicant is conferred with the right to make an appeal against such rejection but is limited to time period of 30 days from the date of receipt of rejection notice. In case the applicant expresses a desire to be heard, a personal hearing is to be granted to him by the appellate authority.
• The appellate authority altering taking consideration of the appeal and the arguments produced by both parties may reject/allow the appeal, contemporaneously recording the reasons for its decision.

RENEWAL OF LICENSE

• In order to get a license renewed, the pet shop owner is required to submit an application for renewal in the format of application for grant of license. Such application is to be made 30 days prior the expiry date of the license. He is also required to pay a fee of Rs1,000/- to the local authority.
• It is the discretion of the local authority and the representative of the board to re-inspect the premises of the pet shop owner, on receipt of such application.
• In event of the applicant failing to get the license renewed within stipulated time-period, then he will have to submit an application for a fresh license.
• Renewal of license is valid for period 2 years.

GENERAL PRACTICES TO BE OBSERVED BY PET-SHOP KEEPERS

Apart from the legal requirements, there are numerous other conditions that the Shopkeepers are needed to maintain while operating their respective shops:

• Aquariums are to keep for the sale of fish and all adequate arrangements have to organised by the pet shop owners.
• Pet shops are not permitted to sell any animal for the purposes of food.
• It is mandatory for a pet shop to follow and maintain strictly all procedures of animal care and cautioned handling of breeds.
• Appropriate fire extinguishing equipment must be installed and maintained in shop premises.
• Preventive measures and daily routine care accompanied by veterinary aid shall be maintained.
• Pet shops shall not put any animal/bird for sale/exhibition outside the premises of the shop.
• Adequate arrangements for waste disposal in order to maintain cleanliness standards are essential.
• It shall be ensured that animals placed in same compartment exhibit compatibility towards each other.
• It is for the pet shop owner to ensure that pup/kitten is weaned and properly vaccinated before sale.
• Accommodation accessories offered should be appropriate for the species.
• Food meant for animals and birds should be packed and stored in sealed containers in order to avoid contamination. Freshwater and fresh, smell-free foods is to be provided to all animals/birds in the shop.
• Appropriate provision of electricity has to be maintained in shop premises. All pets are kept in safe condition.
• Accommodation should be cleaned on regular basis to maintain hygiene and cleanliness.
• Accommodation should be maintained in good order and crafted as per the suitable conditions of animals and birds- temperature, lighting, ventilation.
• Grant of the license will be for only those animals/birds the sale of which is not prohibited under Wildlife Act 1972.

LATEST POLICY SCENARIO

‘The new policy on trade of pets is still in its conception stage and will “take some time to come into effect’

Though the concretised document of the new policy is not out yet, the grounds for premising the new policy have been set:

• License fee will be increased
• Sale of birds and fish are not given an adequate amount of attention in the existing policy, and therefore the upcoming policy shall be laying emphasis on the sale of birds or fish accounted for.
• In event of any pet shop treating animals with cruelty, heavy fines will be reimposed on such shop-owners.
• NGOs often claim that caging birds and animals is an exhibition of cruelty towards animals/birds, they refute the contention that caging of animals/birds fall within the ordinary course of business of the pet shops. Challenging the nature of the business carried out by pet shops and claiming harassment of animals/birds, NGOs and pet shops are often involved in the clash. The clash between NGOs and pet shops shall be sought via the instrument of the new policy.

IMPORT OF PETS – A NEW DIMENSION

• The governmental authorities have imposed a barrier on the import of foreign breeds of dogs for purposes of sale/exhibition/trade. Import shall now be allowed only to equip defence and police forces.
• Those intending to import such foreign breeds will be required to acquire recommendation from Committee for purpose of Control (that will be monitoring the purposes of import) and Supervision of Experiments on Animals (to keep in check the manner in which animals are treated).
• Purchasing a foreign breed in India is made more expensive in an attempt to discourage the inclination toward foreign breeds.
• Only those possessing the valid documents for import shall be permitted to bring pets in the territorial boundaries.
• The Law Commission report no. 261 observes that pet shops and breeders violate provisions of animal welfare laws with impunity, and recommends that it is necessary to regulate their practices.

References:

• http://www.lawyersclubindia.com/experts/-how-to-get-license-for-a-pet-shop–294611.asp
• https://www.dogspot.in/licensing-policy-pet-shops
• http://www.awbi.org/awbi-pdf/draftpetshoprules.pdf
• http://envfor.nic.in/sites/default/files/Pet%20Shop%20rules_3.pdf
• http://www.dnaindia.com/india/report-delhi-pet-shop-owners-welcome-new-licence-rules-1198936
• https://scroll.in/latest/807301/india-bans-import-of-foreign-dogs-for-breeding

In this article, Sanghamitra Sengupta of SLS, Pune discusses Legal Compliances to follow for opening a grocery store in India.

With India’s Retail Industry growing at a rapid rate and being one of the fastest growing retail industries in the world; it cannot be denied that food and grocery which form the backbone of the Indian Retail Sector are essential to the country’s economy.

Setting up a retail store – Best practices to follow

The retail industry consists of retail markets which engage themselves in the process of selling consumer goods and services to customers, in order to earn a profit. Grocery stores come under the ambit of the retail industry as they too sell a variety of food and non-food products. In fact, in the Indian context, grocery stores are the most popular type of retail business, as no matter what the state of the economy in a particular region is, grocery is an essential part of one’s daily life and can’t be done without.

Now that the importance of grocery stores in the country has been established, there are a few points that one needs to keep in mind before establishing a grocery store and while running it so as to not run into a legal dilemma. Don’t forget that running a grocery store is quite similar to running a large business when it comes to complying with the law.

Here are the few steps you need to keep in mind before starting a grocery store:

Business Structure

• Business structure or a legal entity, as we may call it, refers to the kind of ownership the business possesses. It is very important, for you, as a grocery owner, to make a wise decision regarding the business structure as it determines the growth of your store in the long term.
• There are 6 options namely- sole proprietorship, partnership, one person company, limited liability partnership, private limited company and public limited company.
• Sole proprietorship is the easiest business structure to start with and this is exactly why it is a popular choice amongst those wanting to start a grocery store. Opting for this structure would mean less legal compliances, making it easy for you to handle the store on your own.
• Register the store under sole proprietorship at the nearest local municipal office. There are no additional costs involved and only a current account is required to be registered with the grocery store at a bank. Corporate tax rates will not be levied on the grocery store in case of sole proprietorship.

Contract of lease

First things first, one needs to obtain a shop to conduct his business of grocery store. For this, the owner of the business has to prepare a contract of lease with the landlord. Proceeding without entering into this contract is like inviting trouble from the legal god. This contract is governed by the Rent Control Act enacted by the states. A lease contract for a grocery store is essentially different from that for a residential house. Hence, it must contain clauses such as:

• Base rent, deposit, maintenance charges
• Alteration of structures
• Right to sublease
• Working hours on the property
• Consequences of breach of contract
• Terms and conditions of renewal
• Code compliance
• Name and Address of both tenant and landlord
• Amount of payment

Licensing and registration

Trade License

A trader is bound by law to obtain a trade license before initiating his trade and as the owner of a grocery store, you too are expected to obtain this license to ensure that your store abides by all standards, regulations, ethical and safety norms. The permission must be granted by the nearest local municipal authority to your grocery store.

There are 3 kinds of businesses and trade for which a trade license is absolutely mandatory, namely-

1. Any business which deals with sale of food such as restaurants, hotels, bakeries, grocery stores, food stalls, canteens.
2. Any trade which uses motives like manufacturing industry, factories, power looms, flour mills, cyber cafe etc.
3. Any offensive and dangerous trade such as sale of timber wood and firewood, candle manufacture, cracker manufacturer.

Legal technicalities of trade license

Every state has its own legal regulations pertaining to trade license. The trade license has to be obtained from the municipal authority. Most of the states provide a 30-day window after the trade has commenced for obtaining a trading license from the municipal authority.

The process isn’t a very tedious one as it usually takes 8 days to obtain a license but the process may take longer if the required documents prove to be faulty. The license may be revoked or canceled if the trader violates any of the conditions laid down in the trade license or because of a ruckus created by the trade.

Documents required for obtaining trade license

• Pan Card
• A bank statement of the establishment of the trade
• Certificate of establishment
• Premises proof in the form of either electricity bill, water bill or sale deed
• Colour photograph, ID proof and Address Proof of the owner/partners
• Front facing photograph of the trading business with goods that are traded in proper display

A trader must ensure to renew his trade license from the period of 1st January to 31st March of a year. Along with the provision of trade license being provided for in The Shop and Establishment Act, there are certain rules and work conditions which a trade must abide by in order to obtain a license-

• Permissible working hours per day and per week have been specified in the act. This permissible limit must not be exceeded by any trade.
• Opening and closing hours, holidays, overtime policies, non-working days, spread over of work are also dealt with by the act. A trade must not exploit its workers by breaching any of these provisions.
• Employment and termination conditions.
• Regulations for maternity leave and paid leave must be followed.
• Employment of young and women must be regulated properly at workplace.

The Shops and Establishment Act, 1953

• As an owner of a shop, the first thing you are required to do is to register your shop under ‘The Shops and Establishment Act, 1953’.
• The act defines ‘shops’ as any premise where goods are sold, either by retail or wholesale and where services are rendered to customers. It is, thus, implied that a grocery store is covered within this definition.
• The owner of a shop must submit an application along with the required legal fee to the Inspector of the local area within the prescribed time.
• The prescribed time for submission of the application and the legal fee may differ in different states.
• The application consists of the owner’s name, shop address, number of employees and other necessary details. The chief commissioner, on satisfying himself with the application will issue a certificate of registration to the shop.
• The shop owner is bound to prominently display this certificate at his shop and ensure periodic review of the certificate.
• The shop owner may make amendments to the certificate by notifying the inspector within 15 days of the occurring of the change.
• The relation between the inspector and owner of the shop doesn’t end with the establishment of the shop and its registration. The owner has an obligation to inform the inspector of the closing of the shop within a prescribed time to get the certificate cancelled.
• The Indian Government, in order to ensure registration of shops in the country, has facilitated online registration. Mumbai grocery store owners can use this link to register themselves. Likewise, Delhi grocery stores can register here. Kolkata and Bangalore too can register themselves online. The grocery store owners of other states can easily find an online registration portal by visiting the webpage of their municipal corporation.

FSSAI licensing

A large chunk of the items for sale at grocery stores is the edible material; food. Any business in India that deals with food is known as a ‘Food Business’, under Food Safety and Standard Authority of India (FSSAI).

FSSAI through this classification imposes numerous legal compliances on a grocery store, the non-compliance of which could prove to be fatal to consumers.

Below are a few factors essential to the process of licensing under FSSAI

• The owner of a grocery store for the purpose of licensing is known as a Food Business Operator (FBO). The FBO needs to first realize the ‘capacity’ of the shop/food business, in order to apply for a specific category of license. The amount of turnover is the biggest determiner of the kind of license granted to an FBO by FSSAI.
• If a food business has its branch in more than one state, it has to obtain a ‘central license’ for its head office. A Food Business with an annual turnover of Rs. 20 Crores qualifies for a central license.
• If a food business has an annual turnover of Rs. 12-20 Crores, then it must obtain a ‘state license’. A license, once obtained, under FSSAI is valid for 5 years, after which renewal is mandatory.

• However, one category of FBOs have been exempted from this obligation and that is ‘petty food manufacturers’, who have an annual turnover of less than 12 Lakhs.
• Petty food manufacturers are small-scale manufacturers with a capacity of less than 100 KG of production in a day or are temporary vendors. They are merely required to register themselves by filling Form A under Schedule II of FSSAI and not obtain a license.
• An FBO may obtain a central license by applying on http://www.fssai.gov.in and sending a copy of the required documents and prescribed legal fee to the Central Licensing officer within 15 days of filing application.
• Form B in the Scheduled 2 is to be filled to obtain a state license and submitted to the nearest designated officer along with required documents and the prescribed fee.

Taxation norms

Controversially called the ‘Poster-boy of Indian Tax Reform’ – Goods and Services Tax (GST) has changed the taxation norms for grocery stores across India. Every business is required to pay tax and register itself under GST, as it deals with the sale of goods. Every grocery store owner, on registration, will get a GSTIN, a 15 digit code which is a unique GST identification number.

Registration becomes compulsory only when the business crosses a specific annual turnover. If the annual turnover of a grocery store is less than 20 lakhs, it may or may not register itself under GST but an annual turnover greater than Rs. 20 Lakhs invites mandatory registration with GST. Due to the emergence of GST, businesses avoid transactions with unregistered companies as everything is documented and could result in reverse taxation. Under normal GST returns, shopkeepers have to file 3 monthly returns and 1 annual return.

Sign permit

You decide to put up a big sign outside your grocery store to attract people, but you realize you’re not attracting customers with your sign but some trouble, instead. Some cities have regulations on the size, location, type or even the lighting of a sign you put outside your grocery store. This particular compliance may not be apparent enough but owners must acquaint themselves with the local regulations on signs from their local municipality.

Are there any legal compliances to follow for starting home delivery services by a grocery stores?

You may have considered starting a home delivery service for groceries from your store to customers living nearby. You can start a home delivery service which will make shopping convenient for your customers and increase your profits, eventually. But, here’s a few things to keep in mind before allowing a delivery boy to deliver groceries-

• A motorbike used by the delivery boy for a delivery purpose cannot be privately registered. It is known to all that vehicles have to be registered before it is driven. A privately registered two-wheeler cannot be used for commercial purpose, i.e., delivery of groceries.
• RTO can seize any motorbike being used for commercial purposes.
• There are no regulations concerning use of bicycles for purpose of home delivery by grocery stores.

Conclusion

Importance of obtaining licenses cannot be ignored in any business and a grocery store is no different. The legal procedure isn’t as cumbersome as other businesses have it considering the small scale on which a grocery store works. Follow the law and reap its benefits!

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In this article, Sanghamitra Sengupta of SLS, Pune discusses Legal Compliances to follow while starting a taxi business in India.

With fuel prices on a rise and a liter of petrol being charged at a high amount of Rs. 75 in several states, the Indian man is now shifting to alternate and cheaper modes of commutation. It is known to all that the public transport scenario is not the brightest with overcrowding, lack of vehicles under the system and uncomfortable journeys contributing to a common man shifting to availing benefits of the Taxi Industry.

The initial set-up investment may be large and daunting but the future returns are promising as the industry is lucrative in the long run. Here are a few factors from the legal point of view that are essential to the management of a Taxi Business in India and mind you, you cannot afford to forget these.

Business Structure

As an owner of a taxi-business, you must first decide what type of a business structure you want to opt for. This decision has huge legal implications as it affects your personal liability, taxation, paperwork of the business, etc. A taxi business is no different from any other type of business, and as an owner, you have 5 choices – sole proprietorship, partnership, limited liability partnership or a private limited company. Mostly, owners of tours and travel company taxis opt for the private limited company because of the amount of credibility and possible outside funding.

Commercial driving license

It is a well-understood fact that before you drive a vehicle, you must obtain a driving license which will permit you to do so. If you go ahead and drive the vehicle without obtaining a license, the chances are that you may soon find yourself embroiled in a legal mess. A driving license is issued by the Regional Transport Authority (RTA) or Regional Transport Authority (RTO) of a particular state, and it is absolutely necessary to have the license, as per the Motor Vehicle Act.

How to get a Commercial driver’s license for driving a taxi

Now, a commercial driving license is one which is awarded to those drivers who wish to drive commercial vehicles. Taxi drivers, falling under the ambit of commercial drivers, must opt for a commercial driving license.

Criteria for obtaining a commercial driving license

• Driver must be of minimum 18 years of age. In some states, the minimum requirement of age is 22.
• Driver must be at least educated up to Class 8. It must be ensured that the driver possesses enough intelligence to read and understand road signs
• A learner’s license is necessary. Before obtaining a commercial driver license, the driver must learn how to drive and pass a written test to obtain a learner’s license.
• Training from a Government Motor School is essential.
• The application for the license can be made through online/offline modes along with the necessary documents. An online application can be made here.
• A driving test is necessary to assess the driver’s skill to award the license to him.
• A medical certificate will also have to be provided by the driver

Documents required for application for a commercial driving license:

• Identity Proof (Passport, Aadhar, PAN Card, Birth Certificate or 10th-grade mark sheet)
• Address Proof
• Multiple passport size photographs
• Application fee

Obtaining permits as per the provisions of Motor Vehicle, Act

Section 66

Section 66 in the Motor Vehicle Act, 1988 makes it compulsory for the owner of a transport vehicle, whether it is transporting goods or people, to obtain a permit from the Regional or State Transport Authority. Both driver of the vehicle and owner can be held liable and be punished under Section 192A of the Motor Vehicle Act if the vehicle is operated as a transport vehicle without obtaining a permit.

Section 73

Section 73 in the Motor Vehicle Act, 1988 deals with ‘contract carriage permit’ and mandates a taxi owner to submit an application to the Regional Transport Authority to grant a permit to carry passengers under a contract to a fixed destination within or outside the state. The authority can decide through this permit the specific routes or roads on which the taxi may ply, the maximum number of passengers and luggage that may be loaded to the taxi, specific rates or fares that may be charged, provision of a taximeter in the taxi, etc. The 5 seater local taxis which you notice plying on the roads have to apply for this permit to the Regional Transport Authority.

Section 84

Section 84 of the Motor Vehicle Act, 1988 spells out all the conditions that are necessary to justify the grant of permit to a taxi. For instance, 84(c) states that a taxi driver with a permit must only charge fares as fixed by the State Government. He may also not drive at a speed exceeding the prescribed speed limit in the Act. If provisions of Section 84 are not fulfilled, the permit may be revoked by the Regional Transport Authority.

All India Permit

Taxi owners can choose to obtain an All India Permit under which, there is the All India Tourist Permit (AITP). An application must be made to The Transport Authority along with the prescribed legal fee. A vehicle granted such a permit must have “Tourist Vehicle” painted on both sides of the vehicle and a board stating that the vehicle has an AITP must be hung above the number plate. Such taxis can only carry tourists and not common commuters. The judgment in the case Satish N vs. State Of Karnataka clearly laid down that if a vehicle with an AITP was found to be carrying common commuters, the vehicle would be detained. The following documents must be submitted along with the application to The Transport Authority:

• Registration Certificate for the vehicle.
• Fitness Certificate of the vehicle.
• Insurance Certificate for the vehicle.
• Proof of payment of tax for the current Quarter to the Home State.

For the issuance of all these permits, one may visit either the State Transport Authority or the Motor License Officer of your city, with the required permit fee and application. The permit granted could be local or natural thus deciding the applicability of the permit in the country. Every local permit has a period of applicability, usually 5 years, after which, reapplication is required.

Motor Vehicle Act, 1988

Section 39 – Registration of vehicle

This section makes it mandatory for every motor vehicle to register his motor vehicle before driving it. It also implies that if the owner of the vehicle lends or rents it out to someone for the purpose of driving, he must ensure that such motor vehicle is registered. Owner of the motor vehicle will be prosecuted even if he wasn’t the one driving it. This makes it clear that owners of taxi businesses, if not owners of the cars under their business, must ensure that such cars are registered before letting them ply on roads.

Section 56 – Fitness Certificate

This section mandates procurement of a fitness certificate for every transport vehicle. The certificate may be issued by an authorized testing station or a prescribed authority after ensuring that the transport vehicle complies with all the requirement of the act. The authorized testing station is basically a service station which could be private or public. The certificate is valid throughout India.

Section 146 – Insurance against third party risk

This section necessitates insurance of the motor vehicle in use against any third party risk. Insurance is necessary to keep your business running smoothly. This insurance will prove to be a safeguard for circumstances where the owner of a motor vehicle accidentally causes harm, damage or even death to a third party. The third party does not actually include the passenger in the owner’s vehicle. But, since taxis are public vehicles, the passenger in your taxi will be a third party and hence, securing insurance for the vehicle is necessary. Do it, because, your taxi is not just your vehicle but also your livelihood.

Taxation norms

• Before GST came into force, service tax was applicable on radio taxis and AC buses. Radio taxis are taxis which are in two-way communication with a central control office and are enabled for using GPS or GPRS tracking system.
• This essentially includes cab aggregators like Uber and Ola. The same practice continues now that GST has come into force; metered taxis will not be liable to GST. If you are an owner of a cab aggregation in India, then, 5% GST is to be charged on the fare from the passenger.
• Before the emergence of GST, the service tax was 6% on the fare. It must be noted that if you have leased cars and for your business and are not the true owner, then, the driver will have to pay 28-43% of tax along with the rent of the vehicle.
• This goes on to show that GST and the new taxation norms pose numerous problems to taxi companies and drivers due to the large increase in the lease payments.
• This, in turn, increases the costs incurred by a taxi company, forcing drivers to look for employment elsewhere.

Environmental regulations

As a taxi business owner, you must ensure that you’re aware of all the norms imposed in the city/state with regards to the environment. For instance, in the city of Delhi, only taxis running on CNG are allowed to ply on roads. It is very important to run taxis as per the environmental regulations to not run into a legal dilemma.

Finances

Funding a business all by yourself can be a taxing and frustrating task. You may want to expand your business by buying more cars, or you may be a driver who is interested in buying a car and operating it as a taxi. The fear of large costs involved acts as an obstacle to business expansion or entry in an industry but banks these days have made the job easier by providing attractive loans.

• A down payment will have to be made, at the outset of the purchase of the car, which will be used in the taxi business.
• An installment repay plan is chalked out by the bank extending the loan. This plan could decide on a weekly repayment plan where the business repays the bank by deducting a predetermined amount from the income of the business. In case of cab aggregators, the bank could chalk out a plan, where the installment amount is deducted from the driver’s income. Repayment could also be through post-dated cheques.
• There is usually no requirement for collateral security or third party guarantee
• The bank could have eligibility requirements for granting of the loan in the form of minimum years of business experience, minimum number of taxis, etc.
• Usually, specific rate of interest is levied on the loan, keeping in mind the customer profile of the business, tenure of loan
• The bank may require the taxi to be hypothecated to the bank
• A guarantor may also be required by the bank extending the loan

What is a radio taxi scheme?

Various state governments have enacted a radio taxi scheme, under Section 74 of the Motor Vehicle Act. Different from the traditional taxis, the general public can commute in a radio taxi by a) making a request on a phone call by dialing their phone numbers b) by hiring the taxi from a designated location c) by stopping the taxi on the road. Online orders cannot be made.

• Only a registered company under the Companies Act, 1956 or a society registered under the Societies Registration Act, 1860 can register under this scheme.
• The State Transport Authority (STA) provides the permit
• Permit is initially granted for 5 years
• The radio taxis will be allowed to ply within the territorial jurisdiction of the municipal corporation for which the permit has been obtained.
• The licensee must be financially sound to run the radio taxi operation and must have sufficient experience of transport business.
• The licensee must ensure sufficient parking space for all taxis and possess adequate office space for control of radio communication.
• The licensee should also have a minimum fleet of radio taxis. This requirement is different for different states. For instance, UP requires a fleet of 10 taxis whereas Delhi-NCR requires a fleet of 500 taxis, within 1 year of commencement of operations.
• Working hours of drivers must be in accordance with the rules laid down in the Transport Workers Act, 1961

List of documents required while making an application

• Address proof, attested by a gazetted officer (Ration card, Voter ID card, Passport, Electricity Bill)
• Proof of financial status
• Affidavit sworn before a notary for any statement made in the application
• Self-signed passport photo
• Fee payment receipt
• Copy of the registration certificate of the vehicles

What are cab aggregators in the taxi industry?

Cab aggregators fall under the taxi industry but are very different from the traditional taxi companies or radio-taxi companies. Let’s divide taxi businesses into two for better understanding, and through this division, we will answer one important question which is, ‘Do taxi companies own the taxis?’

Taxi business where taxis are owned by the company

An outdated and traditional model, this particular business is facing a setback due to its scalability. For instance, Meru Cabs, India’s first radio taxi service company in India, when established in 2007 owned its own fleet of cars. Soon, Meru Cabs changed its strategy, and now, over 50% of its cars are owned by the drivers, themselves, and not Meru. The drivers are salaried employees in this model of business. Large costs are attached to this model in the form of car loan EMIs, high maintenance costs, driver strikes, etc.

Taxi businesses where taxis are owned by the drivers

• This model is highly scalable and prevalent in most countries, including India. Ola, for instance, started with this model in India, where small fleet owners or even single car owners could just put the company brand on its car and get registered with the company.
• The model is better known as taxi/cab-aggregation. Drivers have to pay a fixed commission for every ride they undertake because of the company.
• The model, as evident, includes very low capital expenditure and maintenance costs. These companies don’t particularly want to be governed by the provisions of the Motor Vehicle Act, 1988.
• As their bookings are made online, they wish to be governed by the Information Technology Act, 2000 (IT Act). The City of Bidhannagar in Kolkata is the only city in India that has permitted online taxi aggregators to be governed by the IT Act. The Delhi Government too amended the Radio Cab Scheme to include these taxi aggregators within its purview and allowed these taxis to ply.

Conclusion

There are various other factors such as choosing wise drivers, investment in the business, garage facilities, etc. that play an important role in the establishment of a taxi business. But, without fulfilling these legal requirements, the business is bound to fail. 

In this article, Shreyas Shridhar of WBNUJS, Kolkata does a case analysis of the Hadiya Case.

The Curious Case of Hadiya

The present write-up briefly aims to analyse the two questions framed by the Apex Court in the infamous Hadiya case which will be addressed by the Supreme Court. The case has been subjected to a lot of media polarisation and through the debate many have lost sight of the aggravating facts and circumstances which form the essence of the judgement given by the Kerala HC.

The brief facts of the case

• Akhila influenced by her friends decided to convert to Muslim religion. She did so of her own free will and conduct. However, the circumstances which gave effect to the conversion are suspicious. For instance, the organisation is considered a radical extremist organisation etc.
• The most important event which is often overlooked by the media is the sudden marriage which happened without informing either the Kerala High Court or Akhila’s parents. This aggravated the case and weakened Akhila’s claims that it was based on her own free will and consent.
• Shafin Jahan, Akhila’s husband came in a later hearing to the Court and told the Court that he wanted to take his wife to his workplace in Syria. These among other facts attract sufficient and reasonable doubt due to which the Court annulled the marriage.
• The Supreme Court then allowed NIA to take charge of the case and identify whether this case is a part of certain pattern. In arguendo, pattern or no pattern there is no harm in allowing NIA to investigate the case so as to allow the SC to do complete justice.
• The SC is hearing the case and very recently allowed Akhila to pursue her education and give her custody to the College authorities. This is a welcome step as this removes the limitation on her freedom and right to love with dignity. The case raises few fundamental question of law.

Can High Court annul a marriage under Article 226 of the Constitution of India?

Article 226 of the Constitution of India,[1] gives wide-ranging powers to High Courts, for enforcing any of the rights conferred by Part III and ‘for any other purpose’. It is contended that the High Court can annul a marriage if it is satisfied that the marriage has been orchestrated under suspicious circumstances. There is a lack of decisions which address this specific question raised by the Supreme Court in the latest hearing of Shafin Jahan v. Asokan K.M. case (Hadiya case).[2]

A brief analysis of the Kerala HC judgement in Asokan K.M. v. Superintendent of Police,[3] will help us arrive at the conclusion that marriages can be nullified based on aggravating facts and circumstances. The Court did a thorough analysis of the circumstances which led to the marriage and observed that the case was not an ordinary instance. The following points were observed by the Hon’ble Court to nullify the marriage between two so-called ‘consenting’ adults;

• The Court observed that the present case had to be viewed through the lens of a ‘forced conversion.’ Akhila (alias Hadiya) came in contact with a lot of people who influenced her to convert to Islam. Her conversion was greatly influenced by an unauthorised Islamic Conversion Centre, which also happens to be a banned radical organisation. In Shahan Sha A. State of Kerala,[4] the Kerala HC recognised the existence of forcible conversion by radical groups targeting young girls from different communities. Further, the Court observed that “there are too many incongruities that militate against the story put forward by Akhila.”
• It is quite clear that the marriage contracted between Akhila and Shafin Jahan was an arranged one rather than a love marriage. The same was organised in secrecy by one of the respondents who clearly had no authority to act as a guardian and perform the marriage according to Islamic religious rights. The Court expressed strong dissatisfaction at the sudden turn of events and the immediacy with which Akhila was influenced to marry a complete stranger. It held such a step to be “an interference with the dispensation of the justice by this Court and that the respondents in question have betrayed the trust reposed on them by the Court.” It further observed that, “the alleged marriage is only make-believe, arranged in a chess-board manner, intending to take the detenue out of reach of the hands of the Court.” The marriage was conducted without the presence of Akhila’s natural guardians, who were alive. The petitioner i.e. the father had no such issues with Akhila practising Islam if that was her wish but this marriage strengthens his side of the story and the fears that this could be a case of ‘love-jihad.’
• Interestingly, the Court on the basis of evidence produced held that there was no conclusive document to prove that Akhila got converted to Islam. Further, there is no certainty with respect to the name of Akhila in the marriage certificate.
• The Court took note of the facts that the person who had organised the marriage of Akhila was involved in another case of forcible conversion. Further, the husband in the alleged marriage is an accused in a criminal case. It is obvious that no prudent parent would want her daughter to marry a convict who has alleged links with radical organisations. The Court went to the extent of qualifying Shafin Jahan as “a stooge … assigned to go through a marriage ceremony.”

In light of the aforesaid, the Court keeping in mind the aggravating circumstances and the plight of Akhila’s parents as well as the tactics adopted by one of the parties, declared the alleged marriage to be null and void. This judgement turned heads as the same was not in the prayers of the parties and was given in a writ petition due to apparent misrepresentation and contumacious conduct of the Akhila.

Was an NIA probe necessary?

The second question framed by the Court questions the necessity for a central level investigation. On August 16, 2017, the SC directed the Kerala Police to assist the National Investigation Agency in examining whether this case is an isolated one or a bigger conspiracy is involved.

At this juncture, it is pertinent to address the relevant jurisdiction which allows the Court to direct NIA probe in the case. The Apex Court in Bharati Tamang v. Union of India,[5] as well as various other decisions,[6] enunciated principles which allowed Courts to ensure the effective conduct of prosecution. Giving a wide range of powers to Courts to ensure that no miscarriage of justice happens, the Courts, if need be, can even constitute SITs or entrust the investigation of a case to CBI or any other independent agency.

The High Court has, therefore, inherent and wide powers under Article 226 of the Constitution[7] and can direct NIA to undertake investigations to better appreciate the suspicious and complex chain of events. In addition to this jurisdiction, the NIA can also proceed to conduct investigation u/s 6 of the National Investigation Agency Act, 2008,[8] with reference to the offences which are enumerated in the Schedule to this Act.[9]

Sh. Asokan K.M., father of Akhila, on 16.08.2016 filed a writ petition WP (Crl.) No. 297 of 2016 and claimed that there was a risk that her daughter could be taken away to Syria to join extremist organisations like ISIS. He further claimed that the conversion was suspicious as it was assisted by certain radical Muslim organisations and under coercion/misrepresentation.

Again, the marriage happened immediately and without informing the Court while the petition was still sub judice. Interestingly, in a subsequent hearing on 21.12.2016, Shafin Jahan accompanied Akhila, who stated that he intended to take her abroad where he was working. This contradictory statement created reasonable doubt in the eyes of the Court and therefore, it was justified to order a probe.

The necessity of the probe lies in the fact that extremist organisations target Muslim youths who are generally disillusioned to convert to Islam and then forced to work for terrorist factions. It is unfortunate that such cases of ‘love-jihad’ are on the rise and therefore, it is indeed a necessity to investigate the present case in light of the observations made by Kerala HC.

Conclusion

The Kerala HC was justified in ordering an NIA probe in the case because clearly it was not an ordinary case and had created suspicion and doubts in the eyes of the Court. The media simply stops itself to saying that Court has no right to interfere in the marriage of two consenting adults.

However, they clearly missed out on the contumacious facts and circumstances which led to the marriage intending to defeat the purpose of court proceedings. The marriage is indeed a sham and the NIA investigation would allow the Court to better appreciate the pattern of love-jihad which is prevalent in Southern states.

As for the question of annulling a marriage which doesn’t depend on any pattern, the author believes that the High Courts have a wide range of power and jurisdiction under Article 226. If the circumstances so demand and there is a clear case of misrepresentation and coercion, the Court should indeed annul a marriage (depending solely on the facts and circumstances). The Supreme Court has an opportunity to analyse and hear both sides of the story as it will do and lay down the law which is required to mitigate such sham marriages.

References

[1] The Constitution of India, 1950, Art. 226.

[2] Shafin Jahan v. Asokan K.M., 2017 SCC OnLine SC 925.

[3] Asokan K.M. v. Superintendent of Police, 2017 SCC OnLine Ker 5085.

[4] Shahan Sha A. v. State of Kerala, (2010) 1 KLJ 47.

[5] Bharati Tamang v. Union of India, (2013) 15 SCC 578.

[6] NHRC v. State of Gujarat, (2009) 6 SCC 767; Bahubhai v. State of Gujarat, (2010) 12 SCC 254; Centre for Public Interest Litigation v. Union of India, (2011) 1 SCC 560; Ram Jethmalani v. Union of India, (2011) 8 SCC 1.

[7] The Constitution of India, 1950, Art. 226.

[8] The National Investigation Agency Act, 2008, §6.

[9] Prabhati Nayak Misra, Hadiya Case: SC Directs Kerala Police To Share Probe Details to NIA, August 10, 2017, available at http://www.livelaw.in/hadiya-case-sc-directs-kerala-police-share-probe-details-nia/

This article is written by Rupali S. Akolkar.

The Negotiable Instruments Act, 1881, puts a vicarious liability on the Officer of a Company as per sec. 141 (1) and (2) i.e. 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, shall be deemed to be guilty of the offence u/s 138 of the Act.

Thus if the offence u/s 138 of the Act is committed by a Company, then the Directors are automatically pulled into the ambit of the same.

The only saving grace is when the Director can prove that the offence was committed without his knowledge or he had exercised all due diligence to prevent the commission of such offence.

Thus any person, who, when an offence u/s 138 of the Act is committed, was responsible for the conduct of the business of the company under the law, and was incharge at the relevant point of time, shall be held to be liable.

In the National Small Industries Corporation Vs. Harmeet Singh Paintal, (2010) 3 SCC 330, the Apex Court has held that merely because the Directors are in-charge of the affairs of the company should not be a sufficient cause to make them as an accused but there should be specific averments in the complaint against them, as to how and in what manner they were responsible for the conduct of the business. Moreover, Vicarious Liability should not be pleaded but it must be proved.

Further, in SMS Pharmaceuticals vs. Neeta Bhalla [2005] 68 CLA 192 SC it was held that since Section 138 imposes a criminal liability, the provisions of the Act are to be strictly complied with. Moreover, the Liability arises not because of simply holding a post of the Director but because of being in charge of and responsible for the conduct of the business of the company.

Thus one of the defence by which a Director can benefit from is not being in charge of the business of the company on the relevant day:

1. If he is not in-charge of the everyday business of the company, then by merely being a director, he cannot be held as an accused in the offence. As mentioned earlier, there should be specific averments against him. In the case of Shushatna J. Sarkar & Anr. Vs. State of Maharashtra 2014 (1) MhLJ 214, the complaint did not show what role the director had played. It was observed that the averments were not sufficient to make them vicariously liable for an offence u/s 138.
2. Similarly, the Directors nominated by Central or State Government are kept outside the purview of this section by virtue of their holding any office or employment in such Government or Financial Corporation owned or controlled by the Government. In case of K. Shrikant Singh vs. North East Security Ltd.and others, J.T. 2007 (9) SC 449. The Hon\’ble Apex court observed that vicarious liability on the part of a person must be pleaded and inferred.
3. Further, in N.K. Wahi Vs. Shekhar Singh, AIR 2007 SC 1454, it has been held that before a person is made vicariously liable, strict compliance with the statutory requirements would be insisted. Further, it is held that there can be no deemed liability of the director and the fact that he was a director in charge of business at the relevant point of time is to be averred. The same has been stated in A.K. Singhania Vs. Gujarat State Fertilizer Co. Ltd. & Anr. Where in if there are no specific averments that he was a director in charge of business at the relevant point of time, in the complaint then the Director cannot be held to be vicariously liable, and the prosecution against him is liable to be quashed.
4. In Girdhari Lal Gupta Vs. D.H. Mehta & Anr. (1971) 3 SCC 189, it has been held that a person ‘in charge of a business’ means that the person should be in overall control of the day to day business of the Company.

Thus the most important factor is that the person should be in-charge on the relevant day. In the case of a Director who has already resigned from the company, if the offence occurs after he has resigned, then merely because he was once a director or his name appears in the public domain i.e. the web-site of the company, he is considered to be vicariously liable, is something which is not acceptable to the law.

In such cases, Form 32, under the Companies Act, 1956 comes to aid. Form 32 is filed with the Registrar of Companies and it indicates the status of the Directors. Thus when a Director resigns, and his resignation is accepted by the Company, the Company becomes obliged to file a Form 32 with the ROC indicating change in status of the Directors.

It was held in Mrs. Anita Malhotra vs. Apparel Export Promotion Council & Anr. (Cri. Appeal No. 2033 of 2011) (S.C.) that if the person has proved of his resignation on the relevant date when the offence has occurred, then the proceedings against such a person are liable to be quashed.

Similarly, it was held in DCM Financials Vs. J. N. Sareen & Anr. (2008) 8 SCC 1, that if the Person-in-charge has resigned with the knowledge of the complainant and is not in charge of the business of the company on the relevant date, then he could not be made responsible for the offence.

In such a case, FORM 32 can prove conclusively the position of a director on the relevant date. It is necessary for a person to file a certified copy of FORM 32 before the Court.

Moreover in the case of Sudeep Jain Vs. M/S ECE Industries, CRL. M.C. 1821/2013, the Hon’ble High Court of Delhi has issued guidelines, in which it has directed the Magistrates to seek copies of FORM 32 from the Complainant, in order to prima facie satisfy the Court as to who were the Directors of the accused company at the time of commission of the alleged offence.

Besides a certified copy of FORM 32, the annual return filed by the Company, the Minutes of the Meeting, etc. can also be brought on record in order to prove that the said Director was not in-charge of the conduct of the business of the company on the relevant date. The same is seen in the case of Pooja Ravinder Devidasani Vs. State of Maharashtra & Ors. Cri. Appeal No. 2604 – 2610 / 2010 (S.C.).

Similarly in Manish Kant Agarwal vs. M/S,. National Agricultural Co-operative Marketing Federation of India Ltd. & Anr. It has been held that when the Director has tendered his resignation, and the Board of Directors has accepted it, and acted on it, then such a Director cannot be held to be liable.

However in the case of Suhas Bhand Vs. State of Maharashtra & Anr. Cri. W.P. No. 1194 / 2008, & 2331 / 2006, it has been held that if the complainant produces any evidence showing the continuance of the accused as the Director of the Company after the date of resignation claimed by him as per the certified copy of FORM 32, then such accused cannot be discharged on the production of FORM 32, and he would have to lead evidence to prove the factum of his resignation.

In this article, Deepshikha Sarkar discusses Replying to the Trademark Examination Report.

What is a Trademark Examination Report?

SEARCH REPORT

After an application for trademark registration is made, it is analyzed by trademark examiners.This is done within a period of six months to one year from the date of filing. The officials scrutinize the application forms, the mark and also run their own trademark search.

The trademark office scrutinizes the fulfillment of procedural requirements of the Reply to the Examination Report. Like Form, manner, prescribed fee payment, proper classification, etc.

After this process, they take note of their opinions and analysis about the Scope of the mark getting registered, in which they usually give out reasons as to why the applied mark should not be registered under the Trademark Law. All of these objections along with the statutory provisions are put together in the form of a Trademark Examination Report. The trademark examination report is also put up on the trademark office website along with details of the trademark application.

What is an Examination Report Reply?

It is required that the Applicant replies within 30 days from the date of receipt of the examination report. This document is known as Trademark Examination Reply.

The response to an objection in a trademark examination report can be submitted by the trademark applicant. The response can also be made by an agent authorized by the trademark applicant. This authorization is made by a Power of Attorney by the virtue of Form TM48 under the Trade Marks Act, 1999. This response is called “Reply to Examination Report”.

The Reply can be submitted by email by attaching a scanned copy in colour pdf format to [email protected] OR uploaded online to the website of the trademark office. It could also be submitted in person or by post to the relevant trademark office. Affidavits and documents (as per requirements) should be submitted along with the Reply to the Examination Report.

What are the objections usually raised in an Examination Report?

OBJECTION PERTAINING TO A FORMAL REQUIREMENT

In such cases, the Applicant must compulsorily comply as these are requirements laid down in the statute and required by the office.

For example, if the trademark office has called for the attachment Form TM48, the Trademark Applicant may submit the same with supporting documents in case an agent is applying for the trademark in place of the Applicant in person or state that the Application is being made by the Applicant in person.

OBJECTION PERTAINING TO INCORRECT CLASSIFICATION

If the objection is because the goods and services mentioned in the application and the trademark class so mentioned are not in consonance, the Trademark Office will object.

It is important to note that it is advisable to get proper legal advice as to the correct classification of goods and service, prior to submitting a Reply to Examination Report for objection as to the wrong classification of trademark class.

OBJECTION 2A

OBJECTION STATING THAT NONE OF THE GOODS OR SERVICES MENTIONED IN THE APPLICATION FALL IN THE CORRECT TRADEMARK CLASS.

The trademark applicant may file a request to correct the class of goods or assert in the form of a statement that as per classification of goods or services published by the Registrar, the goods and services have been correctly classified.

OBJECTION 2B

OBJECTION TO THE EFFECT THAT SOME GOODS OR SERVICES MENTIONED IN THE APPLICATION DO NOT FALL IN THE CLASS.

The trademark applicant may file a request for amendment of the application by deleting items that do not fall in the relevant class. And then subsequently apply for those goods/services separately under the appropriate class(es) OR The applicant can also state that as per classification of goods or services published by the Registrar, all items fall in the class mentioned in the application.

OBJECTION PERTAINING TO ABSOLUTE GROUNDS

Section 9, Trade Marks Act, 1999 deals with ABSOLUTE GROUNDS. These objections are primarily related to the mark itself and which are not register-able due to their inherent problems. This ground of refusal is primarily aimed at protecting the interests of general public instead of any specific third party.

As per Sec 9(1) of the Trade Marks Act, 1999 a trademark should be distinctive and non descriptive. That means it should be distinct in itself and it should not be indicating the goods it stands for nor should it be common to the trade in which the Mark would do to business in.

For example, If the wordmark “Apple” is chosen by a company selling Apples then it would be a descriptive trademark but if the wordmark “Apple” is chosen by a company selling computers then it is a non descriptive trademark. Similarly if the word “Salon” is registered by Salon service then no other Salon can use it.

If there is an objection regarding the trademark being non distinctive, the applicant can submit a reply to the ER stating that the Applicant’s mark can be distinguished from the goods and services it stands for OR the Applicant’s mark has acquired distinctiveness due to its extensive use relating to the goods it stands for by long time before the application was even made. If acquired distinctiveness is being claimed then an affidavit containing evidence of the extensive use of Applicant’s mark alongwith documents needs to be filed.

OBJECTION PERTAINING TO RELATIVE GROUNDS

There might be an objection based on the relative grounds of refusal under Section 11 of Trade Marks Act 1999. A trademark faces this objection during registration on the ground of same or similar trademark have been already registered or applied for before the registry of Trade Marks by some third party. The purpose of this grounds of refusal is to protect, rights of the party holding a similar or identical trademark and also to safeguard general public from confusion or deception as to the origin of the goods or services.

In case of objections as to relative grounds of the trademark, the applicant needs to decide carefully if he wants to state that his mark is different and so it has to be registered or if it is similar then an argument of a prior user of the mark can be put forward. In addition, the applicant can also produce consent or no objection from the proprietor of marks cited as conflicting in the examination report.

What is to be kept in mind while Replying to an Examination Report?

The response should not contain only single page blanket denials. The words “structurally, phonetically and visually different from the cited marks” can not be the core of most of the objections. Each objection should be dealt with separately.

FIND A SAMPLE EXAMINATION REPORT ISSUED BY THE CONTROLLER BELOW

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This article is written by Krithika Kataria, a 3rd year student of NMIMS School of Law, where she discusses the feasibility of allowing mutual funds to do cryptocurrency trading.

Introduction

A new out of the box idea more often than not becomes the burning issue of the day. And so is the case with virtual currency. With its ever-increasing value, digital cryptocurrency is catching a great deal of attention. In the light of this vast topic, the author will study a particular aspect of cryptocurrency concerning mutual funds. This paper will discuss whether or not mutual funds should be allowed to engage in cryptocurrency trading.

For this purpose, the author has split the paper into three main parts: First part explains cryptocurrency and the legal framework in place for it. The second part describes mutual funds regulations regarding the securities they can invest in and whether it would be permissible for mutual funds to do cryptocurrency trading. The third part looks at the merits and demerits of allowing mutual funds to do cryptocurrency trading and lays out certain precautions the country must take while allowing cryptocurrency trading by mutual funds.

Cryptocurrency – The Cryptic Currency

Cryptocurrency is a digital currency that has no centralized authority monitoring it. A cryptocurrency is a medium of exchange that uses cryptography to manage the creation of new units as well as to secure the transactions.[1] At present, it differs from every other currency type as it is not fiat currency, i.e., it is not issued or backed by the Government of the respective country. The rate of creation of such units is defined beforehand and is publicly known [2] in contrast with the control of supply by the Government in the case of fiat money.

Bitcoin is a cryptocurrency, and as it is one of the most widely used cryptocurrencies; the terms are often used interchangeably. Rather than relying on any regulatory authorities, Bitcoin uses a blockchain, a public ledger where all the transactions made using Bitcoins are recorded and so can be considered secure transactions.[3] This is a relatively new concept so different countries have a different perspective on this subject of virtual currency.

Canada is the first country to have a defined legal structure for Bitcoin. In Canada, businesses dealings in this digital currency are subject to the Proceeds of Crime (Money Laundering), and Terrorist Financing Act of 2000 (PCMLTF) and taxes need to be paid accordingly. On the other hand, the financial department of Denmark has declared that Bitcoin is not a currency and hence will not fall under any financial services categories, including electronic money, currency exchanges, or any other financial regulations.[4]

Countries like India and China have shown that they are skeptical about the concept of cryptocurrency. In India, the government agencies have been very vocal about their concern in cryptocurrency trading. There is even a team known as India’s Special Investigation Team (SIT) that is said to be in the process of drafting a report which will elaborate all the problematic issues with the decentralized cryptocurrency. In December 2013, the RBI issued a press release cautioning users, holders and traders of virtual currencies, including Bitcoins, about the potential financial, operational, legal, customer protection.[5] Despite this there do exist some very big players in the Indian market who buy and sell Bitcoins like Zebpay, Unocoin, Coin secure, Btcxindia among others.

In reality, there is no legal framework regulating cryptocurrencies and they haven’t been declared ‘currencies.’ As such, the law will be interpreted differently by different groups to understand if they are legal or not. One of the glaring obstacles for Indian investors who are interested in investing in cryptocurrency is the confusion about its legal status.

Mutual Funds

The mutual fund sector is a very complex field that needs tight regulation for all its players, which include sponsors, investors, fund managers, and other intermediaries, for consistent growth. Various authorities regulate the mutual funds in India like SEBI, AMFI, other SROs, RBI, and the Investor‘s Association of India.[6]  With the SEBI regulations, all mutual funds have been brought under a common regulatory framework to ensure a higher degree of transparency in their operations and adherence to a standard structure. The SEBI and RBI make regulations with the sole purpose of safeguarding the interests of investors.

Open-ended retail funds

Mutual funds can invest in, under the SEBI (Mutual Funds) Regulations 1996 (MF Regulations):

• Securities: shares, debentures and equity-linked instruments, Foreign securities
• Money market instruments.
• Privately-placed debentures.
• Securitised debt instruments (either asset-backed or mortgage-backed securities).
• Gold or gold-related instruments.
• Real estate assets.
• Infrastructure debt instrument and assets.

Restrictions on investments

A mutual fund must not,

• Invest more than 10% of its net asset value (NAV) in debt instruments issued by a single issuer.
• Invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment must not exceed 25% of the NAV of the scheme.
• Own more than 10% of any company’s paid up capital carrying voting rights.
• Buy and sell securities only on the basis of deliveries.
• Make temporary investments in short-term deposits of commercial banks, subject to the applicable laws.
• Make any investment in:
  • any unlisted security of an associate or group company of the sponsor; or
  • any security issued by way of private placement by an associate or group company of the sponsor; or
  • the listed securities of group companies of the sponsor which is over 25% of the net assets.
• Invest more than 5% of its NAV in the unlisted equity shares or equity-related instruments in case of an open-ended scheme and 10% of its NAV in case of a close-ended scheme.[7]

It can be inferred from the above list that mutual funds cannot legally invest in real estate or property or any other assets, as the securities described in the regulations are only shares, debentures, and equity-linked instruments.

The question that may be raised here is where does cryptocurrency fit on the list? At the face of it, it is not explicitly mentioned. Express um facit cessare tacitum, which literally translates to ‘when there is express mention of certain things, then anything
 not mentioned is excluded’, applies in this situation and hence it is easy to conclude that Mutual funds cannot take part in cryptocurrency trading as no such provision is expressly laid out in the SEBI regulations. If this is to be allowed, the RBI and SEBI have to provide for it in the regulations.

Cryptocurrency and mutual funds

Upon looking deeper into the subject, one can argue that cryptocurrency may form a part of one of the investments that allow mutual funds. The most obvious one would be to see if cryptocurrency could be considered a currency. The definition of currency laid out in section 2(i) of FEMA, is comprehensive and does not cover Bitcoin. While cryptocurrency may be very similar to currency or legal tender, it does not fall under the definition of a currency or the purview of Government rules and regulations.

Another possible route is to characterize cryptocurrency as a commodity. The term commodity has not been defined
 anywhere under the law in India. In the case of Tata Consultancy Services V. State of Andhra Pradesh,[8] Hon’ble Justice Sinha, concurring with the court’s view, stated that a commodity is understood to mean goods of any kind, which could be something of use or
 an article of commerce.[9] Hence, a cryptocurrency may be characterized as a commodity. So one way of legalizing cryptocurrency trading is to legalize commodity derivatives trading by mutual funds. The market regulator is in advanced stages of talks on allowing mutual funds and portfolio management services (PMS) to trade in commodity derivatives.[10]

There are multiple benefits of trading in cryptocurrency. As mentioned earlier, all transactions are recorded in a public ledger. It is marked by the blockchain transaction which ensures secure digital transactions. It is also effortless to use and promotes instant settlement.

However, at present, the RBI has explicitly shown that it doesn’t favor cryptocurrencies. In fact, it regards it as a violation of the country’s existing foreign exchange norms because the conversion of Bitcoins [11] into foreign exchange does not fall yet under the purview of the central banking institution and hence it makes such transactions highly unsafe and vulnerable to cyber attacks. Adding on to this, there are other regulatory risks, scalability risks, risks of hacking, and extreme volatility associated with Bitcoins. One of the most significant concerns regarding trading in cryptocurrency, to the government and investors both, the sale of cryptocurrency is anonymously, and hence, there is a high possibility of illegal financial transactions and the forming of a black market.

One secure step that can be taken to prevent the mishaps that can occur due to trading in cryptocurrency is to allow only financial institutions such as mutual funds, which have experts in the field, to invest and trade in cryptocurrency. In a country like India where the majority of people still do not have internet access let alone knowledge about this technologically-advanced invention, it is a safer option to only legalize trading in cryptocurrency for institutions like mutual funds who have the means and expertise to make informed decisions and maximize on such investments. This can be done by amending the SEBI (Mutual funds) Regulations, 1996. To completely rule out the option of legalizing cryptocurrency would be taking away a golden opportunity that could help boost the country’s economy. This majorly lies on the basis that cryptocurrency may have a role in the future of payments and other forms of wealth transfer.

The RBI must set further strict KYC norms for this purpose. New KYC norms will be required to regulate this new system. There are even suggestions that India could come up with cryptocurrency within its own legal framework so that regulation will be more natural. Cryptocurrency transactions can be taxed when it is mined or transferred. Mutual funds can be mandated to issue a disclosure form to its customers disclosing the high risks associated with cryptocurrency trading. If these measures are considered and implemented, the author believes that it is safe to allow mutual funds to trade in cryptocurrency and hence they should be allowed.

Conclusion

To conclude, the Government of
 India needs to recognize cryptocurrency as an opportunity and harness this opportunity for the social and economic betterment of the Nation. As the Internet once represented an opportunity, Bitcoin also represents an opportunity which, as highlighted by various eminent commentators, can help in decentralization of economic power, greater financial access and ultimately, break down socioeconomic barriers.[12]

Although there are many barriers to allowing cryptocurrency trading, and the legal framework for cryptocurrency is in its infancy, in the future this new, easily-accessible technology will undoubtedly be adopted by many countries if it continues to grow at the rate it is currently increasing. One way of legalizing cryptocurrency is to understand it to be a commodity and thereby legalizing commodity derivatives trading by mutual funds as per SEBI rules.

The author’s research show that trading in cryptocurrency should no doubt be permitted till a foolproof legal framework is in place. For this purpose, India can create its own cryptocurrency which will then be easy to regulate. An ultimate safety option could be to peg cryptocurrency to the gold standard. But this may not be acceptable and would be hard to implement. Hence, for the time being, there is no better stepping stone than first only allowing mutual funds to invest in cryptocurrency until a completely foolproof legal framework is created and cryptocurrency trading is made either legal for the public.

The reasons are manifold. Firstly, mutual funds will have the means to evaluate the value of such trading and have experts in the field who know how to trade in it. Secondly, since it is a highly speculative investment, mutual funds can provide a disclosure report of the high risks involved, and then those voluntarily ready to invest can invest in cryptocurrency. It is vital that there are regulations in place that will mandate the disclosure report of the risks involved for investors’ money to be put into cryptocurrency. This will ensure that investors voluntarily decide once they have complete knowledge about the risks involved.

Despite the many obstacles present, India must find a way around them to reap the benefits of this technology of tomorrow.

Finally, “Every new technology comes with new legal and tax problems and technology is a double-edged sword. It is imperative that the new technology is understood on a timely basis and the appropriate regulatory regime is developed so that India does not miss out on a vast opportunity. We should not throttle this business.” [13] Nishit M.Desai.

References

1.Andy Greenberg, Crypto Currency (2011),Forbes.com ( Last visited Nov 5th 2017).

2 Nicholas A, Plassaras, Regulating Digital Currencies: Bringing Bitcoin within the Reach of the IMF , https://www.zebpay.com/wp-content/uploads/2016/04/Bitcoins.pdf ?( Last visited Nov 5th 2017).

3.Jerry Brito, Andrea Castillo, Bitcoin: A Primer for Policymakers [2013], http://mercatus.org/sites/default/files/Brito_Bitcoin ? ( Last visited on 4t h Nov,2017)

4.European Central Bank, Virtual Currency Scheme http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf ( Last visited Nov 5th 2017)

5.Hiralal Thanawala, 7 reasons why you should not invest in Bitcoins ( 2017), Economic times //economictimes.indiatimes.com/articleshow/60891341.cms?utm_source=contentofinterest&utm_medi um=text&utm_campaign=cppst ( Last visited on 5 th Nov,2017

6. Llewellyn, David T, Regulation of retail investment services( 1995), Economic affairs, London 13 (Spring)?? ( Last visited on 7t h Nov,2017)

7.Dina wadia,Sahil Shah, Investment Funds in India , (2016) Practical Law, https://uk.practicallaw.thomsonreuters.com/7-517 0357?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 (Last visited on 5t h Nov,2017)

8.Hon’ble Mr. Justice S.B. Sinha’s view in Tata Consultancy Services v. State of Andhra Pradesh, 271 ITR 401 (2004). ?

9. Section 2 of The Sale of Goods Act, 1930 ?
10. Jayashree Upadhyay, SEBI in talks on allowing mutual funds in Commodity derivatives trading (Sept 2017)http://www.livemint.com/Money/8B6EwkPgkO0ewo74pGpMTM/Sebi-likely-to-allow-mutual-funds-to-trade-in-commodity-deri.html( Last referred on 5 th November,2017)

11.5 reasons you should go for cryptocurrency ( Oct 2017) , //economictimes.indiatimes.com/articleshow/60891733.cms?utm_source=contentofinterest&utm_medi um=text&utm_campaign=cppst( Last reffered on 5t h Nov,2017)

12 Bitcoins-A Global Perspective (April 2015) , Nishit Desai, http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Bitcoins_A_Glob al_Perspective.PDF ( Last visited on 7th November,2017)

13.Ibid

In this article, Priya Agrawal discusses Corporate governance in State-owned enterprises.

Introduction

Corporations, whether they are family firms or State enterprises, work within boundaries set by law, by regulations, by those who own and fund them and by the expectations of those they serve. The natures of these boundaries vary country to country and undergo fundamental changes through time. That is why there can be no single generally applicable corporate governance model.

Good corporate management means using the physical resources, financial resources, and human resources to get the best results in terms of profitability, productivity, and market capitalization. Corporate governance depends on two factors, namely, the attitudes and the values cherished by the management of the business enterprise, and the external environment in which the company operates. The external environment in which the business operates would include the legislation relating to the functioning of business enterprises covering the entire spectrum from registration of companies, structure, settlement of disputes, laws relating to capital market and so on. As regards the governance of State-owned enterprises, the Government has throughout maintained a tight rein on them.

What are State-owned enterprises?

State-owned enterprises(hereinafter referred to as SOEs) are enterprises that carry out commercial activities on behalf of the State, its owner. They are government-controlled companies or statutory corporations set up by an Act of Parliament, or departmental enterprises of the government like in the defense sector, railways, or telecommunications.

The SOEs enjoy characteristics such as distinct legal personality, the appointment of Board by the Government and audit through the Comptroller and Auditor General. The SOEs are controlled by several agencies such as the following:

• Department of Expenditure (Ministry of Finance)
• Department of Public Enterprises (Ministry of Industries)
• Planning Commission
• Comptroller and Auditor General
• Secretariat for Industrial Approvals (Ministry of Industries)
• Director General of Technical Development (Ministry of Industries)
• Director General of Foreign Trade (Ministry of Commerce)
• Ministry of Company Affairs in case of SOEs registered as companies under the Companies Act
• Parliamentary Committee on Public Undertakings (COPUs)
• The Members of Parliament
• Consultative Committee

The SOEs can be in the form of a company registered under the Companies Act, or it can be a Public Sector Undertaking (PSU). The various terminologies often used synonymously with SOEs are PSUs, State-owned Company, Government-owned Corporation, State privatized- industry.

The SOEs is a global phenomenon, and such organizations exist in Australia, New Zealand, the United States of America, China and South Africa, such as Freddie Mac and Fannie Mae in the United States of America.

Role of SOEs

State-owned enterprises play a significant role in national and international economic activity.

First, in many developing economies, SOEs are the sole providers of public services (e.g., water and electricity provision, telecommunications and postal services). Secondly, bearing in mind that many developing economies have largely agrarian economies, SOEs regularly account for between 25% and 50% of the urban economy. Thirdly, in economies with less developed private sectors, SOEs can be a major source of employment and job training for the local population.

In developed economies, a more restricted economic role is played by the SOEs. A recent study of Organisation for Economic Co-operation and Development (OECD) -area SOEs shows that they account for as much as 10% of economic activity, but in general their share of the economy is much lower, with SOEs accounting for 2.5% of national employment on average. SOEs are, however, highly concentrated in infrastructure and other network industries and in some cases also the financial sector (OECD, 2014b).

Together, the network industries (telecoms, electricity and gas, transportation and other utilities, including postal services) account for about half of all OECD SOEs by value and 60% by employment share.

Need for corporate governance in SOEs

State-owned enterprises (SOEs) are assets that the government manages on behalf of citizens. Thus, it is essential to ensure that these assets are handled with utmost care and professionalism. For economic growth and development, it is critical that the SOEs perform efficiently. One must understand the fact that the resources utilized by the SOEs are ultimately the public resources. So, when the SOEs are not managed properly, public resources are wasted, funds are channelled away from the productive activities, and the development is ultimately hindered. But when they are governed transparently and efficiently, they can correct market failures, improve public service delivery and play a role in creating fairer and more competitive markets.

Governance of SOEs

Through the SOEs, the Government plays the role of an entrepreneur, planner, investor, regulator and so on. The SOEs are required to function within the framework of national planning and are expected to work as key instruments for the realization of plan objectives. The governance of SOEs is done by the Government by making enabling provisions in the Articles of Association. These provisions cover the following aspects:

1. Check on composition of the Board of Directors
2. Nomination of Government officials on the Board
3. Restrictions on the Board powers
4. Making governmental approval mandatory in some cases
5. Vesting the power to issue directives with the Government

The control of the SOEs vests in the Administrative Ministry/Department which oversees the functioning of the enterprise undertakes periodical reviews of performance, sanctions capital schemes and issues formal and informal instructions.

Issues of governance in SOEs

SOEs face some particular governance challenges that can impair/reduce their ability to perform efficiently, create value, and contribute to economic development. One of the main reasons is the unclear accountability of the SOEs. Their accountability is often dispersed among various State bodies with inherently different policy interests. SOEs might serve various political masters who may have different interests. There is no clear line of accountability of the SOEs. This may lead to an excess political influence on the working of the SOEs; or it may leave a vacuum, with passive ownership and limited oversight, increasing the risk that corporate insiders will advance their personal interests rather than those of the enterprise and the general public. Bribery can also be a major issue in the SOEs. Their employees are particularly at a high risk of soliciting and receiving bribes.

The contrariant policies of the SOEs such as procuring profits with private companies while dispensing public services add to the complexity of the issue. Creating a balance between performance of multiple objectives intensively and falsifying competition can be a challenging situation. In the current scenario, it is of prime importance to prevent the market collapse by establishing equal application of the market regulation to SOEs and private competitors, such as guidelines relating to competition and procurement. It is also important to make sure that any subsidies to SOEs are calibrated to the actual costs of fulfilling clear public policy objectives, to avoid market distorting cross-subsidization of SOEs’ commercial activities.

Recommendations of DCA Committee on Listed Public Sector Corporations

With increasing privatization, more and more companies in the public sector would function as listed corporations with institutional and retail shareholdings in addition to the Government’s own. The Committee gave the following recommendations:

• The foremost need would be to protect the needs of vast stakeholder clientele in the public sector enterprises.
• To the extent companies’ legislation governs such corporations, it is necessary to clarify governance requirements and the mutually complementary roles of different legislative, monitoring and assurance agencies that bear upon their functioning.
• The effort should be to usher governance practices to the highest standards while offering them enough elbow room to function and respond in a businesslike
• The internal audit function is an important instrument for Board surveillance and executive-control. These arrangements should continue on lines similar to those applicable to private sector companies.
• The Audit Committees of the Boards of respective companies should be entrusted with the tasks similar to their counterparts in the private sector listed companies and ensure that the independence of internal audit function, its resources and expertise, and other such matters are duly taken care
• The concepts of vigilance and ethical conduct in business operations are valid, and every effort should be made to ensure that the deviant behavior is detected and dealt with and in fact to the extent possible, pre-empted.
• Organizational control systems should be designed to root out unacceptable behavior through more transparent processes and vastly reduced discretionary authorities.

The Committee has specifically eulogized the work done by the Committee set up in the United Kingdom in the 1990s under the chairmanship of Lord Nolan which published a document setting out standards of behavior in public service. This body has now been converted into a permanent committee with full-time members researching and offering guidance in this field. A draft code of ethics for Public Sector Enterprises and concerned administrative ministries had been prepared by the then Chairman of Public Sector Enterprises Selection Board.

It may be appropriate to constitute a Committee to consider and prescribe a code of behavior and ethics applicable to SOEs in India which can be adopted by company boards for enforcement within the organization.

The Draft code of conduct and ethics for the PSEs and Administrative Ministries

The objective of the Code is to prescribe standards of integrity and conduct that are to apply to all executives and employees in the PSEs and the officials and employees of the Administrative Ministries concerned with them.

The principles stated below underlie and supplement the rules and laws regulating the public and private conduct of the executives/officers and employees of both PSEs and Administrative Ministers.

Objectives of the PSEs

• The role of the executives/officers is to assist the PSEs to achieve its objectives as spelt out in the charter constituting the setting up of the enterprise.
• It is the obligation of every executive/officer and employee of the PSE/Administrative Ministry to hold the Rule of Law and respect for human rights solely in the public interest while making recommendations or exercising administrative authority. He/she must maintain the highest standards of probity and
• The religion, region, caste, language of the executive will have no influence on his official capacity to work.

Conflict of interest and peer pressure

• Executives, officers, and employees of the PSEs/Administrative Ministries should refrain from decisions in respect of which they have reason to believe that they are calculated to benefit any particular person or party at the expense of the public interest.
• Every executive, officer, and employee in the PSE/Administrative Ministry shall disclose any clash of interest when there is a conflict between public and private interest, or he/she is likely to benefit from any act of omission or commission while discharging his/her functions.
• Executives, officers, and employees of the PSEs/Administrative Ministries should be alert to any actual or potential conflict of interest, financial or otherwise and should disclose this to their superiors about whether the conflict covers them and their family members

Accountability and responsiveness to the public

• Executives, officers and employees in the PSEs/Administrative Ministries should be consistent, equitable and honest in their treatment of the members of the public, with particular care for the weaker sections of society and should not be or appear to be unfair or discriminatory. The decision in pursuit of discretionary powers should be justifiable on the basis of non-arbitrary and objective criteria.
• Executives, officers, and employees in the PSEs/Administrative Ministries should accept the obligation to recognize and enforce customer’s right for speedy redress of grievances and be committed to provide services of declared quality and standard to customers.

Concern for the value of public assets and funds

• The employees in PSE/Administrative Ministry should avoid wastage and extravagance and ensure effective and efficient use of public money within their control. No unlawful stoppage or disruption of work or damage to the assets of the PSEs should be resorted

Continuous improvement in professionalism and teamwork

• It shall be the duty of every employee of the PSE/ Administrative Ministry to upgrade his/her skills and knowledge continuously, strive for creativity and innovation, and nurture the values of the team working and

SCOPE’s suggestions on SOEs

The Standing Conference on Public Enterprises (SCOPE) has indicated the need for availability of resources, both for revamping and retaining a competitive edge for the SOEs in a market-driven economy. In its view, whatever resources the SOEs had, were being taken away. The need is to plow back a part of the disinvestment proceeds to the SOEs for the purpose of their development. This is particularly essential due to diminishing budgetary support to these enterprises.

OECD Guidelines for SOE corporate governance

The OECD’s guidelines for corporate governance of SOEs can be summarized as follows:

Ensuring an adequate legal and regulatory framework for SOEs

The legal and regulatory framework for SOEs should ensure a level playing field in markets where SOEs and private sector companies compete in order to avoid market distortions. The framework should build on, and be fully compatible with, the OECD Principles of Corporate Governance.

The state acting as an owner

The State should act as an informed and active owner and establish a clear and consistent ownership policy, ensuring that the governance of SOEs is carried out in a transparent and accountable manner, with the necessary degree of professionalism and effectiveness.

Equitable treatment of shareholders

The state and its SOEs should recognize the rights of all shareholders and, in accordance with the OECD Principles of Corporate Governance, ensure their equitable treatment and equal access to corporate information.

Relations with stakeholders

The state ownership policy should fully recognize the SOEs’ responsibilities towards stakeholders and request that they report on their relationships with stakeholders.

Transparency and disclosure

SOEs should observe high standards of transparency, in accordance with the OECD Principles of Corporate Governance.

The responsibilities of the boards of SOEs

The boards of SOEs should have the necessary authority, competences, and objectivity to carry out their functions of strategic guidance and monitoring of management. They should act with integrity and be held accountable for their actions.

Conclusion

Owing to the role that the SOEs play in the development of an economy, it is imperative that they function efficiently. Adoption of sound governance policies in SOEs is the need of the day!