In this article, Brinda Dubey pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the review mechanism prescribed by SEBI for the audit qualifications contained in the audit reports of the listed entities.

What is an audit qualification?

Audit Report is the communication to the shareholders/investors and other bodies by which an auditor expresses his opinion about the financial statement of the company audited by him. Audit report is an important aspect in the audit process. An audit qualification is typically a statement of the auditor’s opinion written on any check done by a professional auditor. It indicates that financial results presented by the management do not reflect the true and fair affairs of the financial transactions of the company and can hence have a considerable impact stakeholders’/investors’ decision making.

An audit provides those who have to rely on/look to financial statements, adequate assurance that the statements are in conformity with Generally accepted accounting principles and relevant regulations. The contribution of the independent auditor is to give credibility to financial statements, which are relied upon by creditors, bankers, stakeholders, the government and other interested third parties.

In case auditor has any reservation in respect of certain methods mentioned in the financial statements he may qualify his report. If the accounting standards issued by Institute of Chartered Accounts of India is not followed by the company the auditor may qualify his report.

Additionally as per Companies Auditors Report Order rules the auditor may qualify in his report in respect of inventories, Fixed Assets, loan given or taken by the company, internal control procedures, internal audit system, acceptance of public deposits, maintenance of cost records, payment of statutory dues, transaction prejudicial to the interests of the company, etc.

Audit qualification generally a suggests a lack of consensus between the auditor and the management. A modified/qualified audit report indicates that the financial statements/results are materially misstated. The impact of qualification/s may be quantifiable or may not be determinable.

Generally, qualifications are harbingers of negative perception for companies and should be avoided. This can be possible only if the issues are resolved between the management and the auditor.The management had to compulsorily include all adversities and qualifications in the board report from time to time as well and hence be answerable. Further, for qualifications that are not quantifiable (e.g. lack of sufficient appropriate audit evidence/scope limitation), the auditor is permitted to state the fact through a limitation of scope or disclaimer of opinion.

A clear description of all the substantive reasons of the qualifications should be included in the report and, unless impracticable, a quantification of the possible effect(s), individually and in aggregate, on the financial statements should be mentioned.When not practically feasible to quantify the effect of modifications made in the audit report accurately, the auditor may carry out plausible audit tests and base the estimates made by the management while clearly indicating the same thereto.

Previous review mechanism

As a regulator of companies which are listed, the Securities and Exchange Board of India recently, after taking into consideration best international practices based upon detailed analysis of the inspection systems of the audit regulators around the world, introduced some consequential amendments relating to a new mechanism to review audit qualifications contained in the audit reports of listed entities ,these amendments will come into for all the annual audited standalone/consolidated financial results, submitted by the listed entities for the period ended on March 31, 2016.

Till November 2015, listed entities were required to submit a form (Form B) for a qualified audit report together with annual report and a Form A if submitting an audit report with unmodified opinion. These forms are to be signed by the Chief Executive Officer/Managing Director, Chief Financial Officer, Auditor and Chairman of the Audit Committee.

The qualified opinion was reviewed by  Qualified Audit Report Review Committee (QARC) comprising of stock exchanges, representatives from the Institute of Chartered Accountants of India (ICAI), other stakeholders, and contingent on their recommendations, SEBI asked the companies to either get the opinion rectified or revise the financial information to address the qualifications. In cases where the QARC determined that the qualifications were major and explanations were not to their satisfaction, the audit report would be referred to the Financial Reporting Review Board (FRRB). If the FRRB was of the opinion that the qualifications were justified, SEBI  mandated a restatement of accounts of the company and require the company to inform its shareholders through intimation to the respective stock exchange. The revised financial information was submitted as pro-forma results (revision to the results already filed/ submitted) and companies would further adjust their next year financial statements for a prior period to the error however relaxation in terms of the period has been given to cushion from tax impacts.

The Board has also divested powers for the well being of the investors to take any action, regarding the above, as they saw fit. Further, annual report was filed at a later time than financial results which are to be filed within 60 days of the end of the year and Form B was required to be filed along with the annual report and no such information on qualifications was required with the filing of quarterly results.

The FRRB reviews financial statements of listed companies to determine to the possible extent their compliance with generally accepted accounting principles in the preparation and presentation of financial statements, disclosure requirements prescribed by regulatory bodies, statutes and rules and regulations relevant to the enterprise and compliance with reporting obligations of the enterprise as well as the auditor.

Changes after 2016 Amendment

Divesting of timely information to stakeholders which was one of the primary concerns was not being addressed by this mechanism, hence with the amendments certain changes were made to it along with the process getting more streamlined.

Primarily, a financial result of a company could be misstating by a significant amount and not known to the investors at the time investment decisions are being taken. Also, Form B provided limited information — i.e. qualifications with respect to management explanations and matters of quantification and the impact on the financial results were not prescribed in the form.

With the notifications of September 2016 May 2016, SEBI amended listing regulations which now require a ‘statement of cumulative impact of audit qualifications’ to be filed instead of Form B. Further, the statement needs to be submitted along with the annual financial results. Management of the company also has to provide it’s views on the qualifications. The listed entity will have to furnish a declaration in case there are no audit qualifications.

It seems that statement may be required for quarterly results as well. The statement contains detailed information such as net worth, net profit, turnover, total expenditure, earnings per share, total assets and total liabilities in a tabular form. the firms will have to make submission about details, types, frequency of audit qualification too.

Instead of simple qualification information, SEBI requires filing of numbers along with adjusted numbers. Frequency, types and details of audit qualifications done also have to be spelt out of each qualification separately.

Revisions rectify and fills lacuna of the previous requirements. The compliances might be more demanding but nevertheless, information is cumulatively disseminated at the right time. Most importantly, the most outstanding difference might be that the SEBI review mechanism of the qualified reports has discontinued. The review is undertaken by stock exchanges now.

There is not much clarity at present about the exact performance of the review but sections related to re-opening of accounts and revision to financial statements under the Companies Act 2013, have been made effective/notified in June 2016 following the constitution of National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). These sections provide for the revision/ restatement for financial statements after approval from NCLT/ NCLAT. Additionally, unlike the existing Indian GAAP, the newly adopted IFRS converged standards (Ind AS) require restatement of previously issued financial statements, in case an error is noted for past periods. A sound interpretation of requirements hints that India might be gravitating towards  a world of restatement (a prevalent phenomenon in the west)

Similarly now, SEBI/ stock exchanges can apply to the Tribunal for restatement of financial statements of a company, if they believe that the accounts were prepared in a fraudulent manner, on the basis of qualifications filed along with financial results. This could be a significant change from the current practice of recording past period errors in the current year financial statements as a prior period item.

Restatements though have an unfavorable effect on the stock prices and is to be seen as and is viewed as walking on a bed of coals.

Even as we battle the implementation of the changes as they have been brought about in a short span of time, these recent changes should bring out more transparency and efficiency in financial reporting in the corporate sector. It is absolutely essential that corporates’ internal processes and systems are sturdy enough to withstand and deal with the changing requirements.

References

1. CIR/CFD/CMD/56/2016
2. CIR/CFD/CMD/15/2015
3. (Listing and Other Disclosure Requirements) Regulations, 2015 (‘Listing Regulations)
4. CIR/CFD/DIL/9/2013
5. http://taxguru.in/chartered-accountant/qualified-opinion-auditors-report.html
6. Newspaper reports

In this article, Dhruv Shekhar discusses the American Cyanamid case.

The law of injunction in our country is one which owes its origins to the Equity jurisprudence as present and borrowed from English law[1]. The basic principle that an injunction is reliant upon is the latin maxim of ubi jus ibi remedium which translates to where there is a right there is a remedy[2].

Thus an injunction is a judicial remedy which either ensures that the party is required to refrain from doing a particular act or conversely is supposed to carry out a particular act[3]. In the former case it is referred to as a restrictive injunction and in the latter as a mandatory injunction. Injunctions find statutory basis in Order XXXIX of The Code of Civil Procedure[4], § 94 & 95 of The Code Of Civil Procedure[5] and § 36 & 42 OF The Specific Relief Act[6]

A further classification of the type of injunctions can be as the following (1) temporary or perpetual; (ii) prohibitory or mandatory; (iii) negative or positive; (iv) ad-interim or interim[7]. For the purpose of this article the focus is going to be on temporary/ interlocutory injunctions and one condition which used for granting it (as a part of the three pronged test laid down in American Cyanamid[8]).

An interlocutory or temporary injunction may be granted when the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit. The Court in such circumstances is posited to grant an injunction to prevent either dispossession of the plaintiff’s property or to prevent any damage being inflicted in regard to the aforesaid property.

The central theme that is being explored in this article is an explanation of the American Cyanamid case and how it set a strong basis of the prima facie criterion for granting of a temporary injunction in a matter.

The Pre Cyanamid Era                        

The concept of prima facie criterion in the Pre- Cyanamid era was present, however there was rarely if ever a stringent imposition of this criterion.  The case of Stratford v. Lindley[9]  was one of the first cases where the concept of a prima facie case was strongly asserted. Even in the case of F. Hoffman[10], Lord Diplock stated the need to prove a strong prima facie case as being essential in determining the application for interim injunctions. However the uniformity in the assertion of the same principle was not the same in all cases.

The American Cyanamid Case

Interim injunction have often served as the edifice for Intellectual Property disputes[11]. The principle setting case of American Cyanamid also contented with an application for interim injunction against the respondent company Ethicon to bring about a product which infringed upon the plaintiffs patent ( i.e. absorbable surgical sutures of filaments made of a particular kind of chain polymer known as “a poly-hydroxyacetic ester” (“PHAE”).

The principles that were discussed upon in this case now serve as a trite law for it has established the three mandatory conditions that an applicant must fulfill for the court to grant his/her application for temporary injunction. They are as follows, 1) there is a prima facie case to be tried 2) the applicant will suffer irreparable damage if the interlocutory relief is refused 3) Balance of convenience resulting from granting or denying the interlocutory relief[12].

While the questions pertaining to the latter two aspects of irreparable injury/damage and balance of convenience have been assessed on a case by case basis. The perplexing issue has however often been confined as to what constitutes a prima facie case. In the aforesaid matter, Lord Diplock in his judgment states that a prima facie case would be made out if the plaintiffs raised a serious question to be tried. Thus the requirement to be satisfied appears as being that the plaintiff has to raise a serious question to be tried, rather than having to show a possibility of reasonable success at the trial[13].

Thus a serious question would be considered to be made as long as it the plaintiff’s case is not of frivolous and vexatious nature. This requirement imposes a very low burden as the assessment of the case at this stage does not take into account the relative merits of the case. In the years hence forth an interesting change took place in regard to the meaning of the prima facie case.

The 1996 Court of Appeals decision of Series 5 Software[14]serves as a very interesting interlude in this entire discussion. For on the question of prima facie case, this case states that relative strength of the claims made by the parties would be examined to determine this question. However since this was a Court of Appeals decision, English Courts have largely treated this matter as an anomaly and instead followed the principles established in the Cyanamid case .

Thus what can be perused from the multitude of English cases is that there appears little to separate the prima facie test as well the serious question test. While any attempt to use the second test would automatically entail an assessment of the parties in regard to the relative strengths of their respective positions, however the extent to which this is done appears to be far from clear.

Another interesting interlude that appears in a number of the reported English cases on interlocutory injunctions is the interchangeability with which Lord Diplock’s words were used to deal with the prima facie test[15]. The various terms used by Lord Diplock are as follows “frivolous or vexatious,” there must be a “serious question to be tried”, “real prospect of succeeding” and “an arguable case”.

The meaning of these phrases have been examined in two cases, namely Smith v. I.L.E.A [16]and Mother Care Ltd. v. Robson Brooks Ltd.[17]. When adjudicated upon by Browne L.J for the former matter and Sir Robert Megarry-V.C for the latter one, they were of the opinion that the three different wordings in Lord Diplock’s test should be treated as equivalents. Thus while the prima facie case principle is an essential part of the three pronged test for granting interlocutory injunctions. It’s arguable that this term has become an “umbrella term” which is inclusive of all the four statements to be used either as equivalents or on case by case and need basis[18]. Thus the rich jurisprudence of the English courts serve as a tool in the hands of the judiciary who can use any of the strains of the concept of a Prima Facie case, while assessing an application for interlocutory injunction. The question worth positing now is whether a similar development in the concept of prima facie case has taken place in the Indian legal landscape.

[1] A summary of a workshop on the Law of Injunctions held at Maharashtra Judicial Academy (18/01/2015), Page 1- http://mja.gov.in/Site/Upload/GR/Summary%20-%20%20workshop%20dt.%2018.01.2015.(Civil).pdf

[2] Shamnad  Basheer, Jay Sanklecha and  Prakruthi Gowda, Pharmaceutical Patent Enforcement: A Developmental Perspective, 603-635(2014) . This was Chapter 19 of the book  Ruth L. Okediji and Margo A. Bagley, PATENT LAW IN GLOBAL PERSPECTIVE 603-635 (2004)

[3]B. Chandra Sekhar Reddy And Others v. K. Naga Raju Yadav & Anr. 2013(2) ALD 626 84, para. 8. derived from Halsbury’s Laws of England (4th Edn.), Vol. 24, para 901, p. 511

[4] Order XXXIX of The Code of Civil Procedure

[5] § 94 & 95 of The Code Of Civil Procedure

[6] § 36 & 42 OF The Specific Relief Act- the conditions as present in English law ( as developed  in the American Cyanamid matter ) have not been directly embedded into  the provisions of various Indian statutes providing injunctive reliefs

[7] B. Chandra Sekhar Reddy And Others v. K. Naga Raju Yadav & Anr. 2013(2) ALD 626 84, para. 9

[8] American Cyanamid v. Ethicon Ltd [1975] AC 396

[9] JT Stratford & Son Ltd v Lindley [1965] AC 269

[10] F. Hofmann-La Roche A.G. v Secretary of State for Trade and Industry [1975] A.C. 295

[11] Feroz Ali K, Patent Infringement and the Law, THE HINDU BUISNESS LINE( Feb.28,2008), http://www.thehindubusinessline.com/todays-paper/tp-opinion/patent-infringement-and-the-law/article1617248.ece

[12] American Cyanamid v. Ethicon Ltd [1975] AC 396,  pg. 404-408 of the judgment as well as discussed in

Jean-Philippe Groleau, Interlocutory Injunctions: Revisiting the Three-Pronged Test,53, McGill L.J., 269, 269-71(2008)

[13] Mohir Naniwadekar, On ‘Prima Facie’ cases and ‘Originality’: Part I, SPICY IP( Nov.8, 2008), https://spicyip.com/2008/11/on-prima-facie-cases-and-originality.html

[14] Series 5 Software v. Clark  1996 C.L.C. 631

[15] Christine Gray, Interlocutory Injunctions since Cyanamid, 40, CLJ, 307, 307 (1981)

[16] Smith v. I.L.E.A [1978] 1 All E.R. 411

[17] Mother Care Ltd. v. Robson Brooks Ltd [1979] F.S.R. 466

[18] Thus, the term of “prima facie case” serves as the genus and those 4 terms serve as its species.

In this article, Ankit Suri pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Corporate governance and its role in Risk Management.

An insight into Corporate Governance

There are various definitions of corporate governance framed by various experts over the course of time. On analyzing the various definitions of corporate governance, a generally accepted definition can be coined as follows,

‘Corporate governance refers to the way in which companies are governed, and to what purpose it is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives this could be to maximize the wealth of its owners, its shareholders, subject to various guidelines and constraints and with regard to other groups, with an interest in what the company does. Sound “corporate governance” may therefore be said to exist where the conflicting interest of all stakeholders in a company are ethically balanced.

The essentiality of corporate governance cannot be over-emphasized as it is the “one key element in improving economic efficiency and growth as well as enhancing investor confidence”, as a result, the cost of capital is lower and firms are encouraged to use resources more efficiently, thereby sustaining growth. Corporate governance also helps to ensure that assets of the firm are secure and not subject to expropriation by individual groups within a firm who could wield excessive power. Corporate governance may, therefore be an instrument of checks and balances in the administration of a company.

Basics of Corporate Governance

Corporations

Corporations are a group of consensual, contractual relations among several constituencies.[1]

Corporate charter (or Articles of incorporation):

This is an agreement between the “corporation” and “state” in which it is incorporated as to how the corporation will be run; this includes:

• Authorized shares of the corporation.
• Corporation’s name.
• Corporation’s purpose.
• In return, the corporation pays franchise tax to state based on authorized capital of the company.
• A corporate charter may be amended after they are originally filed by incorporators by the majority or super-majority vote of shareholders.
• For public companies, vote requires:
• Proxy filing with Securities and Exchange Commission (SEC)
• Hiring of proxy solicitor to encourage shareholders to vote their shares

By-laws

• The main purpose of by-laws is to “Fill the gaps” left by the charter.
• They address board elections and composition, the appointment of officers, timing and conduct of corporate annual meetings, etc.
• By-laws may be amended by the board if permitted by the state of incorporation and charter; otherwise, it is amendable by shareholders.

Board of directors

• The board of directors are elected by shareholders at the annual stockholders’ meeting.
• Each share is generally entitled to one vote per director unless there is cumulative voting or multiple classes of stock.
• The winner of the voting is decided based on simple majority and hence the director who obtains the most votes wins.
• Directors are expected to maximize the value per share.

Directors’ Fiduciary Duties

• Directors have two duties to shareholders under the law:

Duty of care

1. Director must act in good faith and strive to exercise ordinary prudential care in making business decisions through processes
2. “Business judgment rule”: the presumption is in the favor of the director’s decision-making even if the expected results of the decision are not realized.
3. “Total fairness standard”: if the director has a conflict of interest, he/she must prove that his/her decision was fair to all parties.

 Duty of loyalty

1. A Director must act in the best interests of the corporation and not do things that harm the corporation.
2. The Director cannot compete directly with the corporation unless the other directors have expressly permitted the competing enterprise.
3. Failure to adhere to these two duties may lead to personal liability one part of the director.

Daily Governance of Corporation

Chief executive officer (CEO)

1. The board recruits and hires the CEO to run the day-to-day operations.
2. The CEO serves as the management’s representative to the board and is frequently the same person as chair of the board.
3. The CEO hires a management team (chief financial officer, chief marketing officer, and other “C-level” executives)
4. The board holds the CEO accountable for the corporation’s operating performance and the stock price performance.

Managers have fiduciary duties of care and loyalty that prohibit them from:

1. Competing with their employer
2. Appropriating business opportunities
3. Misappropriating corporate trade secrets and confidential information

Consequences for breaching duties to corporation:

1. Managers may be sued personally.
2. Manager’s employment may be terminated.

Sarbanes-Oxley Act

1. The management of public companies is responsible for structuring corporation with adequate “internal controls” so that the company has integrity in its financial reporting and other processes.
2. The corporation must report any deficiencies in and status of its internal controls in its public filings with the SEC.
3. This process provides current/prospective shareholders with a view on the perilousness of corporation’s internal management systems.

A brief overview of the development of Corporate Governance in the U.K and U.S

One of the main reasons corporate governance has made is mark is because of the separation of the ownership from management. The agency theory suggests that there could be a divergence in the interests of owners and managers. Corporate governance is an internal mechanism to minimize this divergence.[2]

 This section of the report reviews the disclosure requirements in four countries, “the United Kingdom, the United States, Australia and Germany” with regards to the board of directors, audit committee, internal control and risk aspects of corporate governance. A brief review of corporate governance development and regulations in each of the four countries is given below before the evaluation of their practices.

United Kingdom

The Cadbury Committee has played an essential role in the establishment of corporate governance practices in the United Kingdom, and many other countries. In addition to this, a number of committees, such as “Turnbull Report” , “Myners report”  and Higgs Report , have refined the corporate governance practices in the UK since the Cadbury Committee report in the early 1990s (Tricker, 2012). The “Financial Reporting Council” is the UK’s independent regulator, responsible for promoting corporate governance.

The United States of America

The United States is often seen as being the pragmatic case of the market-based model to corporate governance (Jackson, 2010). However, corporate governance failure in Enron resulted in high criticism of the corporate culture in the US and caused substantial changes through the Sarbanes-Oxley Act of 2002.

Public listed companies are also required to follow additional governance standards stipulated by stock exchanges in the country.

What is the Risk involved here?

Any and every business in today’s world faces risk on a daily basis. Their efficiency in managing those risks is all too apparent when major business failures unfold. Thereby making the first and foremost point clear that “failure” is often the result of poor risk management practices. Risk Management can be defined as a term which is used to describe the processes aiming as assisting organizations to understand, evaluate and take action on their risks with a view to increasing the probability of their success and reducing the likelihood of failure.

It is forgone conclusion that “effective risk management” gives comfort to shareholders, customers, employees and society at large that a business is being effectively managed and helps the company or organization confirm its compliance with corporate governance requirements. Risk management is relevant and an essential aspect in regard to all organizations, large or small. Effective risk management practices support accountability, performance measurement, and reward and can enable efficiency at all levels through the organization. Risk management requires a detailed knowledge and understanding of the organization and the processes involved in the business. The board of directors and management must appropriately select and manage the risks that a corporation takes as it seeks to increase the per share value of its stock.

Role of Corporate Governance in effective Risk Management

Risk, associated with a business, has a very broad ratio. With the intention of understanding the aspect of risk in corporations and businesses, it can be categorized into “three” kinds of risks namely:[3]

• Counterparty risk
• Interest rate risk
• Liquidity risk

Counterparty risk

• This refers to the kind of risk that an organization/person with which a corporation has a business relationship with, fails to perform its obligations.
• Defaulting by borrowers on their loan agreements with banks.
• Prospective buyers “fail to close” on the purchase of a contract with home sellers.
• Domino-like effect (must consider counterparties’ counterparty risk)

To mitigate this risk

• It is essential to avoid concentration of lenders, vendors, customers, etc. (i.e. diversify)
• This is relatively easier for a large company to do than for a small, entrepreneurial firm.

Interest rate risk

• This refers to the kind of risk where a shift in interest rates will adversely affect either the company’s assets or its liabilities.
• In the event of a corporation having $100 million of floating rate debt outstanding, a rise in interest rate will increase company’s interest expense burden.
• If the interest rate increases, the value of the investor’s fixed rate bonds will be reduced, since the bond prices rise when the interest rates fall and vice versa.
• The lower the coupon payment and the longer the bond has until maturity, the greater the interest rate risk.

To mitigate this risk

• The balance duration (weighted average cash flows) and mix of fixed/floating interest rate instruments between assets and liabilities
• Easier for large financial firms to do than for smaller and non-financial firms.

Liquidity risk

The possibility that the firm will not have sufficient cash on hand or immediately available credit to pay its bills as they come due.

Some possible causes

1. Accounts receivable go bad (due to counterparty risk).
2. Lenders get nervous and call the loan before due date
3. The unexpected order which necessitates the emergency purchase of inventory.

To mitigate this risk, keep higher cash balances

1. Cash is expensive.
2. Without sufficient profitability, raising equity to provide that cash is also expensive.
3. Keeping cash rather than investing it again can be costly.
4. Nevertheless, a failure to have sufficient cash can cause financial distress or bankruptcy.

Other types of risk

1. Product obsolescence risk.
2. Exchange rate risk (mainly for companies doing business internationally).
3. Succession risk: risk that company cannot adequately replace its current CEO[4]

Before looking into the details of methods to mitigate different kinds of risks that corporations and businesses undergo, it is essential to understand that Corporate boards and audit committees must first identify and confirm the particular risk involved and then move to thinking about way and ways to mitigate/eliminate those risks. In this respect,  the “UK Corporate Governance Code Main Principle” states, “The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the company’s auditor.”

CONCLUSION

Corporate Governance alone cannot be held responsible for the current Financial Crisis. However, Corporate Governance could have prevented some of the worst aspects of the crisis, only if effective governance operated throughout the period of time during which the problems were developing and before they crystallized. Furthermore, effective Corporate Governance could have helped to reduce the catastrophic impacts that the global and national economies are now suffering.

Corporate Governance has been an integral part of risk management since the dawn of companies, and should be stringently incorporated as its only interest is welfare of shareholders in terms of increase in shareholder wealth, increase in confidence on the investor and reduced cost of capital along with other benefits such as better brand equity, greater employee morale and greater confidence of creditors.

References

[1] http://www.oecd.org/daf/ca/risk-management-corporate-governance.pdf

[2] https://www.oecd.org/corporate/ca/corporategovernanceprinciples/42670210.pdf

[3] http://www.emeraldinsight.com/doi/abs/10.1108/09513570310492335

[4] https://www.icaew.com/en/technical/corporate-governance/risk-management

This article is written by Ramanuj Mukherjee, Co-Founder and CEO at At iPleaders and LawSikho.

Why every organization needs a dating policy

Office romances get a lot of footage on movies, television series and popular culture. It is so normalised that one may expect to find love or at least fleeting sexual encounters in the workplace. Think of how many of your favourite television series have important characters who are involved in a workplace romance at one time or other. Cops, spies, outsourced workers, doctors, lawyers, stock brokers – they are all having lots of sex with coworkers and some of them are even getting married.

So young people today join the workforce and treats the workplace as a place where they might meet a love interest or just get more sex. It may not be said loudly but the expectation exists.

It’s time that organizations begin to notice it. After all, it is not like India doesn’t have a harsh sexual harassment law or very difficult legal system. In the last few years the high and mighty have fallen time and again with scandals related to workplace sex and multiple sexual harassment accusations. CEOs, founders, investors and MDs have gone down in blaze after being hit with multiple sexual harassment complaints, with their own as well as the organization’s reputation ruined for the long term.

There are other less publicized costs of sexual harassment or even consensual sexual/romantic relationships in the workplace. And it is not just distraction or competition and resultant animosity amongst co-workers.

These relationships in the workplace, especially when undisclosed, can lead to conflict of interest, lack of trust among co-workers, poor judgement, favouritism, ethical breaches and of course harassment.

None of these bode well for an organisation. Most organizations are already battling a tough battle of hiring good people, retaining then, building a suitable and friendly culture, creating alignment between teams, keeping people energized and excited, ensuring an ethical and fair environment. None of these are easy. Adding relationship related dynamic complications to that or sprinkling in some jilted lovers and jealous co-workers is nothing short of disastrous.

How should organizations go about handling dating in the workplace?

There are a few approaches that seem to work and there are many that don’t work at all.

In my opinion, dating in workplace should be prohibited. If two people start dating or engage in a sexual encounter, they should immediately be required to disclose the same to the management, and one of them may be thereafter released in a planned way or given a role so that there is no conflict of interest situations.

If you allow your finance guy to date a vendor, or a product manager to date an engineer, or a lawyer to date his clients then I can only wish all the best for your organisation but would not be expecting the best at all. These are all terrible conflict of interest situations. I will never want to lead or invest in an organisation where people who are accountable to each other professionally are in sexual or romantic relationships and are not prevented by policy or required to disclose such conflict of interest. This is simply because that sort of pervasive conflict of interest, if allowed to thrive, costs untold losses which are sometimes very difficult to even discover or quantify.

One effective approach to dating policy in workplace is to ban dating co-workers and requiring immediate disclosure of relationship of a romantic or sexual nature. At iPleaders and LawSikho, we follow this approach.

Another good approach is to not ban it outright, but requiring the signing of a consensual relationship contract that both the parties in the relationship agree to. This should be connected with rigorous management of any conflict of interest. People can be shifted from one role to another or to a different team to avoid conflict of interest. This definitely bring down the number of casual workplace relationships as people know that there is a procedure they need to follow and hence are more serious when considering a relationship with a colleague. It also drastically reduce allegations of sexual harassment as people cannot later claim that they were pressured for being into a relationship. The organization should also get an indemnity from dating co-workers to protect itself from legal or other liabilities that may arise due to their existing relationship or as a repercussion to a future falling out.

The dating policy should also address if an employee or officer may date customers/ buyers. This is a special case of conflict of interest and represent a different set of challenges.

The dating policy is, of course, not to be confused with a sexual harassment policy and should be kept separate from a sexual harassment policy. Mixing them up, though done by some organizations, sends the wrong signal.

Do you think your organisation should or should not have a workplace dating policy? Why yes or why not? Please share your comments with us generously.

Here is a course related to Sexual harassment laws and workplace diversity that I co-created. Please check it out and recommend to your colleagues who may benefit from it.

In this article, Akriti Shikha pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses duties and responsibilities of a Director of a Private Limited Company.

INTRODUCTION

Private companies are a standout amongst the most widely recognized business entity in India. In a private Ltd. company, the Directors assume a critical part amid the incorporation procedure and post-joining process. Organization Director’s are in charge of the administration of their organizations and have duties to the organization’s representatives, its exchanging accomplices and the state. As a Director, one needs wide powers to help in advancing the organization. In any case, they confront genuine penalties in the event of manhandling of those forces.

Private ltd. company requires at least two directors, two members, and two shareholders to enroll itself lawfully. Be that as it may, a most extreme of fifteen directors is permitted in an organization according to the Companies Act, 2013 laid out by Ministry of Corporate Affairs.

MEANING OF DIRECTOR IN PRIVATE LIMITED COMPANY

Directors refers to as someone designated to the Board of a Company. Board of Directors refers to a group of individuals elected by the shareholders of a company to deal with the issues of company. Thus, Director is a man named or chosen by law, who manages, controls or coordinates the undertakings of an organization.

REQUIREMENTS TO BECOME A PRIVATE LIMITED COMPANY DIRECTOR

Appointment of a Director is not only a crucial managerial prerequisite, as well as a procedural necessity that must be satisfied by each organization. Only an individual can be appointed as a Director- a corporate, firm, association or other bodies with artificial legal personality cannot be appointed as a Director.

For a person to become a director in a Private Ltd. Company, such person is required a Director Identification Number (DIN) which can be obtained for any individual over the age of 18 years. Additionally, a Digital Signature Certificate (DSC) is required. The director cannot have a criminal record. He shouldn’t have been detained anytime before his appointment as a director.

As to residency necessities of a director, there is nothing in Companies Act, 2013 that denies the appointment of any individual who is a foreigner or NRI as a director of a Company.

MANNER OF APPOINTMENT

In a Private Ltd. Company, Articles of Association can recommend the way of appointment of any everyone of the Executives. In the event that Articles of Association are silent, the directors must be selected by the shareholders. Companies Act,2013 likewise allows the Articles to accommodate the appointment of 2/3^rd of the directors as indicated by the principle of proportional representation, if so received by the organization being referred to.

DISQUALIFICATIONS FOR APPOINTMENT OF DIRECTOR

A person shall not be qualified for appointment as a director of an organisation, if:

• He is of unsound mind and stands so declared by a competent court;
• He is an undischarged insolvent;
• He has applied to be adjudicated as an insolvent and his application is pending;
• He has been indicted by a court of any offence, regardless of whether including moral turpitude or something else, and sentenced in regard thereof to detainment for at the very least six months and a time of five years has not slipped by from the date of expiry of the sentence.
• An order disqualifying him for appointment as a director has been passed by a court or Tribunal and the order is in force;
• He has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call;
• He has been convicted of the offence dealing with related party transactions under section 188 at any time during the last preceding five years; or
• He has not got the DIN.

TYPES OF DIRECTORS

1. First Directors

The first directors of most of the organisations are named in Articles of Association. In the event that Articles does not specify it, then subscribers to Memorandum of Association who are individuals shall be deemed to be until the directors are duly appointed.

2. Additional Directors

Anantalakshmi v Indian Trade & Investment Ltd[1] held that if the Articles of Association specifically provides, the Board has the discretion, where it feels it necessary and expedient, to appoint Additional Directors. However, an individual who fails to get appointed as a director in a general meeting cant be designated as Additional Director. They hold the position for a limited term i.e upto the date of following Annual general meeting or the last day on which meeting ought to have been held whichever is earlier.

3. Alternate Director

Alternate Director is somebody appointed by the Board of Directors in a general meeting to represent a director called the “original director” during his absence for a period of not less than three months from India.

4. Nominee Directors

Subject to the Articles of a company, the Board may appoint any individual as a director nominated by any financial institution in pursuance of the provisions of any law or of any agreement. Banks and Private Value speculators who concede obligation or value help to an organization for the most part force a condition as to appointment of their delegate on the Board of the concerned Organization. These nominated persons are called as Nominee Director.

5. Resident director

Every Private ltd. company must have no less than one director who resides in India for a total of not less than 182 days in the previous calendar year from the date of incorporation.

6. Managing Directors

A Managing Director is a Director who has substantial powers of management of the undertakings of the company subject to the superintendence, control and direction of the Board being referred to. It prohibits regulatory acts of a routine nature when so authorized by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank and so forth.

7. Whole-time/ Executive Director

A Whole time or an Executive Director incorporated a director who is in the whole-time employment of the company, commits his whole-time of working hours to the company being referred to and has a significant personal interest in the company as his source of income.

8. Ordinary Director

An Ordinary Director is a simple director who attends the board meetings of a company and participates in the matters put before the Board of Directors. These directors are neither whole- time Directors or Managing Directors.

WOMEN DIRECTOR REQUIREMENTS

There is no women Director requirements for a private ltd. company. However, every listed company and limited company having a paid-up share capital of Rs. 100 crore rupees or more or turnover of Rs. 300 crores or more are required to name atleast one woman Director.

DUTIES OF DIRECTORS

The following duties and liabilities have been imposed on the directors of companies, by the Companies Act of 2013 are:

• A director of a company shall act as per the Articles of Association of the company.
• A director of the company should act in good faith, in order to advance the objects of the company, for the advantages of the organization in general, and to the greatest advantage of the partners of the organization.
• A director of a company should practice his obligations with due and sensible care, expertise and industriousness and might practice free judgment.
• A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
• A director of a company s should not accomplish or endeavor to accomplish any undue pick up or advantage either to himself or to his relatives, accomplices, or partners and if such chief is discovered liable of making any undue gain, he might be subject to pay a sum equivalent to that pick up to the organization.
• A director of a company shall not relegate his office and any task so made should be void.

If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one Lakh Rupees and which may extend to five Lakh Rupees.

REMOVAL OF DIRECTORS

A Private ltd. company by ordinary resolution in an Annual general meeting or an extra ordinary General meeting can remove a director. Special Notice about the resolution to remove a director should be given to the members with a copy of the respective notice to be sent to the director to be removed. The director is given an opportunity of being heard in the meeting. If the director gives any written representation to the notice, then the said representation is given to all members. If the representation could not be given to all members, then the Director can request the said representation to be read out in the meeting. The members can pass an ordinary resolution, by simple majority and remove the director. The Company shall within 30 days from the removal of a director file Form No.32 and a copy of the resolution with the Registrar.

RESIGNATION OF DIRECTOR

A director may resign from his office by giving notice in writing. The Board shall, on receipt of such notice within 30 days intimate the Registrar in Form DIR-12 and also place the fact of such resignation in the Director’s Report of subsequent general meeting of the company and post the information on its website. The director should also forward a copy of resignation with detailed reasons for the resignation to the Registrar.

CONCLUSION

Along these lines, Companies Act, 2013 is absolutely an extremely creative and milestone enactment in regard of the obligations and duties of the executives of organizations moreover. Both general classes of chiefs, to be specific, the executives having financial association with the organization, and the free chiefs, have been appropriately thought to be under this develop enactment for executives. It looks to make the corporate administration and administration in India rather effective, completely responsible, straightforward, and maximally gainful to all partners and related experts, through this insightful enactment over obligations and duties of chiefs in Indian organizations.

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References

• http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
• https://www.legalraasta.com/director-in-pvt-ltd-company/
• https://www.icsi.edu/portals/0/APPOINTMENT%20AND%20QUALIFICATIONS.pdf
• http://www.caclubindia.com/articles/the-companies-act-2013-provisions-for-directors-18413.asp

[1] AIR 1953 Mad 467, (1953) IMLJ 275

In this article, Shamayem Fasih pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, does an overview of Limitation Act, 1963.

Law of Limitation in India

The word limitation itself says the meaning. The word limitation in its literal term means a restriction or the rule or circumstances which are limited. The law of limitation has been prescribed as the time limit which is given for different suits to the aggrieved person within which they can approach the court for redress or justice.

It is necessary to have certain basic knowledge regarding the law of limitation though it is not expected from every citizen to master various provisions which has been provided for limitation in different suits matters.

The basic concept of limitation is relating to fixing or prescribing of the time period for barring legal actions. According to Section 2 (j) of the Limitation Act, 1963, ‘period of limitation’ means the period of limitation prescribed for any suit, appeal or application by the Schedule, and ‘prescribed period’ means the period of limitation computed in accordance with the provisions of this Act.

The Law of Limitation signifies to prevent from the last date for different legal actions which can take place against an aggrieved person and to advance the suit and seek remedy or righteous before the court. Where a suit is initiated after the bar of limitation, it will be hit by the law of limitation. The main and the fundamental aim of the law of limitation is to protect the lengthy process of penalizing a person indirectly without doing any offence.

The law relating to Law of Limitation to India is the Limitation Act, 1859 and subsequently Limitation Act, 1963 which was enacted on 5th of October, 1963 and which came into force from 1st of January, 1964 for the purpose of consolidating and amending the legal principles relating to limitation of suits and other legal proceedings.

According to the provisions provided under the act, it is the litigation which is initiated, the Appeal which is entertained and the request which are made after the specified term which shall be dismissed even though the limitation is not raised as a defence. It is a suit which is initiated when the complaint is instituted to any of an appropriate officer in a normal case and where the person is a pauper. In other circumstances a suit is initiated when the request for leave to file a suit as a pauper is made and where the cases relating to the allegation which is against the company that is being wound up by a court, where the applicant initially sent his assertions to the official liquidator. Where the assertion is made in a form of set off or counterclaim, it shall be deemed as a separate litigation and in the case of set off it shall also be considered to have initiated on the date on which the preceding for set off is pleaded. It can be said that in a case of additional claim a suit shall be instituted within the same date on which the counterclaim has been made. With this a request by notice of motion is made in the High Court when the application is provided to the appropriate officer of that particular Court.

When a court is closed on the expiry date for filing any shoot to kill or application search suits API law application may be initiated on the reopening day of the court. An appeal or application shall be admitted by the court after the specified period if the litigant convinces to the court why showing inadequate cause for the failure to prepare a pill application within the specified period then the court can admit his appeal or application. It is the duty of a litigant to give appropriate cause for his failure for the filling of a suit appeal or application. Beside all this, it is the act which provides that where a person who is having an authority to file any suit or to make any request for the execution of defence who is a minor or insane or an idiot during the specified time of filing is to be considered. He may be initiated a to file a suit or application which shall be filed within the same time after his disability has come to an end, or at the time during which the specified term is to be considered she may initiate the legal actions or applications within the same term after both in capacities of disabilities of his have come to an end. Where else if the incapacity your disability continues of that person till his death, when the act West the authorities of that person on the legal representatives to initiate the legal actions or make any application after his death within the same period.

As provided under the Act, the legal disability shall not apply to any suits which are filed for the right of pre-emption or the limitation period and which are to be extended for a period and upon such conditions. While to do a calculation of the limitation period for any litigation, appeal or application, the date from which such period is to be considered, shall be deem to be exempted. A suit which are filed for review or revision or appeal of a judgment, the date shall be calculated from the date on which the judgment is delivered and the time of request for getting duplicate of the decree, or order appealed from or revised or reviewed shall be exempted. The Act also provides for other computation of limitation for suits against trustee, execution of a decree, effect of fraud or mistake. The Act states acquisition of easement by prescription for the enjoyment of the use of land without interruption for twenty years.

The Limitation Act, 1963 does not affect the provisions provided under The Indian Contract Act, 1872. The Act is made effective for the reason that it bars the jurisdiction of the court to entertain the actions that are frivolous and to avoid the long proceeding of the pending actions by the complainants.

The Salient Features are

• The Limitation Act contains 32 Sections and 137 Articles. The articles have been divided into 10 parts. The first part is relating to accounts, the second part is relating to contracts, the third part is relating to declaration, the fourth part is relating to decrees and instrument, the fifth part is relating to immovable property, the sixth part is relating to movable property, the seventh part is relating to torts, the eighth part is relating to trusts and trust property, the ninth part is relating to miscellaneous matters and the last part is relating to suits for which there is no prescribed period.
• There is no uniform of limitation for the suits under which the classifications has been attempted.

• The limitation period is reduced from a period of 60 years to 30 years in the case of suit by the mortgagor for the redemption or recovery of possession of the immovable property mortgaged, or in case of a mortgages for the foreclosure or suits by or on the behalf of Central Government or any State Government including the State of Jammu and Kashmir.
• Whereas a longer period of 12 years has been prescribed for different kinds of suits relating to immovable property, trusts and endowments, a period of 3 years has been prescribed for the suits relating to accounts, contracts and declarations, suits relating to decrees and instruments and as well as suits relating to movable property.
• A period varying from 1 to 3 years has been prescribed for suits relating to torts and miscellaneous matters and for suits for which no period of limitation has been provided elsewhere in the Schedule to the Act.
• It is to be taken as the minimum period of seven days of the Act for the appeal against the death sentence passed by the High Court or the Court of Session in the exercise of the original jurisdiction which has been raised to 30 days from the date of sentence given.
• One of the main salient feature of the Limitation Act, 1963 is that it has to avoid the illustration on the suggestion given by the Third Report of the Law Commission on the Limitation Act of 1908 as the illustration which are given are most of the time unnecessary and are often misleading.
• The Limitation Act, 1963 has a very wide range considerably to include almost all the Court proceedings. The definition of ‘application’ has been extended to include any petition, original or otherwise. The change in the language of Section 2 and Section 5 of the Limitation act, 1963 includes all the petition and also application under special laws.
• The new Act has been enlarged with the definition of ‘application’, ‘plaintiff’ and ‘defendant’ as to not only include a person from whom the application. Plaintiff or defendant as the case may be derives his title but also a person whose estate is represented by an executor, administrator or other representatives.
• According to Sections 86 and Section 89 of the Civil Procedure Code, it requires the consent of the Central Government before suing foreign rulers, ambassadors and envoys. The Limitation Act, 1963 provides that when the time obtained for obtaining such consent shall be excluded for computing the period of limitation for filing such suits.
• The Limitation Act, 1963 with its new law signifies that it does not make any racial or class distinction since both Hindu and Muslim Law are now available under the law of limitation as per the existing statute book. In the matter of Syndicate Bank v. Prabha D. Naik, (AIR 2001 SC 1968) the Supreme Court has observed that the law of limitation under the Limitation Act, 1963 does make any racial or class distinction while making or indulging any law to any particular person.

According to Halsbury’s Laws of England, the Main Objects of the Law of Limitations are as follows

Whereas it has been observed and expressed by the Court that there are almost three different types of supporting reasons for the existence of statutes of limitation.

1. That long dormant claims have more of cruelty than justice in them.
2. That a defendant might have lost the evidence to dispute the State claim.
3. That person with good causes of actions should pursue them with.

There are two Major Broad Considerations on which the Doctrine of Limitation and Prescription are based on

• That, the right which are not exercised for a long time are said to be as non-existence.
• That, the rights which are related to property and rights which are in general should not be in a state of constant uncertainty, doubt and suspense.

The main object of limit in any of the legal actions which is to give effect to the maxim ‘interest reipublicae ut sit finis litium’ which means that if the interest of the State is required that there should be a limit to a litigation and also to prevent any kind of disturbance or deprivation of what may have been acquired in equity and justice or by way long enjoyment or what may have been lost by a party’s own inaction, negligence or laches.

The intention in accepting the concept of limitation is that “controversies are restricted to a fixed period of time, lest they should become immortal while men are moral.”

There is a limitation to litigation which interposes the statutory bar. This statutory restriction after a certain period of time gives a status to enforce an existing right. Simply, it neither create any right in favour of any person nor does it define or create any cause of action against the particular person but it prescribes about the remedy. These remedy can be exercised only up to a certain period of time and not subsequently. The main object of the statute of the Limitation Act, 1963 is more over a preventive kind and not to interpose a statutory bar after a certain period of time and it gives a quietus to all the suit matters to enforce an existing right.

The major purpose of the statutory of the Limitation Act, 1963 is not to destroy or infringe the rights of an aggrieved person but to serve public in a better way and to save time. This statute is basically founded on the public policy for fixing a life span for the legal action which are taken place and to seek remedy in time with the purpose of general welfare. The object of providing a legal remedy is to repair the damage which is caused by reason of legal injury.

Redress of the Legal Injury from Legal Action when Suffered

The provisions of Limitation Act which are provided in the statute are the statute of repose, to suppress frauds and to supply deficiency of proofs which are arising from the ambiguity, obscurity or the antiquity. The presumptions proceed upon the claims which are extinguished or are ought to be extinguished whenever they are not litigated with the prescribed period of time.

The right has been measured as an equivalent with regards to making of the quick diligence to the person. It has discouraged the litigation by buying some common receptacle which has accumulated from the past times which are now unexplainable and have become inexplicable due to lapse of time. The Limitation Act is a law of repose, peace and justice which has barred the remedy after the failure of particular period of time. This is all because for the public policy and expediency without extinguishing any right in certain cases.

It has been the topic of discussion in the Supreme Court and different High Court about the object of the Law of Limitation. In the matter of State of Rajasthan v. Rikhab Chand [1], it has been observed by the Rajasthan High Court that the rules of limitation are mainly intended to induce the claimant in claiming the relief and also in avoiding the unexplainable delay and latches in a suit.

Whereas, in the matter of M.P. Raghavan Nair v. State Insurance Officer [2], it has been observed by the Kerala High Court that the Law of Limitation is based upon public policy mainly aiming at justice, repose and peace.

In the matter of Rajender Singh v. Santa Singh [3], it was held by the Supreme Court of India that “the object of the Law of Limitation is to prevent disturbance or deprivation of what may have been acquired in equity and justice by a long enjoyment or what may have been lost by a party’s own inaction, negligence or latches.”

In the matter of B.B. & D. Mfg. Co. v. ESI Corporation [4], it was observed by the Supreme Court that-

“The object of the Statutes of Limitations to compel a person to exercise his rights of action within a reasonable time as also to discourage and suppress stale, fake or fraudulent claims. While this is so, there are two aspects of the Statutes of Limitation — the one concerns with the extinguishment of the right if a claim or action is not commenced within a particular time and the other merely bars the claim without affecting the right which either remains merely as a moral obligation or can be availed of to furnish the consideration for a fresh enforceable obligation. Where a statute prescribing the limitation extinguishes the right if affects substantive right while that which purely pertains to the commencement of action without touching the right is said to be procedural.”

In Balakrishnan v. M.A. Krishnamurthy [5], it was held by the Supreme Court that the Limitation Act is based upon public policy which is used for fixing a life span of a legal remedy for the purpose of general welfare. It has been pointed out that the Law of Limitation are not only meant to destroy the rights of the parties but are meant to look to the parties who do not resort the tactics but in general to seek remedy. It fixes the life span for legal injury suffered by the aggrieved person which has been enshrined in the maxim ‘interest reipublicae ut sit finis litium’ which means the Law of Limitation is for general welfare and that the period is to be put into litigation and not meant to destroy the rights of the person or parties who are seeking remedy. The idea with regards to this is that every legal remedy must be alive for a legislatively fixed period of time.

The Law of Limitation is an adjective Law. It is lex fori. Thus, it can be said that the rules of the Law of Limitation are generally prima facie with the rules of procedure and which has not created any rights in favour of any particular person nor does they define or create any cause of action. It has been simply prescribed that the remedy can be exercised only for a limited fixed period of time and subsequently.

The two effective implementation which helps in for a quick disposal of a cases or matters and which are also effective for litigation are Limitation and compensation of delay, which plays a vital role before the court. The Law of Limitation helps to keep a check while pulling of cases where it prescribes the period of time within which a suit is to be filled and also it is the time which are available within which an aggrieved person can get the remedy conveniently and in an easy manner. Whereas the Law of Compensation of delay helps to keep the principle of natural justice alive and it also helps to state the facts that when different people might have different problem then the same kind of sentence or a same singular rule may not apply to all of them in a same manner. Thus, it is very much essential to hear the matter first from them and then decide accordingly whether they are fit in the criteria of the judgment or whether they should be given another chance. So, it can be said that Law of Limitation is very much important for the country like India and it also plays a major role in a court of law.

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References

[1]AIR 1966 Raj. 213

[2]1971 Ker. L.J. 583 (DB)

[3]AIR 1973 SC 2537

[4]AIR 1972 SC 1935

[5](1998) 7 SCC 123

http://www.shareyouressays.com/119798/7-main-salient-features-of-the-limitation-act-1963

 http://lawyerslaw.org/the-limitation-act-1963/

 http://www.shareyouressays.com/119804/object-of-the-law-of-limitation-act-1963

 http://www.vakilno1.com/bareacts/limitationact/limitationact.html

 https://indiankanoon.org/doc/1317393/

 https://www.netlawman.co.in/ia/limitation-act-1963

http://www.dullb.com/Downloads/Semester3/LIMITATION_STUDY%20MATERIAL_SEM%203.pdf

http://www.legalservicesindia.com/article/article/condonation-of-delay-and-law-of-limitation-543-1.html

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In this article, Rajan S pursuing M.A, in Business Law from NUJS, Kolkata discusses How will RERA, 2017 affect Working Capital requirements by Builders.

The Real Estate (Regulation and Development) Act, 2016 was established and passed by the Parliament and came into force from May 1, 2016 with the notifications to be mentioned by all States and Union territories. Further, remaining provisions came into force from May 1, 2017, which was progressively notified and implemented by the state governments. A State-level Tribunal will regulate and monitor all the transactions in residential and commercial projects.

The Salient Features of this act majorly protect the Buyers and provide Transparent Transactions

• All Real Estate Projects and Real Estate Agents have to register with RERA including their on-going projects.
• No Sale can be made without registration.
• Project shall have certification through Affidavit for all Legal title and free from encumbrances.
• All the units have to be sold mentioning the carpet area at the time of Project delivery.
• Developer is liable to rectify any structural or workmanship defect within 5 years without any additional cost to buyer.
• Penal provisions for both promoter and buyer, in case of default, maximum 10% of the project cost or 3 year imprisonment or both.
• Promoter to upload the details of the project in RERA website.

Following features will affect the Working Capital Requirements by Builders

Challenging Provisions 1

No promoter shall advertise, market, book or offer or invite persons for sale in any manner in real estate without registration of the project under REA.

In general, most of the small-scale promoters are raising the funds from the market through pre-launches or some time with their broad idea of the project. This time-honored practice of raising funds is not possible now. As the project registration requires the sanctioned plan, layout and specifications of the proposed project from the competent authority. In addition, the registration requires a declaration, supported by an affidavit to establish the legal title of the land, encumbrances, deposit of seventy percent project fund as an allotment in separate account.

However, the requirement is to safeguard the buyer capital and seems reasonable, however in practical to get rid of all these clearances promoters to depend on the relevant authorities and government departments. This is one of the major causes for delay, which directly affects the commencement as well as promoting the project to seek for funding from the market.

So the earlier way of raising fund from the public by privately marketing properties in projects through informal investors and broker channels is become impossible for builders. In other hand, due to poor reputation over real estate business sector, banks are becoming reluctant to sanction the loans and making stringent regulations to avoid the bad loans.

Challenging Provisions 2

Seventy percent of the project cost collected from the allottees shall be deposited in a separate account to cover the risk of negative cash flow during construction;

In project financing, the cash flow is key role and the project does not required bulk finance during initial and development stage. The flow of cash becomes critical as the project progresses only upto 50 – 60% or in some case it will remain critical until the completion.

Hence, this provision is one of the biggest hurdles for the developers as they have to maintain an escrow account and keep bulky amount during initial stage itself, this will impact the cash flow and builders has to invest more finance to maintain the positive flow of cash to complete the project on time.

As the deposited fund is for specific project they cannot withdraw or divert or utilize the deposited funds of one project to any other project. Hence, this provision does not allow the space to utilize the idle funds and thus obstruct the growth of business as developer to invest more borrowed capital at highest cost to complete the project.

Challenging Provisions 3

Developer cannot receive a sum more than 10% of the total cost of apartment from the buyer as an advance payment.

From this provision, the funding option of developers from buyer is limited to only 10%. Therefore, the developer has to find the other way of funding which are very costly in reality.

Challenging Provisions 4

The Buyer has to pay for the Carpet area i.e. actual useable floor area of an apartment and not for built-up area.

This provision makes unambiguous state to buyer that what he is paying for and transparent, however built-up areas have also to be developed by the developer and it cannot be claimed from the customer. This creates an eventual financial burden to the developer on the carpet area itself.

In addition to the aforesaid challenging provisions, developer has to submit the track record of their projects while registration for any new project. The record includes their financial record and any poor fund management in past projects will affect the registration process.

Finally, the challenges are mostly with small-scale real estate developers or poorly-finance builder with no tangible and established financial discipline to raise formal capital for their project. This RERA Act brings back or improves the developer to well-capitalized agent.

Reference

1. The Real Estate (Regulation and Development) Act, 2016, published by Ministry of Law and Justice dated 26th Nov 2016.
2. The Government of Tamil Nadu Notification on RERA “Real Estate Rules 2017” published on 22.06.2017.

In this article, Aditi Katyan pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Where to file a complaint regarding E-wallet Fraud in India.

Technology is a gift, that does not only make functioning of our day to day activities easier, but has also become a pertinent factor in determining the economic growth of any nation. With the declaration of demonetization in order to create a cashless economy and tackle the problem of corruption, the trend of e-wallets has increased in India.

E-wallet or digital wallet is an online platform that allows users to conduct the electronic transfer of finances. The users can also store their card number and other shopping details which provides them with a hassle free procedure to complete any transaction.[1]

The prominent e-wallets that are used in India include, Airtel Money, Citi MasterPass, Freecharge, Paytm etc. Although the e-wallets claim to provide the users with complete protection of their private information through encryptions and passwords, the increase in e-wallet platforms post demonetization has also lead to increase in the number of fraud cases regarding the same.[2]  Also, many a time there have been cases where certain e-wallet service providers are using software systems that are only password protected, which can be easily hacked into or stolen online.

There are various types of online frauds and theft related to e-wallets, namely

1. Identity theft – Since it is not possible to know if the person whose name is mentioned is actually using the ID also, many fraudsters obtain the banking information illegally so as to gain access to the account. Hacking into the personal accounts of individuals has also become easier because of availability of open Wi-Fi networks, and lack of awareness among individuals regarding mails containing virus software.
2. SIM Swap – Many times the imposter either poses as a representative from the e-wallet company or somehow gets access to the individual’s credentials, in order  to purchase a duplicate SIM  with a fake ID. The fraudster then blocks the current SIM of the person concerned and conducts financial transactions with the owner’s SIM by generating one time passwords.
3. Phishing attacks– The hoaxer makes the owner of the SIM use the personal banking information by sending fake emails, or using corrupted websites.
4. Brute Force – The owners using public Wi-Fi or having weak passwords fall under this trap, as the hacker cracks into the system using various permutations and combinations.
5. Malware– These are specifically designed mobile applications or programmes used by the cyber criminals to gain access to sensitive information either when the user downloads some unauthorized application or is sent to him/her via fraudulent attachment through e-mails.
6. Vulnerable payment technology– Even tough it is little difficult to detect the vulnerability in the online payment gateways, using advanced hacking and security systems cybercriminals use look up for any such risk and use it for their advantage.
7. Ransomware- This is one of the typical actions used by he hackers. After the hackers manage to gain remote access to all the important credentials of the victim, along with the device, the block the access to the device for the victim unless they are paid for it.[3]

When any individual is faced with any such situation where they are defrauded, the first and the foremost step for them is to inform the concerned bank through which their e-wallet account is linked. All the credentials should be changed and the cards should be hotlisted.[4] A detailed complaint should be filed with the banking fraud and online fraud cells that are run by the cyber crime unit. Furthermore, a written complaint needs to be filed with the bank, mobile service provider, the e-wallet company, and any such third party vendor who may be the source of any such fraud. A regular follow up with the complaint filed is required. In case the banks fail to redress to the complaint, legal route should be taken in order to avail appropriate judicial recourse. If the complaint is dismissed within 30 days, help from an ombudsman should be sought. As a last resort, in situations when the ombudsman also fails to provide appropriate relief, an appeal can be made to the RBI Deputy Governor.[5]

Apart from the complaint filing mechanism, the RBI has also issued updated and new guidelines ensuring strict regulations, customer security and access to interoperability. The e-wallets are controlled by the RBI through the Master Circulation published on online payment instruments. This circular enlists the protective measures for the e-wallet customers. These guidelines not only provide rules regarding minimum capital requirement or deployment of money collected but also rules for the e-wallet companies to establish grievance redressal cells.[6] In order to ensure safety, the RBI has also made rules for the service providers to submit their yearly annual reports that covers technology, hardware and compliance systems. These companies will also have to make sure that a separate log-in ID is provided for the pre payment instrument (PPI) account. This PPI should not be made part of any other services that are provided by the companies.[7]  All these online applications are also asked by the RBI to guarantee that their app is not allowed on rooted device and conduct a pre-check regarding any other embedded malicious codes on their applications before launching, so as to maintain proper security. [8]

However, even though the RBI has mentioned guidelines to protect the customers from e-wallet frauds, it fails to guarantee complete protection of the information as the issued circular merely asks the e-wallet service provider to take “adequate” measures for data security and prevention of frauds. There is no minimum standard provided by the RBI that is required to be maintained by these companies, nor has any appropriate liability been established in case any fraud occurs due to lack of security measures.

In situations when the RBI guidelines fail to provide proper recourse to the online fraud, the liability is imposed on the e-wallet company under Section 43A of the Information Technology Act, 2000,  that deals with the security of the information held by the private companies. But again these statutes only provide clauses that mention that the e-wallet service providers are required to maintain reasonable measures to ensure data protection of the customers.[9] Also, if the private corporation has proved that they have maintained reasonable standard for data protection, their liability is quashed despite the loss incurred by the customer.

In view of the fast shift in the payment methods from using hard cash to digital money, there is an urgent need to increase and establish necessary measures to ensure protection of sensitive information. Along with protecting the software programmes the security can also be increased by introducing hardware level security where protection is provided in the chip or the processor,  as the processed data is encrypted, tightly bound to the chip or processor.[10]

Along with the measures taken by the RBI and the efforts of  the service providers to increase their level of data protection, it is also required for the customers to exercise due diligence and caution during transactions using the e-wallets, such as: [11]

• Regularly monitoring their bank accounts and keeping a check on unusual activity.
• Refrain from sharing their data, credentials and sensitive information with anyone else.
• Transfer money into their e-wallets rather then link it directly to their bank accounts as it requires storage of personal information which makes it easier for the hackers to gain access
• Change passwords on a regular basis and ensure that the card number is not visible to the retailers during the payment.
• Exercise caution while downloading mobile applications, to prevent corruption from malwares.
• If possible, maintain separate email Ids for e-wallet transactions so as to maintain a distance from malicious spam and junk mails.
• Prioritise data protection over convenience and make sure to log out their e-wallets after use, this reduces the chances of fraudulent transactions in case of loss of mobile phones, etc. to a small extent.

Even though RBI measures and individual precautions will help in improving the protection status regarding e-wallets complaint, since most of the e-wallet owners are private in nature, it is necessary for them to provide better recourse to such situations as well. There are a number if instances reported regularly, where the victim is not only suffering because of loss of data, but also because the e-wallet company fails to recognize his/her grievance as well. The customer service is still not provided in the best possible way. The period after the announcement of demonetization was one of the most crucial time period for these service providers.[12] The number of people resorting to online payments mechanisms were increasing, and not most of them were fully aware of the functioning of the system, hence, it is very important for the private companies to own up to their duty as service providers as well.

The online payment gateway is a tripartite system, the banks, the users, and the service providers work hand in hand. The safety of his data is in the hands of the individual, hence, it is necessary to exercise due caution. The users should read the terms and conditions properly and thoroughly before signing up for the services of the e-wallets in order to ensure that the e-wallets have not shed their responsibility of customer protection in case of third party frauds. Also, proper rights and liabilities of the users need to be established in order to ensure faster and appropriate redressal mechanism in situations of fraud.[13]

REFERENCES

[1] http://economictimes.indiatimes.com/definition/e-wallets

[2] https://www.sumhr.com/digital-wallets-india-list-online-payment-gateway/

[3] http://www.businesstoday.in/magazine/money-today/investment/web-of-frauds/story/243774.html

[4]http://indianexpress.com/article/technology/tech-news-technology/what-to-do-if-you-are-a-victim-digital-banking-fraud-4425316/

[5] http://www.bgr.in/news/rbis-new-guidelines-for-wallet-services-strict-regulations-customer-security-access-to-interoperability-and-more/

[6] https://rbi.org.in/scripts/NotificationUser.aspx?Id=8993&Mode=0

[7] http://www.bgr.in/news/rbis-new-guidelines-for-wallet-services-strict-regulations-customer-security-access-to-interoperability-and-more/

[8] http://www.bgr.in/news/rbis-new-guidelines-for-wallet-services-strict-regulations-customer-security-access-to-interoperability-and-more/

[9] http://tech.firstpost.com/news-analysis/e-wallets-no-prescribed-security-standards-under-indian-e-wallet-laws-puts-your-financial-data-at-risk-351209.html

[10] http://www.indjst.org/index.php/indjst/article/view/111087/78779

[11] http://indianexpress.com/article/technology/tech-news-technology/what-to-do-if-you-are-a-victim-digital-banking-fraud-4425316/

[12] http://economictimes.indiatimes.com/magazines/brand-equity/why-is-customer-service-still-so-terrible-in-an-age-of-wallets-and-mobile-banking/articleshow/58802868.cms

[13] http://www.business-standard.com/article/pf/wallet-frauds-on-the-rise-116012400764_1.html

In this article, Abeer Sharma pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses How the Presidential Election takes place.

The essence of the election process of the President of India is enshrined in Article 54 of the Constitution of India. In order to supplement and give shape to this Constitutional provision, the legislature has enacted the Presidential and Vice-Presidential Election Act, 1952, which is accompanied by the rules made under its authority, the Presidential and Vice-Presidential Election Rules, 1974.

The entire conduct of the Presidential election is held under the watchful eye of the Election Commission of India, which has the following responsibilities:

• Preparation of the electoral roll.
• Planning and execution of the electoral process.
• Ensuring that the election is conducted in a free and fair manner.
• Calculation of votes and declaration of the winning candidate.

Qualifying criteria for President

Any individual wishing to contest for the post of President must first ensure that he/she qualifies for the position, the criteria of which are laid down in Article 58 of the Constitution. These are:

• Must be a citizen of India.
• Must have completed 35 years of age.
• Must be eligible to be a member of the Lok Sabha.
• Must not hold any office of profit under the Government of India or the Government of any State or under any local or other authority subject to the control of any of the said Governments (Exceptions are the offices of President and Vice President, Governor of any State and Ministers of Union or State).

Explanation of Qualifying Criteria

 Who is eligible to be a member of the Lok Sabha?

A Presidential candidate is eligible to be a member of the Lok Sabha when he conforms to the criteria which are laid down in the Indian Constitution (Articles 84 and 102) and the Representation of People Act, 1951 (Sections 8 to 10-A).

What is an office of profit?

The concept of “office of profit” was devised to maintain the independence of legislature and prevent the conflict of interest that would arise if an individual was both a member of the legislature as well as working in an executive role that would accrue to him any significant pecuniary gains. Under Indian law, an office of profit is any position or appointment made by or under the authority of the government – be it the Central             Government, State Governments or local authorities. In case someone is the holder of such an office, he would first have to resign before contesting an election for President.

Eligibility Criteria for Electors

The President is the official Head of State, and is chosen with the help of an indirect election process by an electoral college consisting of the elected members of the Parliament of India and the Legislative Assemblies of the States and the Union Territories of Delhi and Puducherry.

What is an indirect election?

A direct election occurs when the citizens of a country vote directly for their representatives. For instance, the election process to the Lok Sabha is an example of a direct election.

An indirect election,  on the other hand, is a process in which the ultimate voters (i.e. the citizens) don’t get to choose the candidate, but rather choose electors who will subsequently make the decision for them.

What is the exact composition of the Presidential Electoral College?

While the Electoral College comprises of legislators, not all members of the legislative branch are eligible to be electors in the Presidential election. Legislators can be grouped into two categories based on how they ascend to their position:

Elected members: These are legislators that have been chosen after undergoing the process of an election. In the case of the Lok Sabha and State Legislative Assemblies, this refers to individuals who have become members as a result of the general elections and state legislative elections, respectively, and in the case of the Rajya Sabha it refers to individuals who have become MPs  after an election has been held in their relevant State Assemblies.

Nominated members: These are legislators that are appointed to their post by the President or Governor (as the case may be) without undergoing an electoral process. Nominated members include the following:

• 12 members nominated to the Rajya Sabha by the Central Government amongst persons who have special knowledge or practical experience in respect of such matters as literature, science, art and social service.
• 2 members nominated to the Rajya Sabha by the Central Government to represent the Anglo-Indian community
• 1 member nominated to the State Legislative Assembly by the State Government in case it feels that the community is underrepresented. Every State is empowered to make this nomination.

Out of the Indian Parliament (both houses) and the State Legislative Assemblies, only the elected members are eligible to participate as electors in the Presidential Election. The nominated members are, correspondingly, ineligble. Additionally, members of the Vidhan Parishad (in states which have one) are not eligible to be part of the electoral college.

Are legislators from Union Territories eligible to be part of the electoral college?

As a result of the 70^th Amendent Act to the Indian Constitution, elected Legislative          Assembly members of the Union Territories of Delhi and Puducherry are also to be included in the electoral college. The other UTs do not have a Legislative Assembly.

Voting Shares of the Electoral College

Not only is the election of the President conducted through an electoral college, but it also doesn’t follow the concept of “one man, one vote.” Given the fact that the election is an indirect one, and geared to represent the choice of the country as a whole, the Constitution prescribes a specific formula to calculate the value of the vote cast by every elector.

Given that the national parliament as well as the state legislatures participate in this electoral process, the formula calculating the the weightage of votes is based on two fundamental principles:

Uniformity

The formula aims to secure uniformity in the scale of representation of all the different States in the country, to emphasize the equivalent status of all States despite the differences in their size, population, or other characteristics.

Parity

The formula tries to secure parity between all the States as a whole and the Union in order to uphold the idea of a federal government structure.

The formula provides for different methods of computing the vote weightage for MPs and MLAs.

Calculation of the vote share of an MLA

The formula for calculating the vote share of an MLA can be represented as follows:

Calculation Note: Calculations that end in fractions exceeding 1/2 will be rounded up to the nearest whole number, whereas fractions of less than 1/2 will be rounded down.

The way this formula operates can be better illustrated through the following hypothetical example of the State of Andhra Pradesh:

Step 1:-

Multiply the total number of elected MLAs with 1000:

294×1000 = 2,94,000

Step 2:-

Divide the State population by the result of Step 1:

4,35,02,708/2,94,000 = 147.968

Step 3:-

Given the fact that the result of step 2 is a decimal number, and the decimal part is a fraction greater than 1/2 (or, in other words, more than .5), the number will be rounded up to the nearest whole number, giving us the value of 148.

Important Note: Originally, the Constitution intended the population figures to be continuously updated to reflect the results of the immediate preceding census. However, in order to promote family planning measures throughout the country, the Parliament passed the 42^nd Amendment Act which was later updated by the 84^th Amendment Act. According to the 84^th Amendment, the census figures of 1971 are to be taken as the population of each state, and these figures will be in operation until the first census after the year 2026 is conducted. In other words, the 1971 population figures will be fixed until the 2031 census, and the 2032 Presidential election will be the first Presidential election to use updated population figures.

Calculation of the vote share of an MP

The formula for calculating the vote share of an MP can be represented as follows:

It can be deduced from this formula that the value of an MP’s vote is directly dependent on the vote value of all MLAs. The following steps will be required in order to get the final value:

Step 1:-

Calculate the value of the votes of all MLAs from every state in accordance with the formula prescribed in the section above and then find the grand total of these values

For instance, if the value of the vote of an MLA from Andhra Pradesh is 148 and there are 294 elected MLAs, then the total vote share of Andhra Pradesh will be 148×294 = 43,512

Repeat this process for each state and then add up all the total vote shares of each state to find the sum of vote value of elected members of all the Legislative Assemblies.

Step 2:-

 Divide the grand total value found in Step 1 with the total number of elected members in both the Lok Sabha and Rajya Sabha (543+233 = 776). The resulting number will be value of the vote held by every MP.

As can be seen from everything detailed above, the “voting power” of each elector varies depending on whether they belong to the Union or the State legislature, or which State they belong to in the latter case.

What if a State’s Legislative Assembly has been dissolved?

It must be remembered that the calculation of vote shares will be dependent on the number of State Legislative Assemblies which are in existence at that point of time. Therefore, if President’s Rule under Article 356 of the Constitution has been imposed on a State and it hasn’t been re-constituted in time for the President’s election, the election will go on             regardless. The legislators who were in power prior to the dissolution of the Assembly will not be eligible to qualify as electors, and the MP vote shares will be calculated wihout factoring in their vote values. However, it is the moral responsibility of the Election Commission to schedule elections in such a manner that they may be as representative of the nation’s will as possible.

Conduct of Election

Preliminary Activities

The Election Commission shall publish a notice informing the public about its plans to conduct the Presidential Election at the specified dates and venues. Prospective candidates can begin planning their election game-plan following this notice.

In order to secure one’s Presidential candidature and contest the elections, the interested individual has to complete a few specific procedural tasks, aside from filling out the requisite paperwork and declarations:

Securing nominations

To be eligible for the electoral process, a candidate must get his nomination papers signed by 50 electors as proposers as well as 50 electors as seconders.

Paying the Security Deposit

A prospective candidate is also required to submit a security deposit of Rs. 15,000 along   with his nomination papers. This deposit will normally be refunded to him, unless he loses and the number of votes he got is less than 1/6th of the amount he would have needed in order to win the election. The amount of votes he would’ve needed in order to win is, of course, a variable number and depends upon the number of candidates contesting the elections and the number of electors present.

System of Election

The election of the President of India is achieved through the system of proportional representation by single transferable vote.

The way this works can be illustrated in the following way:

• Suppose there are five candidates in a particular election.
• All members of the Electoral College  will be required to mark their preferences on their ballots. In other words, they will have to rank all five candidates from 1^st to 5^th.^[1]
• After everyone has cast their vote, the counting process takes place.
• In order to be declared the winner, a candidate is required to get the prescribed quota of votes. The winning quota is determined by the following formula:
• Winning quota = 50% of all valid votes polled^[2] +1

The value of votes a contesting candidate gets in the first round is determined in the following way:

Number of ballots on which candidate is first preference X Value of vote which each ballot paper of a member (MP or MLA) represents.^[3]

If the election took place under the rules of the first-past-the-post system, then figuring out the winning candidate would have been quite straightforward – the candidate with the most number of votes, no matter by how small a margin, would be elected President. However, under the proportional representation by single transferable vote system, it is not necessary that the election will be completed in a single round.

In fact, there are a number of different ways the electoral process could pan out, depending on the total value of votes each candidate obtains in the first round.

To understand this process better, assume that the total value of all votes in an electoral college is 200^[4].

Scenario A

FIRST ROUND OF COUNTING

Keeping in mind the formula for the winning quota, a candidate needs to obtain at least 101 votes ([50% of 200] +1) in order to be declared the winner.

If the breakup of the votes polled ends up the way described above, then Candidate B will be declared the winner.

Scenario B

However, what if after the first round of counting, no clear winner emerges?

FIRST ROUND OF COUNTING

Given that nobody managed to reach the necessary quota of 101 votes, there will be a need to rely on subsequent rounds of counting.

The returning officer will exclude the candidate with the lowest number of first preference votes, which in this case is Candidate D. The 23 votes obtained by candidate D will be distributed amongst the remaining candidates.

This is where the preferences of each elector become relevant. Those 23 votes which originally belonged to D will be distributed among the remaining candidates keeping in mind the second preference of each elector.

For instance, out of the 23 votes that D obtained:

• 12 had B as the second preference
• 5 had E as second preference
• 5 had C as second preference
• 1 had A as second preference

These three candidates will receive these votes at the same value that C originally got them. The resulting vote shares of the remaining candidates would look like this:

SECOND ROUND OF COUNTING

As can be observed here, even after distributing the vote shares of the eliminated candidate, none of the remaining candidates have managed to reach the winning quota. Therefore, the process of elimination will have to be undertaken once again.

Now it can be seen that Candidate A  has the lowest tallied votes.  As a result, the number of votes he has gotten will be distributed among the remaining candidates.

Important note: It must be remembered that in the first round of distribution, one of Candidate D’s original vote shares had labelled Candidate A as the second preference. Therefore, when distributing that particular vote share, the returning officer will look at the third preference. The rest of the votes being distributed have A marked as the first preference, therefore the returning officer will look at the second preference marked and allott them accordingly (except for cases where the second preference is a candidate who has already been eliminated, in which case the returning officer will look at the third preference).

Out of A’s eliminated 31 votes, the returning officer finds that:

• 27 of A’s original votes have marked Candidate B as the second preference
• One of Candidate D’s original votes – which had been assigned to A after D was eliminated – has marked candidate B as the third preference
• Two of A’s original votes have marked Candidate E as the second preference.
• One of A’s original votes has marked Candidate D as the second preference. However, since D was eliminated after the first round, the returning officer looks at the third preference for that particular vote, which has been assigned to B.

After factoring in all this information, the returning officer will begin the third round of counting, the results of which will be as follows:

THIRD ROUND OF COUNTING

Given that Candidate B has attained the winning quota after the third round of counting, he shall be declared the winner of the Presidential Election.

The scenarios highlighted above are an extremely rudimentary illustration of how the system proportional representation by single transferable vote takes place. In a real presidential election, the returning officer would  be dealing with the votes of thousands of individuals, and he would have to keep in mind all the different values of their votes, depending on their designation and the State they’re from. He would have to take note of complex preference variations (some electors may even choose not to assign all preferences), and would have to eliminate invalid votes from valid ones. With the advent of electronic voting, however, the entire electoral process has become a whole lot more streamlined and efficient.

References:

The Constitution of India

Representation of People Act, 1951

Presidential and Vice-Presidential Election Act, 1952

Presidential and Vice-Presidential Election Rules, 1974

Press Information Bureau. ELECTION OF THE PRESIDENT OF INDIA – Backgrounder. 2017. Web. 29 June 2017. (The example and figures of Andhra Pradesh has been taken directly from this source)

^[1]It is not necessary that an elector must mark all of his preferences on the ballot paper. It is even acceptable if he only marks his first preference and leaves the rest blank.

^[2]A vote is considered valid if the ballot paper conforms to all the criteria laid down by the Election Commission. In case a ballot paper doesn’t match up to those criteria (for instance, if it has two candidates marked as first preference or any other defects), then it is deemed invalid and is excluded from the counting process entirely.

^[3] As has been mentioned earlier, the votes of all members will not be treated equally. For example, the vote of a single MP will be given more weightage than the vote of a single MLA. Similarly, there will be different values ascribed to the votes of MLAs of different states.

^[4] This is an extremely simplified example used for the sake of convenience. The actual total value of votes in a real Presidential election is invariably a far greater amount. Further, this illustration doesn’t break up the value of votes among individual members depending on their status.

In this article, Rohit Upadhyay pursuing M.A, in Business Law from NUJS, Kolkata discusses the procedure for transfer of a case from one court to another.

Introduction

The judiciary has been paramount institution for determination of any legal dispute. The judiciary has been a watch dog to keep an eye on the legislature and executive authorities to control their arbitrary actions and to keep a check on their activities which may be either driven by their whimsical or by any hidden interest. The judicial authorities are vested within various courts and at many levels as deemed to be proper by the respective High courts. The Indian judiciary has a huge extravagant burden on its shoulder of pendency. In a broader classification, the trails could be separated in two classes namely-

1. Civil law and
2. Criminal law.

Civil Law

The Civil laws are the laws which relate to disputes between individuals, individual and a company, individual and an organization, or organization against any organization. The scope of the civil law is a wrong doer and against such wrong doing the court may award penalties or cost to the wrong doer and compensation to the victim who has suffered any unwarranted loss due to such behavior. In civil law, the burden of proof is leveled at the preponderance of probability, which means that both the parties of the litigation have to make their best possible effort to establish their case and then based on the level of prudence of the pleading the court would determine the case.

In civil law a case is instituted by the plaintiff against the defendant and ends up with a judgment. Either party who may be aggrieved by the judgment of the court may prefer and appeal against the order passed by the court. The punitive action of the civil law would in the form of compensation. The example of civil laws are Indian contract act, 1872, Civil procedure Code 1908.

Criminal law

Criminal wrongs are those which possess the potentiality of damaging the society at large. Generally, criminal acts are those acts which have an overall impact on the society and influence a major share of the society with its occurrence. The criminal law covers all the offences and crimes under different laws and statutes. The criminal case against an individual may be instituted by a First information report (F.I.R) or by presenting a private complaint against a person. Whenever a complaint is preferred to any magistrate he may after taking cognizance and observing any substance in the complaint may issue necessary instruction for further investigation and fact finding of the case. The burden of the proof in such criminal cases lies on the prosecution which is here referred as the state to establish its case far beyond reasonable doubt against the offender. In case if the prosecution fails to do that the benefit of doubt would flow towards the accused. The party which may be dissatisfied by the judgment of the court may approach the competent superior authority to file an appeal against the order of trail court. The punitive consequence of criminal law would be fine or imprisonment of may be even both the criminal court also have superior jurisdiction to order the offender to pay the victim against his crime as under victim compensations scheme. The example of criminal laws are Indian Penal Code, 1860, Criminal procedure code, 1973, Narcotic drugs and psychotropic substance, 1985

Objective for transfer of cases in courts

The entire judiciary is viewed with utmost respect and with an expectation that the judiciary would do very fair and equitable justice to the person coming before them or pleading for genuine redressal of any complaint of grievance. The court should always maintain a fair view that court should not only do fair justice but the justice should be pronounced in such a manner that a clear message should be made to everyone that justice is made. The judiciary is the most sanctified body to deliver justice and has always maintained a very strict view regarding fairness in trail procedures and trail fairness. So in order to protect the reputation of the courts and the maintain high order of moral standards between the members of judiciary the code of Criminal Procedure and the civil procedure code have enough reasonable grounds to transfer cases from one court to another court.

The main intention of delivering justice or to decide a matter is to address a public sentiment although there are various provisions regarding appeal. But such practices would impart tremendous pressure on the mechanism of judiciary and the judiciary would further be burdened with more pendency and delayed justice to all which may consequently create more dispassion and unrest about judicial processes. So to address all such burning issue the statutes already provides certain provisions regarding the transfer of cases from one court of trail to another court of trail.

The hierarchy of the courts is followed as per the table drawn below.

Power of Civil courts to transfer cases

The civil procedure code, 1908 is a concise legislature to determine the litigation aspect and to determine the course to be adopted for trial. Section 15 of the C. P. C, 1908 provides that the every case should be filed in the lower court competent to try that matter. This avoids absurdity regarding the jurisdiction of maintenance of claim and place of filing claim.

Section 22 of the C.P.C 1908- Power to transfer suits which may be instituted in more than one Court.

When a trail is lying pending before a court and the same jurisdiction is shared by many other territorial or other court the defendant who may have objection to the jurisdiction of the place of trial of the court may after moving an application to all the relevant parties of the legislation may be given with an opportunity to be heard and argue and then the court may determine the merit of the case and order further instructions. In civil cases when the case is for obtain a specific possession of a property it is preferred to file the case within jurisdiction of the court under which the property or any other achievable of the defendant are available.

Section 23 of the C.P.C 1908- To what court permission lies.

This section of C. P. C 1908  deal with the provisional part used to exercise this right hand how the application regarding  such transfers be made and whom to be made with such applications. As per the statute the application may be preferred to any court which is immediate superior to the trial court or the appellant court of that trial court. Subjected to following circumstances: –

When the appellant court is same:- when the suit is to be shifted or transferred to  court which have same court of appeal or under same subordination such transfer application would be preferred to appellant court.

When the appellant courts are different: – when both the courts of trial lies under different court of appellant jurisdiction. Then the application would be preferred to the high court under which both the courts are subordinate to.  The High court after observing the substance of the complaint would decide the application and dispose it off accordingly.

When both the trail court are under different High courts:- In a case where both the litigant parties claim under the court which have different High court  jurisdiction. Then such an application shall be preferred to the High court which has jurisdiction over the court in which the case was firstly instituted.

Power of criminal courts to transfer cases

The Supreme Court is the highest court of criminal appeal but the right to prefer an appeal to the Supreme Court lies in some exceptional cases. The original court of criminal appeal is the High Court as per the Code of Criminal Procedure. The Supreme Court has the largest authority regarding the administrative functions of all its subordinate court.

Section 406 Cr. P. C 1973 – Power of Supreme Court to transfer cases and appeals

The Supreme Court is vested with the widest discretionary power to make any such order to transfer any specific case or appeal or any matter lying pending before one high court to another high court to meet up the end of justice and satisfy the principle of fair justice. The application to transfer such case from one High court to another high court would be moved by any person who is under apprehension of any unfair action or he may not find proper justice for him or Attorney General of India. The provision made under section 406 of Cr. P. C majorly relies upon the discretion of the Supreme Court. The applicant is not under any obligation to establish conclusively that in absence of this transfer the interest of justice regarding him would fail. The applicant will have to reasonably substantiate his contentions regarding the application. The Supreme Court is not only vested with the authority to transfer files form one High court to another High Court. The Supreme Court also has authority to the transfer any case from one court to another court which is in subordination to the Supreme Court. Any objection if arose by the court under which the matter is lying pending. Although the trail court may ensure the Supreme Court about maintaining the principle of fair and equity, but the Supreme Court would take all reasonable measure to transfer that case to some other court which may be either to the court of same competence of may be court lower or higher competence.

Section 407. Cr. P. C 1973- Power of High Court to transfer cases and appeals.

The high court is also vested with the similar authorities to transfer a case from one court of its sub ordinance to another court of its sub ordinance or the high court may even the try the case by itself. The following are the ground on which an application to transfer the case could be made to the high court.

1. When the court could reasonably apprehend that the fairness of the trail would be prejudiced by the trail if conducted with the same court which has been trying the case currently.
2. When the high court is of the opinion that the trail of the case may involve decision of some questions which are substantial question of law and could only be dealt by the high court in expedite manner.
3. The High court may take into consideration of the convenience of the parties for such to meet up the end of justice and towards the expedience of justice for both the parties.

The High court after receiving any such application from the applicant the court may even if require conduct an enquiry and then decide whether such transfer is in the interest of justice or it is filed with an intention to defeat the justice. If the grounds of filing such application are found to be false, frivolous or vexatious the court would dismiss the application. The Attorney general of the state may also file application of such transfer to the High court with an affidavit which on oath would again affirm the contents of the application. The trail court can also refer to the High court any such cases which may need transfer from one court to another to meet the ends of justice.

Section 408. Cr.P.C – Power of Sessions Judge to transfer cases and appeals.

In sub ordinance to the High court the session court also have vested authority to transfer one from one court to another under his jurisdiction within his session division.  This order may be made b y the court for better delivery of justice and settle the sentiment of the victim. An application shall be preferred on following grounds:-

1. When the court is reasonably satisfied that the subordinate court is unable to deliver justice to the aggrieved. The sessions court by his own accord may take all reasonable measure for expedite delivery of justice by the court.
2. The application could be filed by the lower court to the sessions court which may demand such transfer or by the own accord of the court. Or by the application moved by the parties involved within that course, or the court may even consider the report of the lower court which favors or recommends such transfer from o0ne court to another. To deliver justice.
3. The applications which is made to the sessions court should be in consistence with the provisions of 407 (3) (4) (5) (6) (7) and (9). Before deciding any such application of transfer the copy of the application should be provided to the public prosecutor and with a reasonable opportunity to argue on the application filed by the applicant. If in case this exercise is not performed in the same manner the application becomes void. No further actions could take place from thereof.

Section 409 Cr. P .C Withdrawal of cases and appeals by Sessions Judges.

Further in section 409 Cr. P. C the Sessions judge is vested with additional administrative functions regarding transfer of case from one court under his subordination to another court under his subordination under following circumstances:-

1. The Sessions judge can withdraw cases and appeals from any of the judges under his subordination. And after obtaining such transfer file from the assistant Sessions court or from the Court of Chief Judicial Magistrate.
2. The Sessions judges also have authority to recall or withdraw any appeal which is lying pending before any Add. Sessions judge. After obtaining such file from transfer the Sessions court may order it to be made over to any other Add. Sessions judge.

• When any of such withdrawal affected under sub section 1 and 2 of section 409 Cr.P.C. the sessions judge may personally keep the matter with himself and then further the case would be tried in his court or may act in accordance to the provisions of this act.

Section 410 Cr.P.C Withdrawal of cases by Judicial Magistrates.

The Chief judicial magistrate or the Chief metropolitan magistrate are vested with the authority to withdraw any case from any judicial magistrate either first class or second class which is in subordination to him and may inquire into the substance of the trail conducted by the magistrate subordinate to him or may even transfer the trail from that judicial magistrates court to his court. In furtherance the Chief Judicial Magistrate can also authorize or further refer such inquiry to any magistrate under his subordination.

Any judicial magistrate may under the light of section 192(2) of the Cr.P.C can enquire into any case which is made over to him from any other judicial magistrate.

The grounds on which the cases can be transferred

The following are the grounds on which a case could be transferred from one court to another court.

1. To meet the ends of justice :- It is the utmost duty of the court to take all such measures to meet up the ends of justice and to pronounce the judgement which should also send a good message in the society that justice was not only done it was done with an impact that it appears that justice is done. The court is the most trusted and sacred institution. And every person holds a very high relative position and respect for court and its decisions. So the courts have extra moral obligation to keep the spirit of trust and confidence alive within this machinery. This ground to meet the ends of justice have a vide connotations it could be easily understood that this authority would have high degrees of discretionary powers. Which could be used in accordance with the factual quantum to provide justice to all the subject litigants. The factual matrix of every trail weather civil or criminal proceedings is quite different so in order to ascertain a pre-managed situation for dealing may not ensure a fair trial or may even end up causing irreparable loss to the interest of the litigants. Therefore the court has been vested with such discretionary authority to determine such question regarding transfer of court.
2. As per the inquiry report of any superior judicial officer such as any Chief judicial magistrate or any sessions judge the trail must not be conducted by a particular magistrate or any other officer such a report shall also be deemed to be a valid ground for such transfer of a case from one court to another.
3. The trail court deems it fit to be transferred from its purview or the determination of the trail may involve such substantial question of law. Determining substantial question of law far above its jurisdiction would render the complete trail fruitless.
4. The court have a limited jurisdiction over the subject matter of the dispute in such limited or shared juridical issue the court trying the matter will have a liberty to transfer the case to the court which have competent jurisdiction to try that matter conclusively so that the complete trail could not be failed because of lack of complete jurisdiction.
5. Mutual collision between the party and other judicial officer. The possibility of corruption is no stranger to the judicial fraternity. in such cases to avoid the failure of interest of the actual aggrieved party between the litigants the court provides reasonable opportunity to the party which may have such apprehension.
6. The judicial officer being engaged or involved in the litigation by some or the other. In such scenario the litigant parties have complete freedom to approach the authorities for avoiding any collision of interest when capitalised through any characterised persons.
7. The judicial officer may be made as witness. If any judicial person has been made as a witness to any trail this surfaces the end of the ability of that person to conduct the trail. Such actions may append breach of ordinary prudence of fair trail and may impeach the interest of justice.
8. When the court or any judicial authority is working in contravention to the principles of natural justice. Any if such breach when reported to the authority continues to happen the aggrieved party would be free to take shelter for preferring transfer of case.
9. Any mutual disturbance or unethical relationship between the lawyer or the judicial officer may also prefer an application of transfer of case from one court to another.

Conclusion

The transfer of case from one court to another may not change the nature of the trail or the relief nor does it changes the subject position but with the addition of such provisions the legislature and the judiciary imparts a huge impression on the subject about the principle of equity and good conscience. Transfer of cases from one court to another would also ensure that the litigant parties are assured to the justice done to them.

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