This article is written by Syed Owais Khadri. This article provides an overview of all the Chapters of the Tamil Nadu Court Fees and Suit Valuation Act, 1955 while discussing important Sections in detail.
It has been published by Rachit Garg.
Table of Contents
Introduction
The Tamil Nadu Court Fees and Suit Valuation Act, 1955, is a statute enacted by the legislature of the state of Tamil Nadu. The Act was passed on May 13, 1955, after receiving assent from the President of India, and it came into force on May 19, 1955. The Act aimed at amending and consolidating the laws dealing with court fees and the valuation of suits in the state. The Act is a cornerstone regarding the monetary expenses involved in legal proceedings within the state. The Act comprises 8 Chapters, 88 Sections, and 3 Schedules.
Scope and Purpose of the Act
The scope and purpose of this Act have been made clear in the preamble.
The purpose of this legislation, as stated in the Preamble, is to amend and consolidate the laws relating to court fees and valuation of suits in the state of Tamil Nadu. Although the Preamble lays down the purpose of the Act in a simple sentence, the legislation serves an extensive purpose, starting from defining important terms to laying down a comprehensive and well-established law with regard to the monetary expenses related to the court. The legislation provides for the fee based on the classification of suits, which has been done under Chapter 4 of the Act. The Act also specifies fees that should be paid in various courts and for various suits. Furthermore, the Act aims to establish consistency across the State with regard to monetary expenses in courts by providing for a proper method of valuation of suits and by specifying fees for various cases well by itself.
The Preamble ends with the terms in the State of Tamil Nadu, which refer to the scope of this legislation. Section 1(2), which provides for the extent of the legislation, states that the Act extends to the whole of the State of Tamil Nadu. The scope of the legislation is limited to the State but does not extend beyond it as it is an Act of the State Legislature. Furthermore, the applicability of the Act discussed under Section 2 of the Act talks about the exceptions to the scope of the Act.
Applicability
Section 2 of the Act mentions the applicability of the Act. It is partially a negative provision as the first Sub-Section of the Section does not mention the cases or scenarios of application of the Act but mentions exceptions to the application of the Act, and Sub-Section 2 of Section 2 provides for the application of this Act in the presence of any other law.
Section 2(1) of the Act provides two exceptions to the application of the Act, one among which is omitted and the other is an operation. Section 2(1)(a) was omitted in 1979 with an amendment to the Act, which came into force in January 1980. The omission made the provisions of this Act applicable to the Presidency Court of Small Causes, Madras. Section 2(1)(b) makes an exception to the applicability of the Act before any Central government officer. According to clause b, the provisions of this Act are not applicable to documents presented or to be presented before any Central government officer.
Section 2(2) talks about the doctrine of harmonious construction in the presence of two legislations on the same subject matter. The Sub-Section states that if there is any other legislation that contains provisions with regard to the levy of fees in respect of proceedings under such law, then in such a case, the fee with regard to such proceedings must be levied according to the provisions of this Act in respect of such proceedings has to be applied with subject to the provisions of the other law.
For example, A and B are two legislations. A contains provisions with respect to the levy of fees for partition suit, and B also contains provisions on the same. In such a case, the provisions of B shall be applied subject to the provisions of A.
The Sub-Section says that both legislations must be construed harmoniously and shall be applied accordingly.
Overview of the Act
The Act was enacted in the year 1955 as Act 16 of 1955. The Act came into force on May 19, 1955, after receiving the assent of the President on May 13, 1955. The Act contains 88 Sections listed under 8 different Chapters. The Act further contains 3 schedules that contain specifications for fees.
The Act begins with the Preamble, which sheds light upon the object and purpose of the Act, which is to amend and consolidate laws relating to court fees in the State.
Chapter 1
The first chapter of the Act is the preliminary, which comprises three provisions (Sections 1 to 3).
Section 1 of the Act provides for the extent and commencement of the Act, along with the short title.
Section 2 provides for the applicability of the Act and
Section 3 defines a few terms of the Act.
Some of the definitions provided under Section 3 include the following.
Section 3(i) states that “appeal” includes a cross-objection.
Section 3(ii) mentions what “Court” means in any Civil, Revenue, or Criminal Court and includes a Tribunal or other authority having jurisdiction under any special or local law to decide questions affecting the rights of parties.
Section 3(iii-a) means “transferred territory,” which means the Kanyakumari district and the Shencottah taluk of Tirunelveli district.
Chapter 2
The Second Chapter of the legislation discusses the liability to pay fees. It comprises six provisions (Sections 4 to 9).
Section 4 provides for the levy of fees in courts and public offices; it makes payment of fees mandatory for filing, recording, exhibition, or furnishing of any document either in courts or in public offices. The proviso part further gives an exception to the Section. The proviso states that it is the discretion of the court to allow the exhibition, filing, or recording of a document in a criminal court even though the fees are not paid to prevent failure of justice.
Section 5 of the Act deals with the payment of fees for a document that has been already produced in a court or public office without prior payment. The Section states that if any document has been inadvertently produced without complete or partial payment of fees, the court or the head of the office may allow such fees to be paid within a prescribed period. It provides that delay in payment in such a case would not have any effect on the validity of the document and it shall have the same validity or force as it would have if the fees had been paid in the first instance.
Section 6 of the Act deals with the value of fees that should be paid in cases of suits involving multiple reliefs.
Sub-Section 1 states that if separate and distinct reliefs are on the same cause of action, the value of fees shall be the aggregate value for all the reliefs sought. Furthermore, if the multiple reliefs sought are secondary or subordinate to the main relief, then the fees would be the value of the main relief. Sub-Section 2 provides that when distinct reliefs are sought on the same cause of action alternatively, then the fees shall be of the highest value among the reliefs sought. Likewise, Sub-Section 3 provides for a levy of fees on suits arising out of two distinct and different causes of action.
Section 7 provides for the determination of market value. It states that the market value must be determined as of the date of presentation of the suit.
Section 8 and Section 9 are similar to Section 6, but deal with a set-off or a counterclaim.
Chapter 3
Chapter 3 of the Act deals with the determination of fees. It contains eleven provisions (Sections 10 to 20).
Section 10 provides that the suit must contain a statement of particulars of the suit and a valuation according to the market value.
Sections 11 and 12 provide for the decision as to the proper fees in the High Court and other courts, respectively, if any difference with regard to the valuation of the fees arises. According to Section 11 of the Act, the decision rests with a taxing officer in the case of the High Court; nevertheless, he may consult the court on questions of general importance. Furthermore, the Court may review the decision of the taxing officer. The power to make such a decision in any Court other than the High Court rests with the Court itself. It provides for an order to make payment if the court fees paid are a deficit and also to refund if the fees paid in the lower courts are in excess.
Section 13 provides for fee payment on the additional issues framed within a stipulated time. Failure to do the same would result in striking that particular issue and proceeding with the other issues.
Sections 14 and 15 provide for the relinquishment of claims and fees on written statements, respectively. Sections 16 and 17 state that Sections 10 to 14, subject to necessary changes (mutatis mutandis), shall apply in respect of memorandum of appeal, cross-examination, applications, petitions and other proceedings, etc.
Sections 18 and 19 give the power of deputation of officers as court fees examiners and the power to inquire and commission the court. Section 20 talks about notice, if necessary, given to the state government by the court during any such inquiry mentioned in the last preceding Section that may affect the fees payable.
Chapter 4
Chapter 4 of the Act deals with the computation of fees. The Chapter comprises thirty two provisions (Sections 21 to 52). The Chapter contains the computation of suits based on their subject matter or relief. It contains classifications such as suits for money, suits for maintenance, movable property, dissolution of property, specific performance, suits relating to mortgages, easements, trust property, partition suits, etc., and appeals. This chapter also includes Section 21-a which states that the computation of fees should be to the nearest multiple of five paise, and Section 44-a which includes the category of various classified suits.
Chapter 5
Chapter 5 of the Act contains two provisions, i.e., Sections 53 and 54. The Chapter deals with the valuation of suits.
Section 53 of the Act states that unless and until a specific provision is provided for the value of a suit for the jurisdictional purpose in the instant Act or any other law, the value of the suit for such a purpose and the computation of fees for the same shall be the same under this law.
Section 54 of the Act provides for the procedure that needs to be followed when an objection is taken on appeal or revision that a suit or appeal was not properly valued for jurisdictional purposes.
Chapter 6
Chapter 6 of the Act, titled “Probates, Letters Of Administration And Certification Of Administration” contains eleven provisions (Sections 55 to 65). The Sections under this Chapter provide for the application of probate and letters of administration, grant of probate, inquiry by the collector, etc.
Section 55 of the Act provides for applications for probate or letters of administration, which, after receipt by the court, are sent to the collector of the district where the estate is situated.
Section 56 provides for the fee chargeable for the grant of probate or letters of administration.
Section 57 states that a grant of probate shall not be done until the court is satisfied that the fee prescribed by the Act based on the estate’s net value has been paid. The proviso part gives an exception to the said rule in case of the Administrator-General in his capacity, giving an undertaking to the Court that the said fee will be paid within the time as may be fixed by the Court.
Section 58 provides that if a grant of probate or letter of administration has already been made after the fee payable has been paid, the applicant need not pay the fee again if another like grant is made. In simple words, in case of several grants being made, the fee shall be paid only once and not for every grant individually.
Sections 59 and 60 provide for the inquiry by the collector, application to court, and power of court.
Section 61 provides for making up of fees in cases where too low a fee has been paid.
Section 62 makes it mandatory for an administrator to give proper security before letters are stamped.
Section 63 provides for relief when too high a fee has been paid. If it is discovered that a fee greater than the valued fee payable has been paid, then the administrator or executor can apply for a refund to the collector.
Section 64 provides for the recovery of penalties from the administrator or executor as if it were arrears of the land revenue.
Section 65 states that the powers of the collector shall be subject to the control of the Board of Revenue.
Chapter 7
Chapter 7 of the legislation contains eight provisions (Sections 66 to 73) that provide for remissions and refunds. It includes six Sections providing six scenarios or instances of refunds, one provision exempting certain documents, and the last Section providing for the power to reduce or remit the fees.
Sections 66, 67, 68, 69, 70, and 71 provide for the five instances of refund, which are as follows.
Refund in cases of delay in presentation of plaints, etc.
Refund in cases of remand.
Refund in cases where the court reverses or modifies former decisions based on mistakes.
Refund on the settlement before the hearing.
Refund of fees paid by mistake or inadvertence.
Refund in cases of instruments of partition engrossed on non-judicial stamps.
Section 72 exempts the charging of fees on certain documents. The provision contains a list of 20 such documents.
Section 73 of the Act empowers the state government to reduce or remit any fees under this Act by issuing a notification in the Gazette.
Chapter 8
Chapter 8 of the legislation contains 15 provisions (Sections 74 to 88). It includes miscellaneous provisions such as provisions relating to the power of the High Court, the Board of Revenue, and the Government to make rules and other repealing, saving, and amending provisions.
Section 80 discusses the power of the High Court to make rules; Section 81 discusses the power of the Board of Revenue to make rules; and Section 82 provides for the power of the Government to make rules.
Section 84 amends the Tamil Nadu Civil Courts Act, 1873, omitting Section 14 of that Act.
Section 85 repeals the Presidency Magistrates (Court Fees) Act, 1877, in the state of Tamil Nadu.
Section 86 amends the Madras City Civil Court Act, 1892, omitting two Sections (Sections 9 and 13).
Section 87 is a repealing and saving provision, and Section 88 provides for savings in respect of the transferred territory.
Conclusion
The Tamil Nadu Court- Fees and Suit Valuation Act, 1955, is significant legislation of the state of Tamil Nadu that establishes consistency and uniformity within the courts concerning the court fees and valuation of suits. It rules out the possibilities of ambiguity concerning the above subject matter as the legislation is comprehensive, covering all relevant areas, and the legislation has also been amended to adapt to the changes in society and the legal system.
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This article is written by Danish Ur Rahman. This article gives an exhaustive overview of the concept of ‘debentures’ in Company law, the uses of debentures, different types of debentures, how it is issued and what remedies are given to the debenture-holders.
It has been published by Rachit Garg.
Table of Contents
Introduction
Securities are issued by companies to acquire capital from investors. A security is a negotiable instrument issued by a company or a government which has a certain monetary value to acquire capital from the persons who invest in it. There are three types of securities in company law – a) equity securities which give the equity share value as a security to the person who is investing; b) derivatives securities which give value through another financial instrument or promise or contract and, c) the debt securities which gives the creditor a value through an instrument which comes with a charge on the assets provided as a collateral or security.
Debentures are a type of debt securities issued by a company and are one of the best ways for a company to acquire capital without diluting its ownership or equity values. Debenture has its own features with respect to both the companies and the debenture-holders. It is good for the company as it helps the company to acquire capital without diluting any of its ownership, and it is also good for the debenture-holders as they are secured through their right to charge. A more detailed analysis of debentures is given below in the article.
Meaning of debentures according to Companies Act, 2013
A debenture is a type of debt instrument which is issued by a company to raise capital. Debenture is a long-term debt instrument which may be in the form of a bond or a loan which is secured by the charge upon the assets which have been provided as securities. Debentures have a fixed rate of interest and other characteristics which are described in detail later in the article.
According to Section 2(30) of the Companies Act, 2013 – the term “debenture” includes debenture stock, bonds, or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not. The definition in the Companies Act, 2013 does not mandate the creation of a charge. So, a debenture can be issued without creating a charge on the company’s assets. For example, unsecured debentures are issued without creating a charge, where the company is not required to provide any property or asset as a security for the debt amount acquired by issuing the debentures.
Types of debentures
Debentures are several types and each has its own features and characteristics. The different types of debentures are listed below.
Debentures based on security
Debentures based on tenure
Debentures based on conversion
Debentures based on registration
Debenture based on security
Usually, the debenture-holder has less or no risk for the amount he has lent to the company to get the debentures since he has securities to charge, upon the default of payment by the company. The debentures based on security are of two types – secured and unsecured debentures.
Secured debentures
Secured debentures are also known as mortgage debentures. They are a type of debenture that are secured by a charge either fixed, or floating, on a company’s assets. The holder of this type of debenture has the right to recover the principal amount and the interest from the assets which have been given as securities.
Unsecured debentures
In this type of debenture, the companies are not required to pledge any of their properties or assets as collateral for the debt amount. Since the unsecured debentures do not require any assets to be used as a security, the lender usually is at high risk of losing his principal amount in case the company defaults. This type of debenture has a high rate of interest.
Debentures based on tenure
Redemption of the debenture occurs when on the maturity date, the company pays back the principal amount along with the interest and releases its properties or assets from the charge given to the debenture-holder. It is divided into two types – redeemable and irredeemable debentures.
Redeemable debentures
Most of the debentures are redeemable, meaning on the expiry of the maturity date, the debenture is redeemed by the company by paying back the principal amount with interest to the debenture-holder and releasing its assets from charge.
Perpetual or Irredeemable debentures
If a debenture does not contain any clause as to the payment of the principal amount by the company and redeeming the debenture, then it is known as a perpetual or irredeemable debenture. This type of debentures, unlike redeemable debentures, does not cease on the maturity date.
Debentures based on conversion
The company has the right to convert the debentures into equity shares. There are two types of conversion of debentures – convertible and non-convertible debentures.
Convertible debentures
The company issuing debentures has the right to convert these types of debentures into equity shares. So the debenture-holder who was just a creditor to the company becomes a member of the company and enjoys ownership of the company to the extent to which he has the equity shares of the company.
Non-convertible debentures
This type of debenture cannot be converted into equity shares of the company. So the debentures will always be redeemed and will never have the characteristics of equity shares of the company.
Debentures based on registration
As most of the important deeds and instruments of a company are usually registered in the company, debentures are no exception. There are two types – registered and unregistered debentures.
Registered debentures
If debentures are issued by the company, the company is required to maintain a register of its debenture-holders as Section 88 of the Companies Act, 2013 provides that every company shall register the holders of its debentures. Both, the debenture certificate and the company’s register, shall have the name of the debenture holder.
Unregistered or Bearer debentures
The company can avoid the registration of the debenture-holders if it issues the debentures to the bearer. Such types of debentures are transferable, like negotiable instruments, by way of simple delivery and are also called debentures payable to the bearer.
Why are debentures issued
Debentures are financial instruments distributed by companies to raise their capital. There are various sources through which a company can raise its capital such as – retained earnings, equity capital and debt capital.
Retained Earnings – a leftover profit after paying all the direct and indirect costs, all the interests to the lenders and the payment of dividends to the shareholders. The retained earnings of the company are used for further investment in the company.
Equity Capital – It is a source of capital generated by giving out the equity of a certain part of ownership to the person who invests in the company. For example, shares.
Debt Capital – It is a source of capital generated through debt which is lent by banks and other lenders who get a fixed rate of interest. For example, loans and debentures.
Of all the sources available to the company, one of the most efficient capital sources for a company’s capital are the debentures.
Advantages of debentures
Debentures have several advantages and they are characterised in two kinds as given below:
Advantages of debentures to the company
Advantages of debentures to the debenture-holder
Advantages of debentures to the company
Secure way of raising money: Debentures are one of the most effective and safer ways for a company to raise funds when compared to equity or shares. Issuing debentures is safer because it can be paid back by the company.
Less authoritative: Since the debenture-holders do not have any voting rights as mentioned in Section 71(2) of the Companies Act, 2013, the company is not under the authority of so many persons and can function more independently.
Less risk of dilution: The company has less risk towards diluting its equity as the company does not provide any ownership to the debenture-holders.
Option of redemption: Since the debentures can be paid back by the company when they have surplus funds, there is no limitation to the company for the perpetual obligation that they would have to give security to the debenture-holders once they pay back their debt to the debenture-holders.
Advantages of debentures to the debenture-holder
A secured way to invest money: There is very minimal or no risk to the amount invested by the debenture-holder in the debentures. Irrespective of the market’s fluctuation or the company’s performance, the amount invested by the debenture-holder is always secured even if the company winds up.
Fixed-rate of Interest: The debenture-holder gets a fixed amount of interest no matter how the company is performing or the company is in loss.
Right to charge: The debenture-holder has the right to charge against the properties or assets of the company which have been given as security for the amount lent by the debenture-holders.
Disadvantages of debentures
Debentures have some disadvantages as well and they are characterised as two types and they are:
Disadvantages of debentures to the company
Disadvantages of debentures to the debenture-holder
Disadvantages of debentures to the company
Expensive during depression: In times of depression of a company, there may be a chance that the debentures can become expensive, but since the rate of interest would be the same and hence the company would suffer a loss by paying more interest.
Burden of Interest Payment: Since the performance of the company and the trends of the market does not affect the payment of interest to the debenture-holder by the company, the interest payment is generally a burden on the company when it is not performing well.
Imbalance of debt-equity ratio: Though the debentures do not affect the company’s equity, it would force the company to depend on debt, and the financial feasibility of the company would be disturbed by the imbalanced debt-equity ratio.
Major cash outflow: When in the times of redeeming debentures, a major cash is transferred to the debenture-holders from the company which would result in the imbalance of a company’s in-hand capital.
Disadvantages of debentures to the debenture-holder
No ownership: Though the debenture-holders help a company to acquire capital by issuing debentures, they cannot be given ownership of the company to any extent.
Fixed interest: Unlike shares, where the dividends may be high when the company is performing well, in debentures, there is a fixed interest irrespective of how bad the company is doing.
Not always secured: Though debentures are more secure than shares, all types of debentures are not secured, unsecured debentures have more risk than the secured debentures.
How are debenture issued by a company
There are various rules and regulations that have to be followed while issuing debentures by a company. The essential requirements are listed under Section 71 of the Companies Act, 2013.
Rules for issuing debentures under the Companies Act, 2013
The issuance of debentures can be made by a company with an option to convert such debentures into shares, such conversions may be done wholly or partly. For the purpose of converting debentures into shares, there must be a special resolution passed at a general meeting of the company.
The issuance of debentures along with the voting rights in any activities of the company is prohibited by Section 71(2). A company may issue secured debentures subject to the prescribed terms and conditions under section 71(3). Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 gives various rules for the issuance of debentures, which
Rules as regards to debenture Redemption Reserve (DRR)
If a company issues debentures under Section 71, a debenture redemption reserve account has to be created by the company from the profit of the company available for the payment of the dividend. Under Sec 71(4) the amount credited to such a reserve account shall not be used for any purpose other than the redemption of debentures.
The objective of a Debenture Redemption Reserve (DRR) is to reduce the risk of the debenture holder in case of default of repayment by the company. The debenture redemption reserve contains a certain earmarked (designated) amount of profit of the company each year. Only such profit is contributed to DRR that is eligible for the payment of dividends.
Sometimes a company may suffer from a lack of profit or from a liquidity shortage that may cause them to default in repayment of the debentures. In the year 2000, the government developed the idea of a debenture redemption reserve to reduce such defaults from the companies.
Public financial institutions, whose paid-up shareholdings are held by the Central Government to an extent of 51% or more and the public financial institutions that are governed by the Reserve Bank of India (RBI) are exempted from the obligations to maintain the DRR.
According to Section 71(5) & 71(6) of the Companies Act, 2013, no company shall make an offer, or an invitation or publish a prospectus to the public or the members of the company whose number exceeds 500 for the subscription of debentures, without appointing one or more debenture trustees.
The conditions that govern the appointment of such trustees shall be subject to prescribed rules. The role of the debenture trustee is to take steps to redress the grievances of the debenture-holders and protect their interests.
According to Section 71(7), any provision contained in either the trust deed or in any contract with the debenture-holders secured by a trust deed is void,
if such provision exempts the debenture trustee from any liability of breach of trust, where he fails to show the due care and diligence as required by him as a trustee.
if such provision indemnifies the debenture trustee for any liability of breach of trust, where he fails to show the due care and diligence as required by him as a trustee.
According to Section 71(9) of the Act, if at any time the debenture trustee feels that the assets of the company are not sufficient to fulfil the principal amount and when it becomes due, the trustee may file a petition before the national company law tribunal and by order restrict the company from incurring any further liability.
Another important duty of the debenture trustee is to keep the company’s assets charged against the debentures. Rule 18 (3) of the Companies (Share Capital and Debentures) Rules, 2014, provides various other functions of the debentures trustee, that the letter of offer to issue debentures are consistent with the debenture deed, to request periodic status and performance of the company and inform the debenture-holders in case if there is a default.
Other general rules while issuing debentures
The creation of a charge is mandatory on the properties or assets of the company or its subsidiary company, its holding company or its associates company for the purpose of issuing debentures.
If a company fails to redeem the debenture-holders on the date of the maturity or on the due date the company fails to pay the interest, then by application of one or all the debenture-holders or by the application of the debenture trustee the Tribunal may by order direct the company to redeem the debentures.
The Central Government has the power to prescribe the procedures, for securing the interest of the debenture-holders, for the form of debenture trust deed and for the debenture-holders to inspect the trust deed.
Charge
Charge is defined under Section 2(16) of the Companies Act, 2013. A charge is the concept of control over the company’s properties or assets which have been given as securities for the amount lent by the creditors in the case of debentures of the debenture-holders. A charge may arise upon the properties given as securities when there is a default on the repayment of the money lent. The debenture-holder can take the charge to sell the property secured to satisfy his debt amount. There are two types of charges:
Fixed Charge.
Floating Charge.
Fixed charge
This is a normal concept of charge which is created on some specific properties or assets. As a result, the assets which have been charged have a fixed nature, which restricts the companies from selling such assets freely. If the company wants to sell the assets, it will either have to get the debenture holder’s permission to do so or repay the debt amount to release the asset in order to sell them. Even if they sell a new charge has to be created for the new assets which would hinder business. So that gives rise to the concept of floating charge.
Characteristics of fixed charge
The company cannot sell the assets which are provided as a security to the debenture-holders, without the permission of the debenture-holders, thus making them more secure.
Big businesses use the fixed charge more often than small businesses. Bigger businesses have many assets that are immovable and constant, such as machinery.
The businesses have little say in the matters of fixed charge, the fixed charge on a company’s assets puts restrictions on the company’s borrowings through the sale of their assets.
Floating charge
The floating charge is linked to all the assets of the company either present or future. The charge on the assets keeps on changing as the company buys or sells assets at its convenience. This type of charge gives an opportunity to the companies to freely continue trading the assets or selling them when there is a necessity to do so, without repaying the debt amount to the debenture-holders.
This type of charge created, however, is not to be fixed immediately, it is floating among all the assets of the company which the company may acquire from time to time.
When the time comes when the lender wants to enforce his security to realise his debt, the charge on the assets which is in the hands of the company at that time becomes fixed. Now, the debenture-holder takes charge of the assets which are present in the hands of the company at that time and gets back his principal amount and interest.
Characteristics of floating charge
It should be a charge upon a class of both, present and future assets.
The class of assets which is to be charged must be one which in the ordinary course of business of the company would be generally changing from time to time.
It should be communicated by the charge until the debenture-holder takes any step, the company shall have the right to use the assets comprising such charge.
Crystallisation of floating charge
The process of converting a floating charge into a fixed charge in the time of enforcing the security by the debenture-holder is known as the crystallisation of a floating charge. The floating charge remains dormant till it becomes fixed when the securities are enforced by the debenture-holder.
In the case of Government Stock and Other Securities Investment Co Ltd v. Manila Railway Co Ltd (1897), it was held that it is of the essence of a floating charge that it remains dormant until the undertaking charges cease to be a going concern, or until the person in whose favour the charge is created intervenes. Thus, a crystallisation of floating charge occurs when the company is winding up or when the charge-holder intervenes i.e., the debenture-holder intervenes.
Procedure for issuing debentures
Part B of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 provides the requirement of a due diligence certificate from the debenture trustee. Various other procedures which have to be followed by companies while issuing debentures are explained in detail below in this heading. It is essential for every company that decides to acquire capital through debentures to follow the below mentioned steps.
Call and convene a general meeting
A notice for board meeting shall be issued, at least seven days before the meeting to all the directors of the company to their address. The notice shall be attached with the agenda, notes to the agenda and draft resolution.
The board meeting shall pass the necessary board resolution like approval of debentures through private placement, approval of private placement offer letter, approval of members to whom private placement be made and authorise the director to sign and issue notice of the general meeting
Filing of form MGT – 14 with ROC
The company shall file form MGT – 14 with the Registrar Of Companies (ROC) along with the fee as specified in the Companies (Registration offices and fees) Rules,2014 within 30 days of passing the special resolution in the general meeting. The certified true copies of the resolution along with an explanatory statement and general meeting documents shall be submitted while filing the form.
Private placement offer letter
Section 42 of the Companies Act, 2013 directs that the company shall record all the names of the persons to whom the debenture shall be offered through private placement. PAS – 4 forms shall be used to make a private placement offer letter.
The company has to send these offer letters either in writing or in electronic mode within 30 days of recording the names of persons to whom the debenture is offered. The company shall maintain a register using the form PAS – 5 of the person to whom the debentures have been offered through the offer letter.
Open a separate bank account
A separate bank account shall be created in a bank which has been scheduled in Schedule II of the Reserve Bank of India Act, 1934, for keeping the monies which have been received on the application.
Debenture certificate
If there is any allotment of debentures to the debenture-holders, the certificate of debenture shall be issued to debenture-holders within 6 months of the date of allocation.
How to buy debentures
Debentures are fixed security income and work like a loan and in return, the company pays a fixed interest with a certain interest rate per annum and after the maturity date the principal amount is paid back. If the person buys debentures by opting for cumulative interest, then all the cumulative interest along with the principal amount would be paid back at the maturity date.
There are two methods for investing in debentures which are listed above and they are characterised as the direct method and the Indirect method.
Indirect method
Indirect method of buying the debentures is a concept of purchasing the debentures wherein the investor can buy debentures outside the company’s physical selling point. In an indirect method, the person need not buy debentures directly from the company, he can buy them through a third source.
A person can invest in debentures indirectly by investing in mutual funds, there is an option to invest in known debt mutual funds which includes debentures. The concept of mutual funds is that the mutual funds would mutually collect funds from the investors and will invest in different types of funds. The different types of funds may include corporate funds or government funds. Those debt mutual funds would play the role of debentures by raising corporate funds or government funds.
The most important benefit of buying debentures in an indirect method is its convenience. The person investing is not required to physically go anywhere to buy debentures. The major drawback of mutual funds is its fees, any mutual fund would charge the investors with 1% or 2% of total money invested as fees per year. If a person wants to save such fees, he must invest in a direct method.
Direct method
The direct method of investing in debentures is where a person can buy the debentures directly from the company either physically or online. The direct method is used to buy government debentures, corporate debentures and tax-saving debentures. The methods to buy or invest in debentures through direct methods are explained in detail below.
Corporate debentures:
Corporate debentures can be bought or traded in stock markets. If a person wants to buy debentures he has the option to buy debentures in his trading or demat account. Several debentures would be listed in the stock markets from which the investors can choose to buy debentures as per their convenience.
Other options to buy corporate debentures of private companies are through multiple commercial banks, like State Bank of India, HDFC Bank, ICICI Bank etc. A person can also directly visit a company’s website and buy debentures from them or a person can directly visit any of the company’s physical branches to buy debentures. The debentures will be received in the form of either a physical certificate or in demat form which is reflected in the demat account.
If a person wants to invest in corporate debentures, he will be entitled to receive a fixed rate of interest from the company. The interest provided by any company directly depends on its credit rating. If a company gives the investors less risk, then the rate of interest given by such a company would be less. If a company has a strong balance sheet then the company is considered to give its investors less risk and hence, the debenture-holder would be entitled to a lower rate of interest for their debentures. If the company has a low credit rating and a weak balance sheet, then such a company would pay a higher rate of interest.
Another criterion where the interest rate has fluctuated is based on its security. The unsecured debentures promise to pay more interest rates of up to 14% per annum compared to the interest paid by the secured debentures.
Government debentures:
Government debentures are one type of sovereign bonds which is issued by the government to support public spending, which includes a payment of periodic interest by the government. Government debentures cannot be bought from trading or demat accounts, because brokers are not registered with RBI. Only financial institutions, commercial banks or primary dealers can purchase government debentures, a retail investor cannot purchase government debentures.
A retail investor can buy government debentures by investing through commercial banks, a range of 7-8% interest rate per annum can be expected from government debentures. If the investment is short term then the interest rate would be 7% and if it is of a long term of 20-30 years, then it will be 8%. Government debentures cannot be bought online; a person has to physically visit the commercial banks to buy them.
The demat account is mandatory even if a person wants to invest in government debentures, the debenture certificate can be either in the form of physical or demat. Since the government debentures cannot be traded in stock markets, only after the maturity date, the principal amount be paid back, so the government debentures are slightly illiquid assets.
Tax Saving debentures or bonds:
Tax-saving debentures or bonds are issued by the government or its authorised entities or its infrastructure companies which payback long-term gains with very little interest on them. Organisations like the National Highway Authority of India (NHAI), Rural Electrification Corporation (REC), Power Finance Corporation (PFC) etc., provide tax-saving debentures or bonds. An individual has to buy such debentures or bonds by physically visiting those organisations’ financial institutions or through commercial banks which are registered with these organisations. Since these types of investments help an individual to save long-term capital gains, the interest rate here is considerably low, it is generally 5 – 5.5% per annum.
Registration of debentures
Normally the debentures are registered under the company’s registry under Section 88 of the Companies Act, 2013. Since the debenture-holders are secured and registered under the company’s registry, they enjoy priority over other contributors of the company’s capital like shareholders, unsecured creditors etc. The registration of debentures under the company’s registry is limited to determining the priority of debenture-holders in a company. Whereas, the registration under the Registration Act, 1908 determines the priority of all the creditors to the company and their priority over the immovable assets of the company.
K. Roy & Bros vs. Ramanath Das and Ors. (1943)
Facts of the case
The appellants are the building contractors and they agreed to build a sugar mill for the company. The appellants were not paid for their work and the materials required for building the sugar mill, so they eventually went to arbitration and secured for themselves an award for their debt. The defendant was a director and one of the managing agents of the company, and he bought 151 debentures in the company, each of them for Rs. 500. With the money raised the company built the machinery and installed it in the production sector. The company after functioning for a certain time got into financial issues and a winding-up order was ordered by the court. The liquidator appointed by the court considered that since the debentures were not registered under the Registration Act, 1908 the debentures have the charge only on the movable assets of the company. Whereas the appellants, the builders would have priority over the immovable assets of the company.
Issue of the case
Whether the registration of debentures under Section 17 of the Registration Act, 1908 is required to be done in addition to the registration of debentures under Section 88 of the Companies Act, 2013?
Judgement of the case
The Calcutta High Court held that according to the conditions in the debenture trust deed, the money payable to the debentures shall be charged without any preference or priority towards other debentures. The Hon’ble Court held that the priority of charge on the company’s assets is based on the registration of the debentures under the Companies Act, 2013 and is applicable only to the debenture-holders. Whereas, the registration under the Registration Act, 1908 is applicable to the assets of the company in general. So in this case, the appellants have more priority over the immovable property of the company as they have the arbitration award in their favour and the defendants only have a charge over the movable properties as they have not registered under the Registration Act, 1908.
Redemption of debentures
The repayment of the debt amount of the debenture by the company to the debenture-holder at the maturity date is the redemption of debentures. Redemption of debentures allows the company to discharge from its liability as a debtor and can get back the assets which have been provided as charges. The company can redeem the debentures at a value that it decides at the time of redemption. There are three values at which a debenture can be redeemed:
At Par: The redemption value which is given by the company is equal to the face value of the debentures.
At Premium: The redemption value which is given by the company is more than the face value of the debentures.
At Discount: The redemption value which is given by the company is less than the face value of the debentures.
Procedure for redemption of debentures
Different companies can opt for different ways for redemption of debentures issued by them. In the process of redeeming debentures, the company usually pays back the debenture-holders the capital raised from them in the form of debentures. The Debenture Redemption Reserve (DRR) is used for the purpose of redemption of debentures by the company. Section 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 lists the following procedure to be followed while redeeming the debentures:
The Debenture Redemption Reserve (DRR) is to be accumulated by the profits gained by the company which is available for dividend payments.
There must at least be 50% of the amount raised through debentures in the DRR to secure the payment during the redemption.
For the purpose of partly converted debentures, the DRR must be created in respect of the non-convertible portion of the debentures only.
The DRR funds may not be used for any other purpose than the purpose of redemption of debentures.
In case of any default by the company on repayment of the debenture amount, any or all of the debenture-holders or debenture trustees can seek remedy for the same before the National Company Law Tribunal(NCTL) .
How are debentures related to shares?
In most of the financial aspects, shares and debentures are similar in nature. Both shares and debentures are used by the company in the course of raising their capital to improve their business. In a company both the shares and debentures have certain common functions in any business transactions.
Similarities between shares and debentures
Both the shareholders and the debenture-holders play the roles of investors as they invest their money in the company.
Both the shareholders and the debenture-holders also get something in return from the company for the money they have invested in it.
As both the shares and the debentures are the fundraising tools for the company, they can be issued to the public. Both the shares and debentures can also be sold or purchased in an open market.
Both the shareholders and the debenture-holders depend upon the assets of the company as securities for the money they have invested in the company.
Differences between shares and debentures
Though both the shares and the debentures are the fundraising tools for the company to raise their capital funds, there are certain differences between them which is explained in detail below.
Differences with respect to the powers of shareholders and debenture-holders
The first basic difference between the shares and debentures is the role of their holders in the company.
Shareholders play a role of being a member of the company as they have the company’s ownership to the extent to which they have invested in it. Thus, they enjoy all the rights of the members of the company. Shareholders have voting rights in the company so they engage in the major activities of the company.
The debenture-holder cannot be a member of the company and thus they do not have the company’s ownership, a debenture-holder is simply a creditor of the company who lends money to raise their capital. Section 71(2) of the Companies Act, 2013 directs that no company shall issue debentures with voting rights to the debenture-holders in any of the meetings of the company. Majorly the debenture-holders cannot interfere in the business activities of the company.
Difference in respect to returns received
Both the Shares and the debentures get some return for the amount invested in the company. The Shares get their return by way of dividends. Dividends are given from the profit incurred by the company, the rate of dividend is proportional to the rate of profit of the company. The more the company is in profit, the more the shareholders can get their dividends from the company.
The debentures get their return by way of a fixed rate of interest. Unlike shares the interest is not given from the profits incurred by the company, moreover, the profit or loss of a company is immaterial in respect of returns from debentures. The rates at which the interest is to be given are governed by a regulating body – the Investment Information and Credit Rating Agency (ICRA). As the rate of interest for a debenture is fixed, the rate of dividend may be much higher than the rate of interest
Difference in respect of security given by the company
The company gives securities to the investors who invest in their capital, some securities may be secure and some may be insecure.
The Securities given by the company in respect of shares are the ownership of some extent of the company to which the shareholders have invested. The securities of this type which are given to the shareholders are not secure and are of more risk when compared to the securities given to the debenture-holder. The fate of the shares depends on the market’s fluctuation and the company’s performance.
The Securities given by the company in respect of debentures is the right to charge on the assets which have been given as collaterals. The securities of this type which are given to the debenture-holders are secure and are of no risk when compared to the securities given to the shareholders. The Market’s fluctuation and the performance of the company are irrelevant in terms of debentures as the securities are secure and the debenture holder has less risk.
Other differences between shares and debentures
The company cannot pay back the shareholder and get back the equity shares without the shareholder’s consent. If the shareholder is willing to sell or transfer the shares to the company itself, he/she can do so, but the company does not have the power to pay back by itself. On the other hand, unless the debenture is a perpetual debenture, the company can always pay back the debenture-holders and get back their securities.
Since the shareholders are the members of the company and they enjoy ownership of the company to some extent, their claims to return their investments in the company in terms of winding up are not paid in priority. In case of debentures if the company is winding up, then the debenture-holder is to be paid in priority. They are the first to be paid by the company in case of it winding up because they are the creditors of the company.
Summary of the difference between debenture and shares:
Serial No.
Basis of Difference
Debentures
Shares
1.
Role in the company
The debenture-holder just plays the role of creditor of the company.
The shareholder acts as a member of the company.
2.
Ownership
The issuing of debentures does not affect the ownership of the company.
The issuing of shares dilutes the ownership of the company.
3.
Risk
The debentures are generally risk-free.
The Shares are a risky venture of investing in a company.
4.
Return
The debenture-holder gets a fixed amount of interest from the company for the principal they have invested till the date of maturity
The shareholder gets returns in the form of dividends, the dividends are issued when the company is in profit.
5.
Transformation
A debenture can be transformed into shares, which are also known as convertible debentures
A share cannot be transformed into debentures
6.
Security
A debenture is secured by a way of charge on the assets provided by the company as collateral
A share is not as secure as a debenture as they are based on the market trends and the performance of the company
7.
Function of a company
A debenture-holder cannot take part in any function of a company.
A shareholder being a member of the company can take part in the functions of the company.
8.
Right to vote
A debenture-holder does not have the right to vote in the company meetings
A shareholder has the right to vote in the company meetings.
Difference between debentures and other securities
The major difference between debentures and other securities such as derivative securities and equity securities is that it is a debt security – the company is indebted to the debentures issued i.e. the company gets a debt through issuing debentures from the debenture-holders and adds it to it’s capital. Whereas the other securities even though they too help the company to acquire capital, they are not considered as a debt to the company. Some securities may give ownership and some may give value which depends on another underlying instrument or document. There is another type of security which is known as hybrid securities, which are a combination of two or more securities.
Conversion of debentures into other form of securities
The debentures can be converted to other forms of securities of a company. The most common form of conversion is the conversion of debentures into shares, wherein a company gives an option to the debenture-holders to convert their debentures into shares, thus also giving them the right to ownership of the company. The right to ownership acquired through such conversion is limited to the extent of the converted shares. These types of debentures are called convertible debentures.
Conclusion
Debentures are one of the most regulated and one of the most useful capital-earning methods for a company. They have very unique features when compared with other modes of acquiring capital. In the concept of debentures, both the company and the debenture-holder are in safer and profitable aspects with respect to each other. As the private sector’s power is increasing day by day, it is vital to follow a more secure way for both the companies and the person investing in it for the purpose of acquiring capital for the growth of the business. Debentures are the most secured form of securities given by the company and as there are different types of debentures, it will help both the companies and the debenture-holders to choose any one among them as per their convenience.
Frequently Asked Questions (FAQs)
Can a company buy its own debentures?
A company can buy or purchase its own debentures in the open market. Companies do so with the motive of investing in them and at a later period of time selling them at a higher price and earning a profit thereby. According to Section 68 of the Companies Act, 2013 and Section 17 of the Companies (Share Capital and Debentures) Rules, 2014 defines the procedure for buyback of securities by a company.
What is the time period to redeem debentures?
There is as such no time period to redeem debentures, it may vary from company to company but most of the time, the redemption happens after the maturity date. It may be a fixed number of years, any time after a stipulated number of years has passed since its issue or any time after the debenture-holder has issued a notice showing his intention to get back his principal amount through annual drawing.
What is the role of a debenture trust deed in debentures?
The debenture trust deed is an instrument which is in favour of the debenture holder and is executed by the company. The company in the trust deed defines its role and duties in the issue of debentures and protects the interest of the debenture-holders.
Are debentures and bonds the same?
Generally speaking, all debentures are bonds, but not all bonds are debentures. When a bond is unsecured it is considered a debenture. Debentures are basically used for a specific purpose, unlike bonds. For example, a bond may be issued to raise the capital of the company in general, whereas a debenture may be issued to raise capital for any specific upcoming project of the company. Also in case of the convertible debentures, the convertible debentures can be converted into shares, but bonds can never be converted into shares. Another major difference is that the bonds are issued for a long period of time as compared to debentures that are issued for a short period.
Any tax liability to a debenture-holder while redeeming debentures?
If a debenture-holder has invested in bonds or debentures, then he needs to file an Income Tax Return (ITR) and pay tax on the income received when the debenture gets redeemed by him. As per the Income Tax Act, 1961, debentures are considered as securities and they can be sold, and the sale of debentures is considered as a capital gains income. In terms of listed and unlisted debentures for short term capital gains, there is a tax slab in the Act and in terms of listed and unlisted debentures for long term capital gains, the tax rate is 10% and 20% respectively without indexation under Section 112 of the Income Tax Act, 1961.
References
Avtar Singh, Company Law, Eastern Book Company (EBC), 16th edition.
S Chand, A Textbook of Company Law, P. P. S. Google, 11th edition.
Dr. S. C. Tripathy, New Company Law, Eastern Book Company (EBC), New edition.
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Industrially produced goods and services may not always meet the actual needs of society. Instead, they often create new needs and introduce new products into the market. What was once considered a luxury eventually became a necessity. Therefore, industries and commerce are vital to a country’s economy. Trade and commerce involve the exchange of goods and services through business transactions, which create contractual agreements between the parties involved. To regulate such contracts, states have enacted strict rules and regulations to formalise all business activities. This is how the Indian Contract Act of 1872 came into existence.
Evaluation of Contract Law
Before enacting the Indian Contract Act, there was no codified law to regulate business activities; contractual relationships were governed by personal laws of different religions’’, like Hinduism and Islam. If any contracts occur among different communities’, a lot of confusion arises about which law prevails between the two. The first codified law was enacted Before the advent of the Indian Contract Act, English law was applied in the Presidency Towns of Madras, Bombay, and Calcutta under the Charter of 1726 issued by King George to the East India Company. This law did not fulfil all the needs for redressal of all issues, such as distinct types of business houses, indemnity, insurance, etc. Under the India Contract Act, two rights are available right in rem and right impersonal.
Cross border business – a new dimension
Cross-border business or transnational business means trade and commercial business being held between two different nations. When the business expands beyond its territory, it must face and find solutions to other challenges like language barriers, legal area issues, managing coordination and shipping, the formation of global contracts, foreign exchange, coordination of goods and insurance, and dispute resolution mechanisms. Therefore, the Contract Act alone is not sufficient to sort out the above issues. The international community found necessary solutions by way of international business treaties.
International organisational support
The United Nations Industrial Development Organisation is one of the wings of the UNO to maintain and regulate international trade and commerce between member countries. present Director of UNIDO, Mr Gerd Müller, describes its goal “My goal is that UNIDO provides concrete and practical solutions to pressing global challenges. Sustainable industrial development can deliver a world without hunger, using sustainable energy for productive activities, and creating jobs, particularly for young people”.
Cross border payment regulations
Different countries deal with their currency for transactions, but international trading needs a common exchange system for payment and receipt. The Reserve Bank of India issued some guidance for Cross-border Payments concerning AML limits, etc. In Singapore, the MAS oversees cross-border payments. In Europe, they use the SEPA system and other legislation like PSD2. Hence, there is no uniform way these payments can be regulated.
Landmark case related
Banco National de Cuba vs. Sabbatino (1964)
This case involved a contract dispute between a Cuban national company and an American company. The issue of the case is whether the US Supreme Court shall enforce the payment to a Cuban company, given the political circumstances involving the nationalisation of foreign assets in Cuba. The US Supreme Court, “led by Justice John Marshall Harlan II, applied the act of state doctrine, refusing to declare the expropriation of land a violation of international law due to lack of international consensus. The court also noted that a single court enforcing US law in another country could disrupt sensitive international negotiations”.
Language barrier
English has become a widely used language in international business. However, language barriers can still pose a challenge to effective communication. With the invention of computers, it has become easier to overcome such obstacles. Companies are now providing language classes to their employees, using visual aids, and conducting seminars and conventions to develop cultural knowledge. In some cases, interpreters are also hired to translate important agreements and business treaties.
Jurisdiction obstacle
Cross-border trade and commerce face a significant challenge. Countries need to comply with the rules and regulations of other countries to conduct business with them. The main aspects to consider are the taxation, labour laws, and environmental laws of the respective countries. Developing countries are now offering more relaxed labour laws and tax holidays for certain periods, such as exemptions from paying income tax and local taxes, to attract new foreign investment and create employment opportunities for their citizens. They are also providing land for business and industrial establishments by subsidising subsidy costs and introducing a single window system to provide all necessary approvals.
Leading case law for cross-border juristic obstacles
Hadley vs. Baxendale (1854)
This case is not linked to transnational business but deals with the consequential damage of the breach of contract. The breaching party is liable for all losses the parties to the contract should have predicted. If the breaching party lacks knowledge that the other party has, they’re only liable for foreseeable losses based on available information.
Logistics and shipping
Nowadays, other than perishable goods, all other goods are coordinated by shipping. Whenever seaborne trade began, collation by two ships in the deep sea, losses from pirates, and shipwrecks caused by storms and hurricanes were normal phenomena. Shipping company owners and traders faced huge losses; during this time, entire ships, capitals, and businesses were sunk. Marine insurance has overcome the above difficulties. Contract of indemnity base for insurance, and it was developed as the marine insurance branch of general insurance. Marine and General Insurance Company underwriters of high-volume risk and losses in voyage and shipping underwrite insurance policies individually or collectively by reinsurance mechanisms; even the different insurance policies belonging to different countries share their premiums and perils. Insurers and insurance companies sort out their disputes towards the settlement of claims through international treaties. THE UNCLOS (UNITED NATIONAL CONVENTION OF LAWS OF THE SEA) UNO held a 1958 conference for laws of the sea at Geneva, resulting in four treaties to regulate and streamline the disputes:
This international agreement was signed by the member countries engaging in international trade and commerce and international agreements that establish a legal framework for all marine and maritime activities. The courts also play a key role in the redressal of maritime issues.
Leading case law in maritime issues
The Mary Nour (1989)
In this case, there was a disagreement regarding a time charter party agreement for a ship that was transporting sugar from Brazil to Jordan. The ship encountered several unforeseen events, such as harsh weather conditions and labour strikes, which caused delays. The main issue was whether these events could be considered “frustration of purpose” under the contract. The case focused on the concept of frustration in international shipping contracts and how it affects the obligations of the parties involved.
Dispute Resolution Mechanism
The common occurrence of business is raising disputes if different opinions arise between the parties’ civil courts and some special tribunal takes a vital role in redressing the dispute. The new developments in national and international business, Alternate Dispute Resolution Methods, Arbitration, and Mediation, play a key role in the redressal of disputes, as none of the “ADR” parties opt for this to save money and time in some important international arbitration forums.
1. International Court of Arbitration (ICCI-ICA) Paris;
2. World Intellectual Property Organisation (WIPO);
3. London Court of International Organisation (LCIA);
4. Singapore International Arbitration Centre (SIAC);
5. Hong Kong International Arbitration Centre (HKIAC);
6. Dubai International Arbitration Centre (DIAC);
Leading case of international arbitration in border business
Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc. (2012)
In this case, the Supreme Court of India affirmatively held as follows:
The Act of 1996 has accepted the territoriality principle, which has been adopted in the UNCITRAL Model Law.
Section 2(2) of the 1996 Act makes a declaration that Part I of the 1996 Act shall apply to all arbitrations that take place within India. Part I of the 1996 Act, therefore, has no application to international commercial arbitrations held outside India. Provisions contained in Section 2(2) of the 1996 Act are not in conflict with any of the provisions, neither of Part I nor of Part II of the 1996 Act.
No application for interim relief in a foreign-seated international commercial arbitration is maintainable, neither under Section 9 of the 1996 Act nor under any other provision of Part I of the 1996 Act.
Explore the internet and AI technology
The world has become smaller due to the improvement in internet connectivity and digital money transactions, which will make it easier to communicate business activities and transfer funds quickly and safely. It can be said that the advancements in web development and artificial intelligence in the past two years have revolutionised not only the business world but also all activities. However, it is important to acknowledge that these discoveries come with their own set of risks and benefits. The main threat from hackers is data production. Business institutions spend a major part of their earnings on data protection and intellectual property protection from infringements.
Conclusion
The Contract Act has a major role in cross-border business. Even though the world has become a global village, with the rapid expansion of business activities, it is necessary to meet challenges like language barriers, area issues, managing planning and shipping, the formation of global contracts, foreign exchange, the coordination of goods, and dispute resolution mechanisms. Therefore, the Contract Act alone is not sufficient to sort out the above issues.
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The rapid development of artificial intelligence and machine learning technologies virtually across all sectors of the global economy is very evident. Privacy, on the other hand, is becoming more imperative given the above rapid development. As technology continues to evolve at a breakneck pace, the collection and processing of personal information, especially in the realm of emotional recognition, displays challenges in the ethical and privacy domains. Emotional recognition, a technique utilised by artificial intelligence to identify human emotional responses, is gaining traction in areas such as personalised environments, employment, security, marketing, and healthcare. This article delves into the intersection of data privacy and emotion recognition technologies and probes into the advantages, disadvantages, and regulatory frameworks that affect this concept.
What is emotion recognition
Emotion recognition technology is a rapidly evolving field that identifies and analyses human emotions through various methods, including facial recognition, voice analysis, and biometric sensors. Facial emotion recognition is a technology used for analysing sentiments from different sources, such as pictures and videos. Voice analysis is primarily used for identifying even the slightest change in a subject’s nervous system or changes in respiration and muscle tension, which in turn affect the voice production process.
An overview of data privacy and emotion recognition technology
It is estimated that the concept of emotion recognition technology is likely to be worth almost $56 billion by 2024. This goes on to show the wide application and utilisation of technology in the contemporary world. It will not be far from the truth for us to presume that various governments, corporate entities, and tech giants are subjecting us to the very same technology by this minute. For instance, theLucknow Police announced their intention to implement emotion recognition technology to track expressions of “distress” on the faces of women who come under the scope of AI-enabled surveillance cameras in public places. The cameras would automatically alert the nearest police station even before the alleged victim took any action to report any issue herself.
How emotion recognition works
As discussed above, emotion recognition technology is employed in various sectors with the help of different emotion recognition mechanisms. The following are the primary emotion recognition methods:
Facial recognition
Facial expressions are forms of non-verbal communication that are captured from different sources, such as pictures and videos. Facial emotional recognition is analysed via, a) facial detection; b) facial expression detection; and c) expression classification to an emotional state. Depending on the algorithm, facial expressions are classified into basic emotions (e.g., anger, disgust, fear, joy, sadness, and surprise).
Voice analysis
By analysing the tone, pitch, and cadence of a person’s voice, this method can detect emotions such as joy, frustration, and fear. With devices listening everywhere you go, privacy concerns are endemic to advancing technology. For instance, a mobile application or virtual assistant that is designed to adapt to the user’s mood and recognise emotions in real-time.
Biometric sensors
This is by far the most accurate method for recognition technology, as it corresponds to direct physiological signals, such as heart rate and skin conductance, to infer emotional states. The other two methods, combined with biometric identification, improve accuracy, thus decreasing the chances of wrong inferences.
Application of emotional recognition technology
This technology is employed by various industries and has a plethora of applications. We will discuss some of the prominent industries that use this technology.
Marketing and advertising
To analyse customer’s emotions while shopping for particular goods or their arrangements. Further, to capture the customer’s reaction to a particular product for targeted advertising.
Healthcare
It can help assess and monitor mental health conditions, offering a more nuanced understanding of a patient’s emotional well-being. Additionally, it aids in detecting autism or neurodegenerative diseases, predicting psychotic disorders or depression and primarily helping in suicide prevention.
Education
Emotion recognition technology can be employed to monitor student behaviour and engagement in classes, which affect learning experiences.
Security
Security covers both public safety and crime detection. This technology is used as a lie detector in border control and as predictive screening in public places to identify emotional triggers. Furthermore, it also aids in crime detection by effectively monitoring changes in emotion.
Data privacy concerns
A groundbreaking technology with immense potential, such as emotion recognition technology, though effective in a lot of scenarios, is bundled with certain significant concerns related to privacy and data protection. The collection and processing of personal data, especially emotional data, raises ethical and regulatory concerns that cannot be neglected. An evident concern that might arise is that of bias, which can be a result of the design and training of the platform or the inadequate data set utilised to develop the technology.
Data protection
The storage and transmission of emotional data must be secure to prevent unauthorised access. Emotional data would fall under the category of sensitive personal data, which, if leaked or breached, could potentially lead to a violation of privacy, i.e., confidentiality, integrity, and availability. Recently, the mental health records of almost 2,000 students, including 60 current students of an educational institution in Los Angeles, were uploaded to the dark web after falling victim to a ransomware attack.
Necessity and proportionality
Utilising human emotional expression by converting it into data to increase sales or improve the experience is quite often not well-received by society. The utilisation of such technology ought to be counter-balanced with necessity and proportionality principles. Not adopting such safe practises often leads to the exploitation of data subjects (data principals) and the violation of privacy rights. However, the proportionality depends on the types of data collected, how long the data is retained and potential further processing.
Accuracy and fairness
Emotional recognition technology provides data that, in isolation, may not be accurate. Emotional expression can most often be hoodwinked and lead to inaccurate inferences. Further, emotion recognition technology relies on a theory called basic emotion theory, which is a set of non-scientific assumptions that claim there is a connection between facial expression and internal emotion and that such emotions are distinct and consistent across all cultures.
It is also understood by many that societal and cultural differences have a prominent impact on facial expression, which in essence affects accuracy. For instance, a person from a particular ethnicity might have a facial expression that corresponds to a particular emotion, but he might be wrongfully profiled for being angry. Unless adequate and diverse data is fed to the technology, there is a possibility for inaccurate and unfair inference.
A peculiar situation where the emotion recognition technology might fail is when it tries to infer the emotion of a person diagnosed with alexithymia, which is a state in which a person has difficulty comprehending the emotion he/she is experiencing.
Surveillance and privacy
Thanks to the ubiquitous nature of cameras and microphones, we are constantly under surveillance that we are unaware of. These cameras and microphones not only capture facial expressions but also the voice of a person. This raises a serious concern about transparency in the collection and processing of such sensitive data. The subjects of such surveillance are blissfully unaware of the purpose and means of processing their emotional data. This leads to the processing of personal data without a legal basis warranted by data protection legislation.
Regulatory framework
The General Data Protection Regulation (GDPR)
The GDPR, implemented by the European Union (EU) in 2018, is one of the most comprehensive data protection regulations globally. It requires transparent data processing, informed consent, and the right to be forgotten. Emotion recognition technology companies that process the emotional data of EU residents must comply with the regulations. It is pertinent to mention that despite the sensitive nature of emotional data, the GDPR does not categorise it as special data, resulting in a lack of comprehensive protection.
The Digital Person Data Protection Act, 2023
The DPDPA was granted presidential assent on August 11, 2023, marking the birth of a novel regulation governing digital personal data. However, the legislation is silent on sensitive personal data or biometric data. The Indian legislation that addresses this concern is the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. Section 2(b) of the rules defines: “biometric” as the technologies that measure and analyse human body characteristics, such as fingerprints, eye retinas and irises, voice patterns, facial patterns, hand measurements and DNA for authentication purposes. Additionally, Section 43A of the Information Technology Act of 2000, merely prescribes a relatively feeble requirement for private data controllers to maintain “reasonable security practices and procedures.”
Ethical AI guidelines
Organisations like IEEE (Institute of Electrical and Electronics Engineers) and the AI Ethics Guidelines by the European Commission have released guidelines for ethical AI development. These guidelines emphasise transparency, fairness, and accountability in the development and deployment of emotion recognition technology.
Conclusion
To conclude, emotional recognition technology has immense potential and can be utilised in various industries. It is deployed to infer real-time human emotion and alter the user experience, respectively. However, the collection and processing of emotional data raises significant data privacy and ethical concerns. The development of such futuristic technology ought to be guided by an ethical regulatory framework that encompasses informed consent, data security, fairness and accountability.
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This article is written by Uneza Khan. In this article, the author provides a comprehensive analysis of Section 185 of the Companies Act, 2013, along with the recent amendments made to the Act pertaining to the aforesaid section. Additionally, it also discusses the exceptions to this provision and the punishments provided in the 2013 Act in the event of non-compliance.
It has been published by Rachit Garg.
Table of Contents
Introduction
The Companies Act, 2013 (hereinafter referred to as the 2013 Act) is an important portion of Indian legislation. It governs the administration, formation, and operation of corporations in the nation.
The 2013 Act brought various changes replacing the Companies Act, 1956. The Act contains several clauses covering business law, Corporate Social Responsibility (CSR), auditing, financial reporting, and many other topics. It seeks to improve corporate sector responsibility, transparency, and investor protection. The “One Person Company” concept was also introduced by the Act, which greatly changed how Indian businesses are organised and run.
One such provision incorporated in the 2013 Act, pertaining to a company’s lending and borrowing activities, is Section 185, which is the subject matter of the present article. The provision establishes certain conditions on how the company can provide loans, security, and guarantees to its directors or other individuals, in whom directors have an interest.
According to Section 185, the Companies are prohibited from granting money to the directors or other interested individuals without necessary checks and balances. Specific requirements are outlined in Section 185 for Companies to grant loans, security, or guarantees to their directors or other individuals in whom directors possess interest.
In this article, we will be discussing in detail about Section 185 of the Companies Act 2013.
Section 185 of Companies Act, 2013 : an overview
Public and private companies are prohibited under Section 185 from making loans, advances or guarantees to any of their directors or to any other individual in which the director possesses interests. They are also prohibited from making guarantees or offering security in connection with any loans that the director or that other person may take out.
Section 185(1) specifies that;
(1) No company shall advance any loan
Directly or indirectly, which includes any loan represented by a book debt to, or in connection with any given guarantee or provided security with any loan taken by
any director of the Company, or director of a holding company or any partner or relative of any such director; or
in any such firm, the director or relative is a partner.
The motive of the Ministry of Corporate Affairs appears to be transparent which is to take a strict stance on the flow of funds from the company to its directors or other persons in whom the director is interested. The director’s fiduciary duty is more prominent, which is why loans and other credit are restricted to directors and other designated individuals.
To reduce a few of the industry’s concerns, the Ministry has eliminated the following transactions from Section 185 of the Companies Act, 2013 scope in the Companies (Meetings of Board and its Powers) Rules, 2014, which were notified on March 31, 2014: Transactions between holding companies and their wholly owned subsidiaries concerning:
Any loans made by holding companies to their wholly owned subsidiaries;
Any guarantee or security provided by holding companies regarding any loans made to their wholly owned subsidiaries; and transactions between holding companies and subsidiary companies;
Any guarantee or security offered by a holding company concerning a loan that a bank or other financial institution makes to one of its subsidiaries, wherein the subsidiary (including a wholly owned subsidiary) utilises the loan for its primary business operations.
Loan to any person in whom any of the directors of the company possesses their interest
Section 185(2) states:
In connection with any loan made by a person in which any of the company’s directors has an interest, a company may advance any loan, including any loan represented by a book debt, or offer any guarantee or security, subject to the condition that:
The following special resolution is adopted by the company’s general meeting: provided that the explanation to the notice for the pertinent general meeting shall disclose all the details of the loans provided, guarantees provided, or security provided, as well as the purpose for which the recipient of the loan, guarantee, or security is proposed to use it, as well as any other pertinent fact; and
The borrowing corporation for its chief business operations uses the loans.
The term “any person in whom any of the directors of the Company is interested” has the following meanings for the purposes of this subsection:
any such director is a director or member of any private company;
any body corporate at a general meeting of which not less than 25% of the total voting power may be exercised or controlled by any such director, or by 2 or more such directors, jointly; or
any body corporate, the Board of Directors, management, or management committee.
As per Section 2(11), a Company incorporated outside India is included in ‘body corporate’ or ‘corporation’, and it excludes any cooperative society registered under any law related to cooperative society and any other body corporate which is specified by notification by the Central Government.
Conditions
Subsection (2) of section 185 states the conditions to be fulfilled for giving a loan or guarantee.
The loan to directors or other businesses made in a corporation should be in accordance with Section 185,
The loan must be authorised by the board of directors resolution and by shareholders special resolution.
The resolution must outline the loan’s purpose, size, terms of repayment, and security, if any, for the loan, among other details.
Section 185 also restricts the company’s ability to advance or lend money. The company’s 60% paid-up share capital, free reserves, and securities premium account is the maximum it can lend.
Exceptions to Section 185 of Companies Act, 2013
Section 185(3) provides exceptions to which Subsections (1) & (2) shall not apply.
The company may provide loans, guarantees or security to:
The whole time Director or the Managing Director as a part of the condition of service offered by the company to all its members; or
In accordance with a scheme accepted by the members through a special resolution.
In this the approval of the board of directors of a Company is necessary and it should be mentioned in the company’s financial statements.
The loan amount should not surpass either 100% of the free reserves and securities premium account or 60% of the paid-up share capital and free reserves, whichever is higher.
Subject to certain restrictions, a Company may provide any loan, guarantee, or offer security in relation to any loan to a director who is neither a Managing Director nor a Full-time Director with prior approval from the Board of Directors.
The maximum loan amount is one crore rupees, or twenty-five percent of the paid-up share capital, free reserves, and securities premium account, whichever is less.
a company that, as part of its regular operations, makes loans, guarantees repayment of loans, or pledges securities for repayment of loans, and charges interest on those loans at a rate not lower than the current yield on the longest-term government security (one year, three years, five years, or ten years), depending on the length of the loan;
any loan made to a wholly owned subsidiary firm by a holding company, as well as any guarantee or security offered in connection with such a loan by a holding company;
a holding company may offer a guarantee or security in exchange for a loan that a bank or other financial institution makes to one of its subsidiary companies, provided that the subsidiary company for its core business operations uses the loans
A firm or company in which the director is a partner or director, or a person who is a director’s relative, is included in a person in whom the director has an interest.
Exceptions for Wholly Owned Subsidiaries
Section 185 does not apply to loans or advances given by a company to its Wholly Owned Subsidiary
Subsidiary 2(87) under the Companies Act 2013 states in relation to other companies means a company in which the holding company has control over the board of directors composition or controls more than 50% of the total voting power.
Exceptions for Government Companies
Government Companies are excluded from the ambit of Section 185 in case such a company acquire prior approval before providing any loan or guarantee or security under the amended section (Notification No. G.S.R. 463(E) dated June 5, 2015, of the State Government or the Ministry of the Central Government which is responsible for the administration of the company.
Exceptions for Private Companies
Introduced through the Notification on 5th June 2015. The provision of Section 185 shall not apply to a Private Company-
in whose share capital any money is invested by a body corporate;
if the company’s borrowings from banks or financial institutions or any body corporate is less than twice its paid-up share capital or fifty crore rupees whichever is less; and
under this section, such a company repayment default of such borrowings existing at the time of establishing transactions.
Exceptions for Nidhi Companies
Section 185 shall not apply to a Nidhi Company as introduced by a notification on 5th June 2015, provided that the loans provided to the Director or his relative in their capacity as members and by a note such transaction will be revealed in the annual accounts.
Exceptions for IFSC( International Finance Service Centres) Companies
Clause ‘c’ was substituted in subsection (1) of Section 185 (Introduced through Notification on 4th January 2017) which stated that The director of a lending company can be a director or member of a private company, in which the director of the lending company does not have direct or indirect shareholding either through themselves or their relatives and to this effect a special resolution is passed.
Punishment for non-compliance to Section 185 of Companies Act, 2013
Section 185(4) of the Companies Act provides the punishment for non-compliance of this Section.
It states that, if any guarantee or advanced security for any loan is provided, specified or utilised in violation of the provisions of this section,
the company shall be subject to a fine that shall not be less than Rs. 5 lakhs but may not exceed Rs. 25 lakhs;
default by any officer of the company shall be subject to either imprisonment for a term that may not exceed six months or a fine that shall not be less than Rs. 5 lakhs but may not exceed Rs. 25 lakhs; and
Imprisonment which may extend to six months or a fine of not less than five lakh rupees but not more than twenty-five lakh rupees, or both, may be imposed as punishment on the director or any other individual to whom any loan is advanced or guarantee or security is given or provided in relation with any loan taken by him or the other person.
The objective of Section 185 of Companies Act, 2013
Section 185 of the 2013 Act addresses loans and advances to directors and any affiliated organisations. The principle objective of Section 185 is to protect the shareholders’ and other stakeholders’ interests and to stop directors from abusing their positions.
The rationale behind this Section is
to avert the stealing or fraud of public funds granted by Banks and Financial Institutions,
Public issue proceeds,
This Section notably prohibits a company from advancing loans or providing guarantees or securities using the proceeds of any public issue for:
-Section 185 ensures that the funds raised through the public issue are related to the purpose stated in the prospectus (which includes basic information regarding the company in the form of advertisement, circulars, and notice inviting the public for the offering)of the company and are not used for personal gains of directors.
-This Section also puts restrictions on persons on whom the director possesses interest.
To prevent misuse by conveying funds to directors’ private businesses,
This section also prohibits loans and advances to the directors and the person related to them in order to prevent any misuse of the company’s funds for personal benefit.
Providing financial institutions securities and corporate guarantees in order to secure directors’ personal gains.
Section 185 had a prominent effect on structured lending transactions which were supported by collateral, credit support, or guarantee either from a group or parent company. The Companies (Amendment) Act, 2017 addressed the major obstacles faced by the market players in raising funds and collateral and credit support by intra groups.
In view of this, Section 185 of the 2013 Acts, has been amended to eliminate the prohibition to some limit by providing for a way out in the form of a shareholders’ resolution for allowing loans/guarantees/securities to individuals or organisations in which directors possess some interest or for common controlled group companies.
After the aforesaid Amendment, every officer of the Company has more obligations to ensure that all loans, securities, and guarantees are in accordance with the Companies Act of 2013 because after the amendment the provisions have significantly broadened the scope of the penalties which is mentioned in Section 185(4) of the Companies Amendment Act 2017.
Conclusion
In order to circumvent any conflicts of interest, encourage good governance, and safeguard the interests of shareholders and stakeholders, Section 185 of the Companies Act 2013 plays a vital role. The clause improves responsibility and transparency in company affairs by placing restrictions on loans and advances to directors. To ensure smooth operations and maintain trust in the company’s environment, it is critical for companies and directors to understand the complexities of Section 185, abide by its regulations, and evolve strong governance procedures.
Frequently Asked Questions
What are the prohibitions under Section 185?
Section 185(1) states the prohibitions.
No corporation may give a loan in advance to its “directors” or to “other persons in whom directors are interested” either directly or indirectly.
In connection with any loan accepted by him or that other person, no company may issue a guarantee or a security.
The company cannot grant the aforementioned persons a loan that is represented by a book debt.
“Loan represented by Book Debt” refers to loans that aren’t really shown as loans in the books of the company but are instead represented in the balance sheet by debtor or credit sales, among other indirect loans.
“Guarantees” does not include performance guarantees; rather, it only includes guarantees related to loans or financial guarantees.
What is the penalty under Section 185?
Section 185(4) states the penalty if the provision of Section 185 is not complied with. It provides that, if the loan is advanced in contravention of Section 185 the Lender Company shall be liable with a fine between Rs. 5 lakh and Rs. 25 lakh.
Further, a director or other person to whom any loan is issued or a guarantee or security is given shall be liable for imprisonment which may extend to 6 months; or with a fine between Rs. 5 lakh and Rs. 25 lakh; or both.
Can a deposit be treated as a loan?
Whether a deposit shall be treated as a loan or not will depend upon the nature of the transaction and the facts gathered from the terms and conditions attached to the transaction. The essential requirement of a loan is the advance of money upon the understanding that it shall be returned and it may or may not carry interest, as held in the case of Dr Freddie Ardeshir Mehta v. Union of India (1998)by Bombay High Court.
What are the changes brought in Section 185 after the 2013 Amendment?
Public Companies cannot provide any loan or security in connection with a loan to a Director or any other person in whom the Director possesses an interest, excluding the Managerial Director and Whole-time Director as prescribed. It ensures appropriate checks and balances on providing loans or guarantees.
What are the changes brought in Section 185 after the 2017 Amendment?
Section 185 after the amendment by the Companies Amendment Act, 2017:
Restricts the prohibition on loans, advances etc. to the Directors of the Company or its holding company or any partner of the director or any firm, the director or relative is a partner
Permits the company to provide any loan or guarantee or provide any security in relation to any loan to any individual or organisation in whom the director possesses interest, provided that a special resolution should be passed by the company in a General Meeting. The borrowing company shall utilise the loan exclusively for its primary business undertakings.
The scope of Subsection 4 of Section 185 of the Act is expanded by including an officer in default of the Company which is mentioned in Section 2(59) to include any director, manager or Key Managerial personnel or any person in accordance with whose orders or instructions the Board of Directors or any one or more director’s is or are accustomed to act.
Is LLP included in the ambit of Section 185 of the Companies Act 2013?
No, The LLP is not included under the Companies Act, 2013 as LLP is required to comply with the provisions of the Limited Liability Partnership Act, 2008. Thus, they do not have to abide by Section 185 of the Companies Act, 2013 while providing loans to their partners.
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The article is written by Shefali Chitkara. This article seeks to elucidate upon one of the most important phases in a case before actually beginning with a criminal trial, i.e., the phase of filing a chargesheet, which is to be filed by the police officials as a result of an investigation.
It has been published by Rachit Garg.
Table of Contents
Introduction
Any criminal case goes through three stages which are investigation, inquiry and trial, after which a judgement is passed based on the evidence, statements of witnesses and other relevant and admissible information. The first phase of the investigation is conducted by police officials and based on that investigation, a final report under Section 173 of the Criminal Procedure Code, 1973 (hereinafter referred to as “CrPC”) is submitted.
A final report can be a chargesheet or a closure report, which is generally filed if no offence has come to light through the investigation. However, the magistrate can reorder the investigation or may even go ahead with the case if it deems fit. Moreover, in this article, the author has covered everything about a chargesheet, which is different from a closure report as filed by police officials.
What is a chargesheet
In India, the term ‘chargesheet’ is mentioned in the procedural law (CrPC) and other special acts dealing with criminal offences, like the Narcotics Drugs and Psychotropic Substances (NDPS) Act, 1985. A document like a chargesheet is necessary in criminal cases where investigation by police officials can only reveal certain events that otherwise could not be made available by the parties before the court; therefore, CrPC under Section 173 mentions the report that has to be filed by the police on completing the investigation and that report is known as a chargesheet.
A chargesheet is a final report that is filed by the investigating officer or police officials under Section 173 CrPC after the completion of the investigation in a cognizable or non-cognizable case. A chargesheet has been defined as “a final report of the police officer under Section 173(2) of the CrPC” in one of the famous cases ofK. Veeraswami v. Union of India & Others (1991).
The provision also states the contents of the chargesheet and the manner in which it needs to be filed. Further, there are various other provisions in the Act mentioning the chargesheet or a final report.
Section 173- Report of police officer on completion of investigation
Every investigation under Chapter XII shall be completed without any unnecessary delay.
Sub-section 1 states that for the offences under Sections 376, 376A, 376AB, 376B, 376C, 376D, 376DA, 376DB and 376E, the investigation has to be completed within two months from the date on which information was recorded by the officer in charge in the police station.
Sub-section 2, clause (i), states that as soon as it is completed, the officer in charge of the police station shall forward to a Magistrate empowered to take cognizance of the offence on a police report, a report in the form prescribed by the State Government, stating-
a. The names of the parties;
b. The nature of the information;
c. The names of the persons who appear to be acquainted with the circumstances of the case;
d. Whether any offence appears to have been committed and, if so, by whom;
e. Whether the accused has been arrested;
f. Whether he has been released on his bond and, if so, weather with or without sureties;
g. Whether he has been forwarded in custody under Section 170;
h. Whether the report of medical examination of the woman has been attached where investigation relates to an offence under the offences mentioned in sub-section 1.
(ii) The officer shall also communicate, in such manner as may be prescribed by the State Government, the action taken by him, to the person, if any, to whom the information relating to the commission of the offence was first given.
Benefits of a chargesheet
Chargesheet, being a very relevant report that initiates criminal proceedings against an accused, serves various benefits, helping courts arrive at a decision:
It contains the statements of the accused and all other witnesses.
Marks the beginning of a criminal trial.
Charges on which courts have to proceed against the accused are mentioned.
It is useful for the accused in obtaining bail as the offences are mentioned clearly.
Contents of the chargesheet
A chargesheet must contain following information as per Section 173(2)(i) of the CrPC-
The names of the parties.
Nature of the information.
Names of the persons who appear to be acquainted with the events.
About the offence that appears to have been committed and the person by whom it has been committed.
Information regarding the arrest of the accused, his/their release with or without sureties and whether he has been forwarded into custody under Section 170.
Further, this report by the investigating officer should be in the form prescribed by the state government. The officer in charge should also communicate the action taken by him to the person who gave the first information regarding the offence as per clause (ii) of Section 173(2).
Is a chargesheet filed after investigation
A chargesheet can be filed only after the completion of an investigation by the concerned police officials, since the contents of the chargesheet cannot be filled out without investigating the case. As clearly laid down in the case of Dinesh Dalmia v. CBI (2007), a chargesheet is a final report under Section 173(2) of the CrPC so that the court can decide on taking cognizance. It has to be filed only after the investigation is complete, not while the same is ongoing.
Also, in Sharadchandra Vinayak Dongre v. State of Maharashtra, the court observed that if a chargesheet is filed without completing the investigation, then the same will amount to an incomplete chargesheet and will not be considered a final report and the magistrate will not be able to take cognizance under Section 190(1)(b) CrPC on the same.
Only after filing a chargesheet on completion of the investigation will the power to conduct a subsequent investigation and file a supplementary chargesheet under Section 173(8) emerge.
Need to quash a chargesheet
The law is only meant to punish guilty individuals. The present scenario is quite different, as people, including police officers, try to harass accused persons by letting police file false FIRs and chargesheets against them. Courts have a duty to come against the same and therefore, provisions like the quashing of the chargesheet are made.
Even if the FIR or chargesheet does not disclose the commission of any offence, it deserves to be quashed and the same can be done by the High Court through the exercise of inherent powers under Section 482 of the CrPC.
In the case of the State of Madhya Pradesh v. Laxmi Narayan, it was noted that if a chargesheet is filed under Section 307 IPC and the same is challenged before the High Court under Section 482 of the CrPC on the ground that the parties have compromised in the matter, the court may quash the chargesheet after examining certain things like the nature of injuries sustained, the weapons used, etc.
Difference between charge and a chargesheet under CrPC
If a cognizable offence has been committed, then the police officer is bound to conduct an investigation and file a final report on the same, which is known as a chargesheet, on the basis of which the magistrate will take cognizance. However, a charge is framed by the magistrate against the accused for which he is tried. A charge is framed for every offence alleged to have been committed by the accused under Chapter XVII of the CrPC after the filing of the final report and the commencement of proceedings before the magistrate.
Is filing a chargesheet compulsory
Filing of a chargesheet in case a cognizable offence is said to be committed by the accused is mandatory on the part of police officials, either by themselves or on the orders of the court, after filing an FIR. However, the same is not compulsory in cases where a non-cognizable offence has been committed unless the court orders an investigation.
Supplementary chargesheet
A supplementary chargesheet is an additional chargesheet that can be filed on the directions of the court if the case discloses new evidence that could be discovered during further investigation. Section 173(8) of the CrPC provides for the same and the right of police to conduct further investigation in a case and file a supplementary report before the magistrate. The same provisions as mentioned under sub-sections (2) to (6) of Section 173 will be applicable to the supplementary report.
In the case of Rama Chaudhary v. State of Bihar (2009), the court has clearly stated that further investigation will be in continuation of the earlier investigation and cannot be regarded as a fresh investigation. Further, the Hon’ble Delhi High Court in the case of Surender v. State (NCT of Delhi) (2018), has held that there should be a reason for further investigation and a supplementary chargesheet must indicate new or novel evidence.
Chargesheet in cognizable and non-cognizable offences
In a cognizable case, the police officials have the power to arrest a person without a warrant and start an investigation themselves but in a non-cognizable case, the police officials can arrest only after a warrant from the magistrate and thus cannot conduct an investigation and file a chargesheet on their own until the magistrate orders them to do so, unlike in cognizable cases. Recently, in the case of Biju V.G. v. State of Kerala (2020) before the Kerala High Court, it was reiterated that if there are non-cognizable as well as cognizable offence/offences in a case, the police can conduct the investigation and file a chargesheet before the magistrate for all the offences under Section 155(4) of CrPC.
Chargesheet and the closure report
A final report has to be filed by the investigating officers before the magistrate under Section 173 CrPC, which can be in the form of a chargesheet or a closure report. A chargesheet is filed once it is revealed during the investigation that an offence has been committed by the accused, whereas a closure report is filed when police find that no offence has been committed and no evidence can be traced in the given case.
Cognizance and chargesheet
After the filing of a chargesheet by the police officials, it is the duty of the court to decide whether or not to take cognizance of the case by applying the judicial mind. Cognizance is of the offence and not the offender, as can be noticed under Section 190 CrPC. It is based on the opinion of the court, which can be taken only after a chargesheet is filed before the court.
What happens when a witness is not named in the chargesheet
It is not necessary or a requirement of law to mention the names of all witnesses in the FIR or in statements u/s 161 of the CrPC. Such witnesses can also be examined by the prosecution with the permission of the court. Not mentioning the name of any witness in the FIR or chargesheet would not mean rejection of evidence of any witness. The same has been laid down in the case of Prabhu Dayal v. State of Rajasthan (2018).
Evidentiary value of a chargesheet
It is a settled principle of law that an FIR under Section 154 CrPC is not a substantive piece of evidence. Similarly, a chargesheet is also not a substantive piece of evidence, as both are filed by the police officials and all that is stated in both of them is not proved till the stage but only the statements given outside the court of law and not before the magistrate. However, a chargesheet can be called the collective opinion of the investigating officers.
When can a chargesheet be filed
It is settled law that in case of the non-filing of a chargesheet by the police officials within a prescribed time limit, as has been mentioned below, an accused is entitled to default bail under Section 167 of the CrPC. Therefore, as a duty prescribed under CrPC, an investigating officer is bound to file a chargesheet after the completion of an investigation in a particular case before the authorised magistrate.
Recently, a bench comprising Justices Krishna Murari and CT Ravi Kumar in the case of Ritu Chhabaria v. Union of India (2023) remarked that a chargesheet or a prosecution complaint cannot be filed by an investigation agency without completing the investigation in a given case. Generally, this was done so as to deprive an arrested accused of his right to bail under Section 167(2) of the CrPC. Thus, it can be said that police can file a chargesheet after the investigation in a particular case; if the offence is cognizable, then it can be filed automatically after completing the investigation and in cases of non-cognizable offences, the same can be filed only on directions from the magistrate.
Evidence is deficient
According to Section 169 CrPC, if after an investigation, it appears to the police officials that there is no sufficient evidence so as to forward the accused to the magistrate, he may release him on bond with or without sureties.
However, even after the release of the accused on bond, if the magistrate deems it fit, he may direct the investigation to start again and submit a report under Section 173 of the CrPC.
Evidence is sufficient
According to Section 170 CrPC, if it appears to the police officials that there is sufficient evidence against the accused, then they can send the accused under custody to the magistrate. The magistrate may take security for his appearance before him if the offence is bailable and the accused is able to give security. The officer shall also send any weapon or article to the magistrate, along with all the documents on which the prosecution relies and the statements recorded under Section 161 of the CrPC, along with the report as per Section 173(5).
Time limit for filing a chargesheet
In Section 173(1) CrPC, it is clearly mentioned that a chargesheet has to be filed on completion of the investigation, which has to be completed without any unnecessary delay. In the case of HC Khurana v. Delhi Development Authority (2001), the High Court of Delhi quashed the chargesheet and inquiry proceedings against the petitioner, holding that no useful purpose would be served for proceeding against the petitioner after such a long delay, particularly when the petitioner has retired from service, as the chargesheet was issued on November 27, 1997, and related to the period between 1983 and 1987.
Further, Section 173(1A) states that the investigation for certain sexual offences under Sections 376, 376A, 376AB, 376B, 376C, 376D, 376DA, 376DB or 376E of the IPC has to be completed within two months from the date on which information was recorded by the police officer.
Recently, the Supreme Court inFakhrey Alam v. The State of Uttar Pradesh (2021), said that the provision for default bail under Section 167(2) of the CrPC is not merely a statutory right but a fundamental right under Article 21 of the Constitution of India. Therefore, a strict time limit, as mentioned under Section 167(2) of the CrPC, has to be followed in the filing of the chargesheet by the police officials before the magistrate.
Relaxation in the time limit
According to Section 167(2) of the CrPC, a chargesheet has to be filed within 60 days from the date of remand of the accused and the same can be extended to 90 days for certain offences, i.e., it must be filed within 60 days or 90 days, as the case may be.
However, the time limit for filing a chargesheet has been relaxed in certain cases, like in the NDPS Act. The Hon’ble Supreme Court in the case of M. Ravindran v. Directorate of Revenue Intelligence (2021)has scrutinised Section 36A(4) of the NDPS Act and held that the investigation has to be completed within 180 days instead of 90 days, which may be extended to 1 year by providing special reasons. Section 36A of the Act states that offences under the Act that are punishable with imprisonment for more than three years are triable only by special courts.
Consequences when chargesheet is not filed within the time limit
When the chargesheet is not filed within the time limit as mentioned under Section 167(2) of the CrPC, the accused is entitled to default bail on an application for the same. In Rakesh Kumar Paul v. State of Assam (2017), where the accused was charged under the Prevention of Corruption Act, 1988, it was argued by the Council of the State that he could be given maximum imprisonment for up to 10 years and that the date for applying for default bail would commence on the expiry of 90 days. However, the Hon’ble Supreme Court held that the accused had satisfied all the requirements of the bail and was in custody for more than 60 days and no chargesheet had been filed; therefore, he was entitled to be released on bail.
The Court further noted that Section 167(2)(a)(i) applies in cases where the offence is punishable with death, imprisonment for life or imprisonment for not less than 10 years. The accused will be released if the chargesheet is not filed within 90 days. Section 167(2)(a)(ii) applies in cases where the offence is punishable with imprisonment of less than 10 years. The accused will be given default bail if a chargesheet is not filed within 60 days.
The right to default bail is lost once the chargesheet is filed within 60 or 90 days and the court will not itself grant bail to the accused in this case unless an application in this behalf is filed by the accused.
Can a chargesheet be quashed
A chargesheet like an FIR may be quashed by the High Court under Section 482 of the CrPC by exercising its inherent powers. The inherent authority is exercised by the High Court to prevent the misuse of the process of law and uphold the interests of justice. The same could be done on the following grounds:
When there is no merit in the FIR as filed against the accused or when allegations do not establish commission of an offence.
When the court is of the view that it contains false accusations against the accused.
When a compromise was reached between the parties only in exceptional cases.
In the case of Anand Kumar Mohatta v. State (Government of NCT of Delhi) (2018), the Supreme Court held that while exercising the powers under Section 482 of the CrPC, the court can quash the FIR even if the chargesheet has been filed since the offence was not made out in this case.
How to issue a chargesheet against a government official
Government officials who are accused of any offence are subject to disciplinary proceedings. Their service regulations and standing orders govern the same since they cannot be left unpunished and, thus, are subjected to fair and impartial proceedings against them. Certain protection to the members of the civil service of the Union or State is given under Article 311 of the Indian Constitution, which talks about dismissal, removal or reduction in rank of persons employed in civil capacities under the Union or State.
According to it, an inquiry has to be conducted if such a member is charged with any offence, and he must be given the opportunity of being heard. Further, the member cannot be removed by an authority subordinate to the one who appointed him.
Remedies available when a chargesheet is filed without arrest
Wherever the police feel that the arrest of an accused is not required, they can complete the investigation and file a chargesheet even without arresting the accused. As per Section 170CrPC, it is not necessary to arrest the accused for submitting the report if there is reason to believe that the accused will neither abscond nor disobey the summons by the court. The Delhi High Court has clearly laid down in the case of Court on its own motion v. CBI (2004) that an accused should be arrested only in utmost necessity where the investigation cannot be done without arresting him.
Recently, the Hon’ble Supreme Court, in the case of Siddharth v. State of UP (2021), held that there is no need for an accused to be arrested in every case while submitting a chargesheet. If a person has not been arrested during the investigation and if he fears his arrest upon appearance before the court, then in such a scenario, the following remedies are available to the accused person:
To file for anticipatory bail under Section 438 of CrPC.
To file for an exemption from personal appearance before the court under Section 205 of CrPC.
To file for regular bail before the magistrate under Section 437 and 439 CrPC.
If a person has not been arrested during the investigation and has also co-operated during the investigation, the guidelines for bail concerning such accused persons have been highlighted by the Hon’ble Supreme Court in the case of Satender Kumar Antil v. CBI (2023). The court has divided the offences into four different categories:
The first category is that of offences that are punishable with imprisonment of 7 years or less, wherein the bail application can be decided by the court upon the appearance of the accused without taking him into custody. An interim bail should be granted by the court in such a case until the matter of regular bail is pending.
The second category comprises those offences that are punishable by a death sentence, imprisonment for life or more than 7 years, and in this case, the bail application has to be decided on merits upon the appearance of the accused.
The third category is for the offences punishable under Special Acts and the general principles concerning delay would apply in these cases.
Whereas the fourth category deals with economic offences not covered under special acts. Under this category, the court has to look at the severity of the punishment and the seriousness of the charge. Bail cannot be denied automatically for these offences.
Difference between FIR and chargesheet
An FIR is the first information recorded by the police officials that is received by them from any person regarding a cognizable offence, whereas a chargesheet is prepared by the police after completing the investigation in that case. The provisions regarding the recording of the first information have been mentioned under Section 154 of the CrPC and a chargesheet is given under Section 173 of the CrPC. A chargesheet mentions the guilt of the accused based on the evidence collected during an investigation, whereas an FIR is not a decision on a person’s guilt.
It is the duty of the police officials to record an FIR; if the same is refused, a complaint can be sent to the Superintendent of Police or to the magistrate to direct the police to register an FIR and start the investigation. If police are unable to collect sufficient evidence in a case, they can also file a closure report as a final report or an untraced report before the magistrate.
An FIR is filed by the victim of the crime in the police station, whereas the chargesheet is filed by the investigating officer of the case in court. Further, an FIR is filed for the purpose of investigation in the case and the chargesheet is filed to start with a trial. Furthermore, an FIR is a public document that can be made available to the public at large while required by any member of the general public, whereas a chargesheet is not a public document, as has been discussed in brief below.
S. No.
Basis of differentiation
FIR
Chargesheet
Meaning
An FIR is the first information recorded by the police officials, which is received by it from any person regarding a cognizable offence.
A chargesheet is prepared by the police after completing the investigation of a particular case.
Cause
An FIR is lodged when an offence has been committed.
A chargesheet is made after an FIR has been registered or filed in a particular case.
Section
Section 154 CrPC
Section 173 CrPC
Filed by whom
Any person or a victim of the crime.
Investigating officer
Purpose
FIR is not a decision on a person’s guilt. It only mentions the first information that is received regarding an offence.
A chargesheet mentions the guilt of the accused based on the evidence collected during an investigation.
Public document
Yes, it is a public document.
No, it is not a public document.
Phase
The FIR is the first phase of the investigation.
A chargesheet is filed by the police officials after the investigation.
Where is it filed
An FIR is filed at the police station.
A chargesheet is filed with the court.
Why is a chargesheet not a public document
Recently, a petition was filed before the Supreme Court in the case of Saurav Das v. Union of India (2023) to upload the chargesheet on the police websites or websites of the State Governments so as to make it accessible to the public. But a bench composed of Justices CT Ravikumar and MR Shah turned it down, saying that a chargesheet filed by police officials is not a public document under Section 74 of the Indian Evidence Act, 1872, and thus cannot be revealed to the public at large under the Right to Information Act, 2005. Notably, Section 74 defines public documents and Section 75 mentions private documents as those that are not covered under Section 74.
In the case of Youth Bar Association of India v. Union of India (2016), the Supreme Court has directed that FIRs be published on the website within 24 hours to make them accessible to the public, except in cases where the offences are sensitive in nature but the judgement nowhere mentions the publication of chargesheet, which is considered to be the private document for a particular case, covering all the statements of the parties and other evidence.
Important case laws
Ram Lal Narang v. State, Delhi Administration (1979)
Facts of the case
In the case of Ram Lal Narang v. State, Delhi Administration (1979), two pillars were stolen from Suraj Kund Temple for which three different FIRs were filed. The main contention of the accused regarding these different FIRs was that the subject matter of the two already filed FIRs and chargesheets was the same, because of which there was an implied bar to further investigation in the present case.
Issues raised
Can the investigating officials conduct further investigation even after filing the chargesheet as a final report in a particular case under Section 173 CrPC and after the taking of cognizance by the court?
Whether prior permission from the court is required to conduct further investigation?
Judgement of the case
The Hon’ble Supreme Court stated that there is no bar on the police officials to conduct further investigation even after cognizance has been taken by the magistrate and in order to conduct further investigation under Section 173(8) of CrPC. Further, it was held that the police may or may not seek the permission of the court and mere information is sufficient for the same.
J. Jayalalitha v. State (2002)
Facts of the case
In the case of J. Jayalalitha v. State (2002), the petitioners were charged with offences under Section 120B IPC read with Sections 13(2) and 13(1)(e) of the Prevention of Corruption Act, 1988.
One of the petitioners has held pecuniary resources outside the country on behalf of the other petitioner and a case was filed against them for illegally doing so. The main problem faced by the petitioners during the investigation was that they were aggrieved by the breach of undertaking in the letters of request under Section 166A of the CrPC which was done during further investigation under Section 173(8) of the CrPC.
Issue raised
The question herein was regarding the procedure to be followed in case of further investigation and after the same pursuant to the letters of request under Section 166A CrPC and its legality thereof.
Judgement of the case
The Madras High Court has made it clear that the provisions of Sections 173(2) to 173(6) will be applicable in further investigation as well under Section 173(8) CrPC.
Patiram v. State of Maharashtra (2003)
Facts of the case
In the case of Patiram v. State of Maharashtra (2003), the appellant has challenged the conviction by the Trial Court for the offence under Section 302 IPC. It was contended that during the investigation, the statements of the witnesses were not recorded under Section 161 CrPC and two of the witnesses were not produced before the magistrate, whose statements were recorded under Section 164 CrPC. The statements under Section 164 were sealed and were not made available to the defence to prove the omissions and contradictions.
Issue raised
One of the issues in this case relating to our topic is whether the statements recorded under Section 164 CrPC that have not been provided to the defence are correct under the law.
Judgement of the case
In this case, the court stated that the statement of the accused recorded by the magistrate under Section 164 CrPC must be mentioned in the chargesheet so as to be available for the defence.
State of Madhya Pradesh v. Laxmi Narayan and Others (2019)
Facts of the case
In the case of State of Madhya Pradesh v. Laxmi Narayan and Others (2019), an FIR and a chargesheet have been filed naming the respondent for an offence under Sections 307 and 34 of the IPC. The respondents have filed an appeal before the High Court for quashing the chargesheet because there was a compromise between the parties and the complainant was also ready to take back the case. The Hon’ble High Court quashed the proceedings and acquitted the respondents. Therefore, an appeal was filed in the Supreme Court challenging the quashing orders of the High Court.
Issue raised
Does the High Court have the power to quash a chargesheet under Section 482 of CrPC? And can a chargesheet be quashed through the inherent powers of the High Court in case a compromise has been reached between the parties?
Judgement of the case
The Apex Court highlighted the power of the High Courts under Section 482 of the CrPC to quash the chargesheet. Through this case, it is clear that if a chargesheet is submitted for an offence under Section 307 of the IPC by police officials and the same is challenged on the ground that parties have come to a compromise, it can be quashed by the High Court. Further, the Hon’ble Supreme Court stated that the antecedents of the accused have to be considered before quashing the proceedings, chargesheet or FIR for non-compoundable offences that are private in nature.
Saurav Das v. Union of India (2023)
Facts of the case
In the case of Saurav Das v. Union of India (2023), a plea was filed by Saurav Das, an RTI activist and independent journalist, to publish chargesheets filed by the police, the Central Bureau of Investigation and the Enforcement Directorate on government websites and to make them available in the public domain. According to them, states should enable free access to the chargesheet and final reports to the public as per Section 173 of the CrPC.
Issue raised
The major issue in this case was whether a chargesheet could be published and made available to the public at large, just like an FIR.
Judgement of the case
The Hon’ble Supreme Court has held that chargesheets cannot be published and cannot be made available and accessible for the public at large, as these are not public documents.
Conclusion
A chargesheet is considered to be the most important and significant document that helps courts decide on the acquittal or conviction of the accused. Though it is not substantive evidence to decide the same, it is considered by the courts to arrive at a decision. We can now say that a chargesheet is called an outcome of the investigation based on which a trial or further inquiry, if needed, is initiated.
A chargesheet not being a public document is said to be relevant to a particular case as it aids the magistrate in drawing a conclusion and is significant to a case, covering all the important evidence, including the statements of the witnesses. We can conclude by saying that the same is very different from an FIR and is filed by the police officials before the concerned magistrate on the basis of the first information received by it in the form of an FIR.
Frequently Asked Questions (FAQs)
Can a chargesheet be amended?
No, a chargesheet once filed cannot be cancelled or amended by the police but a supplementary chargesheet can be filed and reinvestigation can also be done on the orders of the court.
Can a chargesheet be filed for non-cognizable offences?
Yes, a chargesheet can be filed for non-cognizable cases on the orders of the court. In such cases, if the investigation is ordered to be done by the court, then a chargesheet has to be filed.
Is the chargesheet a final report under Section 173 of CrPC?
Yes, Section 173 talks about the final report that needs to be submitted by the police officials after the completion of the investigation and the same can be in the form of a chargesheet or a closure report.
What is the difference between a closure report and a chargesheet?
A chargesheet is filed once it is revealed during the investigation that an offence has been committed by the accused, whereas a closure report is filed when police find that no offence has been committed and no evidence can be traced in the given case. Both are filed as a final report by the police officials after an investigation.
Can a court order a further investigation or go ahead in a case if a closure report has been filed?
Yes, it is at the discretion of the court to go ahead in a given case or order for reinvestigation even after filing a closure report.
What is covered in the chargesheet?
A chargesheet is a report giving a brief about the complaint and a list of all the persons who are charge-sheeted and those who are not. It also includes the statements of all the accused persons and the complainant, i.e., both parties involved in a given case.
Why is a chargesheet not a public document?
A chargesheet filed by police officials is not a public document under Section 74 of the Indian Evidence Act, 1872 and thus cannot be revealed to the public at large under the Right to Information Act, 2005, since it is considered to be a private document for a particular case covering all the statements of the parties and other evidence.
Is it compulsory to file a chargesheet?
Yes, it is compulsory to file a chargesheet in cognizable cases after conducting an investigation but not in non-cognizable cases except on the orders of the court.
What is the consequence of not filing a chargesheet within the time limit?
The non-filing of the chargesheet within 60 or 90 days as per Section 167(2) will give the accused a right to default bail.
Can a chargesheet be quashed?
Yes, a chargesheet can be quashed by the High Court under Section 482 of the CrPC.
What is the basis of the chargesheet?
A chargesheet is filed after the completion of an investigation by police officials and the content of the chargesheet is based only on that investigation.
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This article has been written by Aarushi Mittal. The article discusses closure in labour law, specifically what it is and the various provisions pertaining to it.
It has been published by Rachit Garg.
Table of Contents
Introduction
Labour law in India includes several important acts (like The Minimum Wages Act 1948, The Factories Act 1948, The Trade Unions Act 1926, The Payment of Wages Act 1936, etc.) that address and provide legal restrictions and rights for the working population and their employers. Out of these, the Industrial Disputes Act, 1947 (hereinafter referred to as the Act or I.D. Act) came into being with the purpose of fostering peace by settling industrial disputes. Although its main objective is to maintain a balance between the interests and welfare of both labour and industry, it also puts in place important procedures for the closing down of industrial establishments; this is defined in the Act as “closure.”
What is closure
Closure is a term that refers to the indefinite shutting down of an establishment, factory business, or organisation. Factors such as low profits, poor marketing, bad management, tough competition, failure to pay taxes, etc. could result in closures. However, regardless of the reasons for the closure of any establishment, its process is governed by the different labour laws prevalent in the country. These laws ensure that the rights of all the stakeholders involved in the business of the said establishment (employees, workers, investors, suppliers, customers, etc.) are protected in the process.
Definition of closure
Closure is defined under Section 2(cc) of the I.D. Act, which was inserted by the Industrial Disputes (Amendment) Act, 1982 (46 of 1982). It defines closure as the “permanent closing down of a place of employment or part thereof.” Such closure may be either forced or voluntary and can be a result of various reasons.
Significance of the Act and closure: a brief overview
The Industrial Disputes Act lays down the procedure to resolve and investigate industrial disputes or disagreements between employers and their employees. The same is done in three ways, namely; through arbitration, adjudication, or conciliation, as provided by the statute. Its provisions apply to all businesses, establishments, undertakings, or manufacturers that fall under the meaning of ‘industry’ in Section 2(gg)(j) of the Act.
The Act, in its original form, did not provide for any laws relating to the closure of industrial establishments. It was expressly defined only in 1956 in the landmark judgement Hariprasad Shivshankar Shukla v. A.D. Diwelkar (1956). Here, the Supreme Court differentiated between the closure of an establishment and retrenchment. In due course, the laws pertaining to closure were inserted into the Act in 1976 and later in 1982. Depending on the reasons for doing so, the Act lays out the steps that the employer must take if they decide to close their business or establishment. For instance, if the closure is due to certain inevitable circumstances, the Act states that the workers are not entitled to any compensation beyond the average of three months of their wages (Section 25FFF). In case the closure is for any other reason, they must be given notice not less than 60 days in advance, and the affected employees must be adequately compensated(Section 25FFA).
Essentially, the Act provides the legal rules and restrictions under Sections 25FFA, 25FFF, 25-O, 25P, 25R, and 30A pertaining to the closure of industrial undertakings and businesses to safeguard the interests of the stakeholders involved.
Provisions relating to closure
Chapters VA and VB of the Act lay down the provisions dealing with the closure of industrial establishments. The following are the relevant Sections of the Act:
Section 25FFA
Section 25FFA(1) requires the employer of an establishment undergoing closure to serve a notice informing their workmen and the appropriate government authority of such closure at least sixty days in advance of its date of effect. Such notice must clearly indicate the cause for the closure of the establishment. However, this Section is not applicable to the establishment in the following cases:
In an establishment, business or undertaking where-
(i) the number of workmen employed is not more than fifty, or
(ii) the number of workmen employed on an average per working day in the last twelve months is less than fifty.
In an undertaking established for the purpose of constructing dams, canals, bridges, buildings, dams, roads, or for any other construction project or work.
Nevertheless, if the concerned government authority is satisfied that due to certain unprecedented situations, such as an accident at the undertaking, the death of the employer, or reasons of necessity, they may pass an order instructing that the terms of sub-section (1) shall not be applicable to that undertaking for a specified time period (Section 25FFA(2)).
Section 25FFF
Section 25FFF provides for compensation to be paid to the workmen of the establishment undergoing closure. As per subsection (1), when the business or establishment undergoes closure “for any reason whatsoever,” every workman, employed for at least a continuous period of one year must be given compensation and notice immediately before the closure. The same must be as per the provisions of Section 25(F), which pertains to the retrenchment of the workers. Furthermore, if the undertaking/business/establishment is closed down owing to certain unavoidable situations that are beyond the employer’s control, the compensation owed to the workmen according to Section 25F(b), shall not be more than the average of three months of his salary.
The Section includes an explanation pertaining to unavoidable circumstances causing closure. If an undertaking or business is closed for the following reasons, it shall not be considered to have closed due to inescapable or inevitable circumstances beyond the employer’s control.
financial hardship (includes losses); or
accumulation of undisposed stocks; or
expiration of the license or period of lease granted; or
where the undertaking is engaged in mining operations and depletion of the minerals of the area in which such operations are being carried out.
Sub-section (2) states that no workman would receive compensation under Section 25F(b) when any undertaking or business that was established for the purpose of construction (buildings, bridges, roads, canals, dams, or for any other construction project) is closed down due to the completion of such construction work within two years from the date on which it had been set up. However, in cases where the work is not completed within two years, the workmen are provided with both compensation and notice as per the relevant provisions.
Section 25-O
Section 25-O lays down the procedure for closing down any business or undertaking. Employers that intend to shut down an industrial establishment have to apply for prior permission in the specified manner. This application must be submitted to the concerned government not less than ninety days before the date of the closure becomes effective. The reasons meriting such closure must be stated clearly, and a copy of the application must be simultaneously supplied to the representatives of the workmen. The manner and further steps that need to be taken to effectuate the closure are discussed in detail under the heading “Procedure for closure.”
Section 25-O applies to only those establishments or undertakings that have not more than fifty workmen. For all establishments with fifty or more workmen, prior permission for closure from the concerned government authorities is to be obtained as per Section 25N of the Act.
Section 25P
Section 25P of the Act deals with the restarting of those undertakings that were closed down before the introduction of the Industrial Disputes (Amendment) Act, 1976. If the concerned government authority is of the opinion regarding such an undertaking-
that such undertaking was closed down otherwise than due to inevitable or exceptional situations beyond the employer’s control;
of the existence of prospects of re-establishing the business/company/undertaking;
that it is essential for the rehabilitation of the workers employed in the undertaking before its closure or for the maintenance of services and supplies necessary to the life of the community to re-establish the undertaking or both; and
that reinstating the undertaking would not cause the employer any hardship or difficulties relating to the undertaking,
it may, after giving a chance to the employer and workers, instruct, by an order published in the Official Gazette, that the establishment be reinstated within a specified period.
Interestingly, the concerned government authority has no power to legally restart any undertaking or establishments closed down after 1976.
Section 25R
Section 25R discusses the penalty for closure in case the procedure set out by the law is not adhered to. Any employer who closes an establishment without adhering to the terms of Section 25-O(1) shall be punished with “imprisonment for a term which may extend to six months, or a fine up to five thousand rupees, or with both.” Further, if any employer violates an order rejecting permission for closure (Section 25-O(2)) or a direction (Section 25P) shall be made punishable with “imprisonment which may extend to one year, or a fine up to five thousand rupees, or with both.” In case the violation or breach is continuing in nature, the employer may be further fined with an “amount that may extend to two thousand rupees for every day the violation continues.”
Section 30A
Section 30A provides a punishment for any employer who closes down any establishment or undertaking without adhering to the terms of Section 25(FFA). Such employers are punishable with “imprisonment of not more than six months, or with a fine not exceeding five thousand rupees, or with both.”
Constitutional validity of the former Section 25-O
As mentioned earlier in the article, until 1956, there was no clear mention of the term closure in any Act or piece of legislation. With the enactment of the Industrial Disputes (Amendment) Act, 1976, a new provision was added under Section 25-O (old Section 25-O). Its constitutional validity was challenged before the Supreme Court in the landmark case of Excel Wear Etc. v. Union of India and Others (1978).
Excel Wear v. Union of India and Others (1978)
Brief summary of the facts of the case
In Excel Wear v. UOI (1978), Excel Wear, a partnership firm that manufactured and exported garments, filed a petition challenging the constitutionality of Sections 25(O) and 25(R) of the I.D. Act. The firm had around 400 workmen employed in their factory. The petitioners submitted that since 1976, the relationship between the workers and the administration had worsened and grown tense. They claimed that the workmen became aggressive and participated in illegal strikes. As a result, it became nearly impossible to continue the functioning of the business, and the petitioners served a notice to the Maharashtra government for approval of the closure (under Section 25-O(1)). However, the government rejected the application and refused to approve the closure. They believed that permitting the closure would be detrimental to the public interest.
Main issues involved
The main issue before the Court was whether the right to close down an undertaking was a fundamental right granted by the Constitution of India. The petitioners argued that the right to close down a business was a part of their fundamental right to carry on a business provided by Article 19(1)(g) of the Constitution. They contended that Section 25-O imposed a restriction on this fundamental right, which could not be lawfully permissible.
Court’s judgment and other observations
The Court held that the right to close down a business or undertaking could not be equated to the right not to start or carry on a business at all. However, such a negative aspect of a right to carry on business could be equated with the negative aspect of the “right to form associations” present in Article 19 of the Constitution (Freedom of Speech). They found that by no means could a person be forced to form an association or speak, but with the imposition of reasonable restrictions, said person may be prevented from speaking or forming associations. In other words, a complete prohibition of business may be permissible by imposing restrictions within reason under Article 19(6) – the right to carry on business.
However, the Court also disagreed with the argument put forward by the labour unions that the right to close down a business was not an essential part of the right to carry on business or a fundamental right at all. They established that although the right to close down does relate to property (the right to property under Article 19(1)(f) was omitted), this does not take away from the simple nature of this right. Nevertheless, the right to close down was not absolute and could be regulated, restricted, or controlled by the law. Furthermore, the Court noted that the “principles of socialism and social justice could not be pushed to such an extreme so as to ignore completely or to a very large extent the interests of another section of the public, namely the private owners of the undertakings.”
From the wording of Section 25-O(2), the Court observed that it did not require the government to provide any reasons for refusing permission for closure. In the present case, they had merely stated that the closure would be detrimental to the public. This means that although the reasons supplied by the petitioners were adequate and correct, since they were detrimental to the public interest, permission was refused. Further, no time limit was specified while refusing permission, and the refusal order was not subject to any further review by way of revision or appeal. The Court found the restriction to be highly unreasonable and excessive within the meaning of Article 19(6), not permitting an employer to shut down his business to interfere with his right to carry on the business. It declared Section 25-O in its entirety to be unconstitutional and violative of Article 19(1) of the Constitution.
As a consequence of the legislative gap created by the Supreme Court in Excel Wear, Section 25-O of the I.D. Act was amended by Act 46 of 1982.
Constitutionality of amended Section 25-O
On January 17, 2002, the Supreme Court’s Constitution Bench decided to hear the case concerning the constitutionality of Section 25-O of the Act, incorporated by the Amendment Act 46 of 1982 (amended Section 25-O). However, before the Supreme Court judgement in M/S Orissa Textile and Steel Co. Ltd. v. State of Orissa and Others (2002), multiple High Courts had decided differently on the issue. The following are some important judgments that led to the 2002 Supreme Court judgement.
Maulins of India Ltd and Another v. State of West Bengal And Others (1988)
Brief summary of the facts and issues involved
In Maulins of India Ltd. v. State of West Bengal (1988), the petitioner company (Maulins of India) had two factories, one in Calcutta and the other in Punjab. The company had submitted an application to the concerned authority for permission to close down the Calcutta factory. The reasons cited by the company for the closure were the increased cost of labour, decrease in sales, market depression, and remaining stock of unsold goods due to the poor take-off of the company’s products. Due to the above, the company had accumulated a large amount of losses in the last three years. The petitioners claimed that it had become unfeasible for the factory to continue to function. The concerned authority here was the Deputy Secretary of the Department of Labour. They contended that the respondent’s (labour union’s) submissions were heard in their (petitioner company’s) absence. Further, they were given no opportunity to make counter-arguments to the representations made by the labour unions. Subsequently, the Deputy Secretary refused to grant permission for closure. The petitioner appeared before the Calcutta High Court seeking to challenge the said order and have it quashed on the grounds of prima facie errors and violation of principles of natural justice. Further, the petitioners contend that Section 25-O in its entirety be struck down on the grounds of being unconstitutional and violative of Article 19(1)(g) of the Constitution of India.
Court’s judgment and other observations
The Calcutta High Court after a thorough examination of the old Section 25-O against the new amended Section 25-O held that the amended Section was unconstitutional and was to be set aside. It was held that the mere fact that the closure would lead to the unemployment of workers or a decrease in production would not be enough to deny permission, especially when it had become impossible to carry out the functioning of the undertaking. The Court opined that the amended Section still suffered from the infirmities that led to the striking down of the old Section. Under the new Section, although the concerned government authority was required to consider the adequacy and genuineness of the reasons, these terms were never defined. What reasons are considered to be ‘genuine’ or ‘adequate’ are not provided. Neither are the instances under which permission is to be refused mentioned. The Court found this unreasonable and held Section 25-O to be ultra vires Article 19(1)(g) of the Constitution. Further, the Court held that the petitioner had not been given sufficient opportunity to deal with the representation made by the Labour Unions- which was contrary to the principles of natural justice. To this effect, it directed the General Secretary’s order refusing permission for closure to be quashed.
D.C.M. Ltd. v. Lieutenant Governor, Delhi and Others (1989)
Brief summary of the facts and issues involved
In D.C.M. Ltd. v. Lt. Governor (1989), the petitioners were refused permission under Section 25-O of the I.D. Act to close down their undertaking, Delhi Cloth Mills. Prior to this, the petitioners had filed another petition {D.C.M. Ltd. v. UOI (1989)} seeking to quash the letter of the Lt. Governor that communicated this refusal. Here further relief is sought by the petitioners before the Delhi High Court, to declare Section 25-O to be ultra vires Article 14 and Article 19(1)(g) of the Constitution of India.
The petitioners submitted that the Mill was located in a non-conforming industrial area and therefore could not continue its operations at the site. Furthermore, heavy and large-scale industries were not authorised to be located in the Union Territory of Delhi. They claimed that the undertaking had become economically unenviable and unlucrative. The petition detailed the reasons for closure as well as the losses suffered over the past few years. Given these reasons, the petitioners had decided to close down the establishment.
Court’s judgment and other observations
The full Bench of the Court upheld the constitutionality of the amended Section 25-O. It was observed that in Excel Wear, Section 25-O was held constitutionally invalid on the ground that “it did not require giving of reasons in the order,” and as a result, the authority could arbitrarily and whimsically reject permission for closure. The Court ruled that the amended Section 25-O had incorporated the procedural safeguard of documenting reasons. For instance, in the present case, the Lt. Governor must indicate his reasoning and basis for rejecting the permission for closure. The Court established that when the appropriate government authority failed to provide the reasoning for the same, it could be inferred that he had no good reason.
In the present case, although the High Court upheld the vires of Section 25-O, it directed for the Lt. governor’s order to be quashed. The Bench found that the Governor had wrongly exercised his discretion and ordered him to grant permission for the closure of the Mill.
Union of India v. Stumpp, Schedule and Somappa Ltd. (1989)
Brief summary of the facts and issues involved
UOI v. Stumpp, Schedule, and Somappa Ltd. (1989) was an appeal of the order passed by a single-judge bench of the same Court. The company, party to this case, sought the permission of the State government to close down one of its units under Section 25-O. They claimed that the undertaking had become unprofitable and had reached a point where closure was necessary. However, the State government refused to grant permission. The present case is an appeal before the Karnataka High Court, challenging the validity of the State government’s order and the constitutionality of Section 25-O. The petitioners contend that the terms of the Section impose unreasonable restrictions on the fundamental rights of an employer (under Article 19(1)(g)).
Court’s judgment and other observations
The single-judge bench of the Karnataka High Court had held Section 25-O to be constitutionally invalid (Stumpp Schedule and Somappa Ltd. v. State of Karnataka, Union of India (1985)). The present Bench analyzing the ratio of the Excel case, found that it was not possible to declare the Section to be unconstitutional and violative of Article 19(1)(g). It was held that the amended Section was stripped of all the infirmities of the former Section 25-O and required the government authority to provide an adequate reason for its decision.
Insofar as the undertaking goes, the Bench was of the opinion that “time is the best healer.” The undertaking had continued to operate as the employer and workers had amicably settled their dispute. Therefore, the Court found that the employer had no immediate reason to ask for its closure.
Laxmi Starch Ltd. and Others v. Kundara Factory Workers Union (1991)
Brief summary of the facts and issues involved
In Laxmi Starch and Ors v. Kundara Factory Workers’ Union (1991), the petitioners requested permission for the closure of their industrial undertaking, which was refused by the government under Section 25-O(2). The matter was then referred to the Industrial Tribunal, which rejected the application, holding that there were no grounds for reviewing the decision. As a result, the permission to close the establishment was rejected. Subsequently, the petitioners filed a petition before the Kerala High Court to set aside Section 25-O as unconstitutional, quash the award of the Industrial Tribunal, and direct the government to provide permission for closure.
Court’s judgment and other observations
The Kerala High Court came to the conclusion that Section 25-O was not violative of Article 19(1)(g), as the restrictions imposed are reasonable and lie within the limits of Article 19(6). They found that there was no arbitrariness involved in the Section and therefore could not be struck down as unconstitutional. However, like in the Delhi Cloth Mills case, the Court directed the appropriate government body to grant permission for closure. On the question of whether the Industrial Tribunals award was liable to be quashed, the Court ruled in the negative. It held that it could not be said that the Industrial Tribunal had gone beyond its power in passing the said award and therefore refused to quash the same. It was established that it was up to the Government or Industrial Tribunal, to carefully consider all the facts and arrive at a decision regarding the “genuineness and adequacy of the reasons for closure.” The same must be made, taking into account the factors mentioned under Section 25-O, as well as the public interest.
Orissa Textile and Steel Ltd. v. State of Orissa and Others (2002)
Brief summary of the facts and issues involved
In Excel Wear, the Supreme Court declared the then Section 25-O to be unconstitutional. The Section was substituted by a Central Act 46 of 1982 that inserted the amended Section 25-O in the I.D. Act. In the present case (Orissa Textile and Steel Ltd. v. State of Orissa & Ors. (2002)), the constitutional validity of the amended Section 25-O was challenged before the Supreme Court. The petition was initially filed before the Orissa High Court but had been referred to a Constitution Bench at the Apex Court.
Court’s judgment and other observations
The bench compared the former Section 25-O, the amended Section 25-O and Section 25-N, whose constitutionality was upheld in the Meenakhi Mills case. It was observed that Section 25-N and Section 25-O were similar in substance, and the reasons for their enactment were the same. The Court, after making a comparative analysis of the provisions and analysing the previous judgements, upheld the constitutional validity of Section 25-O of the I.D. Act. The Court ruled that there was nothing vague or ambiguous in the amended Section. It found that it would be impossible for Section 25-O to list out all the different situations or contingencies that could arise in reality. Every case pertaining to this Section, i.e., one that involved granting permission for closure, was unique and had to be decided on the basis of its facts and circumstances at that time. The amended Section only set out guidelines to make such a decision and was not ultra vires of the Constitution.
Procedure for closure
As mentioned earlier, Section 25-O(1) of the I.D. Act specifies the procedure to be followed to close down an establishment. The employer that wishes to close down the business or establishment must apply for permission for closure to the concerned government authority. Such permission must be applied for not less than ninety days before the date of the closure and must clearly lay out the reasons for the closure. Simultaneously, a copy of this application must also be served to the workers and employees of the establishment.
Undertakings excluded from obtaining prior permission before closure
Certain undertakings and establishments are excluded from obtaining prior permission before closure. In other words, the provisions of this Section do not apply to all those businesses that are set up to carry out any form of construction work or projects. Besides this, the concerned government may be satisfied that, due to some extraordinary circumstances, such as an accident in the factory or business, an employer’s death, etc., closure can be allowed without the requirement of prior approval.
Grant and refusal of permission for closure
Section 25-O(2) of the Act discusses the grant and refusal of closure. Once the application is submitted by the employer according to Section 25-O(1), the concerned authority must conduct an enquiry into said application that it considers appropriate and sufficient. The workers, employers, and all other interested parties must be given a reasonable opportunity to be heard. The interests of the general public and other relevant factors must also be taken into consideration. If the government is satisfied that the reasons for closure stated by the employer are “genuine and adequate,” they may grant permission to close the establishment. The reasons on the basis of which permission is granted or refused are to be recorded in writing and furnished to both employers and workers.
This order of the government shall be “final and binding” on all the involved parties as per sub-section 4. It will remain in force for a period of one year from when the order was made.
When is permission for closure deemed to be granted
As per Section 25-O(3), in case the concerned authority fails to communicate the granting or refusing of permission for closure within sixty days from when the application was submitted, the permission is deemed to be granted on the sixtieth day.
Appeal to the Labor Court or the Industrial Tribunal for closure
Section 25-O(5) of the Act lays down the provisions relating to appeal. The concerned authority may either, on its own accord or on an application by any worker or employer, review its order- granting or refusing permission, or referring the matter to a Tribunal for adjudication. The appeal must be made not later than thirty days after the order refusing permission for closure. The Tribunal must pass an award not later than thirty days from the matter being referred to it. The award is binding on all parties.
Illegal closure: a must-know subject
Section 25-O (6) of the Act discusses illegal closure. In case no application for prior permission is made as per the provisions of the Section, or if permission is not granted, the closure shall be considered illegal. In other words, if the application for permission is not made at least ninety days before the closure or the government has refused to grant permission, the closure is illegal. All the workers shall be entitled to all the benefits they would normally receive if there were no closure. However, when permission is granted and the establishment is allowed to close down, the workmen are entitled to receive an amount of compensation as specified in subsection (8) of Section 25-O.
Case laws relating to the closure
The following are certain significant judgements pertaining to closure in India.
Managing Director, Karnataka Forest Development Corporation Ltd. v. Workmen of Karnataka Pulpawood Ltd. (2007)
Brief summary of the facts and issues involved
In Managing Director, Karnataka Forest Development Corporation Ltd. v. Workmen of Karnataka Pulpawood (2007), two appeals against the decision of the Karnataka High Court were filed before the Supreme Court. The respondents in this case were workmen of Karnataka Pulpwood Ltd. It was a joint sector government company of Karnataka Forest Development Corporation Ltd. and Karnataka Harihar Polyfires Ltd. that was running at a loss. It was decided that the company was to be wound up, and the appropriate steps had to be taken in this regard. Subsequently, the government granted the necessary permission for closure. Furthermore, the government passed an order directing that the respondent workmen be absorbed into the service of the appellant company. The impugned order was challenged in the present appeal.
Court’s judgement and other observations
The Supreme Court allowed the appeal and ruled that in the event that an establishment or undertaking is closed, the only right that the workmen are entitled to is to obtain adequate compensation as provided by the Act. If they believe that any other right has accrued to them, they must approach the appropriate forum for redress.
S. G. Chemical and Dyes Trading Employees Union v. S. G. Chemicals and Dyes Trading Limited and Others (1986)
Brief summary of the facts and issues involved
In S.G. Chemical and Dyes Trading Employees Union v. S.G. Chemical and Dyes Trading Ltd. (1986), the respondent company was operating in three different locations in Bombay. Its Pharmaceutical division was at Worli, the Marketing and Sales division was at Churchgate, and the Laboratory and Dyes Division at Trombay. The holding company had a chemicals and dye factory in Gujarat, which was sold out in 1984. The buyer company preferred to conduct sales through their distribution channels and therefore did not require the employees and other staff members to work in their registered office. Subsequently, they intimidated the government of Maharashtra about their intention to close down their registered office via notice as per the provisions of the I.D. Act. The notice mentioned the number of workmen to be ninety, but on closure, the company terminated the services of only 84 employees- allowing the remaining six to continue working. The Employees Union lodged a complaint with the Industrial Tribunal contending that the closure was in violation of Section 25-O and thus the workers were still employed and entitled to their wages. They contended that there was functional integrity amongst the three offices of the company; therefore, the total number of employees exceeded one hundred, and the company was required to apply for prior permission for closure under Section 25-O. Since the company failed to do so, the closure was illegal. The Industrial Tribunal dismissed the case, ruling that Section 25-O would not apply since there were never more than a hundred employees at Trombay. Further, the Churchgate office was not part of the Trombay factory and was not an industrial establishment as per the meaning of Chapter V-B. The Tribunal found that even if Section 25-O were to apply, a violation of the same would not constitute an act of unfair labour practice under the relevant provisions of the Maharashtra Act. This decision of the Tribunal was challenged before the Supreme Court in the present case.
Court’s judgement and other observations
The Supreme Court held that the closure of the Churchgate division of the company was illegal as it was contrary to the terms of Section 25-O. As a result, the workmen whose services were terminated continued to be employees of the company and were retrospectively entitled to the entirety of their wages and other allowances. The Court found that the Act did not require an undertaking to be in the same location or premises as the industrial establishment. It is not feasible for all the stages that lead to the manufacture of the finished product to be carried out in the same place. Further, the Churchgate division and the Trombay factory carried out functions that were not separate or independent from each other but were so integrally connected that they constituted a single establishment.
The combined number of employees at the Trombay and Churchgate divisions was one hundred and fifty. Thus, if the respondent company wished to close down the division, it would have to satisfy the provisions of Section 25-O of the Act and not Section 25-FFA.
Conclusion
Closure refers to the shutting down of an industrial undertaking, business, or factory. For it to be considered valid, certain steps need to be taken by the employer before they can close down the establishment. Non-adherence to these steps results in a penalty, and the closure is deemed illegal.
As a result of the COVID-19 pandemic, many businesses and industries have been forced to close down. The I.D. Act discusses the procedure and requirements necessary to effect this closure. Closure is a significant event and has extensive and widespread consequences for all its stakeholders. The law tries to balance the interests of all the persons involved and affected and protects their rights and needs.
Frequently Asked Questions (FAQs)
What is the difference between lock-out, strike, and closure under the Industrial Disputes Act?
Lock-out
Strike
Closure
Section
Lock-out is defined under Section 2(l) of the Act.
Closure is defined under Section 2(gg)(cc) of the Act.
Definition
It refers to the “temporary closing of a place of employment, or the suspension of work, or the refusal by the employer to continue to employ persons.”
It refers to the “cessation of work” by workers employed in an industry or undertaking.
It refers to the indefinite or permanent shutting down of an establishment, factory business, or organisation.
Declared by
The employers or owners of the industry or undertaking declare a lock-out.
The employees or workmen of the industry declare a strike.
The employers declare the closure by following the procedure given in the Act.
Causes
The causes of a lock-out may be financial problems, political disturbances, management issues, etc.
Such a stoppage of work may be an act in collaboration, a concerned refusal, or a refusal under some common consideration by a group of employees.
Factors such as low profits, poor marketing, bad management, tough competition, failure to pay taxes, etc. could result in closures.
What is the difference between layoffs, retrenchments, and closures under the Industrial Disputes Act?
The differences between layoffs, retrenchments, and closures are discussed in the table below.
Closure is defined under Section 2(gg)(cc) of the Act.
Definition
It refers to the “refusal, inability or failure” of the employer to provide employment to his workers or employees.
It refers to the “termination” of the services of the workman by the employer.
It refers to the indefinite shutting down of an establishment, factory business, or organisation.
Causes
On account of shortage of raw materials, power, coal breakdown of machinery, accumulation of stocks, natural calamity, or any other connected reason.
It is for any reason other than punishment. It does not include voluntary retirement, retirement on reaching the age of superannuation (if the same is stipulated in the worker’s employment contract), or termination on the grounds of continued ill health.
Factors such as low profits, poor marketing, bad management, tough competition, failure to pay taxes, etc. could result in closures.
Special Provisions
Special provisions pertaining to lay-off are provided under Section 25(M).
Special provisions pertaining to retrenchment are provided under Section 25(N).
Special provisions pertaining to closure are provided under Section 25(O).
What is the difference between employees and workmen?
Indian laws dealing with industries ordinarily categorise employees as ‘workmen’ or ‘non-workmen’. Persons referred to as ‘workmen’ are granted various legal protections and entitlements, for instance, severance compensation and prior notice and compensation in case of retrenchment or closure of the industrial establishment. ‘Workmen’ are those persons employed in such establishments to do any unskilled, manual, technical, clerical, skilled, supervisory, or operational work for hire or reward. It does not include
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Shark Tank is a TV show that needs no introduction. We have all seen those business negotiations that go on between the Sharks and the pitchers. These negotiations are easy to understand for someone who has a commerce background or has studied how businesses are built and performed, but for someone who doesn’t hold any degree in commerce or accounting and is a layman in the business world, the concepts and terminologies that are being used in the show become difficult to understand most of the time, and this is where this article comes into play. It is an effort from my side to break down the nits and bits of this show so that it becomes easy to understand even for an average viewer.
History and background of Shark Tank
Let’s begin by talking about the history and background of this show. “Shark Tank” made its debut in the United States in 2009, and it quickly became a very popular show. This show is originally based on an international show called “Dragon’s Den,” which aired in 2005 in Britain and is again based on a Japanese show launched in 2001, “The Tigers of Money.” If we talk about the global reach of “Shark Tank,” then this show’s format has been successfully adopted in numerous nations, including Canada, the United Kingdom, Australia, and even India.
Concept of Shark Tank
It is the concept of this show that makes it so popular. It’s a reality TV show where aspiring entrepreneurs, often referred to as “pitchers,” take chances to make money by creating something new or providing a service that people want. They’re often seen as people who come up with fresh ideas and take risks to turn those ideas into reality and these are different from a businessman in the sense that a businessman is generally more focused on managing existing businesses and optimising established processes. In the show, they present their business ideas or products to a panel of wealthy investors, the “sharks.” There are five sharks in the show who are successful businessmen. These entrepreneurs are seeking investments in exchange for a percentage of equity in their companies. The show provides a platform for aspiring entrepreneurs to seek investment funds and expertise to help grow their businesses.
The pitchers usually get about 2-3 minutes to present their ideas or business models before the sharks and it is only during this pitching time that the pitchers need to tell them how much money/investment are looking to raise from the sharks and what equity stakes they are willing to give to the sharks in return for that investment. This gives sharks an idea about the valuation of the company.
Let’s understand the various terms used in the above paragraph
Equity: the ownership stake in a company.
Equity stake: the percentage of ownership offered to an investor.
Valuation: The estimated worth of a business.
Let’s understand this with the help of an example.
Mr. X comes to the show and delivers a very beautiful pitch about his company, ABC, which manufactures breathable fabric shoes. Mr. X tells the sharks he’s looking to raise INR 50,00,000/- for a 20% equity stake in his company.
Now if we consider that Mr. X has 100% equity in his company, meaning he is the 100% owner of the company’s shares or stocks, he’s asking the sharks to invest fifty lakh rupees in his company, and in return for that investment, he’ll give them a 20% equity stake, which means the shark who’ll invest 50 lakh rupees in ABC will become the 20% owner of the company’s shares or stocks. and therefore, after the deal gets finalised, Mr. X will lose 20% of his ownership and he’ll remain with 80% of the shares or stocks. Now if the value of giving 20% shares of Mr. X’s company is 50 lakh, then by basic multiplication, the value of 100% shares of ABC’s company would be 2.5 crore and this is what is called the current valuation of the company.
When the pitcher completes his pitching, sharks start putting up questions from the pitchers, and the importance of these questions cannot be overstated. These questions help the sharks assess the risks and potential rewards of an investment. Sharks invest their hard-earned money, so it becomes really important to make informed decisions. These questions look like this:
What are your sales and profit margins?
Sharks often want to know about the financial performance of the business. They ask about current sales figures and profit margins to measure the company’s revenue and profitability.
What is your plan for scaling the business with this investment?
If entrepreneurs are seeking funding, sharks want to understand how the investment will be used to grow the company. They ask about the specific strategies and initiatives that will be funded with their capital.
Tell me about your background
Sharks often want to know about the entrepreneur’s experience and qualifications, as well as their personal connection to the business idea
Sharks pay a lot of attention to the background of the pitcher because they want to know who they’re partnering with. It’s not always just about the business; sometimes it’s also about the entrepreneur behind it. They want to ensure that the pitcher is committed and capable of taking the business to the next level. Many times we have seen on the show that the sharks were not moved by the pitch; they were not interested in the business either, but then they asked about the background of the entrepreneur and got so impressed by the qualifications, the life history of the entrepreneur or the future and vision of the entrepreneur that they got convinced of the fact that although the business of the pitcher is not profitable now, it is not big enough, but the pitcher has the potential to take this business to new heights, and based on this fact, the sharks close the deal. In the same way, many times we have seen that the pitch was delivered brilliantly by the pitcher but when sharks began grilling the pitcher he was not able to give a satisfactory answer and just because of this reason, he couldn’t make a deal. There is this saying, “Until and unless there is a skilled rider on the back of the horse even the fastest horse couldn’t win the race,” and these lines fit perfectly for this show.
Finalising a deal on Shark Tank
Once the sharks have listened to the pitch, they have grilled the pitcher, and they are satisfied. They make an offer to the pitcher. This offer can be the same as what was asked for by the pitcher or a different one.
Let’s understand this with the help of an example:
Mr. X is asking 50 lakh rupees for 20% stakes in his company ABC, in response to that invitation to offer:
A shark can agree on the terms of Mr. X and can give 50 lakh rupees for 20% stakes, by which the valuation of the company will remain unchanged at 2.5 crore.
A shark can also offer differently to Mr. X and this can be in three ways:
It could have a lower valuation. The pitcher has the option to decline the offer or to counter-offer the shark and now it is up to the shark to agree with the counteroffer, decline it and stay with their original offer or give a new offer with a different valuation. Mr. X invited Sharks to invest in his company ABC for 50 lakh rupees for a 20% equity stake, according to which the company was valued at 2.5 crore rupees. After the pitch, the sharks asked some questions and found out that sales and scalability did not match the company valuation; hence, the company has been overvalued. Sharks say, Okay, I’ll give you 50 lakh rupees but for 33% of the equity stakes. This offer brings the valuation of the company to a lower amount because, as per Sharks’ offer, the company is now valued at 1.51 crore. Upon this, the pitcher can say 33% is a lot to give, how about 50 lakh at 25% stake and now by this counter offer, the pitcher tries to negotiate at a higher valuation of 2 crore, and this is how negotiations happen in the show and once the negotiations are over, a deal may/may not happen.
Sharks can offer some amount in equity and some amount in credit. Shark offered 30 lakh rupees at 20% stake and gave the rest 20 lakh as credit for a period of 5 years at 10% interest p.a., which means not only the company is now undervalued by Shark at 1.5 crore, but Mr. X also has to return 20 lakh after 5 years along with the interest amount so he has to return 30 lakh rupees. There can now be a lot of permutations and combinations of this type of offer. Again, it is up to the pitcher to agree to this offer or to counteroffer it.
The shark can agree to the valuation of the pitcher or undervalue it with his offer and at the same time, he can charge a royalty fee. Shark agrees to invest 50 lakh at a 20% stake in ABC but imposes a royalty fee of Rs. 20 on every shoe sale. This means whenever a shoe is to be sold by ABC, 20 rupees of that sale amount will belong to the shark. This royalty fee can be for perpetuity, meaning until the time ABC sells shoes. Rs. 20 will be credited to Shark on every sale or it can be for a fixed period of time, let’s say for 5 years, which means after five years ABC will not be liable to pay a royalty fee to the shark or it could be till the time a certain agreed amount is repaid. Let’s say Shark proposes Rs. 20 as a royalty on each pair of shoe sales until 20 lakh rupees are credited to me. Now, once 20 lakh rupees are paid to the shark, ABC will not be liable to pay any royalty to the shark. There can be a lot of permutations and combinations of this, too. Again, the pitcher can agree to this or make a counteroffer.
The show is all about how well you can negotiate a deal. On the one hand, sharks see a scalable business and want as many stakes as they can in the business because the more stakes they have, the more profit they are going to earn, while on the other hand, pitchers look for big investments and the expertise of the sharks but they do not want to lose too many stakes in their company so in a way, this show teaches us a lot about negotiations and the power of negotiations.
A handshake deal is no deal
As we all know, a handshake deal is no deal until and unless formalised by paperwork deciding the rights and liabilities of the parties. The same is also the case with this show. After the handshake deal, there comes the task of doing paperwork, and for that, the Sharks perform due diligence on the pitcher’s company. Before the beginning of the show, the sharks have no idea who’s going to come to pitch them or what that business is going to be about. It is during the pitch that only sharks get to know about the company and their business and it is upon the beautifully presented pitch and after looking at the numbers of sales and scalability that sharks decide to invest in the business but there might be a possibility that the pitcher might have lied or might have disclosed some facts that can harm the business so sharks need to perform due diligence to check if all the facts that were told by the pitcher align perfectly or not and once the sharks perform it and find nothing fishy, they agree on the paperwork and it is only after that the deal is actually closed or finalised.
It is the concept of this show that makes it so popular. It’s a reality TV show where aspiring entrepreneurs, often referred to as “pitchers,” take chances to make money by creating something new or providing a service that people want. They’re often seen as people who come up with fresh ideas and take risks to turn those ideas into reality and they are different from a businessman in the sense that a businessman is generally more focused on managing existing businesses and optimising established processes. In the show, they present their business ideas or products to a panel of wealthy investors, the “sharks.” There are five sharks in the show who are successful businessmen. These entrepreneurs are seeking investments in exchange for a percentage of equity in their companies. The show provides a platform for aspiring entrepreneurs to seek investment funds and expertise to help grow their businesses.
The pitchers usually get about 2-3 minutes to present their ideas or business models before the sharks and it is only during this pitching time that the pitchers need to tell them how much money/investment are looking to raise from the sharks and what equity stake they will be offering to the sharks in return for that investment. This gives sharks an idea about the valuation of the company.
Let’s understand this with the help of an example:
Mr. X presented the valuation of his company at Rs. 2.5 crore. When Shark asked about last year’s and present year’s sales, they found out that the company had been presented as overvalued and asked the same question to the pitcher If the sales numbers did not align with the valuation, why have you presented your company in the overvalued figure to this Mr. X says that he has received an order to manufacture 1 lakh shoes from DMart as they want to sell my shoes in their store and this order can take the valuation of ABC to the figures I presented. Based on this fact, one of the sharks closed the deal via handshake but during the time of due diligence, it was found that the order of manufacturing was just for 25,000 shoes. Now this fact and other facts like this can hugely impact the future venture of the shark and pitcher together so due diligence is performed and it is only after that that the deal gets closed or not.
Common terms used in Shark Tank and their meaning
Some common terms used in the show and their meanings are:
Gross margin: The difference between revenue and cost of goods sold.
Patent: legal Protection for an invention.
Crowdfunding: Raising funds from a large group of people.
Angel investors: High-net-worth individuals who invest in startups.
Venture capitalist: Professional investors who manage pooled funds from others.
Royalty: Payment for the use of a product or idea.
Dilution: Reduction in ownership percentage due to new investments.
B2B: Business-to-business.
B2C: Business-to-consumer.
D2C: Direct-to-consumer.
Purpose of Shark Tank show
Shark Tank” benefits both investors (the “sharks”) and entrepreneurs in several ways:
Benefits for investors (sharks)
Diverse investment opportunities
The show presents in front of investors a wide range of business ideas and industries they may not have encountered otherwise, which often leads to profitable investments.
Brand visibility
Being a shark on the show can enhance an investor’s public profile and personal brand. It can lead to increased visibility, speaking engagements, and opportunities for networking. Before Shark Tank India, there were very few people who knew about Anupam Mittal (Shadi.com), Aman Gupta (Boat), and Ashneer Grover (BharatPe), but after this show, these successful businessmen appeared on so many talk shows and podcasts, and they went viral all over the internet through YouTube shorts or Instagram reels.
Access to innovative ideas
Investors get access to innovative products and concepts, which can be appealing for those looking to stay ahead in their industries or expand their investment portfolios. We see this many times when all the other sharks call themselves out of the offer but one shark believes in the product or idea and invests in it.
Expertise and mentorship
By investing in entrepreneurs, sharks can offer their expertise and guidance, helping these businesses grow and succeed. This mentorship role can be personally fulfilling and financially rewarding.
Benefits for entrepreneurs
Access to capital
Entrepreneurs often need funding to start or scale their businesses, and “Shark Tank” provides a platform to secure investment capital from experienced investors.
Exposure and marketing
Appearing on the show can give entrepreneurs significant exposure to a large audience, which can lead to increased sales, brand recognition, and marketing opportunities.
Expertise and mentorship
Beyond the investment, entrepreneurs can benefit from the business acumen and industry knowledge of the sharks. This mentorship can help them make better decisions and navigate challenges. This is the reason why the pitchers sometimes settle for a lower valuation offered by the shark, because it’s not only the investment that the shark is offering but he’s also sharing his expertise.
Validation
Securing an investment from one or more sharks can serve as validation for an entrepreneur’s business idea, making it more attractive to other potential investors and partners.
Negotiation practise
The negotiation process on the show can be a valuable learning experience for entrepreneurs, helping them sharpen their negotiation skills for future business dealings.
Entertainment and publicity
Even if entrepreneurs don’t secure a deal, their appearance on “Shark Tank” can generate interest from the public and other investors, leading to potential opportunities outside of the show. We saw many times that a product or idea didn’t inspire the sharks to invest in it but after coming out of the show, the product or idea became so popular and eventually turned into a good business.
Some Shark Tank’s success stories
Simple Sugar
Lani Lazarri was just 18 years old when she entered the tank in season four of Shark Tank America to pitch her skincare company, Simple Sugars. She ended up making a deal with Cuban for $100,000 in return for 33% equity. Within just 24 hours of her episode’s premiere, Lazarri’s sales jumped from $50,000 to $220,000, and she hit $1 million six weeks later. Today, Simple Sugars products are in over 700 retail locations and ship internationally. This year, the company has already brought in over $3 million in revenue.
Scrub Daddy
In 2012, Aaron Krause went on Shark Tank America to pitch his durable, reusable, smiley-faced sponge that he called the Scrub Daddy. Lori Greiner invested $200,000 for a 20% stake after saying, “I know a hero from a zero. This is a hero.” By 2019, the company was valued at $170 million after selling 25 million sponges. In December 2020, Krause told the Philadelphia Business Journal that the company’s sales were up 25 to 30 percent year over year.
Skippi Ice Pops
Skippi Ice Pops was the first startup to get an all-sharks deal on the Shark Tank India show. The ice popsicle brand got a deal for Rs. 1 crore for 15 percent equity. Before appearing on the show, the company used to register sales of Rs 4-5 lakhs per month and only had regional distribution. But now, the numbers have skyrocketed. Their monthly sales stand at Rs 70 lakh. From 150 visitors per day to 8,000 visitors per day, their website has seen immense growth in traffic. They have also started international exports in Uganda, Nepal, Kuwait, Hong Kong, and Dubai.
Hammer Lifestyles
The Athleisure Electronics wearable brand was one of the favourites when it appeared on Shark Tank India Season 1. Offering electronics like grooming accessories, headphones and smartwatches, the company had a revenue of Rs 70 lakh per month before coming to the show. After the show, the company increased its revenue to Rs 2 crore each month. The company also managed to increase website traffic by 5x after the show.
Unstop
Unstop is an early talent engagement and hiring platform that connects talented individuals from untapped corners of the country with the right employers. On the other hand, employers leverage Unstop to brand, source, engage, assess, and hire the right candidates. The startup has a community of 4.5 million students, freshmen, and professionals with 0-5 years of experience. The company pitched Shark Tank Season 2 and asked for Rs 1 crore in exchange for 1% equity, but the final investment was Rs 2 crore in exchange for 4% equity from sharks Aman Gupta, Namita Thapar, Amit Jain, and Anupam Mittal.
Conclusion
In conclusion, “Shark Tank” serves as an iconic platform that entertains while offering a genuine chance for entrepreneurs to secure vital investments. For entrepreneurs, it’s a unique opportunity to learn, secure funds, and gain exposure. For investors, it provides a diverse range of investment prospects and a mentoring role. “Shark Tank” is a stage where dreams become reality, emphasising that with the right idea and determination, anyone can dive into the business world and emerge successful.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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This article is written by Shubhangi Tiwari. This article will cover in-depth all the necessary information that a judicial aspirant aiming to clear the Assam Judicial Service Exam or Assam Judiciary Exam must know. Each topic, like the latest official Notification published by APSC, the eligibility criteria, the educational requisite qualification, the important dates, the stages and the syllabus of the APCS-J exam, the books to refer to, and a plethora of FAQs that may occur in the mind of an aspirant while preparing for the Assam Judicial Service Exam, or the Assam Public Service Commission (Judiciary), are discussed in great detail.
It has been published by Rachit Garg.
Table of Contents
Introduction
How to become a Judge
Becoming a Judicial Officer is one of the most coveted ways of serving the nation and being a government servant. Being a law student provides an upperhand by being a government servant in so many different areas one of them being a judicial officer. By virtue of possession of a law degree and being a citizen of India, the entire universe of judicial services examination opens. The appointment at the Hon’ble Supreme Court of India as a Judge of the Apex Court has been elucidated in Article 124 of the Indian Constitution and Judges are appointed upon the recommendation of the National Judicial Appointments Commission upon fulfillment of the criteria that the candidate must:
i. Have been a High Court Judge of one state or states for five years in succession, or
ii. Have been a practising advocate at one High Court of one state or states for ten years in succession, or
iii. is, in the opinion of the President, a distinguished jurist.
Similarly, the appointment of Judges of the High Court of any State has been elucidated in Article 217 of the Indian Constitution and Judges are appointed upon the recommendation of the National Judicial Appointments Commission, and the Governor of the State, and, in the case of appointment of a Judge other than the Chief Justice, the Chief Justice of the High Court upon fulfilment of the criteria that the candidate must:
i. Must have held a judicial office in the territory of India for a period of ten years; or
ii. has for at least ten years been an advocate of a High Court or of two or more such Courts in succession.
Article 233 of the Indian Constitution delineates the process of appointing district judges, where such appointment is made by the Governor of the State in consultation with the High Court exercising jurisdiction in relation to such State. The article further classifies another manner in which an Indian citizen could be a district judge, as long as they are not already in the service of the Union or the State, by being an advocate or a pleader for seven years and is recommended by the High Court for appointment.
The quickest, most full-proof and without-getting-into-practice way to become a judge still remains to clear the state judiciary examinations, just after law school called the State Public Commission (Judiciary), or Higher Judicial Services (HJS). This article is focused on the state of Assam, where the discussion shall be on all relevant information about the Assam Public Service Commission (Judiciary) (herein called ‘APCS-J’), popularly known as the Assam Judicial Service Exam and how to crack the said exam.
The state: Assam
The High Court at Gauhati is the Highest Judicial Court for the state of Assam. The rest of the states who make up the seven sisters have their own High Court. The state of Assam is made up of 34 districts and 7 zones and the judicial officer usually stays in a particular zone for 3 years. One of the most overlooked factors in the judicial job profile is that Judiciary is a transferrable job; as a judicial officer, one must be ready to take charge at any of the above zones at any given time.
Ordinarily, the transfer is issued in the month of December, and charges are to be resumed from 31st January. Mid-term transfers are made in exceptional cases as per requirement or better administration of justice at the discretion of the Hon’ble Chief Justice of Gauhati High Court.
Assam Judicial Services exam for two levels : Grade I /III
The entry into the Assam Judiciary happens at two levels, one where no experience is required which is called Grade III and one where seven years’ experience is required, which is called Grade I.
Though both are entry points to the state judiciary, there is a vast difference between the two. Grade III requires a fresher in law whereas Grade I mandates a seven year practice. Grade 1 services begin at the Additional District Judge level, where Grade III begins with the very grassroot level of the judicial services. Although Judicial Officers of Grade I services tend to have a higher tendency of retiring as a High Court judge, it is much more difficult to write and prepare for an exam after being in the professional space. Additionally, Grade I services also act as a great back up plan for aspirants who for some reason, financial or otherwise could not sit or give their 100 percent to the Grade III judicial services examination.
Exam Centre for Assam Judiciary
The Assam judicial services exam has a trend of having only Guwahati as their centre for the exam for both Grade I and Grade III. The city is well connected by every means of transport, as it is the capital of the state of Assam.
Must hold a degree in law from a recognized university;
Must be a practising Advocate in the Courts of Civil and Criminal Jurisdiction for a period of not less than 7 years.;
The age should not be less than 35 years or more than 45 years for the unreserved category. A relaxation of 3 years is given for the reserved category for the upper limit;
A further relaxation of 10 years is given to persons with disabilities, and a relaxation of 15 years for those who belong to the SC/ST categories.
Details of Assam Judicial Services exam
Stage 1: Assam Judiciary Preliminary examination
Details of the paper
The Preliminary examination, popularly known as prelims, consists of 100 marks which is to be answered in 2 hours. 60% is the minimum eligibility cut-off.
Syllabus of the Paper
The Prelims cover 10 marks worth of proficiency in Assamese, the official language of the state of Assam, and 90 marks cover General Knowledge, Aptitude, English, Constitution of India, Code of Civil Procedure, Code of Criminal Procedure, Indian Penal Code, Transfer of Property Act, Indian Evidence Act, Limitation Act, Legal Theories of Jurisprudence, Arbitration & Conciliation Act, Indian Contract Act, Family Law, Specific Relief Act, Motor Vehicle Act, Industrial & Labour Law, Land Acquisition Act, Law Relating to Trust, Indian Registration Act, Court Fees Act. For every wrong answer, there is a negative marking of 0.25.
Qualifying the Paper
Candidates are called in 1:10 ratio, where for every one seat, 10 candidates will be asked to write the mains examination. The ten candidates will be decided on the basis of their scores during the preliminary examination.
Stage 2: Assam Judiciary Main examination
Popularly known as Mains, it is a subjective written examination consisting of papers. Papers I-III are to be answered in 2 hours and for paper IV, 1 hour is provided. Paper I-III is of 100 marks, while Paper IV is of 50 marks.
Paper I: This paper tests the General knowledge, aptitude, intelligence, test of comprehension and expression of law and General English including Essay Writing on legal topic and information technology.
Paper II: This paper is objective-based questions and tests problems of law as regards the Transfer of Property Act, Civil Procedure Code, Code of Criminal Procedure, Indian Evidence Act, Indian Penal Code and Limitation Act.
Paper III: This paper consists of judgement writing, Legal theories on Jurisprudence and provisions of the Constitution of India.
It is imperative to mention here that the candidate is expected to refer to relevant decisions of the Apex Court and the High Court while writing answers in Papers II and III.
Paper IV: This is the language paper to test the proficiency of candidates in official languages of the state of Assam, which is currently Assamese. The paper consists of 50 marks, out of which scoring 20 is minimum requirement.
The eligibility for the Interview mandates that a minimum of 45% in the Papers I, II and III and a minimum of 35% in the Official Language Paper is required. Apart from the minimum cut-off in every paper, an aggregate of 60% is the minimum requirement for being eligible for the next stage.
Additionally, the marks secured in the official language paper is qualifying in nature and shall not be counted in the aggregate marks secured by the candidates in the examination for the purpose of final selection.
Stage 3: Interview
The Interview will be of 50 marks.
Candidates are called in a 1:3 ratio- for every seat available, 3 candidates will be contesting for the said position.
The candidate shall have to secure a minimum of 60% marks in the interview to qualify to become a Judicial Officer in the state of Assam.
Application Process of Assam Judicial Services exam
The application to the Assam Judicial Services Exam can be made in online mode only, and the fee payment is offline only. It is imperative that the candidate keeps sufficient time in hand as the application process requires one SBI bank branch visit and confirmation for successful application requires two stage verification. In case anything goes south, it is imperative that the candidate has some time in hand in order to rectify the process. The official notification can be found on the official website of the Gauhati High Court at Guwahati.
Step I: Registration at the Portal
To get to the application portal, the candidate needs to register at the portal with their basic credentials. This includes the following- their name, father’s name, date of birth, a mobile number and an email address that they frequently check.
After submission of the above, a registration code will be generated. This registration code will also be sent to the registered email address, however, it is recommended for the candidate to note this registration code as it is the means to coordinate with the commission for all future references.
A combination of the registration code and date of birth shall be the login credentials of the candidate for all the phases of the examination.
Step 2: Form Submission
After registration, the candidate is expected to fill in the application form. The form requires primary credentials like gender, category, address, qualification, experience and other candidature specific information.
After this, the candidate needs to upload their signature and photograph with the following specifics:
The image format should be in .jpg, .png or .gif format only. No other format is accepted.
The photograph should be 276 pixel wide and 354 pixel in length, with 80% of the photograph covered by the face of the candidate.
The signature of the candidate should be 276 pixels wide and 118 pixels in length, with 70% of the photograph bearing the signature.
The size of the image should be between 5-30 Kb only along with the pixel specifications.
It is imperative that all the boxes in the application form are filled in, no field box is left blank.
Upon declaration that everything is correct and in order, the submit candidature will be available in green colour and be activated for submission.
After submission, no more modification to the form will be possible, so this step is to be done after the form has been thoroughly checked.
Step 3: Fee Payment
The fees for the examination needs to be paid after two working days of filling the form and before the last date fixed for payment of fees. The mode of payment is cash only and requires a bank visit to the nearest State Bank of India branch only. It is highly recommended that this process of the candidate is done well within time and not to be left for the last minute.
After filling the form, the candidate needs to print out the Fee Payment Challan by clicking the ‘Print fee payment challan form’. After two working days of submitting the form, the challan needs to be presented before bank, and the fee needs to be paid. Upon payment of the fees, the bank, in exchange for the challan, provides a journal number.
It is crucial that the candidate checks that the challan, upon fee payment, now has the bank seal and signature. This challan copy needs to be kept carefully for any future reference.
After two days of making the payment, the journal number, payment date and the paid amount will be reflected in the candidate’s account. It is recommended that the candidate verifies the same on the portal after two working days from making the payment and keep a physical copy of the acknowledgement receipt.
The application form and the acknowledgement receipt generated are two very crucial documents and should be safely kept for ready reference.
In case of any technical assistance for the submission of the online application form, emails can be sent to [email protected], mentioning the post name in the subject line. The body of the email should mandatorily mention the registration code, applicant’s name, name of the father of the applicant align with the grievance.
Application fee is Rs. 500/- only for all general category students, Rs 250/- for all SC/ST students and nil for candidates with physical disability.
It is however imperative that candidates with physical disability are required to submit the certificate of disability in the following format:
Specifics for the Application Procedure:
No other mode of application except online will be accepted for the application.
Candidates shall not paid any allowances to appear for the examination.
Any information submitted by an applicant in their application will bind the candidate personally and if found false, their candidature will be cancelled forthwith and shall be liable for criminal prosecution.
The certificate for claim of reservation must have been issued by the competent authority.
If any candidate is found canvassing directly or indirectly, their candidature shall be rejected.
Assam Judicial Services exam eligibility Criteria for Grade III- APCS-J
To sit for the Assam Judicial Services Exam, it is of importance that the candidate fulfils the following criteria as per the official notification of 06.02.2023:
i. The candidate must be a citizen of India;
ii. Must hold a degree in law from a recognized university;
Iii. The age should not be more than 38 years for the un-reserved category or more than 43 years for the reserved category.
Apart from the basic above criteria, it is essential that the candidate does not fulfil the following disqualification criteria:
They are citizens of another country.
They have been dismissed from service by any High Court, Government or Statutory or local authority
They have been convicted of an offence involving moral turpitude or has been permanently debarred or disqualified by the High Court or the Union Public Service Commission or any State Public Service Commission from appearing in any examination or selection conducted by it.
They have directly or indirectly influenced the recruiting authority by any means for his candidature
They have more than one living spouse
Details of the Exam
Stage I: Preliminary Examination
Details of the Paper
The Preliminary examination, popularly known as prelims, consists of 100 marks which are to be answered in 2 hours. 60% is the minimum eligibility cut-off for this objective-type multiple choice paper. For every wrong answer, there is a negative marking of 0.25.
Syllabus of the Paper
The Prelims cover 10 marks worth of proficiency in the official language of the state of Assam, and 90 marks cover General Knowledge, Aptitude, English, Constitution of India, Code of Civil Procedure, Code of Criminal Procedure, Transfer of Property Act, Indian Contract Act, Indian Penal Code, Indian Evidence Act. Law of Torts.
Qualification for the Mains Examination
Candidates are called in 1:10 ratio, where for every one seat, 10 candidates will be asked to write the mains examination. The ten candidates will be decided on the highest number of marks scored by them during the preliminary examination.
Stage II: Final Written Examination/ Mains Examination
Popularly known as Mains, it is a subjective written examination consisting of papers. Paper I-IV are to be answered in 2 hours and for paper V, 1 hour is provided. Paper I-IV is of 100 marks, while Paper V is of 50 marks.
Paper I: This paper tests the overall understanding of English a candidate posses. Basics like essay writing, precise writing and grammar is evaluated.
Paper II: This paper tests the General knowledge and aptitude of the candidate via a objective multiple choice question paper.
Paper III: This paper is Law Paper I and tests the Constitution of India, Transfer of Property Act, Civil Procedure Code and Indian Contract Act
Paper IV: This paper is Law Paper II and tests Indian Penal Code, Criminal Procedure Code, Indian Evidence Act and Law of Torts.
It is imperative to mention here that the candidate is expected to refer to relevant decisions of the Apex Court and the High Court while writing answers in Paper III and IV.
Paper V: This is the language paper and tests proficiency of the Official language of the state of Assam, as it is a qualifying paper. A minimum of 35% is mandated for the candidate to qualify for the interview round.
The eligibility for the Interview mandates that a minimum of 45% in Papers I-IV and a minimum of 35% in the Official Language Paper is required. Apart from the minimum cut-off in every paper, an aggregate of 60% is the minimum requirement for being eligible for the next stage. A relaxation of 10% in the aggregate and 5% in individual papers is provided to SC/ST categories.
Special Reservation for Arunachal Pradesh Scheduled Tribe (APST): Candidates who obtain fifty percent or more marks or corresponding grade in the written examination/ mains shall be eligible for the interview.
Additionally, the marks secured in the official language paper are qualifying in nature and shall not be counted in the aggregate marks secured by the candidates in the examination for the purpose of final selection.
Stage III: Viva-Voce/ Interview
The Interview will be of 70 marks, and the candidate is expected to secure a minimum of 60% marks in the interview. Candidates are called in a 1:3 ratio- for every seat available, 3 candidates, who have qualified the mains examination, will be contesting for the said position.
The mains examination and the interview and all other conditions for appointment shall be as per the Arunachal Pradesh Judicial Services Rules, 2006 (as amended).
Further the rules outline the following instructions for the interview:
Selection of candidates shall be made on the basis of cumulative grade obtained in the written (mains) and the interview
The objective of the interview is to assess the suitability of the candidates for the cadre by judging the mental alertness, knowledge of law, clear and logical exposition, balance of judgement, skills, attitude, ethics, power of assimilation, power of communication, character and intellectual depth and like of the candidate.
The final evaluation of the candidate will be in the order of merit subject to overall suitability of the candidate. Selection of the candidate will be made on the basis of the marks obtained in the mains examination and the interview, subject to the cut-off marks indicated above.
Application process of Assam Judicial Services exam
The application to the Assam Judicial Services Exam can be made online only, and the fee payment is offline only. It is imperative that the candidate keeps sufficient time in hand as the application process requires one SBI bank branch visit and confirmation for successful application requires two stage verification. In case anything goes south, it is imperative that the candidate has some time in hand in order to rectify the process. The official notification can be found on the official website of the Gauhati High Court at Guwahati.
Step I: Registration at the Portal
To get to the application portal, the candidate needs to register at the portal with their basic credentials. This includes the following- their name, father’s name, date of birth, a mobile number and an email address that they frequently check.
After submission of the above, a registration code will be generated. This registration code will also be sent to the registered email address. However, it is recommended for the candidate to note this registration code as it is the means to coordinate with the commission for all future references.
A combination of the registration code and date of birth shall be the login credentials of the candidate for all the phases of the examination.
Step 2: Form Submission
After registration, the candidate is expected to fill in the application form. The form requires primary credentials like gender, category, address, qualification, experience and other candidature specific information.
After this, the candidate needs to upload their signature and photograph with the following specifics:
The image format should be in .jpg, .png or .gif format only. No other format is accepted.
The photograph should be 276 pixel wide and 354 pixel in length, with 80% of the photograph covered by the face of the candidate.
The signature of the candidate should be 276 pixels wide and 118 pixels in length, with 70% of the photograph bearing the signature.
It is imperative that all the boxes in the application form are filled in; no field box is left blank.
Upon declaration that everything is correct and in order, the submitted candidature will be available in green colour and be activated for submission.
After submission, no more modification to the form will be possible, so this step is to be done after the form has been thoroughly checked.
Step 3: Fee Payment
The fees for the examination needs to be paid after two working days of filling the form and before the last date fixed for payment of fees. The mode of payment is cash only and requires a bank visit to the nearest State Bank of India branch only. It is highly recommended that this process of the candidate is done well within time and not to be left for the last minute.
After filling the form, the candidate needs to print out the Fee Payment Challan by clicking the ‘Print fee payment challan form’. After two working days of submitting the form, the challan needs to be presented before bank, and the fee needs to be paid. Upon payment of the fees, the bank, in exchange for the challan, provides a journal number.
It is crucial that the candidate checks that the challan, upon fee payment, now has the bank seal and signature. This challan copy needs to be kept carefully for any future reference.
After two days of making the payment, the journal number, payment date and the paid amount will be reflected in the candidate’s account. It is recommended that the candidate verifies the same on the portal after two working days from making the payment and keep a physical copy of the acknowledgement receipt.
The application form and the acknowledgement receipt generated are two very crucial documents and should be safely kept for ready reference.
In case of any technical assistance for the submission of the online application form, emails can be sent to [email protected], mentioning the post name in the subject line. The body of the email should mandatorily mention the registration code, applicant’s name, and name of the father of the applicant to align with the grievance.
Things to be kept in mind:
The number of vacancies is indicative only and may vary at the time of final selection.
No allowances shall be paid to the candidates for appearing in the written test/interview, etc.
Any information submitted by an applicant in their application will bind the candidate personally.
The certificate for claim of reservation must have been issued by the competent authority.
If any candidate is found canvassing directly or indirectly, their candidature will be rejected.
Number of attempts that you get for Assam Judicial Services exam
No judiciary exam has a cap on the number of attempts, however it has an age restriction which prevents the eligibility of the candidates after a certain point.
Candidates are eligible to write the Grade III, APSC-J exam only up till they are 38 years of age for the general category and 43 for the SC/ST ones.
Candidates are eligible to write the Grade I, APSC-J exam only between the ages of 35-45 years of age for the general category and 35-48 for the SC/ST ones.
Evaluation of the Papers for Selection
In order to accommodate the subjectivity of the written examination, every answer is numbered and every number is then converted into a grade as the following, as per the Arunachal Pradesh Judicial Service Rules, 2006:
Percentage
Grade
Grade Value
70% and above
0
7
65% to 69%
A+
6
60% to 64%
A
5
55% to 59%
B+
4
50% to 54%
B
3
45% to 49%
C+
2
40% to 44%
C
1
Below 40%
F
0
After converting the numerical marks of each and every question into a grade, the evaluator would convert the grade into a grade value, according to the third column above.
The final evaluation would result by adding up the grade values and dividing the sum total by numbers of questions in total. The cumulative grade value average obtained by the candidate shall be the final result obtained by the candidate in the written examination.
Such procedure has been adopted to indicate only the cumulative evaluation grade of the candidate which moderates the inevitable element of subjectivity and fairness to much higher degree.
A similar procedure is adopted for the interview procedure, and a total of both shall be considered in finalizing the list of candidates selected for the post of Judicial Officer in the state of Assam.
Everything about being a Judicial Officer
Scope and Career of Judicial Officers
Judicial Officers of a state administer, interpret and implement the law at the very grass root level. They have an immediate bearing on the lives of people and solve pressing issues of the society at a most intimate level. At such an elementary level, the judicial officers have the authority to elevate the pain of the citizens and form the basis of how the law is to be interpreted.
Apart from what the perks the position provides, it is one of the most noble ways of providing a service to the nation and help create an impact in solving the issues of the society. Great power, obviously comes with great responsibility and the role of a judge demands a sense of commitment and dedication towards serving the people and the nation.
Salary of the Judicial Officers
A grade III officer’s salary ranges from Rs. 27,700 to Rs 44,700 plus other allowances. A grade I officer’s salary ranges from Rs. 51,550 to Rs. 63,070 plus other allowances.
Perks of being a Judicial Officer
Other Allowances include dearness allowance, house rent allowance, medical allowance, and travel allowance, among others. They are reimbursed for electricity and water charges, newspapers/magazines, telephones and conveyance. They also receive benefits like pension, provident fund, leave encashment, and medical facilities. After retirement, judicial officers also receive domestic help allowance. A special pay is also attached to the various posts in the judicial service.
Life and Growth as a Judge
As per the official notification, the Assam Judicial Services and the recruitment and promotion take place according to the Arunachal Pradesh Judicial Service Rules, 2006 which lay down the specifics of the promotion of Judicial Officers from Grade III to Grade II, Grade II to Grade I and how the seats of Grade I are filled with direct recruitment and by promotion.
It is imperative to mention here that there are Departmental Examinations that aid in the promotion of one grade to another after having served for a certain number of years in the Judicial Service.
Training of the Judicial Officers
Training Course for Officers appointed in Grade I
After appointment, the officer would be required to submit his/her joining Report before the Registrar General, Guwahati High Court and thereafter, the officer would be given a four week training at the Training Institute upon the following matter:
Writing of judicial orders in both civil and criminal cases
Framing of charges and settlement of issues
Judgement writing
Administrative and other matters relating to administration of office, including accounts.
Any other subject which the High Court/ Training institute may deem fit and proper.
Training Course for Officers appointed in Grade III
Grade III officers shall have training over the following topics:
Class room lectures at training institute as per the curriculum fixed in consultation with the High Court
Two months working knowledge of the Criminal Court, Civil Court and Revenue Courts
On the completion of the period of six months training the officers who have completed 3 years of practice at the Bar shall be given posting
The officers who have not completed 3 years of practice at the Bar shall be given further training for a period of 6 months.
Tentative timeline of Assam Judicial Services exam
For filling of Vacancies in the Cadre of a Grade I officer in the Assam Judicial Services.
Notification of Vacancies
31st March
Advertisement inviting applications from eligible candidates
15th April
Last date for receipt of application
30th April
Publication of list of eligible candidates
15th May
Issue of Admit Cards
16th May-15th June
Written Examination which may be objective/ subjective
30th June
Declaration of Written Examination Result
16th August
Dates for Viva-Voce
1-7th September
Declaration of Final Result
15th September
Issue of Appointment Letter
30th September
Last date of joining Judicial Training
31st October
For filling of Vacancies in the Cadre of a Grade III officer in the Assam Judicial Services.
Notification of Vacancies
15th January
Advertisement inviting applications from eligible candidates
1st February
Last date for receipt of application
1st March
Publication of eligible list of candidates
2nd April
Issue of Admit Cards
2-30th April
Preliminary Written Examination
15th May
Declaration of Prelims Result
15th June
Final written/Mains examination
15th July
Declaration of Mains result and scheduled interviews
30th August
Dates for Viva-Voce
1-15th October
Declaration of Final Result
1st November
Issue of Appointment Letter
1st December
Last date of joining Judicial Training
2nd January of the following year.
Acing the Assam Judicial Services exam
When to begin preparation
The ideal time to begin the preparation is when the last notification is out. The next best time is at least 18-24 months before the exam. It allows you to go in depth and prepare notes which is helpful when you need them for mains preparation. The answer key is available immediately, and if you feel that you may qualify the prelims, you might as well start the preparation for mains. The interview should be prepared for only after the mains result are out, especially by giving mocks and having one-to-one conversations with senior advocates and judicial officers.
Self-Study v. Coaching
The field of law is growing at an unprecedented rate not just in terms of young budding lawyers but also in terms of increasing number of aspiring judicial candidates. As an esteemed career option, vast number of students are moving towards the judiciary. But the road to the bench is not easy, for a lot of students face dilemma when it comes to choosing between coaching and self-study.
Given the cut-throat competition that exists, it is imperative for every candidate to have a well-planned approach. Realistically, both approaches have their own pros and cons but ultimately the best way to prepare is to look for a well-suited approach which works well for the aspirant.
Though not exhaustively, there are some factors that might help the aspirants to narrow down their choices to a right approach-
1. Self-Study:
Self-study is the term for individual learning and preparation that is done independently without the direct supervision of a coach or instructor. It offers advantages like-
· Flexibility and Autonomy: Candidates who self-study can create their own study schedules which cater to their own needs and obligations. It allows the individual to create a space wherein they can devise learning methods best suited to their preferences and style.
· Self-Motivation and Discipline: Self-study requires a strong sense of self-motivation and self-control. Candidates must learn how to focus without external guidance, set goals, and effective time management. This autonomous method can develop beneficial traits like persistence and self-reliance which are important to be inculcated in every aspirant aiming for judiciary.
· Tailored Learning Approach: Self-study gives applicants the chance to customise their learning strategy based on their learning style preferences and areas of strength and weakness. They can give additional time to difficult subjects and prioritise the study areas that need greater focus. This individual-centric method enables a greater comprehension of the subject.
For instance, any student who is aiming for Judicial Services of any respective state, might not begin with Core Law subjects like Company Law but rather might focus on light materials like Evidence Act etc.
Coaching does not provide the students with this kind of liberty and autonomy; they have pre-designed modules containing planned structures for different subjects.
2. Coaching:
Coaching is more about being guided and trained by experienced mentors or tutors who focus on assisting applicants in their preparation for judicial services tests. It offers several benefits like:
· Expert Guidance: Candidates who participate in coaching get access to trained mentors who are deeply knowledgeable about the examination process, including the exam style, syllabus, and anticipated question types. These professionals can provide insightful advice and practical tips for navigating the difficulties of the judicial services test.
· Structured Curriculum: Coaching institutes frequently provide a well-defined curriculum that encompasses all pertinent subjects as well as structured study resources. This methodical approach guarantees thorough coverage of the curriculum and lowers the chance of forgetting important topic areas. It is important that each and every subject should be thoroughly paid attention to while learning and it becomes more easier to cover everything when there is a well-designed and structured curriculum.
· Peer Learning and Networking: Through the medium of coaching, candidates get an opportunity to interact with peers who have similar aims and aspirations. Together with other applicants, you can create a competitive atmosphere, promote information exchange, and create a supportive learning environment by participating in group discussions, mock exams, and study sessions. This is often helpful in creating a conducive environment for creative group learning.
We have already discussed what could be some of the best outcomes of self-study or coaching. At this juncture, here are some of the tips that might prove to be of help to a judicial aspirant in choosing the most efficient and effective study method.
a). Learning style- Candidates should evaluate their preferred learning style to determine whether they do best in a structured, guided learning environment or prefer a self-paced, independent study environment.
b). Time Restrictions: Take into account your personal responsibilities and time availability. Self-study gives those with tight schedules more flexibility, although coaching institutions could offer a set timetable for efficient time management.
c). Resources and Access: Consider the accessibility of reliable study guides, mock exams, and pertinent sources. Coaching facilities may offer thorough study guides and internet resources that might facilitate the learning process.
d). Financial Considerations: Financial considerations: Self-study might be less expensive than coaching establishments, which frequently need a financial investment. It’s critical to evaluate one’s financial situation before making a decision. Those opting for self-study owing to financial constraints can also seek guidance through instructors and study material available online. They can join a number of test series instead of full-fledged coaching to evaluate their growth and understanding of key subjects.
Mastery over concepts
In a competitive exam like the Assam Judicial Services Exam, the competence of a law graduate is examined in a range of areas. Although the exam’s material is extensive, there are some of the topics that should be prioritised in order to score well:
1. Indian Constitution
· Fundamental Rights and Directive Principles of State Policy
· Constitutional Amendments
· Judiciary and its role
· Constitutional provisions related to the judiciary
2. Indian Penal Code (IPC)
· General Principles
· Specific Offenses and their definitions
· Punishments and sentencing
3. Code of Criminal Procedure (CrPC)
· Investigation process
· Arrest, Bail, and Remand
· Trial process
· Sentencing and judgments
4. Code of Civil Procedure (CPC)
· Jurisdiction and Territoriality
· Pleadings and Parties
· Trial and Appeals
5. Indian Evidence Act
· Relevance and admissibility of evidence
· Examination of witnesses
· Documentary and oral evidence
6. Law of Contract
· Essential elements of a contract
· Types of contracts
· Breach of contract and remedies
7. Law of Torts
· Negligence, Nuisance, and Defamation
· Vicarious Liability and Strict Liability
· Consumer Protection laws
Along with these fundamental subject areas, an aspirant should have in-depth knowledge of the following subjects:
· The Assam Judicial Services Exam has a general knowledge portion, thus it’s critical that you have a fundamental grasp of current events, history, and geography. The focus should be on landmark judgments and recent legal developments happening both at the state and national level.
· English Language: The test has a portion on the English language, therefore proficiency in reading, writing, and speaking is essential to ace the language exam. It’s also important to be well-practised in reading comprehension and essays along with good grasp on grammar.
· Assamese: Despite it being native tongue, it is imperative that the fluency and comfort in that language is maintained, both for the subjective and objective part. One of the most overlooked aspects, it has the power to make or break your career.
Prioritise your studies and concentrate on the key topics if you wish to do well on the Assam Judicial Services Exam. Additionally, it is essential to practise past years’ question papers along with careful analysis of the exam pattern. Take mock exams to become comfortable with the exam format and develop time management skills. Regular topic reviews and in-depth knowledge of legal principles are equally crucial.
Regular mocks and practice papers help the student to anticipate questions that have been recurring in exams. It helps them understand as to what all areas they need to focus on. Some additional tips can also be useful like-
1. Start early: Considering how competitive the exam is, it’s essential to get a jump on the preparation process. Ideally, There should be ample time for an aspirant to read the entire course content and rehearse answering questions.
2. Consult a tutor for assistance: If as an aspirant you are having trouble understanding a certain subject, a tutor may be able to help. You can receive individualised instruction from a tutor, who can also aid in your comprehension of the subject.
3. Constant Motivation: Although the Assam Judicial Services Exam is difficult, it’s crucial to maintain motivation and determination. Sometimes, the information and constant study pressure may be lot to take in however do not lose sight of your aim.
Points to ponder for Assam Judicial Services exam
Tips for the Preliminary Paper
Tip 1: One of the most underrated practices that judicial aspirants have is with regard to answering legal questions in another language. Even if it is one’s mother tongue, it is imperative that special emphasis is made on reading legalese and vocabulary that is used in day to day practice of these judicial officers. Apart from reading newspapers and legal books, it may be of crucial help that orders passed by district judges may be read by the candidates appearing for such examinations. It will be fruitful in maintaining fluency in the language and enriching the legal vocabulary required from a judicial officer.
Tip 2: Candidates often tend to make the rookie mistake of appearing for all judicial exams that happen. Being an exam that differs from state to state, it is important that the candidate targets one state and gives papers only for the paper most similar to the state in target. Aiming for all, dilutes the preparation. In some cases, some local laws of the state are always required in the preparation- in such cases, the candidate ends up wasting precious time for a state they were never keen on going anyway.
Tip 3: Having said that, the more prelims, mains and interviews you give, the more practice you’ll get. A lot of people give multiple attempts in order to calm their nerves and be accustomed to the stress they have to undergo in order to crack the exam of their choosing.
Tip 4: An aspect that most aspirants tend to overlook is the fact that mock tests apart from telling a pattern, also help in practising answers within a time limit. It is small things like these that help in making a crucial difference in the time-pressed situation where the ability to pick and choose which questions to answer can make or break your career.
Tip 5: Get out of the law school mentality. Candidates still stuck in this tend to answer all questions, even at the cost of quality of answers. Answering with absolute surety triumphs over guesswork. It may do more harm than good.
Tip 6: Concepts along with sections. Understanding the process behind the law is the best way to remember it. It is not recommended that sections can be absolutely taken for a toss. However, this preparation can always be done before the exams, where emphasis is paid on memorizing sections.
Tip 7: Treat Prelims as a qualifying examination. Passing this exam is only a pass to sit for the main show. Analyze what is asked and what your weak areas are. The answer key is usually available immediately after the paper, so give emphasis on areas were you are more prone to mistakes so that they may not be repeated in future examinations.
Tip 8: Bar and Bench and LiveLaw are your best friends in understanding the law and keeping you updated. Make sure you devote your time in refreshing your legal knowledge as it helps in preparing for Prelims as well as mains.
Tips for Assam Judiciary Mains exam
Tip 1: Another aspect that most people tend to underestimate is the ability to write long subjective answers. The four papers of mains is held in two days and most candidates are unable to even complete the paper. In such cases, along with it being a time-saving strategy where chunks of the answer are prepared one way or another, the candidate also develops the physical endurance to write lengthy answers to the best of his ability.
Tip 2: In every chunk of your answer, make sure you add one stellar point, it could be trivia, or it could be case law. Memorizing them in a chunk ensures that even if a question is somewhat near to what you have prepared for, you do have a stellar answer ready. For an IPC question, add aspects of CrPC or the Constitution.
Tip 3: Candidates often tend to falter in understanding when and how to begin the preparation. The sooner, the better, definitely applies, but it is also important to brush up on basics and prepare and write answers of five marks each. It is imperative that the preparation of prelims and mains is done in tandem and the best strategy is to keep writing in small chunks. This helps in quick revision strategies and aids in building the ability to write more.
Tip 4: Pay special emphasis on sectional cutoffs. Though it is advised you be thorough with the syllabus, it is human that some areas will be stronger than other. Even in cases where you are planning to leave certain topics altogether, make sure that you do it such a way that at least the sectional cutoffs are met.
Tip 5: Given the amount of emphasis that is paid on cases of the High Court, make sure that apart from landmark Supreme Court cases, you also keep a close tab on the landmark judgements being passed by the Gauhati High Court.
Tip 6: Answering the whole paper is paramount. It is imperative that you get in the habit of writing for two hours and writing for two hours quickly. Apart from writing stellar answers, it is imperative that you also are able to complete all the whole of the mains paper. This sole ability will give you an edge over nearly half the population writing the paper.
Tip 7: Writing the facts of the case along with the facts, however brief, helps in casting a good impression on the evaluator and gives an impression that you are thorough with your preparation in this exam.
Tips for Assam Judiciary interview
Tip 1: With a lot of video recordings available now on the internet, it is productive for the candidate to listen to such videos and develop their skills for answering and asking questions in a stern yet empathetic manner. These videos are especially useful in times of a break when the mind seeks a bit of peace in between study sessions. It also helps in portraying a good image at the interview level that the candidate is aware and knows how to maintain the sanctity of the post being held by them.
Tip 2: If ever given an opportunity to assist a judicial officer during or after law school, it is important that the candidate grabs it with both hands. No one in the business can provide better insight than the person doing the very same job. The candidate gets an opportunity to get their insight and the rigour of the law, under the tremendous pressure that their decisions could fundamentally alter lives. It is recommended that even internships should be litigation based so that the candidate is able to see the law in practice and can have absolute clarity on procedure.
Tip 3: Include time for a break. You have no little to no control over the result of the exam. It is imperative that you allocate time for your health, family, mental and physical exercise and even for yourself. The world will not stop and you need to accommodate the changing times with it.
Tip 4: Keep abreast of the recent judgements of the Supreme Court and the Gauhati High Court. Even a list of amendments and new statutes along with current affairs is a good strategy.
Tip 5: Make sure you have a conversation that flows. The evaluators are here to judge you on your overall personality and to determine whether you can hold the dignity of the position and power that you are about to receive.
Tip 6: Staying Calm and confident does wonders, and even if you are not, fake it till you make it
Tip 7: First impressions last. Make sure you have the most flattering outfit that aids in your self confidence and is formal enough for the interview. Make sure small things like your hair, tie, earrings, nails and shoes are in place.
Tip 8: A common factor in most Judicial aspirants is that they love to teach. It helps them be in touch with the subject. Additionally, apart from prepping them for the interview, it also helps them in gaining clarity over the concepts as they have to be extremely thorough with the concepts themselves in order to explain it to another law student.
Tips for Assam Judicial Services exam result
Tip 1: Understand that your marks are only fifty percent of the game. Though it depends on how your paper went, it also depends on how difficult the overall paper was. It is imperative to look at competitive exams in the percentile and not the number game.
Tip 2: Consistency is key. Even if you study for 2-3 hours, make sure you are consistent and just revise the bare act on days you do not feel like preparing for the Judicial Exam.
Tip 3: Everyone can only suggest what works for them, you will have to sit and figure out what works and does not work for you. There is no ideal way. And the preparatory stage is extremely isolating. For great gains, great prices are to be paid. Do not let a few rejections be a hurdle towards a bigger goal.
Preparation of Assam Judicial Services exam
Strategy for how to strategize
1. It is imperative that you read the bare acts and have the procedure imprinted in your brain. Even if you begin preparing for judiciary in the very last two years of law school, there is a high chance of you cracking it in the first attempt. What is important is the clarity you have towards the subject.
2. Subjects like procedural law require their understanding to be in motion. In such a case, assisting a judge or interning an advocate is fruitful as they know the flow of power and all available options.
3. Dedicate a specific timeslot to build fluency in the official language of the state every single day. Despite being a negligible contributor, one tends to forget that these are qualifying in nature and have the ability to make or break your result.
4. Some people allocate months of the year and some people allocate time of the day towards mastering a concept. Take time and understand which strategy suits you the best and ensure that you pay attention to your strengths as much as you do to your weaknesses.
5. Interviews are mainly used to determine a candidate’s fitness for a judicial position. During an interview, the interview board assesses a candidate’s confidence, ability, and commitment. It is crucial that the candidate develops the ability to think of their feet.
6. For the interview, make sure you develop storytelling skills. And have an answer to all probable questions- HR ones and the legal ones. And everyone loves a witty answer.
7. Start early: Considering how competitive the exam is, it’s essential to get a jump on the preparation process. Ideally, there should be ample time for an aspirant to read the entire course content and rehearse answering questions.
8. If, as an aspirant, you are having trouble understanding a certain subject, a tutor may be able to help. You can receive individualised instruction from a tutor, who can also aid in your comprehension of the subject.
9. Although the Assam Judicial Services Exam is difficult, it’s crucial to maintain motivation and determination. Sometimes, the information and constant study pressure may be lot to take in however, do not lose sight of your aim.
Books that are recommended
Basic commentaries of all the books are essential in gaining mastery over concepts and learning landmark case laws:
CPC: Takwani
CrPC: Kelkar
Constitution: V N Shukla, M P Jain
Contract Act: Avtar Singh
Torts: Bangia
IPC: Ratanlal and Dhirajlal
Transfer of Property: R. K. Sinha
Concise books like A K Jain are helpful for revision purposes, especially before the interview stage.
For everything else, the Bare Act with commentary suffices. For article writing, reading newspapers like The Hindu and Indian Express helps in the formulation and expression of thought. For the Assamese section, bare acts of diglot edition where the entire bare act is available in Assamese is crucial- for understanding legal concepts and developing fluency in the language. Previous years’ papers also aim to be fruitful in this regard.
For the General Knowledge syllabus, books like Universal and Lucent are helpful. Apart from that, websites like G.K. Today, and Lead the Competition are also helpful in preparation of Judicial Examinations.
Learning from the Toppers
Sukanya Hazarika, Rank 10 of the Assam State Judicial Services, 2021-22, cleared her judicial services examination in the very first attempt, after preparing for it only in her final year. According to her strategy in cracking the paper she highlighted the preparation to be done in a holistic manner as the prelims and the mains are extremely close in time. Therefore, she advises to fully focus on the Bare Act and be extremely thorough with the law. She emphasizes knowing concepts and states that every subject demands a different approach. The Penal Code demanded knowing the concepts thoroughly whereas the procedural ones mandated knowing the flow of power. Her preparation for cracking the paper was also aided by various YouTube videos, she stated.
Darshana Nath, Rank 22 of the Assam State Judicial Services, 2019 recommended devoting an hour to English grammar and two hours to General Knowledge every single day of her preparation. She gave special importance to repeated revisions which allowed her to memorize the bare Act. She further recommended reading Assam Tribune and an Assamese regional newspaper in order to brush up her general knowledge as well as her Assamese. She found that the mains paper focused a lot on concepts. Therefore, it is strongly recommended to prepare concepts as well as bare acts as there is not a lot time in between the prelims and the mains.
Manashi Mandal, Rank 28 of the Assam State Judicial Services, 2019, was a 2014 graduate from Assam University who finally cleared the paper in 2019 after beginning her preparation for the paper in 2015. It is of importance that this was her 7th Attempt towards becoming a Judicial Officer in the states of West Bengal, Assam and Tripura, which were her target states and the second time when she reached the Viva-voce stage This was her fourth attempt for the state of Assam. She emphasised on making her own notes and keeping a thorough revision of the same. She highlighted on knowing the syllabus and knowing areas of sure-shot questions by past paper analysis. The agenda should be to reach a particular score, not be master of all the topics under the sun. Mandal also stressed on paying attention to non-law subjects as they are qualifying in nature and help in gaining an upper hand on the same.
Give yourself a Fixed Time
Once you turn 27/28 years of age and your friends from law school are senior associates or at least are arguing and getting favourable orders, it is but natural to feel dejected and at a loss of self-esteem. Given your financial background, make sure you give yourself a certain kind of deadline. Could range from three years to seven, but once that deadline has crossed, it is important for your own mental health to go out there in the world and be financially independent. If your resolve is strong enough, you will be able to take the exam even when you are working.
It seems like an important time at this juncture to remind you of certain people who failed at their agenda of clearing a competitive exam but pursued to become pioneers in their own field anyway.
Ravish Kumar was a UPSC aspirant, but could not clear it. Today he is the recipient of Ramon Magsaysay Award, known as the Nobel for journalism.
Former President of India, Ram Nath Kovid, was a UPSC aspirant. He did not get marks high enough to get into IAS, so he opted to pursue law.
Sudhir Mishra, was also a UPSC aspirant, but failed to clear this exam. Today, he is a pioneer in environment law and is the managing partner of Trust Legal
Bharat Chugh could not clear the Haryana Judiciary after giving the interview. Soon after he became the youngest candidate to clear the Delhi Judiciary Exam, only to leave the Judicial Services to set up a thriving independent practice in Delhi.
Everyone has their own tangents in life; some we can anticipate, some we cannot. It is important to be honest with the kind of effort you make towards the exam, but it is equally important to know when to draw the line and hang up your boots. It is only when you close one chapter is when another one can begin.
FAQs about Assam Judicial Service Examination
How is APSC-J examination held?
The exam is held in three parts
The Preliminary Examination (qualifying in nature, MCQ based)
The Mains Examination (written examination, subjective type)
The Viva-voce or the interview
The exams pan out over a year and the vacancies are irregular. However, it can be estimated that a vacancy in the Assam Judiciary comes once in every two years.
Who conducts the APSC-J examination?
The Guahati High Court conducts the Assam Judicial Services Exam where it recruits freshers and lawyers with seven years of practise into being judicial officers to administer and implement justice in the state of Assam.
Whom and How do I contact for any queries regarding the Judiciary Exam?
The best way to contact the Officials conducting the exam is through email. The official portal suggests the email to be: [email protected], whereas the notification mentions [email protected] to be contacted in case for any technical issues in submitting the application form.
Can a practising lawyer be eligible to write the Assam Judiciary Exam?
Having a practice is not a hindrance in writing the judiciary exam as long as the criteria for the same are met. In fact, the higher judicial service exam mandates a practice of seven years for a candidate to be eligible to write the paper.
What kind of internships should I pursue to become a judge?
Internships are the best way to know the ground realities of the profession. Being as close as possible to seeing the law in motion, is the most crucial to any judiciary aspirant. It is imperative that this be the litmus test for any internship one thinks to apply for. Internships under lawyers/judges of the District Judiciary show the law in a light which will bring great clarity of thought to the aspirant. Even internships under practising High Court lawyers and sitting High Court judges are fruitful as they bring forward various procedural and substantive questions of law under scrutiny.
Further, it is common amongst judicial aspirants to be legal clerks to sitting High Court judges, as it allows them to be in touch with the subject and develop the legal acumen required to assist the Judge, and sustain themselves financially.
How to select a judiciary course to excel in the Assam Judicial Services Examination?
It is absolutely non-negotiable that the course provides assistance in Assamese as a language, among various other things. Further, it is important that the course moves at a brisk pace, but also allows you to accommodate your shortcomings and leaves room for self-study. Additionally, it is imperative that state-specific guidance is provided. Among others, LawSikho provides tailor made opportunities and checks all the boxes required. It is self-paced but also helps you in keeping your preparation levels in check with the syllabus that needs to be covered.
Concluding thoughts
The judicial exams pave way for one of the most coveted positions in the government. The impact you create in people’s lives is direct and immediate. It is a position of great power and perks and creates a shift in the lifestyle that impacts generations of successors. However, it is one of the toughest exams to clear for the process of it is extremely taxing. The mere anticipation of whether or not one has cleared the paper takes a toll. A lot of brillant students from law schools tend to pursue this option to only leave dejected and unfulfilled. The world in Law Schools is vastly different from the real world and judiciary is on the extreme end of the spectrum. It is imperative to understand that none of the law school abilities decide whether one can crack the judiciary exam. One may be surprised by how many people who started their preparation in the very last semester of law school have cracked the paper, and people who were clear about their goal are still in pursuit. There is no straight jacket formula, and it is only dedicated effort that can aid in cracking the exam. Let your past baggage not decide how your future is to be. Be honest with your preparation and leave no stone unturned. No preparation ever goes to waste- it may aid in this preparation or for bigger things.
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There is nothing like the original creation in this world. Everything that is ever created has been influenced by or inspired by an existing piece of work by someone. It can be an artwork or an invention. And it is allowed by the law under the garb of fair use. But the 21st century is a digital century, and using other people’s work is extremely easy. Thus, we cannot stop people from taking inspiration from existing work. But to what extent is this inspiration valid?
That is the fundamental question. Here, we’re discussing the same doctrine of fair use under the law, especially in digital media in the digital century.
History and origin of fair use
There was no concept of fair use in the earlier century because it was hard to copy or replicate other people’s work. But with the invention of the printing press in the 15th century, copying became an easy process. Thus, protecting the original creation has become immensely important.
Later in the 17th century, in India, British authors started using French expressions without obtaining their prior permission. It was justified on the basis of fair use, i.e., for news reporting, criticism, etc., anyone can use the existing work without violating the original author’s rights.
Even the Supreme Court of India observed that copyright law has two objectives:
to protect the original creation of the individual, and
to help progress science and art.
For the second objective, we have to make available the existing work without any discrimination or fees to the people at large so that they can bring innovation to society, which eventually will help progress society. This is nothing but the fair use doctrine and its importance is cited by the Apex Court.
What is fair use doctrine
Generally, this doctrine allows people to use the copyrighted work for free to some extent without infringing on the original person’s rights. It allows unlicensed use of work in a limited sense for the purpose of comment, research, teaching, criticism, news reporting, etc.
This work may include original work of expression, including literary, musical, pictorial, movie, audiovisual, etc. Section 52 of the Indian Copyright Act of 1957 explains the fair use doctrine and the circumstances in which fair use is allowed.
Similarly, Section 107 of the US Copyright Act enlists four factors to check if the situation falls within the ambit of fair use or not.
These four factors are as follows
The purpose and character of the use
Here, the Court primarily sees if the person is adding new expression and meaning to the existing work or merely copying stuff as it is. And the new work adds some value to the existing work by adding some of his own insights, research, understanding, etc.
The nature of the copyrighted work
If the work is factual in nature, like a biography, then it is likely to be considered fair use by the court as it tends to be more beneficial to the public at large. If the work is fictional in nature, like novels and plays, then the court generally provides more protection because of its creative nature. If the work is already published, then the scope of fair use increases compared to the work that is unpublished because the Court grants the original author the right to control the first appearance of his work to the public at large.
The amount used and its importance to the whole
Generally, more money leads to infringement but that is not the case all the time. The importance of the copied portion matters the most. In the Harper & Row vs. Nation Enterprises (1984) case, the 300-word copied portion was considered substantial of the 200,000 manuscripts as the Court considered it to be the heart of the book.
The effect of the use on the market for the copyrighted work
If using a small portion leads to potential harm to the work in the market, then it is considered beyond the scope of fair use.
Here, the market includes the present as well as the future market for the work. You wish to publish the book and it is selling well in the present market. But you also have the right to publish it in many different languages across the world and even future movie rights vest with you. Thus, if someone wishes to publish your book in another language or wishes to make a movie, he needs to get your prior permission for the same.
Therefore, it is clear that fair use is subjective in nature and totally depends on the facts of each case. Judges play a vital role in deciding the nature of work and if it fits into the ambit of fair use or not. But this fair use policy brings its own challenges when it comes to digital media and we are discussing the same fair use doctrine in today’s digital media world.
What is digital media
Digital media includes information that is in digital format and shared on the internet or computer networks. Its creation, distribution, storage, and use happen on electronic devices. This includes audio, video, text, graphics, etc.
That means almost everything we are seeing today is in digital format and can be considered digital media. For example, the older printing press is replaced by digital prints, a play is replaced by movie theatres and OTT Platforms, etc. Today, the original creation of a person is in digital format and in the most vulnerable state like never before.
Thus, with technological advancement and the emergence of artificial intelligence, protecting the original creation and granting fair use rights to the people has become a daunting task for the law.
Fair use in digital media
When it comes to digital media, we need to discuss social media platforms, news media, and even artificial intelligence. All these are major parts of digital media and massive amounts of information and data are used by them, so the chances of copyright infringement are high. Hence, the application of the fair use doctrine is immensely important in these parts of digital media.
Artificial intelligence and fair use doctrine
AI has really revolutionised the world with its capabilities and has almost superseded human capabilities to some extent. All the AI models work on a similar process of feeding them the vast amount of data that is present on the internet and then they regenerate this fed data according to the commands of the user. Hence, they are called generative AI because they are working on the data that is already present.
But this has ignited a heated debate across the world about whether this software infringes on the rights of the person who created this data in the first place.
Thus, a lot of lawsuits were filed against these AI companies, claiming they had infringed on their copyrights. But at the same time, these AI companies are also trying their best to keep this AI under the garb of fair use under the copyright law.
As discussed earlier, whether the work falls within the ambit of fair use or not depends upon four major factors, and these AI companies also take advantage of these four factors.
The first factor targets whether the work is transformative or not. It was argued that the primary objective of the original author’s work is to showcase his thoughts and expressions to his audience. The AI is trained by the intermediate copying of works, which is like a reverse engineering process. The aim of this process is to understand how human-generated media works. Thus, the objective of AI is not expressive. It is clear that the object of an author’s work is different and the objective of AI with the same information is different. Even the output that is generated by an AI is highly transformative and unique.
The second factor talks about the nature of work. It was argued that it has some ambiguity and that this factor does not play a very important role when the first and fourth factors are strong.
The third-factor talks about the amount and substantiality of the portion. The argument is quite interesting here. AI is almost taking the whole data of the author but the output that it is providing is highly transformative and completely different. It’s more like it’s providing some sort of competent substitute for the public. Furthermore, the original work that AI engulfs in this process is not at all accessible to the public. Thus, it stands as a valid point for fair use.
The fourth factor in determining fair use talks about the effect of the use on the potential market of the original work. AI software consumes the original data of the author and reproduces it according to the commands of the user. But the potential market for the original work of the author is a human market. Thus, apparently, AI is not snatching the customers of the author. However, authors may argue that AI-generated work may harm the value of their existing work.
But a very clever argument was provided in this scenario by the AI companies. It was stated that AI systems are highly innovative and have massive social benefits in writing, assisting, legal, and even in the medical field. Furthermore, it was proposed that the AI system has immense potential and innovation and one cannot overview its capabilities. And even the fair use doctrine was incorporated for the benefit of science and society in the first place. And hence, we shall not neglect the future of AI, as it has disrupted the world in its first generation.
Social media and fair use doctrine
One of the facets of digital media is social media. YouTube is the most used social media website across the world. It has almost 122 million daily active users and around 3.7 million videos are uploaded on a daily basis. Hence, we are discussing the same here.
While posting a video on YouTube, there is a YouTube terms of use section that you need to accept. Upon acceptance, the platform and users also get the right to share and promote your work with others.
Well, this does not mean that anyone can use your work without your permission. But if it happens, then it violates the platform’s terms of use and will get a copyright strike. This terms of use section plays a vital role on almost every social media website.
YouTube’s fair use policy
When a creator uses some portion of copyrighted work in his creation, he chooses the YouTube Fair Use Disclaimer. This disclaimer clarifies that the creator has used some copyrighted portions of his work under the fair use policy for commenting, criticism, educating, etc. purposes. This essentially reduces the chances of future copyright claims from the original owner.
The American Digital Millennium Copyright Act (DMCA) provides a safe harbour rule and it states that online companies are not liable for transmitting and storing copyright-infringing data if they are not aware of it but once they are aware of this information, they have to take instant action against such infringing work.
Conclusion
Fair use is an essential doctrine for the progress of science and art in society. It was quite easy to apply this doctrine in the earlier period. But the 21st century is digital in nature. Technological advancement and artificial intelligence have changed the world immensely. Thus, the application of fair use has become a daunting task for the law. We already saw how AI companies are defending themselves against copyright infringement and are using their best logic to take advantage of this fair use doctrine. Thus, courts around the world are facing the same challenge of applying the fair use doctrine.
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