In this article, Pratyusha Kar pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on Key features of Employment Contracts.

Introduction

With the constant evolution of employee-employer relationship, there is a perpetual divergence in the character of disputes and the nature of conflicts. Naturally, both the employee and employer always pursue to safeguard their own interests. Therefore, to strike a reasonable balance in the interests of both the groups various acts and rules have been enacted. These employment laws are not merely restricted within the limits of workplace injustice and contract agreement but are having a broader ambit of employee-employer relationship as a whole.

Further with the advent of globalisation and convenience of modern technology, there had been a phenomenal change in the employee-employer interrelationship in India. The shifting in the economic policy from regulation to liberalization and access to multinational companies has changed the complete scenario. Unique cross-border zest has been tasted in the employment agreements with several restrictions and limitations. Under present day situation, the relationship has become so diverse, intricate and ambiguous that in the present article I shall restrict my discussion only focusing on India involving several facets of employment contracts in India.

What is Employment Contract in India?

Employment contract in India is a bilateral contract agreement involving service and remuneration on quid pro quo basis for a specific period of time. The services provided by the employee are purely based on social relationship between the employee and the employer and covering no other relationships.[1] However, the Constitution of India and the Indian Contract Act 1872[2] have categorically held that in spite of agreement between the two the right to livelihood of the employee must be safeguarded.

Basic components of the Employment Contracts

The basic features of the employment contracts are based on the Indian Contract Act 1872 which include – ‘offer’ as per Section 2 (a) of the Indian Contract Act, ‘acceptance’ as per Section 2 (b) of the Indian Contract Act, ‘consideration’ as per Section 2 (d) of the Indian Contract Act, ‘competent parties’ as per Section 11 of the Indian Contract Act, ‘legal aspects’ as per Section 23 of the Indian Contract Act and ‘free consent’ as per Indian Contract Act.

Covenant clauses

In India usually the appointment letter signed by the employer and the employee acts as the general contract agreement. However, in the appointment letter itself or separate agreements containing some restrictive covenant clauses are usually signed between employer and the employee in India. Such covenant clauses are described here in under.

Confidentiality Clause

Confidentiality clause or non-disclosure of trade secret and confidential information clause are usually included in the appointment letter of the employee. This provides safety and security to the company. The employee here is not allowed to disclose any confidential information to a third party without taking permission from the employer. Normally such confidential agreements are executed separately. The IT Act 2000[3] and the IPC have the provision for criminal prosecution for breach of confidentiality. In Pyarelal Bhargava v State of Rajasthan (1963) case[4] the accused employee removed some documents temporarily, passed it to his friend and substituted with other documents was accused of theft. Supreme Court held that as the intention was dishonest mere temporary removal of the documents would be considered as larceny under section 378 of the IPC.

In Abinav Gupta v State of Haryana (2008) case[5] the accused before resigning from a company downloaded confidential documents from his company into his personal e-mail and handed it over to his new company after joining which was a competitor of the previous company. The person was held for hacking under Section 66 of the IT Act, under Section 420 of the IPC for dishonesty and under Section 406 of IPC for breach of trust.

However, in the absence of confidentiality clause in the employment agreement the employer has to depend exclusively on the judiciary and the common law rules and sometimes in absence of laid down rules under agreement clause it becomes difficult to ascertain which one is confidential and which one is not. Thus, it is better to incorporate it into the employment agreement.

Non-solicitation Clause

Sometimes this clause is included under the head of confidentiality clause discussed earlier or under non-compete clause to be discussed just after but in many cases it is drafted as a different agreement. Under this clause an employee after leaving/resigning from the organisation is restricted to provide or solicit advice to a customer of the former organisation disregarding who has proposed. Under this clause the employee also agrees not to solicit advice to his fellow worker to resign from the job and attempting to arrange jobs for the colleagues somewhere else.

In Desiccant Rotors International Pvt. Ltd. v Bappaditya Sarkar & Anr. (2009) case[6] the former manager of the company was restricted to solicit customers and suppliers of M/S Desiccant Rotors International. In Embee Software Pvt. Ltd. v Samir Kumar Shaw (2014) case[7] Calcutta High Court held that mere retention of documents by an ex-employee never amounts to breach of secrecy but the solicitation acts of a former employee inhibiting clients of the former organisation could not be allowed.

Non-compete Clause

Under non-compete clause of the agreement an employee is not permitted to work in a competing organisation for a period of six months to two years (it may vary form organisation to organisation) after termination of his job. Although Article 19(g) of the Indian Constitution administers right to practice any profession, trade or business but it is not an absolute right and restrictions can be imposed for the sake of public interest.

In Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd (1967) case[8] the court held that non-compete clauses after termination of employment is not valid as per Section 27 of the Indian Contract act.

Training Bonds

Present day employers usually organise trainings for their employees even before joining the organisation. The employees had to sign a contract bond that after completion of the training they must serve the organisation for a specific period. If they fail to serve the employer would look for compensation. However, under Indian context such clauses are not enforceable. The organisation may at least claim the actual expenditure incurred and not any penalty.

In Satyam Computer services Limited v Ladella Ravichander (2011) case[9] an employee left the job suddenly and was charged to pay Rupees two lakhs in addition to stipend charges and additional expenditure meted out by the employer for his purpose as per the bond agreement he had entered into. The Andhra Pradesh High Court held that as the employee had not caused any damage to the organisation he should not be charged abnormally and fixed an amount of Rupees one lakh considering his job period and the actual cost incurred. In the Sicpa India Limited v Manas Pratim Deb (2011) case[10] also same type of verdict was given by the Madras High Court.

Miscellaneous Clauses

Probation Period

Probationary period is the trial period before absorbing any employee into permanent status. In contract the employer must mention the period of probation. However, the employer may extend the period of probation if there is unsatisfactory performance.

Salary and payment terms

Details of the salary structure with statutory deductions and other deductions like tax, PF, insurance etc. should be mentioned in the contract.

Leaves

The leaves, holidays, and vacation policy are to be stated clearly in the contract. The leaves may include casual leaves, medical leaves, earn or privilege leaves, special leaves etc. In vacation clause the number of vacations entitled to enjoy per year and the provision to carry forward the unused vacation in the forthcoming years should be there.

Termination

One of the most important clauses in the employment contract agreement is the termination clause. In termination clause usually the notice period (usually one month) from either side is usually mentioned. This clause should also include the terms of termination, responsibilities to be carried out by the employee and the employer, compensation, if any to be paid by the employer, penalty, if any to be provided by the employee due to short notice period.

Termination may be voluntary or involuntary. When an employee retires or resigns from the company, the termination is voluntary. On the other hand if an employer terminates its employee due to breach of contract, misconduct and other similar issues, the termination is involuntary. However, in present day employment contract some post-termination clauses are also incorporated particularly covenants as discussed earlier.

Conclusion

An employment agreement in India is a form of any other contracts with some specialties. The contracts of employment is usually an appointment letter issued by the employer containing a series of clauses as mentioned earlier like confidentiality, non-solicitation, non-compete, training bonds, probation period, salary and payment terms, leaves, termination etc. and the employee merely puts his signature on a duplicate copy of the same as a token of acceptance. But if the agreement is anti-competitive in nature and restricts the employee to practice his profession it is not only illegal but also immoral. Justifiable restrictions in the employment contracts are acceptable but excesses of it lead to legal complications.

References

[1] Net Lawman, An Indian perspective on employment agreements, https://www.netlawman.co.in/ia/an-indian-perspective-on-employment-agreements

[2] Indian Contract Act, 1872.

[3] ^{Information Technology Act 2000; Section 66 (hacking), Section 65 (tampering of computer source document), Section 43 (damage of the computer system), Section 66E (violation of privacy policy).}

[4] ^{Pyarelal Bhargava v State of Rajasthan (1963) AIR 1963 SC 1094.}

[5] ^{Abinav Gupta v State of Haryana (2008), CriLJ 4356.}

[6] ^{Desiccant Rotors International Pvt. Ltd. v Bappaditya Sarkar & Anr., (2009) Delhi HC, CS(OS) No.337/2008 (decided on July 14, 2009.}

[7] ^{Embee Software Pvt. Ltd. v Samir Kumar Shaw (2012) AIR 2012 Cal 141.}

[8] ^{Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd (1967) AIR 1967 SC 109.}

[9] ^{Satyam Computer services Limited v Ladella Ravichander (2011), MANU/AP/0416/2011.}

[10] ^{Sicpa India Limited v Manas Pratim Deb (2011), MANU/DE/6554/2011.}

This article is written by Kirti Prakash.

How I Used Facebook To Find My Startup Co-Founder

If you wish to succeed in building a successful startup, then you’ll have to nail the hiring part in your business.

If you get it right, your startup will grow like crazy.

But if you mess this up, you will continue to suffer for a long time.

And sooner rather than later bad hiring will start impacting in every function of the business.

It will cost you a lot of time and money.

I think it’s close to impossible to recover from early stage poor hiring.

And if you get your core team wrong, then you are Doomed!

Over a period I have seen that the most significant hiring any entrepreneur can make is the co-founder hiring.

Because building a business is extremely hard. It is one of the most difficult things you’ll ever attempt in your life. You need someone who can support you in this journey of building and managing your company, someone who is there to help you in your day to day decision making.

And it’s not only a matter of finding someone who complements your skill set.

But it’s way more than that.

I think there is a lot that goes on when you have a smart business partner who is on board with you. You’ll have plenty of emotional, mental & psychological support which can help you in sailing through your bad days.

And that’s the reason why I am specifically writing this story because I wanted to tell you about how I found my business partner on Facebook using a simple approach and how you can do the same by applying the same formula and get your results in a matter of few weeks.

So let’s just dive in straight to my story…

Now I was almost 6-8 weeks deep into building my product.

I was working on my product day in and day out. And after working for long extensive hours one day, I realised that this is the worst approach I can take to building a company.

If I keep on working like this, I can not go far with this product.

I will need some extra help on this. Not just an employee but someone who can put his blood and sweat like me and dedicated himself to building this company.

Hiring a senior level employee won’t just make the cut. Because I couldn’t afford to pay high salaries. I realised having a co-founder would solve this issues of mine in the fastest way possible.

So I didn’t waste much time. I started reaching out to my GANG.

I started reaching out to my school friends, college mates and other acquaintances who were there in my network.

I tried a lot of ways so that I could get one person interested in working with me.

But it’s like one of those things where the needier you get, the more it repels other people.

But after investing some time in it, I came across few people who were interested in working with me, but but but….

There was a catch to it.

The ones who were interested in working with me weren’t ready to commit to me for full-time.

I heard things like “ I don’t know, I like your project, But I am not too sure about this. I don’t think I’d be able to convince my parents/wife. “

For me, it was a no-brainer, that if someone has to work on this, they’d have to come for full time with me and work on building this together with 100% commitment to it.

Soon it was becoming hard to convince someone to come with me for a full-time GIG.

I feel bad in telling this, but I even went to the extent of making those needy “ looking for co-founder posts “ on Facebook.

Now I don’t know whether you have seen such posts or not, but you can go to startup forums on Facebook, and you will find plenty of such examples of people desperately hunting for co-founders on these groups.

But even that couldn’t get me any solid leads.

Until one day I was casually browsing on Google. I got to know about this person Nikhliesh from HiringDecoder. Nikhilesh helps early and mid-stage companies in hiring co-founder by using his simple step by step approach.

Soon we got talking on Email and then later on the phone and I got to realise of all the mistakes I have been making till now.

He helped me in refining my pitch so that it attracts the right type of people for my startup. And within 4 weeks of my hunt, I got a crazy number of applications in my email.

By the end of the process, I had close to 200+ applications with me. All these people wanted to work with me and were happy to join me as a business partner.

Now the process that I followed was simple if I can pull off results like 200+ applications I am sure you can do it too.

But if I tell you that it all happened in this easy way, it wouldn’t be fair on my part.

Coming to this point wasn’t easy.

I wasted a lot of time in going to conferences, meetups & pitching sessions in the hope that I’d be able to find a good guy in those meetups.

But If I had to go in the past, and fix one thing, I would NOT go and waste my time in any of those events.

The BIGGEST problem with these methods is that you have to put in a lot of effort and results are very less.

Now when I say that, what I mean to say is that the kind of people who come to these events are usually wantrepreneurs.

So your chances of finding a good guy in these events are very less.

So it is better to spend your time in areas where you get high quality leads with minimal effort.

FOCUSING on too many low-yield channels is only going to get you BAD leads.

Instead, you should start focusing on high yield efforts.

A good idea to approach this problem is by approaching it like a marketing funnel.

You know how a funnel is? Right?

It has a bigger mouth on the top and a narrow one on the bottom.

Your idea should be to push as many people as you can in your funnel.

So that high-quality leads can keep coming in, and on the other end, you get high-quality hires on the narrow bottom end.

A good source to find high-quality leads is on Facebook.

Facebook out of all the social networks has the best reach when it comes to access to people. It is an excellent medium to source consistent applications for finding a co-founder.

So what you need to do is, you need to get your message out there and show it to as many people as you can.

But before you start spreading your message it is important to understand that you create the right job description for your co-founder.

Since it will take a lot of time, you can learn how to build a job description by clicking on the link here.

The more time and thought that you put in at this stage, the better you’ll have the chances of finding a co-founder.

Once you have created the perfect co-founder job description, then the next thing you need to do is you need to figure out all the startup and startup related groups on Facebook and join all of them.

Now, this step might take you close to 7-10 days to get accepted in all the groups.

Try to join all the startup groups of your country, don’t try to limit yourself to the same city or the state, seek to find the best ones in your country and make your postings over there.

Now back when I did it, I joined close to hundred plus startup and startups related groups on Facebook before floating my job description over there.

One thing which you should keep in mind is that you should only join groups that have more than 300+ members. Because if you try to HIT a number less than 300, it will difficult for you get some action from that particular groups.

So try to find those groups which have this kind of numbers.

Once you have been accepted in these groups, then the next thing you need to do is, you need to start posting your job description in these groups.

Post it in as many groups as you can because the more postings you make, the more people will view it, and it will increase your chances of getting more people in your funnel.

I followed the same formula, and my job posting became amongst the most popular job postings ever.

You can copy and learn from my method and see the kind of job description I had created back then.

Please don’t copy my script word by word because what has worked for me might not work for you, so try to seek inspiration from this and build your case on your own.

You can also run Facebook Ads and put $1 a day ad budget to it. This way will get you high quality leads at a much faster pace.

If you put in the effort to make these 2 techniques work the chances are that you will be getting your results in a matter of few weeks.

When I made my post, I got

• 200 + applications.
• 52 emails
• 15 calls/ meetings
• 2 shortlisted candidates for trials.
• 1 Final recruit.

(This is how my stats looked like)

But again getting up to this point where you get lots, and lots of applications mean you follow the complete process and build a crafty co-founder job description post.

And if you create a perfect post like this you can get access to high-quality people on facebook.

And if you want to learn through the complete process of hiring a co-founder, then you can go to my ultimate guide on how to find a co-founder (which has all the word by word scripts and examples in it)

Try to use this method and let me know in the comments section if you have any doubts about it; I’d be more than happy to help if you need my help on anything.

Feel free to write in the comments section.

See you soon.

Kirti

PS – I take one to one consulting client for hiring co-founders as well, if you need particular help, write me an email & one of my team members will get back to you on it.

In this article, Parth Sarthy Kaushik discusses 5 biggest Indian IPOs of 2017 so far.

Initial Public Offering (IPO) is the process by which a private company goes public by sale of its stocks to general public. The IPO is an exciting time for a company and signifies that it has become successful enough to require much more capital to continue to grow. Following are the five biggest Indian IPOs of 2017 (so far).

General Insurance Corporation of India

General Insurance Corporation of India is the largest reinsurance company in India in terms of gross premiums. The company provides reinsurance across key business lines including fire, marine, motor, engineering, agriculture, liability, credit and finance. Through the IPO, the Government of India is selling 12.26 % stake in the company and the Corporation itself is selling 1.96 % stake.

This will be India’s third biggest public offer ever after Coal India’s Rs 15,200 crore and Reliance Power’s Rs 11,700 crore issues.

Issue Details

• Objects of the Issue: (a) Fresh Issue will be utilized to increase the capital base to support the growth of their business and maintain current solvency levels; (b) The proceeds from OFS would help the government meet its fiscal deficit target of 3.2 % of GDP for the year ending in March.
• Issue Type: Book Built
• Opening Date: October 11, 2017
• Closing Date: October 13, 2017
• Provisional Listing Date: October 25, 2017
• Issue Size: Rs. 11,372.64 Cr. (Fresh Issue- 1.7 cr. Units; OFS- 10.7cr. units)
• Face Value: Rs. 5 per Equity Share
• Price Band: Rs. 855 – Rs. 912 per Equity Share
• Sector: Reinsurance
• Ratings: Stable
• Risk Factors: Highly-regulated industry, ability to accurately assess the risk associated with the reinsured businesses and substantial exposure to agriculture sector.
• Listing At: BSE & NSE

SBI LIFE

SBI Life Insurance Company is India’s largest private life insurance firm in terms of new business premium (NBP), second only to Life Insurance Corporation of India (LIC). It was established in 2001 as a joint venture between State Bank of India (SBI), which is India’s largest state-owned banking and financial services company, and BNP Paribas Cardiff.

Issue Details

• Objects of the Issue: Providing liquidity to the existing shareholders and enhancing the “SBI Life” brand name.
• Issue Type: Book Built
• Opening Date: September 20, 2017
• Closing Date: September 22, 2017
• Listing Date: October 3, 2017
• Issue Size: Rs. 8400 Cr. (Fresh issue- 12 crore units)
• Face Value: Rs. 10 per Equity Share
• Issue Price: Rs. 700 per Equity Share
• Oversubscribed: 3.6 times
• Sector: Life Insurance
• Ratings: Stable
• Risk Factors: Change in Interest Rates, Highly Regulated Industry & Inability to Maintain Market Share
• Listing At: BSE & NSE

ICICI Lombard General Insurance

ICICI Lombard General Insurance Company Limited is ICICI Bank Ltd. is the largest private non-life insurance firm in India, having 8.4% market share on gross direct premium income (GDPI) basis. It was incorporated in 2002 as a joint venture between India’s largest private-sector bank and Fairfax Financial Holdings Limited. The company offers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, marine, engineering and liability insurance, through multiple distribution channels.

Issue Details

• Objects of the Issue: Providing liquidity to the existing shareholders and enhancing the “ICICI Lombard” brand name.
• Issue Type: Book Built
• Opening Date: September 15, 2017
• Closing Date: September 19, 2017
• Listing Date: September 27, 2017
• Issue Size: Rs. 5700 Cr. (OFS- 8.6 crore units)
• Face Value: Rs. 10 per Equity Share
• Issue Price: Rs. 661 per Equity Share
• Oversubscribed: 3 times
• Sector: General Insurance
• Ratings: Stable
• Risk Factors: Concentration Risk, Regulatory Changes & Substantial Exposure to Crop/Weather Insurance.
• Listing At: BSE & NSE

IRB InvIT Fund

IRB InvIT Fund is an infrastructure investment trust sponsored by IRP Infrastructure Developers Limited, one of the largest infrastructure development and construction companies in India. It owns, operates and maintains a portfolio of toll-road assets in India.

IRB InvIT has the distinction of being the first IPO in the InvIT space.

Issue Details

• Objects of the Issue: Investment in the Project SPVs by way of an issue of debt.
• Issue Type: Book Built
• Opening Date: May 3, 2017
• Closing Date: May 5, 2017
• Listing Date: May 18, 2017
• Issue Size: Rs. 5291 Cr. (Fresh issue- Rs. 4,300 crore; OFS- 34.6 crore units)
• Face Value/Issue Price: Rs. 102 per Equity Share
• Oversubscribed: 8.6 times
• Tenure: 16 years
• Sector: Toll Road Construction
• Ratings: AAA/Stable
• Risk Factors: Inflation, Traffic Volume & Government Policies
• Listing At: BSE & NSE

IndiGrid InvIT Fund

IndiGrid InvIT Fund is an infrastructure investment trust sponsored by Sterlite Power Grid Ventures Limited, one of the leading independent power transmission companies operating in the private sector. It was established in 2016 and owns inter-state power transmission assets in India.

IndiGrid InvIT is first ever IPO in the Power Sector InvIT space.

Issue Details

• Objects of the Issue: Repayment of external debt as well as unsecured loans from Sterlite Power Grid Ventures Ltd. to Bhopal Dhule Transmission Company Ltd. and Jabalpur Transmission Company Limited.
• Issue Type: Book Built
• Opening Date: May 17, 2017
• Closing Date: May 19, 2017
• Listing Date: June 6, 2017
• Issue Size: Rs. 2250 Cr. (Fresh Issue)
• Face Value/Issue Price: Rs. 100 per Equity Share
• Oversubscribed: 1.3 times
• Tenure: 35 years
• Sector: Power Transmission
• Ratings: AAA/Stable
• Risk Factors: Load Availability & Market Trends
• Listing At: BSE & NSE

In this article, Tejaswi does a comparative analysis of Insolvency Laws of India and The United Kingdom. A Chartered Accountant student, Tejaswi writes about things that he cares about. He loves to live a Professional Life (like #HarveySpecter). Works in QuickCompany which deals in Company Registration and Other Legal Activities.

The Insolvency and Bankruptcy Code, 2016 is obviously a reformatory move by the Indian Government as prior to its implementation, the then existed bankruptcy framework in India was unclear and was overlapping with many Acts and laws. There was no certain law to regulate insolvency or restructuring of companies in India. The lenders were unconfident with laws in India related to the recovery or restructuring of the defaulted assets.

To regain the confidence of the creditors and to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders for maximization of value of assets, the new Code is introduced. The new Code consolidated the laws relating to insolvency and restructuring of corporations, individuals and partnerships. The Government has the view that such consolidation would aid great clarity in debt default laws and would facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt.

Experts in the field are in the opinion that the Code assented by the President on May 28, 2016, closely mirrors the UK Insolvency Regime. It may be a fact to agree, that there were a couple of laws which were formed at the time of British rule in India were in practice prior to the launch of the new Code. The outdated laws and overlapping laws planted India in the rank of 136 on resolving insolvency. Insolvency resolution in India took 4.3 years on an average in India is self-explanatory for the worst conditions experienced by creditors.

How to repair was a big challenge for Bankruptcy Law Reforms Committee (BLRC). Adopting a successful and proven regime could be the best choice made them think that UK regime can be a better reference. As per World Bank, recovery in the UK is at a rate of 88.6 cents per dollar and that too within a period of 1 year on average, compared to 25.7 cents per dollars in India.

However, the Indian Code of 2016 cannot be exact as those of UK’s, certain key aspects of the UK legalisations may not work in Indian scenario and thus are customized to fit for Indian climate.

This article will have a close evaluation on how the Indian Code and UK Code relates to each other.

Adopted

1. Control:- Under the old laws and acts, the debtors had the upper hand to control the insolvency process. The new law has made a remarkable effort to switch the debtor in possession regime to a creditor in control. As per the new Code, now a creditor or group of creditors can initiate the insolvency process by filing an application to the Adjudicating Authority when a borrower is in default. However, the legalisation vested with the debtors has not been lifted, a borrower or debtor can still initiate the process by filing an application in the respective authority. The regime was adopted from the UK laws which is considered to be the most internationally recognized system.
2. Professionals: The appointment of a licensed professional is another key aspect adopted from the UK regime. As per the new code, the consortiums of creditors on regulatory clearances appoints an interim Insolvency professional to oversee the insolvency process. Three sets of Resolution Professionals are sought to be appointed – Interim Resolution Professional, Final Resolution Professional and the Liquidator. Under the oversight of the Board, the Insolvency Professional will develop professional standards, codes of ethics and exercise a disciplinary role till the end of the process. Insolvency professionals would handle the commercial aspects of insolvency resolution process. Insolvency professional agencies will develop professional standards, code of ethics and be the first level regulator for insolvency professionals members leading to the development of a competitive industry for such professionals.
3. Freeze:  During the insolvency process, when the creditor action has stayed, the Adjudicating Authority on the recommendation of the Resolution Professional can grant Moratorium. As per the Code, during the period of Moratorium, no suits can be instituted or recovery action can be initiated.
4. Priority: The new Code adopted distribution of payments in priority as outlined in UK regime, during the liquidation of the company. Based on the vote of the majority of the creditors, on failure of the submission of resolution plan within the prescribed period, the liquidation process is initiated. The assets held by the debtor are recovered during the liquidation process and will be distributed by the liquidator in the manner of priorities laid in the law.
5. Cross-border: As per the provision of the code, the Government of India can enter into agreements with any country outside India for enforcing provisions of the Code and notify applicability of the same from time to time. Further, assets of the debtor located outside India may also be included for the purpose of the insolvency resolution process and/or liquidation before the Adjudicating Authority.
6. Others: There are certain other parts also can be seen in the Code, which are similar in the UK regime, including the period of antecedent transaction of upto 2 years, license examination for insolvency professionals etc.

Amended or Added

1. Control: During the insolvency process in India, the insolvency professional appointed shall obtain approval from the creditors on various matters related to the insolvency process. Section 28 of the Code detailed such matters which require creditor approval. Whereas, in UK regime, generally the approval is required only at the time of appointment of such professional.

Though the creditors in India enjoy such privileges during the process, there voting rights are limited. As per the Code, only secured or unsecured creditors vote in a creditor committee, whereas in UK, all creditors including trade creditors have voting power in the creditor committee.  Apart from that the 75% of the secured or unsecured creditors will have to approve the resolution plan proposed, whereas the creditors under UK regime a simple majority can approve the plan during the insolvency process.

2. Professionals: In India, an individual or a group of agencies can act as an Insolvency Professional upon approval from the creditor’s committee. However, in the UK only licensed individuals are eligible to become an Insolvency professional. Also, in India, an Insolvency Professional is not required to provide a surety bond or professional insurance whereas the counterpart demands so. There are distinctions in the licence renewal though both demands a licensing or examination process to become an Insolvency Professional. The licences obtained in India are of life membership in nature whereas in UK it should be renewed annually.
3. Freeze: As per the Code on failure of the submission of resolution plan within the prescribed period or if it is not approved by the creditors within 180 days, the liquidation process would automatically get initiated. However, in UK, no such timeline has been specified under the law and is valid for the entire period till plan is approved, if rejected only the liquidation process shall be initiated.
4. Others: In India, there are specialized courts to deal with Insolvency as the new Code established the formation of two tribunals to act as adjudicate Authority and deal with the cases related to insolvency, liquidation and bankruptcy process. The Debt Recovery Tribunal to oversee insolvency, liquidation and bankruptcy process of individuals and unlimited partnership firms, whereas National Company Law Tribunal to administer those of companies and limited liabilities entities.

As per the Code, In India, the remuneration paid to the liquidator could be decided by the creditors and would be decided based on the scale of realization and distribution. However, in UK regime the remuneration is fixed on consensus of creditors and the insolvency professional appointed, in default the court may intervene to fix the remuneration. It is important to note here that the liquidator in India is required to liquidate the assets within a period of two years, whereas no such requirement in the UK for the liquidator.

The UK regime has influences in formulating the Insolvency and Bankruptcy Code in India, but the Bankruptcy Law Reforms Committee has made commendable efforts in customizing it to Indian Scenario. The move is expected to help India move up from its current rank of 130 in the World Bank’s ease of doing business index.

Ref: http://www.ey.com/Publication/vwLUAssets/ey-interpreting-the-insolvency-and-bankruptcy-code/$FILE/ey-interpreting-the-insolvency-and-bankruptcy-code.pdf

iPleaders is looking for a skilled PHP developer for Kolkata office

iPleaders is a globally recognised legal education company with offices in Delhi and Kolkata, catering to students, entrepreneurs and professionals from 23 countries towards achieving professional growth. Our online legal education platform caters to thousands of students across the globe while our websites and blogs are visited by over 5 lakh visitors every month. We have been in operation since 2012 and have been the market leader in the domain of online legal courses and legal training workshops.

Job Description

We are looking for a Senior PHP Developer responsible for managing back-end services and the interchange of data between the server and the users. Your primary focus will be the development of all server-side logic, definition and maintenance of the central database, and ensuring high performance and responsiveness to requests from the front-end. You will also be responsible for integrating the front-end elements built by your co-workers into the application. Therefore, a basic understanding of front-end technologies is necessary as well.

The job will give you the best opportunity to learn and experiment with the latest frameworks and languages (Golang with ReactJS for an idea). It would also give you space to grow with your own tastes when it comes to usage and choice of right technology.

You would also get experience and training in building products which is highly valued in the marketplace, and get the satisfaction of creating amazing software that is used by thousands of paid customers.

Responsibilities

• Integration of user-facing elements developed by front-end developers
• Build efficient, testable, and reusable PHP modules
• Solve complex performance problems and architectural challenges
• Integration of data storage solutions
• Engage in constant learning and development

Skills And Qualifications

• Strong knowledge of PHP web frameworks such as Codeigniter, Laravel, etc.
• Understanding the fully synchronous behavior of PHP
• Understanding of MVC design patterns
• Basic understanding of front-end technologies, such as JavaScript, HTML5, and CSS3
• Knowledge of object oriented PHP programming
• Understanding accessibility and security compliance
• Strong knowledge of the common PHP or web server exploits and their solutions
• Understanding fundamental design principles behind a scalable application
• User authentication and authorization between multiple systems, servers, and environments
• Integration of multiple data sources and databases into one system
• Familiarity with limitations of PHP as a platform and its workarounds
• Creating database schemas that represent and support business processes
• Familiarity with SQL/NoSQL databases and their declarative query languages
• Proficient understanding of code versioning tools, such as Git

Tech Experience

• Stack: LAMP, MEAN (preferable)
• Database: MongoDB and MySQL
• Frameworks: Core PHP, Laravel and Symfony
• Tools: Guzzlehttp, Composer, Git, Docker (preferable)
• Projects: Payment gateways, Web Scraping, Content Management Systems, SOAP and REST APIs

Salary/ Perks/ Misc

• Basic: INR 3 to 4.8 LPA (based on experience and previous salary slips) + incentives for achieving targets.
• Annual discretionary bonus of upto INR 60,000
• Sunday off, Saturday half day
• Office in Sector V, Salt Lake, Kolkata
• Promising opportunity to grow and rise through ranks inside the company

Application

• Apply with your resume and a paragraph about yourself of not less than 100 words.
• Mention the development environments and stacks you are comfortable with.
• Describe your current work profile, your current salary, and your expected salary.
• Email to [email protected] with subject: “Senior PHP Developer”.

Shortlisted candidates would be invited for an in-person interview with the Technology Manager.

In this article, Satyam Mishra discusses Infringement and passing off of goods under Trademark Act, 1999.

Difference between Infringement and Passing off

• Infringement is a statutory remedy provided under section 28(1) of The Trademark Act, 1999 for which registration of a trademark is a pre-requisite, while Passing off is a common law remedy and in Passing Off claims, registration of a trademark is not required.
• Under infringement, plaintiff is only required to show deceptive similarity, as there is presumption of confusion. In passing off, apart from proving deceptive similarity the Plaintiff is also required to prove confusion in public and likelihood of injury to the plaintiff’s goodwill.

Legal remedies – Infringement and Passing off of trademark

To know more about  Trademark Infringement please visit

• If the trademark is registered, section 28(1) of The Trademark Act, 1999 provides a right to get relief against the infringement of trademark in accordance with the provision of the Act.
• Passing off is not specifically mentioned in the act. An infringement proceeding cannot be initiated against unregistered trademark but Section 27(2) says that a passing off proceeding can take place for an unauthorized use of an unregistered trademark.

Things considered as Infringement or Passing off of Trademark

• Trademark infringement/Passing off is the unauthorized use of a trademark or service mark on competing or related goods and services. The success of a lawsuit to stop the infringement depends on whether the defendant’s use causes a likelihood of confusion in the average consumer.
• Under Indian legislation the same is provided in Section 29. According to Section 29, a registered trademark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade in any way which causes confusion in general public.
• If that mark is being used in different form of business from that in which registered trademark is being used and have some identical or similar feature, still it amounts to infringement/passing off of trademark.

Remedy for infringement and passing off of Trademark

There is two type of remedy is provided in case of infringement/passing off of Trademark. Plaintiff has the option to initiate proceeding under any one or both of them.

1. Civil remedies,
2. Criminal remedies

Civil Remedies

• Suit for infringement/Passing off under section 134:- Suit for Infringement/Passing off arising out of the use by the defendant of any trademark which is identical with or deceptively similar to the plaintiff’s trademark, whether registered or unregistered shall be instituted in District Court having jurisdiction to try the suit.
• Relief under Section 135:- Under Section 135(1) In a suit for Infringement/Passing off if the court agree (on the request of plaintiff ), can grant either:

1. Damages or
2. An account of profits,

Together with or without any order for the delivery-up of the infringing labels and marks for destruction or erasure.

Under Section 135(2) Court can give Ex parte or interlocutory injunction order in accordance with Section 36-42 of Specific Relief Act, 1963 or Order XXXIX Rules 1 & 2 and section 151 (Inherent power of the Court) of the code of civil procedure, 1908, for discovery of documents, preserving of infringing goods, documents or restraining the   defendant from disposing Assets which cause adversely affects the plaintiff.

Procedure under civil law

• In the case of infringement, a suit can be filed under section 134 of Trade Mark Act, 1999 in district court. Jurisdiction for the same will be, where the head office of plaintiff is situated or where the cause of action has arisen. Section 20 of CPC does not apply for the purpose of suit under 134 of Trademark Act,1999.
• If the court thinks fit it can allow any of the following order:
  • An injunction restraining further use of the infringing mark under Order XXXIX Rules 1 & 2 of CPC ie. temporary injunction or under Section 36-42 of specific relief act i.e. permanent injunction
  • Damages or an account of profits.
  • An order for delivery-up of infringing labels and marks for destruction or erasure.
• This remedies can be taken in case of infringement as well as in the case of passing off of trademark.

Criminal remedies

• Any person who uses a particular trademark without permission of the proprietor and makes that trademark deceptively similar shall be deemed to falsify a trade mark under section 102 of Trade Mark Act, 1999. Penalty for the same is given under Section 103 of the same act.
• Penalty under Section 103:- Any person falsifies any trademark or falsely applies to goods or services any trade mark shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 3 years and with fine which shall not be less than Rs50,000 but which may extend to Rs2,00,000.
• According to section 104 if any person who helped the accused by selling, providing or hiring services of the such good, possessing such goods for sale or any other possible way will be punished with imprisonment for a term which shall not be less than 6 months but which may extend to 6 years and with fine which shall not be less than Rs 50,000 but which may extend to Rs 2,00,000.

Except in the case where that person can prove that

1. He had taken all necessary precautions at the time of alleged offence.
2. He gave all the information in his power, to the prosecutor with respect to the person from whom he obtained such goods or things or services.
3. He had acted innocently
4. Under Section 105 if a person commits any of the offence provided in section 103 or 104 he shall be punishable for the second and for every subsequent offence, with imprisonment for a term which shall not be less than 1 year but which may extend to 3 years and with fine which shall not be less than Rs 1,00,000 but which may extend to Rs 2,00,000. Fines and imprisonment can be reduced if court thinks it fit.

This Section does not have retrospective effect

• Under Section 111 of the Act forfeiture of goods is provided in the conviction or acquittal under Section 103 if there is no intent to defraud the plaintiff, the court convicting or acquitting him may direct the forfeiture to Government of all goods and things by means of, or in relation to, which the offence has been committed.
• Section 115(3) make offence under Section 103 cognizable and under Sub-Section 4 of Section 115, any police officer not below the Rank of DSP and equivalent may, if he is satisfied that any of the offences referred to in sub-section (3) of Section 115 has been, is being, or is likely to be, committed, search and seize without warrant the goods or things involved in committing the offence, wherever found, and all the articles so seized shall, be produced before a Judicial Magistrate of the first class or equivalent. Provided that the police officer, before making any search and seizure, shall obtain the opinion of the Registrar on facts involved in the offence relating to trademark and shall abide by the opinion so obtained.

Procedure under Criminal law

• A case filed under 103 is cognizable so FIR can be filed under section 154 CrPC if the police officer refuses to register a FIR the person can file complain before the magistrate under section 156(3) CrPC in accordance with the provision procedure laid down in Section 190 CrPC.
• Upon registering the FIR or on the order of magistrate (as the case may be) the investigation will be initiated and conducted by the police officer which include search and seizure of the good with infringed trademark.
• Benefit of criminal remedy in case of infringement is that victim can initiate proceeding even against unknown persons. Sometimes it happens that the identity of the manufactures and the distributors of the infringing material is not known to the complainant and the same operates as an obstacle in initiation of criminal action, but under Section 93 and 94 of CrPC under which one can request for initiation of a search and seizure proceedings against known and unknown persons.

In this article, Ram Maroo pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on Permanent Lok Adalats.

Introduction

It is a perception that Lok Adalats is not considered to be a court in its conventional sense i.e. it does not adjudicate on facts by the application of law but on the contrary it encourages the parties to solve their disputes using other means such as conciliation to reach an amicable settlement which gets crystallized into the award of the Lok Adalat.

Based upon the Gandhian Principles,[1]Lok Adalat is one of the most important components of the ADR system operating in India.[2]

The Judge of the Lok Adalat plays an evaluative and a suggestive role and helps the parties to negotiate and reach a mutual and an acceptable settlement. The whole emphasis in Lok Adalat proceedings is on conciliation rather than adjudication[3] and the entire process is based on effective and active participation and negotiation between the parties.

Lok Adalats gained a lot of popularity during the 1980’s and was therefore granted a statutory recognition by mandating Article 39 of the Constitution of India which ultimately led to the enactment of the Legal Services Authorities Act, 1987 on November 9^th 1995.[4] Justice at Lok Adalats are provided by giving both the parties an equal opportunity to secure their position. Principles of ‘audi alterem partem hence, natural justice is duly followed before passing any order.

Permanent Lok Adalats

Unlike any other courts or tribunals, Permanent Lok Adalats works on a regular basis for permanent dispute resolution. However, the Legal Services Authorities Act was amended in the year 2002[5] and the chapter[6] pertaining to Permanent Lok Adalats was inserted.

To be the Chairman of the Permanent Lok Adalat, one must be a District Judge or an Additional District Judge or has held a judicial office higher in rank than that of a District Judge. Two other persons having adequate experience in public utility services are also appointed by the government.[7]

The jurisdiction of the Permanent Lok Adalats can only be invoked at pre-litigation stage by making an application to the Permanent Lok Adalat for the settlement of the dispute. Once, the jurisdiction has been invoked, the parties cannot take a recourse before a court of law. However, the jurisdiction of Permanent Lok Adalats does not relate to any non-compoundable offence[8] or where the value of the property in dispute exceeds Ten Lakhs. Permanent Lok Adalats cannot take cognizance of a matter which is already sub-judice in a court of law.[9]

A permanent Lok Adalat can direct the parties to produce any sort of evidence or any other documents, if the case requires to be before it while conduction a conciliation proceeding. It also must follow the principles of natural justice, fair play and equity, and is not bound by the Code of Civil Procedure, 1908 and The Indian Evidence Act, 1872.[10]

Where the parties reach an agreement on the settlement of the dispute, they have to sign the settlement agreement and the Permanent Lok Adalat then passes an award in terms thereof and must furnish a copy of the agreement to each of the parties concerned.[11] The idea of a Lok Adalat and a permanent Lok Adalat clearly differs here. Where the parties fail to reach a settlement or if the dispute does not relate to any offence, then the matter is decided based upon the merits of the case.[12] Thus, Permanent Lok Adalats have a residuary jurisdiction, in addition to the jurisdiction enjoyed by the Lok-Adalats, to decide the dispute by virtue of Section 22 C (8), even if the parties have failed to resolve the dispute after conciliation.[13]

The award of a permanent Lok Adalat is final and binding upon the parties and on every such person claiming under them and the same is deemed to be a degree of a civil court.[14] No appeal lies against the judgement of the Permanent Lok Adalat and hence, the award is final.[15] The award shall, however, be made by a majority of the members constituting the Permanent Lok Adalat.[16]

Whether Permanent Lok Adalats are an ADR Mechanism?

The classification of the Permanent Lok Adalats as an ADR mechanism has always been in question and much clarification hasn’t been provided with respect to it. In State of Punjab v. Jalour Singh[17] The Supreme Court held that such type of Lok Adalats only have a conciliatory role and the award of the Lok Adalats does not mean and imply any form of an independent verdict or an opinion derived out of the decision-making process.

The second question that comes within the ambit of questioning is whether the concept of Lok Adalats co-exists with this judgement of the Supreme Court. In State of Punjab v. Jalour Singh, the Supreme Court was dealing with an issue involving a Lok Adalat within the definition and the ambit of Sections 19, 20, 21 and 22 of the Legal Services Authorities Act, 1987. The Permanent Lok Adalats in contradistinction to Lok Adalats have been expressly conferred as an adjudicatory role by the statute.[18] When a matter, at a Permanent Lok Adalat cannot be settled by means of conciliation, it is then statutorily enjoined to decide the dispute of its merit. Therefore, the judgement laid down in the said case, does not apply with Permanent Lok Adalats as because the court was not at all considering the provision as enshrined under Section 22 C (8) of the Legal Services Authorities Act, 1987.[19]

Moreover, as soon as the amendments were made to the Legal Services Authorities Act, 1987, they were challenged, but were upheld by the Supreme Court of India.[20]

In Life Insurance Corporation of India v. Suresh Kumar[21]The Supreme Court observed that permanent lok Adalats have no jurisdiction over matters wherein the parties failed to eventually come to a reasonable settlement. However, if we closely look pon this case, Supreme Court has not considered applying Section 19 of the Legal Services Authorities Act, 1987 which states that “Continuous Lok Adalats” sometimes are loosely described as “Permanent Lok Adalats” and this shouldn’t be confused with that of Section 22 B (1) of the same Act. Further, the position was itself clarified by the Supreme Court itself in the case of InterGlobe Aviation Ltd. v. N. Satchidanand[22] that a Permanent Lok Adalat has the right to decide the case upon the merits if the parties are unable to reach an amicable situation. The Supreme Court passed a ruling saying that the Parliament has given the authority to the Permanent Lok Adalats to decide the matters upon its merit and therefore it has an adjudicatory role to play.

Hence, it is said that the dispute resolution through the system of Permanent Lok Adalats is an ADR mechanism which is hybrid in nature, and has both adjudicatory and non-adjudicatory trappings that offers a substitute to conventional system of litigation and makes the public free from the system of complexity and rigidity. A permanent Lok Adalat is a special tribunal which is not a court[23] and its decision is not subjected to successive appeals.

Hence, the dispute resolution through permanent lok Adalats is definitely an ADR mechanism and a person who is submitting into this form of conciliation is said to be aware of the law that if in case the dispute is not amicably resolved, the Permanent Lok Adalat would acquire an adjudicatory role.

Conclusion

In practice, the Permanent Lok Adalats have similar benefits to that of a normal Lok Adalat and they suffer from the same disadvantages as well. However, the permanent Lok Adalats functions continuously and they require an additional and a separate expenditure. They provide us with an additional state owned conciliation mechanism with the capacity and the time to deal with a much greater number of complex cases than that of the ordinary Lok Adalats.

References

[1] Mohd. Asad Malik, “Concept of Alternative Dispute Resolution vis-à-vis Lok Adalat”, AIHC Journal 129 (September 2007).

[2] P.T. Thomas v. Thomas Job, AIR 2005 SC 3575, See Also Vijaykumar Shrikrushna Chowbe v. Priya S. Dhanokar, “Lok Adalat – A strategic Forum For Speedy and Equitable Justice”, available at: http://papers.ssrn.com; Lok Adalats have also been described as para judicial Institutions. See Tulika Sen, “Natural Justice and Lok Adalats”, (2007) PL February 7.

[3] Ashwanie Kumar Bansal, Arbitration and ADR 32 (Universal Law Publishing Co, Pvt. Ltd., Delhi, 2005).

[4] See Law Commission of India, 222^nd Report on Need for Justice-dispensation through ADR, etc (2009).

[5] See Legal Services Authorities (Amendment) Act, 2002 (Act No. 37 of 2002)

[6] Chapter VI-A was introduced in the Legal Services Authorities Act, 1987 with the title “Pre-litigation Conciliation and Settlement.”

[7] S. 22 B(2), Legal Services Authorities Act, 1987.

[8] United India Insurance Co. Ltd. V. Ajay Sinha, AIR 2008 SC 2398.

[9] Dinesh Kumar v. Balbir Singh, AIR 2008 Himachal Pradesh 59. Such cases which are already pending in courts can only be inferred to a regular Lok Adalat, constituted under Sections 19 and 20 of the Legal Services Authorities Act, 1987.

[10] S. 22D, Legal Services Act, 1987.

[11] S. 22 C(7), Legal Services Authorities Act, 1987.

[12] S. 22 C(8), Legal Services Authorities Act, 1987.

[13] Vijaykumar Shrikrushna Chowbe and Priya S. Dhanokar, “Lok Adalat – A strategic Forum for Speedy and Equitable Justice.” See also, New India Assurance Company Ltd. V. Sabharathanam, AIR 2009 Kerala 71.

[14] In Ram Niwas v. D.D.A., AIR 2007 Delhi 115, it was held that the permanent Lok Adalat is a statutory body in terms of the Legal Services Act, 1987 and its decision must be accepted.

[15] Paras Holidays Pvt. Ltd. V. State of Haryana, 2008 (4) R.C.R (Civil) 367

[16] S. 22 E, Legal Services Authorities Act, 1987.

[17] AIR 2008 SC 1209.

[18] S. 22 C 9 (8), Legal Services Authorities Act, 1987.

[19] Pu Lalkanglova Sailo v. Pi Ngurthantluangi Sailo, AIR 2009 Gauhati 39.

[20] S.N. Pandey v. Union of India, Writ Petition (Civil) No. 543/2002 decided by the honourable Supreme Court of India vide order dated 28/10/2002.

[21] 2011 (4) SCALE 137

[22] (2011) 7 SCC 463.

[23] InterGlobe Aviation Ltd v. N. Satchidanand, (2011) 7 SCC 463.

In this article, Samyukta Ramaswamy pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on breach of contract notice.

Breach of Contract

In legal parlance, a breach of contract is a type of civil wrong that entails a legal cause of action. A breach usually occurs either by non-performance of the contract or interference with the other party’s performance. Therefore, if a party to a contract fails to fulfil his or her obligation as described in the contract, or communicates an intent to not perform his or her obligation under the contract or otherwise appears unable to perform his or her obligation under the contract, such a party is said to commit a breach of contract.[1]

A minor breach of contract is a partial breach or an immaterial breach or where there has been substantial performance, in which case the non-breaching party cannot sue for specific performance, but can sue for damages. On the other hand, a material breach of contract is a failure to perform that allows the other party to the contract to compel performance of the contract, or sue for damages because of the breach. Generally, a breach of contract constitutes a material breach if the term of the contract that has been breached is a condition essential to the contract. The test of essentiality is applied in determining whether the breached term is a condition or not which requires that the term be of such importance to the promisee that he or she would not have entered into the contract unless they had been assured of strict or substantial compliance with the term of the contract which ought to have been apparent to the promisor. This serves as an objective test in determining the intention of the parties at the time of making the contract.

What is a Breach of Contract Notice?

A notice of a breach of contract notifies the counterparty to a contract that they have breached the contract by not upholding their end of the bargain. In such cases, it becomes necessary for one of the parties to the contract to give notice to the other explaining in detail how they have failed to fulfil the terms of the agreement. This is the first formal step in resolving contractual disputes. Also referred to as a type of demand letter, a notice of breach of contract letter should strictly adhere to any terms in the contract that discuss the requirements for notice of breach of contract. The breach of contract notice also lays out the actions that are to be taken in either fixing the problem or terminating the contract and paying compensation for damages incurred. While some notices are specific in their language, clearly laying out a detailed course of action that is to be followed and a timetable within which the problems are required to be fixed, other notices are more general in nature, primarily acting as an invitation to talk things over and mutually fix the breaches.

What to include in a Breach of Contract Notice?

In any Breach of Contract notice, it is important to include the following:

1. The date the notice was communicated to the breaching party.

One important function of the breach of contract notice is to create an official record of the date on which the breaching party was officially made aware/ told of the breach. This date becomes important if the dispute ends up in court. However, before sending the notice, the non-breaching party should confirm that the notice is being sent to the right person, through the proper method.

2. The notice clause in the contract. [2]

Most contracts have a notice clause that stipulates how the notice of breach of contract is to be communicated to the breaching party. It lays down the contact information of each party and how the notices are to be communicated- whether by email, fax, or post. If the procedures contained in the notice clause is not adhered to by either parties, it may affect each of their rights. For example, if a notice is sent to the wrong address or by a method not stipulated in the contract, it may not count as a notice of breach, which would give the breaching party more time to fix the problem.

3. Describing the breach in detail.

The notice of breach of contract must clearly point out what section of the contract was breached. A breach or a failure to perform under the contract is usually of three types namely:

• Where the other party failed to perform the duties specified in the contract. For instance, if the other party hasn’t paid or delivered goods that were promised under the contract.
• Where the other party refuses to perform their obligations under the contract in the future.
• Where one party makes it impossible for the other party to perform its obligations under the contract.[3]

Therefore, irrespective of what type of breach has occurred or why the breach has occurred, when writing the notice, it is important to identify which clauses of the contract have been breached. If there are more than one section that has been breached, it is good to list all of them by starting with the strongest claim.

4. Giving importance to material breach

Parties to the contract may provide notice for any type of breach, however, as a general practise, courts give more importance to ‘material’ breaches. A material breach of contract as explained previously is any action done by the other party that destroys the very value of the contract. A breach of contract constitutes a material breach if the term of the contract that has been breached is a condition essential to the contract which allows the injured party to compel performance of the contract (specific performance), or sue for damages because of the breach. While it is still possible to give notice of a non-material breach (also known as ‘partial breach’ or ‘immaterial breach’) of contract, this usually does not terminate the contract.

5. Putting forth a course of action to be adopted as a remedy for the breach.

Most of the time, a breach of contract notice is an attempt to resolve the contractual problems as between the parties while keeping the agreement intact. With that intent in mind, such notices generally provide for a period of time within which the breaching party is required to cure the breach. This is because, majority of the time, the breaching party is either unaware of the breach, or find it tasking to comply with the terms of the contract due to temporary setbacks.

Sometimes however, there occur situations where there might not be a remedy to the breach of a contract. In such cases, the notice of the breach of contract serves as notice to terminate the agreement and to seek damages.

6. Tone of the breach of contract notice

The breach of contract notice should be drafted in a professional manner and should have a dispassionate tone. The language contained therein should be very polite considering the fact that the notice could become the basis of a court action or part of an exhibit of papers filed before the court. The notice should just stick to the facts and avoid expressing emotional injuries. Lastly, it should not threaten the breaching party with a lawsuit as it may backfire and result in a very expensive lawsuit that the injured party did not want.

On a side note, it is advisable that as far as possible, an attempt be made to settle the contractual dispute informally before sending the notice of breach of contract, or at the time of sending the notice as this can help save both the parties a lot of time and money.

However, if both the parties think it fit to formally end or discharge the agreement, the best way to go about terminating the agreement would be by entering into a separate agreement to terminate the contract. This is often done using a mutual rescission agreement.[4]

Responses to a notice of breach of contract

There are four basic responses that an injured party may receive after sending a breach of contract notice to the breaching party.

• The breaching party may not respond to the letter. When this happens, it is advisable to wait for a few weeks, after which the injured party may draft a second notice that refers to the earlier one with the proper dates and send it forthwith to the other party. If there is no response to the second letter also, the injured party may take the opportunity to consult a lawyer and send a third notice on the lawyer’s letterhead.
• The breaching party may respond by stating that they are not in breach of the contract. In such a case, it is important for the injured party to consult their attorney first before drafting out a response as there is a chance that the other party is right.
• The breaching party may request to have a meeting to discuss the situation and resolve the dispute. Although this is a good way to resolve the dispute, it is important at the same time for the parties to require the assistance of a lawyer in arranging a solution especially in case a written settlement needs to be reached.
• Lastly, the breaching party may concede to the breach of contract by them. In such a case, the injured party needs to decide upon the best way to resolve the issue. Usually, a formal settlement agreement is drafted with the help of a lawyer which is signed by the parties to the contract.

In order to better understand how to draft a Breach of Contract Notice, the following template has been provided in the link mentioned below.[5]

References

[1] “Breach of Contract” at <http://thelawdictionary.org/breach-of-contract/ > last accessed on 29/08/2017.

[2] Refer <https://www.requestletters.com/home/how-to-write-a-breach-of-contract-notice-letter> last accessed on 31/08/2017.

[3] Id.

[4] Refer <http://www.nolo.com/legal-encyclopedia/breach-of-contract-notice-of-32649.html> last accessed on 31/08/2017.

[5] Refer <https://www.priorilegal.com/legal-forms-and-documents/notification-of-breach-of-contract > last accessed on 31/08/2017.

In this article, Uday Agnihotri pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on legal and regulatory framework for taxation of pensions in India.

Introduction

Pension is a benefit conferred upon an employee by the employers after the retirement and hence, can be referred to as a retirement benefit. Pension, as defined by the Oxford Dictionary of Economics, is a regular income paid by the state to people above pensionable age, by former employers to people who have retired from employment, or by a personal pension fund to a contributor. Pension schemes normally give members pensions for their own lives; they vary in their provisions for surviving spouses and other dependents.[1]

This definition, however, is narrow in ambit as it is conspicuously silent on the pension paid by private employers. Pension, as understood in common parlance, is a benefit that an employee gets post his/her retirement. After January 2004, with the introduction of the National Pension System (and subsequent extension in May, 2009 to include all citizens, including self-employed professionals and others in the unorganized sector), a retired employee can receive pension from the employer or the National Pension Scheme. In addition to that, the individuals are free to invest in any pension plans as per their volition which will give them pension after their retirement.

For the purposes of understanding the framework for the taxation of pension under the Indian law, it is important at this juncture to differentiate between the types of pension. Pension can be classified as Commuted Pension and Uncommuted Pension.

Types of Pension

1. Uncommuted Pension: Uncommuted pension refers to the normal periodic pension which an employee receives post-retirement. There is no lump-sum payment (and therefore, no requirement to forgo a certain portion of the pension receivable). It is a periodic payment post-retirement, just like salary pre-retirement. For example, a person, post-retirement, receives a monthly pension of Rs. 5,000.
2. Commuted Pension: Generally, pension is received periodically i.e. just like an employee earned salary periodically (monthly, for instance) before retirement; post-retirement, the employee will receive pension periodically (monthly, for instance). However, many employers permit the employee to forgo a certain portion of the pension receivable to him and in turn, receive a lump-sum amount. This lump-sum amount received as pension is called Commuted Pension. This may be fully or partly commuted. Commuted pension can be explained through an example: a person, who is entitled to receive a pension of Rs. 10,000 monthly for the rest of his life can commute 25% of his pension in advance of the next 10 years and get the lump-sum of Rs. 3,00,000 (25% of 10,000 x 10 x 12). Along with this commuted pension, the person will receive Rs. 2,500 per month for the next 10 year and Rs. 10,000 thereafter as full pension.

Taxation of Pensions

1. Uncommuted Pension: As per Section 14 of the Income Tax Act, 1961, all income received are classified under 5 heads of income for the purposes of computation of total income and for charging income tax. These 5 heads are:

• Salary
• House Property
• Profits and Gains of Business or Profession
• Capital Gains
• Other Sources

Uncommuted Pension, for the purposes of taxation, is considered under the head ‘Salary’ and therefore, is fully taxable as salary i.e. it is treated as salary and hence, is taxable by the hands of both whether government employees or non-government employees, as per the provisions of the Income Tax Act, 1961 related to salary as well as the slab rates decided by the yearly Financial Statement (Budget).

2. Commuted Pension: Taxation of commuted pension is not as simple and easily understandable as the uncommuted pension. In case of the taxation of commuted pension, the first and the most important thing to see is whether the employee is a government employee or a non-government employee.

In case of a government employee, commuted pension is fully exempt. That is to say, if we refer back to the example of commuted pension, in case the person is a government employee, the lump-sum of Rs. 3,00,000 that he receives as commuted pension is completely exempted from income taxation and Rs. 2,500 and the subsequent Rs. 10,000 (after 10 years) would be considered under the head ‘salary’ and taxed as per the prevalent tax slabs (as this amount is uncommuted pension).

In case of a non-government employee, there can further be two situations that are required to be considered for the purposes of taxation of commuted pension. After establishing whether the employee was a non-government employee, it is imperative to ascertain whether the pension is received alone or is coupled with gratuity. Therefore, the question whether gratuity is received with the pension or not has to be answered. Gratuity can be defined as a benefit given to the employee upon leaving the job in gratitude for the services offered by him to the employer while the person was working with the employer. The Payment of Gratuity Act of 1972 governs gratuity and its administration. As per Section 4 of the Act, Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,- (a) on his superannuation, or (b) on his retirement or resignation, (c) on his death or disablement due to accident or disease.[2]

There are two paths that determine the tax burden depending upon whether gratuity is received along the pension or not. If gratuity is received along with pension, then one-third of the amount of pension that would have been received if the entire pension (100%) was commuted is exempt from the commuted pension. The remaining, however, will be considered under the head ‘salary’ and taxed accordingly. On the other hand, in case only pension is received (gratuity is not received with it), half of the amount of pension that would have been received if the entire pension (100%) was commuted is exempt and the remaining amount would be considered as ‘salary’ and taxed accordingly.

Therefore, in ascertaining the tax liability on pension, three questions have to be answered:

1. Whether the pension received is commuted pension or uncommuted pension?
2. Whether the person receiving the pension was a governmental employee or a non-governmental employee?
3. Whether gratuity was received along with the pension or not?

Certain Special Conditions

In certain special conditions, pension is taxed slightly differently (or exempted altogether). These conditions are as follows:

1. Family Pension: Normally, pension is received by the retired employee. However, pension may be received by the spouse or other dependents of the retired employee in the form of family pension. In case of family pension, pension received is taxable under the head of ‘income from other sources’ and not ‘salary’ as there is no employer-employee relationship[3]. With this regard, commuted pension paid to the family of the retired employee is exempt from any taxation[4]. And with respect to uncommuted pension, one-third of the amount of the pension or Rs 15,000 (whichever is less) is exempt and the rest is taxed under ‘income from other sources’.
2. Pension received by family members of Armed Forces: Family pension that is received by the dependents of any member of the Armed Forces is exempted from taxation.
3. Pension received from the United Nations: Pension that is received from the United Nations (or any organization under it) by any employee or his/her family is also exempted from taxation.
4. Pension received by the Judges of the Higher Judiciary: Half of the commuted pension which is received by the retired Judges of the Supreme Court or the High Courts are exempted from taxation[5]

Conclusion

Taxation of pension under the law is not as simple a concept as it is seen ex facie. The simple reason for this is because pension has various different elements and aspects in it that makes a simple straitjacket solution not possible. To ascertain the tax liability of pension, the answers to the three questions raised above (refer to the section ‘taxation of pension’) become imperative. The three questions are reproduced as follows:

1. Whether the pension received is commuted pension or uncommuted pension?

If the pension received is uncommuted pension, then the amount of pension (treated as ‘salary’) is taxable as per the provisions of the Income Tax Act, 1961 related to salary as well as the slab rates decided by the yearly Financial Statement (Budget). However, if the pension is uncommuted pension, the answer to the next question becomes relevant in ascertaining the tax burden.

2. Whether the person receiving the pension was a governmental employee or a non-governmental employee?

If the answer to Question No. 1 is ‘uncommuted pension’, what is to be found next is whether the person receiving the pension was a governmental employee or not. In case he is a retired government employee, the commuted pension will be fully exempted. On the other hand, if the person was a non-governmental employee, the answer to Question No. 3 becomes relevant.

3. Whether gratuity was received along with the pension or not?

If the person was found to be a non-governmental employee in Question No.2, it is required to find out whether gratuity was paid along with the pension or not. If gratuity is received along with pension, then one-third of the amount of pension that would have been received if the entire pension was commuted is exempt from the commuted pension and the remaining is considered under the head ‘salary’ and taxed accordingly. On the other hand, if gratuity is not received with the pension, half of the amount of pension that would have been received if the entire pension was commuted is exempt and the remaining amount would be considered as ‘salary’ and taxed accordingly.

Apart from the aforementioned three-tier test, there are certain special conditions too, in which the tax burden is calculated differently (refer to the section ‘certain special conditions’).

[1] Definition of ‘pension’, Oxford Dictionary of Economics.

[2] Section 4, the Payment of Gratuity Act, 1972.

[3] Section 57(ii)(a), the Income Tax Act, 1961.

[4] Circular No. 573 dated 21.08.1990.

[5] Circular No. 623 dated 06.01.1993.

In this article, V Surash Babu pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, elaborates on kinds of dispute resolution mechanism that should be incorporated in Shareholders’ Agreements and Co-founder Agreements.

Starting a new venture has its own inherent risk. People having same ideas, same passion, same thinking will come together, put their hard earned money and hard work on their dream idea to make it a great success. So a written agreement between the members of the founder team that clearly spell out roles, responsibilities and functions of the of each founder member. Such an agreement, Co-Founders agreement should be incorporated in the very early stage of its existence.

In Indian contest many time the founders neglect this vital aspect of making this internal document signed by them to draw the broader vision, mission, roles, obligation, responsibility objectives of its members to convert their collective idea into a winning reality.

A well-drafted co-founder agreement help to nurture the working relationship among its founder, help in align every member goals with that of their start up’s. The founders’ agreement is a legal binding agreement between the founders of the company but doesn’t involve any other third party like investors or creditors. A Co-Founders agreement should address all unforeseen events to avoid chances of potential and disruptive conflict between its members in future. So the Co-Founders agreement and to a large extent shareholder agreements basically set down the rules and principles over which the firm should exist, internally managed towards faster growth and value creation.

Also, this Co-Founder agreement gain real importance in the later stage of the business, as many potential investors look this document critically before making decision to invest. Even though AoA can address many issues of the newly incorporated firm, still AoA cannot be considered as a replacement of or substitution of Co-Founders or shareholders agreement, as articles of association bind the company and its members in their capacity as shareholders of the company only and not in any other capacity in the company. Also, articles of association of a company are public documents and are open to inspection, hence not suitable document to discuss on internal management and control functions of the company. In addition to that Articles of Association can be amended by way of a special resolution passed by 75% or more majority. By contrary, shareholder agreements and co-founder agreements require unanimous agreement to incorporate the modifications.

The following areas can be considered as the key domain where clear terms of reference will be made available in a well-defined co-founders agreement.

Roles, Responsibilities & Accountability

The roles and responsibilities of each member should be clearly placed in the agreement to avoid chances of future misunderstanding among the team members. For example in a starts up to produce an electronic stabilizer, the roles such as design & development of the stabilizer, its mass production, selling the product, arrange finance to purchase the raw material etc should be clearly defined and demarcated between the members.

Decision-making

As the start up grows, decision making become more and more complex. So the agreement should adequately address this issue of decision making for smooth functioning of the firm and to avoid delay and conflicts in decision making process. For instance, agreement shold address, how are key decisions and day-to-day decisions of the business to be made, majority vote or unanimous. What are the areas where decisions solely in the hands of the CEO? Who will have the authority to sign cheques? Who can approach investors or enter into important contracts on behalf of the business? etc.

Equity Ownership

Each Co-Founder’s equity must be defined clearly in the agreement. To split equity equally between cofounders or dividing proportionally to depending on who brings what to the company. How the factors such as experience, technical know-how, marketing network, financing the firm of the members are taken into consideration in percentage of share allotment to each member.

Intellectual Property

Intellectual Property comes in many forms but it’s important to make sure that whatever IP is being developed for the new enterprise it belongs to the entity and not to the individuals behind such development. So the agreement adequately discusses this issue of IP and included the clause like “whatever inventions, design an individual do for the firm, should remain the property of the firm”.

Non-Compete

The co-founder should not undertake any activity, such as starting another firm, offering similar product or services, becoming the shareholder of a competing company, which affect the fortune of the firm. The agreement should have clear deliberation on this conflict of interest area.

Confidentiality

Agreement must include terms to prohibit the members and fix the accountability, on the members on leaking sensitive business related matters to outside which may adversely affect the business operations.

Conflict resolution

In case of any disagreement on certain issues raised among the founder members, resolving the issue is very important for sustainable development of the firm. Hence, agreement should have provision to resolve the conflict. Agreement should stipulate a strong and clear, predetermined mechanism for dispute resolution which can resolve the issue quickly without causing any damage.

Vision of the business

Overall goal and vision of the existence of the company should be incorporated to make the team focused. It helps the cohesion between the members to achieve the common goal.

Transfer of Shares

Existing shareholders, the founders, generally want to ensure that unwanted parties do not become shareholders involuntarily as a result of any of the above such as member becomes bankrupt, discharged, resigns, retires, becomes incapacitated, or dies. Hence it is important to include these aspects also in founder /shareholders agreement. The agreement should have provisions to regulates the sale and transfer of the startup’s shares. It covers items such as who has the right of first refusal and provides a mechanism for the redemption of the shares for shareholders, who.

Value Additions

The agreement should deliberate clearly about the how to compensate the co-founders who bring value addition to the firm. For example, members can bring value addition in terms of IP, Technical Know-How, marketing network etc.

Compensation

Founder members are more than the full-time workers of the start up. Hence agreement should have clarity in terms of employment, compensation, fringe benefits of each co-founder members proportional to their contribution of revenue generation and growth of the firm, mechanism to change the compensation package from time to time according to the profit generation also should be there in the agreement.

Removing a founder member

Even this looks sensitive issue while the starting point of the firm, but clear terms on this also there in the founders agreement. It should address what grounds a member be removed, the due procedure to be followed, the compensation to be made available to that founder. For example, if one founder member found to be underperforming and dragging the business down or not living up to expectations or committed fraud. Agreement should have clear terms to deal such situations.

Exit strategy

Co-founders generally never think about exiting a business, but due to some personal or other, positive and negative reasons, one of the founder wants to leave. Hence it is important to meet such an eventuality, and the agreement should have adequate provisions for the exit of a co-founder before the lock-in period. The agreement should spell out clearly on what is going to happen to the money that the co-founder have invested, the equity the leaving member. Sale the shares to a Third Party, or to the other members, price on which the shares to be transacted.

Exit in case business shuts down

The questions like what circumstances will the co-founders agreement be terminated? What if the business does not take off and becomes unviable? How will founders distribute assets, liabilities and any money left in the business, etc, even though it looks unpleasant to the founders in the beginning, should also be adequately covered in the agreement.

Expected minimum time commitment

Hard work with devotion of all members is essential for successful establishment of a firm. Hence co-Founders generally prohibited to do other works. The agreement should have clear guidelines on the minimum time commitment from each member to the growth of the company.

Deadlock resolution

If a deadlock reached on a certain important issue and there is no provision in the agreement to deal with it, it may cause serious repercussions in the functioning the company. Hence before reaching such deadlock situation and gravely suffer it is always better to include adequate provisions to handle such situations in the agreement.

Finance

Frequently early stage companies will not be sufficiently cash generative to meet the working capital requirement. If this initial capitalization together with available cash flow is not sufficient, and sometimes forced to avail loan from third party. Agreements has to lay out clear terms to deal situation such as loan capital, the provision of founder personal guarantees to support bank facilities. A shareholders’ agreement may also provide for what is to happen in the event that a party defaults on its obligations. It should be clarified how loan received from founders will be treated. It may be paid back with or without interest, or may be compensated by issuing shares of the incorporated entity. Also agreement should have clear understanding regarding the reimbursement of out-of-pocket expenses.

Division of profits

Profits are another crucial aspect that must be deliberated over in the agreement. How the profit generated should be shared between the members.

Induction of new members

Induction of new co-founders can be very sensitive issue. This should not become a bone of contention between co-founders and lead to decision paralysis. Co-founders agreement should include specific provisions for addressing this.

Minority Protection

Generally the standard articles of association gives extensive powers to the board of directors to take decisions. The Companies Acts and AoA provide limited rights for minority shareholders. Hence it is always recommended to include clauses to protect the interest of minority share holders for a healthy growth of the company in its later stage of life cycle.

Conclusion

A well drafted shareholders agreement sets out the framework within which a company intends to operate. It include provisions which address matters such as the management and control of the company, funding structure, exit strategy, dispute resolution and a deadlock resolution etc.

A balanced agreement establishes in clear terms of relationship between the Co-Founders. And more importantly, for Investors it acts as a guiding document to judge the governance mechanism in the Company. One of the best ways to minimize the probability of co-founder dispute is by drafting appropriate provisions in the agreement by respecting the interest of all the parties. Therefore, not having a rational and balanced Co-founders Agreement can cause enormous hardships and jeopardize the viability f the new enterprise in long run.