To run the country’s economy, every government imposes a certain tax so that the government can generate some funds for the nation’s progress. All the infrastructural developments, public services, production, and consumption of the country, including the distribution system, depend on these taxes.
Inflation is another parameter that has evolved as a result of various taxes. Therefore, it is very essential to understand how these two economic parameters are interrelated. Understanding this relationship will help not only government policymakers but also the general public as a whole.
Therefore, in this article, let us understand the benefits of taxation and its detrimental effects on the economy.
What is taxation
Before understanding the relationships between taxes and inflation, let us first develop a conceptual understanding of taxation. No matter what country you live in, any country’s government will introduce certain taxes on its citizens, various businesses, or any other agencies that are capable of generating revenues.
Taxes can be in several forms, and some of the common forms of taxes are:
Income taxes
Consumption taxes
Property taxes
Corporate taxes
Entertainment taxes
Taxes have existed ever since people became civilised, and whoever ruled the country or a state introduced taxes in some form or another. People have been paying taxes to designated government officials in the form of money or some other means appropriate during that period.
Types of taxes
Let us try to understand the above types of taxes individually:
Income taxes
All of us will try to earn our income to buy the necessary items to run our house. The government will generally impose a particular tax on our income in the form of an income tax. This tax will, however, depend on our earnings. The higher the income, the tax will also be higher.
Government policymakers will create a threshold limit beyond which your income will be taxable. If your income is meagre, then there may not be any tax on your income. The government will decide this threshold limit based on the rate of inflation.
Consumption taxes
There are a few consumption taxes that most of us are familiar with, such as VAT (Value added tax), sales tax, etc., that we have been paying to the merchant when we buy any products or services.
Often, these taxes can be too high for many of us, so our buying power can be severely impacted due to such taxes.
Property taxes
Most of us have a house to live in, which is termed property, and the government can also impose a particular tax for owning such property, which will depend upon the market value of that property.
All state governments in India impose such a property tax on the property owners, which is one of the primary sources of revenue for the respective state governments. Often, such taxes can be high, too.
Corporate taxes
Those who are business owners may earn profits from their businesses, where the government will impose a tax, which is known as corporate tax. The respective states of the country decide the rate of such taxes.
The investments made by businesses often depend upon this corporate tax, which is one of the factors in the country’s economic growth.
Entertainment taxes
Another form of tax, called entertainment tax, is imposed on us when we enjoy any of the following:
Movies
Exhibitions
Sporting events
Streaming videos on TV
The state government also decides on this tax. The government can often waive off this tax if they find that such entertainment may be promoted to educate the masses or benefit the country’s progress. This is another indirect form of taxation.
What is inflation
There can be a rise in prices either due to taxation or several other reasons that may affect the consumer’s buying power, which is known as inflation. The government must consider this important economic parameter, which can seriously influence the country’s economy.
In a situation where inflation is too high, the reserve bank may intervene and analyse the economic condition to control inflation.
Let us take a simple example here to simplify this concept of inflation. When we go to the market to buy our foods, clothes or other essential items, we suddenly find that our money is insufficient to buy as much as we used to. Whether renting a new house or buying a new car, prices are much higher than before. This is because of inflation.
However, it is essential to understand that inflation can offer both advantages and disadvantages.
Advantages of inflation
Advantages of inflation:
Inflation can fuel growth in a country’s economy.
Inflation can provide you with an opportunity to ask your employer for a salary hike.
When there is moderate inflation, prices of the different commodities can be adjusted.
The inverse of inflation is deflation. Inflation will prevent deflation, as it can create a recession in the country.
Disadvantages of inflation
Disadvantages of inflation:
The purchase value of your money decreases.
If your employer does not give you enough raise, then it becomes difficult for you to buy your essential items.
Businesses tend to avoid making any investments.
The country’s competitiveness in the international market is affected negatively.
Inflation can negatively affect a country’s economy if it is beyond control.
What are the effects of taxes on inflation
Now let us discuss here how inflation can exert several impacts on taxation. Many of you must have experienced this, too, when you got a raise in salary due to inflation, and as a result, you will find that you are pushed into higher tax brackets and you may end up paying more income tax.
You may often wonder whether you should be really happy to get your raise, as your net income has not appreciated as much as the price rise that you are facing. Particularly for people who have fixed incomes, inflation may force them to struggle as they are paying higher taxes.
The relationships between taxation and inflation can be quite complex to understand. Taxation sometimes reduces inflation too. When the government imposes taxes to fuel economic growth and create infrastructure and public services, it can reduce inflation
On the other hand, if taxes result in non-growth-related government expenditures, then it may end up with deficits and increased borrowing. As a result, it will expand the money supply and cause inflation.
Relationship between inflation and taxes
Let us now discuss a few more examples of how to establish relationships between inflation and taxes.
The government may increase the interest rate
The government will continuously monitor the inflation rate. If it exceeds the desired target, the country’s reserve bank will try to counterbalance it by increasing bank interest rates. By doing this, the money supply will be under control and there will be an increase in borrowing costs. The higher interest rates may discourage too much economic activity and reduce inflationary pressures.
Taxation and monetary policy
One of the significant roles of a reserve bank is to maintain a stable price. Therefore, it is essential that taxation policy resonate with the country’s monetary policy because it may influence inflation. Tax changes may also impact prices and inflation in the short and medium term.
Tax structures can also control long-term economic dynamics, influencing incentives for investment in human and physical capital and labour supply.
Taxation and government spending
Further, governments may control inflation by minimising government spending and tweaking their tax policies. If there are unnecessary expenses without proper control, then the economy may disbalance, and as a result, inflationary pressures will be created in the economy.
Fiscal imbalances may yield budget deficits, requiring the issuing of government bonds, which expand the money supply and risk fueling inflation.
Impacts businesses
When such a situation develops and the inflation rate keeps changing, the personal property tax valuation becomes too complex. In such a situation, businesses cannot decide the asset’s value based on its type.
As a result, due to increased taxation and production costs, the profit margin will reduce, and there will be no further investments. Inflation can also increase wages and operational costs, squeezing profit margins even further and hindering further business planning and growth.
Impacts the economy
The significant impact of inflation will not only be the reduced purchasing power, but it will also create more wage demand, leading to more layoffs. The national currency value may decrease, making the country’s domestic products less competitive in the global market.
Taxation and inflation policies must strike a balance between revenue generation and economic growth, as high inflation can erode confidence, destabilise the economy, and harm business competitiveness in global markets.
Consumer demand and spending patterns
There is no doubt that taxation will influence inflation and consumer demand. If a higher consumption tax is imposed, it will reduce purchasing power, which may give rise to deflation.
On the other hand, a reduction in consumption tax will produce disposable income, increase demand and affect inflation. Tax rates on essentials like food and fuel significantly affect overall price levels.
Incentives for investment and economic growth
In developing and developed countries, tax concessions are often offered to offset economic growth. A few incentives, like lowering income tax or import duties, are offered.
However, critics often debate whether such gains can justify revenue losses, as lower corporate taxes can also spark inflation if demand is greater than supply.
Conclusion
The relationship between taxation and inflation is quite complex to comprehend. Only economists can understand it better and suggest that the government make policies to counterbalance it. After all, taxation can control the country’s economy by funding various public services, production and distribution systems.
Inflation also has a vital role in the country’s economy, as it can both harm and benefit the economy. A moderate level of inflation can fuel the growth of a country’s economy. However, very high inflation can destabilise the economy. Taxes can play a particular role in controlling inflation.
The country’s government must do a balancing act to manage the economy by developing good economic policies so that inflation remains healthy, government spending can stay under control, and investment by the business community increases. The government policy on taxation and inflation can affect all of us as citizens of the country, businesses and the economy of the country as a whole.
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This article is written by Vanshika Poddar, who discusses the integrities of the right to sleep under Article 21 of the Constitution while analysing why sleep is important and how different jurisdictions have perceived this notion of granting sleep as a fundamental right of an individual.
It has been published by Rachit Garg.
Table of Contents
Introduction
The Indian Constitution, under Part III, envisages the different fundamental rights extended to its citizens but also contains a few rights extended to every individual. The most crucial of all is Article 21, which entails a bunch of rights that every individual deserves, clubbed together under one roof. Starting with the basic rights, such as the right to eat and walk freely, to the more complicated rights, such as the right to privacy or sleep, are encompassed under Article 21. The right to sleep is one of the multiple rights that the Indian Constitution provides. This fundamental right has been guaranteed against state actions, as opposed to private nuances. For instance, if one’s right to sleep is affected as a result of highway construction and repair work at odd hours, one could file it as a violation of Article 21. However, if there is loud music being played in one’s neighbourhood, causing interruption to one’s peaceful sleep, then an action can be brought under the tort of nuisance.
Through this article, we shall discuss the development of Article 21, which has led to the development of the right to sleep.
Interpretation of Article 21 of the Constitution
Article 21 reads, “No person shall be deprived of his life or personal liberty except in accordance with the procedure established by law.” This article provides every person’s right to life and personal liberty, including non-citizens and people whose citizenship is unknown. As the paramount fundamental right, the Article confers an inexhaustible source of many rights. As discussed by Justice PN Bhagwati in Bandhua Mukti Morcha v. Union of India (1983), the right to life includes the right to live with human dignity, and the magnitude of the components of this right depends upon the extent of the country’s economic development. In his words, “This right to live with human dignity, enshrined in Article 21, derives its life breath from the Directive Principles of State Policy and particularly clauses (e) and (f) of Article 39 and Articles 41 and 42“.
This Article, while providing for a wide range of rights, also restricts personal liberty, provided that such restriction is based upon the procedures established by law. While understanding the terms procedure set by law in the ADM Jabalpur case (1976), the Court stated that these terms mean nothing more than the process laid down by the state government. This means:
There must be an existing law that interferes with the right to personal liberty;
Such existing law must be a valid law;
The process for interference must be mentioned in the existing law.
Any departure from the above can be construed as violating Article 21.
Importance of Article 21 of the Constitution
The landmark judgement of AK Gopalan v. State of Madras (1950) first highlighted the interpretation of Article 21 explicitly concerning depriving individuals of their right to personal liberty by the procedure established by law. Under this case, the validity of the Preventive Detention Act 1950 was questioned, stating whether such a procedure would mean any procedure laid down by an enacted law or whether the process should be fair and reasonable.
The law in question dealt with Section 14 of the Preventive Detention Act, which did not provide for mentioning the grounds for detaining a person. Such a comprehensive process cannot be termed a valid procedure to deprive someone of their liberty as envisaged by Article 21. This Article must be treated as the basic structure of the Indian Constitution failing, which would affect its paramount position amongst all the prevailing laws. Though this judgement focused primarily on the law protecting one’s body, the dissent by Justice Fazl was not given much importance. He stated, “Articles 19, 20, 21 and 22 to some extent overlapped each other“, thereby indicating that much priority must be given to the reasonableness of the law in question to prevent situations of dictatorship – one that would take away the importance of Article 21 in its entirety.
This statement was once again brought to light during RC Cooper (1950), wherein the judges emphasised the reasonableness of laws. The object test, as under AK Gopalan, was substituted with the effect test, giving the people the right to be protected against all kinds of infringement of fundamental rights, including Article 21.
Widening the scope of Article 21 of the Constitution
The Maneka Gandhi era- Right to Travel
Article 21 has been an ever-developing law in itself. The rise of this development began in 1978, when Maneka Gandhi brought a case against the passport issuing authorities, who denied giving access without disclosing any reasonable grounds, stating that such non-disclosure was in the general public’s interest. In this case, the primary opinion of the bench was that impounding was null and void as there was no reasonable opportunity given to the petitioner to be heard in her defence. The case proved the catalytic agent that formed various judicial opinions on Article 21. It not only broadened the interpretation of the Article but has been proven to be a fruitful source to protect the rights of the people.
The concept of personal liberty was given the broadest amplitude that covers those rights that, in one way or another, constitute a person’s liberty. Depriving an applicant of the right to know why the application was rejected harmed their liberty. It was here that Justice Krishnan Iyer stated that the right to travel abroad falls under the ambit of Article 21.
Rights of accused and prisoners
As stated above, Article 21 must be read broadly, and no person must be deprived of their liberty except when required by law. The term person here also includes those who have been accused of committing a criminal offence or have been imprisoned after being convicted. Some of these rights have been discussed below:
Rights relating to the arrest of a person
The directions relating to a person’s arrest were laid down in Joginder v. State of Uttar Pradesh (1994), where it was inevitable that arrest must be made only after reasonable suspicion and belief of a crime being committed. Failing this may lead to harm to the reputation and self-esteem of a person. Besides this, three important rights were focused on with respect to the arrest:
The right to inform family members of the arrest,
The right to consult a lawyer, and
The right to know the grounds of arrest
Often, it has been seen that arrested persons have been subject to unwanted custodial deaths. To avoid this, guidelines were formulated in the case of D.K. Basu v. State of West Bengal (1997), which protected the personal liberty of those under arrest.
Right to a fair and speedy trial
Keeping a person in confinement for a period longer than required by law because they have committed a crime is also considered belated by Article 21. In Hussainara Khatoon v. Home Secretary, State of Bihar (1979), it was stated that unnecessarily long custody without trial is against one’s personal liberty, and a fair trial of such an under-arrest person must be considered under Article 21.
Right to bail and free legal aid
It is seen that people attempt to impose frivolous grounds to ensure that a person is not granted bail, and even if one is granted bail, the terms are often unfair. Babu Singh v. State of Uttar Pradesh (1978) held that imposing such harsh and unjust conditions while granting bail is incorrect, following Article 21. Similarly, just because a prisoner is poor and cannot afford legal aid alone, such services cannot be taken away from him, as it is his right under Article 21.
Right against solitary confinement
The Sunil Batra cases have been a landmark concerning the right against solitary confinement as enshrined under Article 21. In Sunil Batra I (1975), the accused was awarded solitary confinement not because of disciplinary action but because he was to get the death penalty. He pleaded this to be against Article 21, as prisoners have a right to move and mingle unless the same is to be curtailed for specific reasons. Similarly, reasonable treatment in prison was violated when Sunil Batra II (1979) took place, where a letter intimating the torture of a fellow prisoner by the prison warden was sent to the authorities.
Right to human dignity and quality of life
As has been reiterated multiple times, human rights and dignity are to be extended to a quality life and not that of mere animal existence. This was also highlighted in the Bandhua Mukti Morcha case (1984), which stated that Article 21 is the heart of fundamental rights and that it is essential that people, including workers, are protected and free from exploitation.
Right to education
Considering that Article 21 contains multiple rights, Article 21A was brought to life in the case of Unnikrishnan v. State of Andhra Pradesh (1993), where the Court mandated the right to education for all up to the age of 14 years. This age limit was put in place considering the developmental stage of a child and the need for primary education for all to improve the standard of living of the people.
Right to shelter and livelihood
In Chameli Singh v. State of Uttar Pradesh (1995), it was brought to light that the right to life guaranteed under Article 21 guarantees, in any civilised society, the right to food, water, decent environment, education, medical care and shelter. Here, shelter includes an adequate living space in a safe and decent structure with clean surroundings, air, light, water, electricity and sanitation, along with other civic amenities.
Right to privacy
This right is not unknown and has been in the news ever since Justice K.S. Puttaswamy (Retd.) and Another v. Union of India and Others (AADHAR Judgement) (2018). However, even before that, there have been incidents that mandated that a person’s privacy be respected. In Mr. X v. Hospital Z (2002), the question of whether the patient’s medical condition about AIDS must be revealed to his family members is raised. Here, the medical practitioner’s guide specifically provides that whatever communication takes place between the patient and his doctor is private and confidential. Therefore, it is important that the patient’s right to privacy is taken care of and that no sensitive information is communicated unless required for the benefit of the patient. At the same time, the authorities found it to be important that a person marrying the patient is entitled to know if their partner has a deadly disease.
Right to sleep
How often have you wondered whether sleeping peacefully can be accorded a right, considering that good sleep leads to a healthy life? Considering that pollution levels have been on the rise, noise is considered a form of pollutant, and noise pollution control regulations were brought into place. Every age group is accorded a minimum number of hours of sleep, which is important to improve their quality of life, brain activity and mood. Sleep not only ensures that your body has adequate energy but, interestingly, de-stresses the heart, helps improve metabolism and produces hormones that promote alertness in the mind. Besides, not getting enough sleep may lead to problems that may affect one’s capacity to think clearly. This ratio was also taken into account by the Madhya Pradesh High Court in the matter of Sayeed Maqsood Ali v. State of Madhya Pradesh (2001), wherein it stated that every citizen is entitled to live in a decent environment and the right to have a peaceful night’s sleep.
Keeping this in mind, steps have been taken to ensure that rest is also to be considered a fundamental right under the wide umbrella of Article 21. The first such instance, though not brought under Article 21, was seen in 1996, when the High Court of Calcutta disposed of a writ petition broad before it, which questioned the interference with the right to use microphones and loudspeakers while praying daily puja and other religious activities. While understanding the importance of respecting and permitting practising religion, the authorities made it clear to maintain a volume and noise level so that any unnecessary nuisance or annoyance could be prevented [Om Birangana Religious Society v. The State and Ors. (1996)]. Apart from this instance, specific judicial decisions have been brought in place that specifically deal with the right to sleep as part of Article 21.
“Noise is a pollutant which causes material injury to the rights of an individual. It contaminates the environment, causes nuisance and affects the health of a person, and therefore, it exceeds a reasonable limit and offends Article 21 of the Indian Constitution. The sweetest music, if it disturbs a person who is trying to concentrate or to sleep, is noise to him, just as the sound of a pneumatic riveting hammer is noise to nearly everyone.“
Noise pollution has been known as a nuisance when it affects the rights of others or when it causes danger or annoyance to the public or people in general. This offence has been punishable under Sections 290 and 291 of the Indian Penal Code, 1860. Furthermore, the Criminal Procedure Code, 1973, gives the district magistrate the power to remove such nuisance under Section 133. In this record, the Calcutta High Court held the use of husking machines at night to be a nuisance and interruptive of the sleep of others in the case of Bhuban Ram and Ors. v. Bibhuti Bhushan Biswas (1919), and the occupier was held to be liable under the IPC.
The effect of noise pollution on an individual’s sleep, including that of a foetus, was discussed in the case of Re: Noise Pollution (2005), where the right to sleep, the freedom to not listen, and the right to remain silent were discussed. The fact that people are not able to sleep due to the rise in pollution levels can result in a great deal of inconvenience and discomfort for people, including adverse health effects. Therefore, the Supreme Court prohibited using a trumpet or any sound amplifier at night between 10:00 p.m. and 6:00 a.m., except in public emergencies.
Religion-related noise pollution was also taken into account by the Supreme Court in Church of God (Full Gospel) v. KKR Majestic Colony Welfare Assn. (2000), where it issued directions to control noise pollution to ensure that such activities do not disturb old or infirm persons, students or children who were sleeping in early hours. The Court also analysed the ‘natural right to sleep’ entitled to young babies.
Judicial decisions
Kharak Singh v. State of Uttar Pradesh (1962)
This case holds prime importance with respect to the validity of Regulation 236 of the UP Police Regulations, which permits domiciliary visits at night. The petitioner in the present case has stated that this regulation is violative of Article 21 of the Constitution since it negates one’s right to peaceful sleep. He stated: “Frequently the chaukidar of the village and sometimes police constables enter his house, knock and shout at his door, wake him up during the night and thereby disturb his sleep. On a number of occasions, they have compelled him to get up from his sleep and accompany them to the police station to report his presence there.” While, on the one hand, it is important to keep an eye on an accused, it is also important that a person is not deprived of his liberty so as to deduce his capacity from that of an animal’s existence. Such disturbances can impair one’s sleep and can be treated as violations of the right to sleep. It is here that the regulation authorising such a visit was struck down as unconstitutional.
Burrabazar Fireworks Dealers Association v. Commissioner of Police, Calcutta (1997)
The manufacture, sale, dealing and storage of fireworks without any restriction and the permission to burst firecrackers without any restriction were in question here since they affect the community’s safety, health and peace. This petition was challenged by another petition stating that allowing the former would go against the dealers’ right to carry on trade and business under Article 19 of the Constitution. The Calcutta High Court here took into account that no fundamental right is absolute, and certain restrictions are important so that the rights of other citizens are not violated. It stated that “A citizen or people cannot be made a captive listener to hear tremendous sounds caused by bursting out from a noisy firework. Tremendous sound is unacceptable not only to human beings but all other animals, and people have a right to sleep and leisure.” Article 51A was also brought into the picture, which casts a duty to protect and improve the natural environment and to have compassion for all living creatures. The pollution control board was ordered to make decisions to manage the sound level of fireworks that would be used in the state and to protect the right to sleep and leisure, besides the other rights of the people living in the state.
People’s Union for Civil Liberties v. State of Gujarat and Ors (2000)
The petition herein was filed on behalf of the hutment dwellers, who were deprived of their huts as a result of forceful removal, stating that the land was public property that belonged to the State of Gujarat and was under the control of the municipal corporations, urban development authorities and housing boards of Ahmedabad and Vadodara. The removal was based on the grounds of the development of urban areas in the interest of the general public and other members of society and the fact that proper and timely notice was given to these dwellers to vacate the encroached land. The question arose that when land is divided into public and private properties, those without land do not have the right to sleep, eat, urinate, take baths or perform other biological functions. This situation results in a worse condition than that of an animal. In this case, the precedent set in previous judicial decisions concerning one’s right to life and personal liberty under Article 21, including the right to sleep, was discussed at length. It was stated that to ensure that people with low incomes are not deprived of their right to basic human amenities, the state must identify and earmark certain land that must be provided to these dwellers. However, the matter of alternate accommodation was to be decided on a case-to-case basis.
Ramlila Maidan v. Home Secretary, Union of India (2011)
Suo moto action was taken against the brutal actions of police against those sleeping in Ramleela Maidan, which was given on rent for a yoga training camp organised by Baba Ramdev. Four days into the campaign, Baba Ramdev started a hunger strike against corruption with a mass crowd of over 50,000 people. Considering that the strike was not called off, people involved in the strike were sleeping in that area in unity. At midnight, around 12 a.m., the police started the lathi charge and used tear gas to remove the crowd. Many lives were lost, and people suffered with burns and injuries. A two-judge bench stated this to be a violation of not only the right to assemble peacefully and without arms, along with the freedom to speech and expression, but also the right to sleep as per Article 21.
Right to sleep in foreign countries
The concept of the right to sleep is not one that is aloof from those sitting abroad. However, unlike India, there are not many states that expressly recognise this right as a fundamental right. On the other hand, with time, states have started to understand the importance of sleep and have, in one way or another, tried to ensure that the right to sleep of the people is not disturbed. The reason for this remains the importance that sleep holds in the overall development of people’s minds. For instance, the Vagrancy Act of 1824, which was functioning in the United Kingdom for a period of almost 200 years, made it a criminal offence to “rough sleep and beg”. This meant that homeless people and those in need could not lodge in any barn or outhouse, which seemed to be a threat to travellers, gipsies and any other individual, and had to take shelter in unoccupied or public property. However, recently, the UK government announced that they are planning to repeal the act to ensure that people without adequate support are not left out wandering looking for a place to sleep.
Another instance is an application filed by an anti-noise group in the United Kingdom, which called for a good night’s sleep to be considered a human right. The matter was brought before the European Court of Human Rights in October 2001, which stated that overnight flights that fly in and out of Heathrow Airport in West London are detrimental to the residents’ basic human rights since they disturb their good night’s sleep. The group called for management to look into the matter and decrease the number of flights between 11:30 p.m. and 6:00 a.m. The Court considered this to be a violation of human rights and directed the government to consider this direction.
The European Union, back in 2017, launched the Homeless Bill of Rights 2017, a campaign to ensure humanitarian rights for people without homes. The key notion behind this Bill was not the inadequate protection standards for the rights of people without homes but to oppose the criminalisation of people without homes. This notion stretched to those legislations that prevented the use of public benches and other public spaces by the homeless for the purpose of sleeping or during their daily basic human activities. The idea for this Bill originally originated in the United States of America but was not readily adopted. However, the USA has very recently decided to adopt the Homeless Bill of Rights, 2023, which has readily acknowledged the rights of the homeless, including the right to sleep. The Bill not only permits the use of public places as shelters with certain restrictions but also allows the registration of complaints regarding inadequate shelter facilities.
Furthermore, though not many, there have been a few judgments that are acting as precedents set by foreign courts on this matter.
Foreign judgments
Harper v. Showers (1999)
The situation here was similar to the Kharak Singh case, where the prisoner was housed in a manner that was cruel and unusual punishment. He was placed in cells near psychiatric patients who would scream and beat on metal toilets. He was moved to fill the cells formerly housed by psychiatric patients and was subjected to malicious and sadistic acts that deprived him of cleanliness, a peaceful mind and sleep. It was argued by the petitioner that “sleep undoubtedly counts as one of life’s basic needs”. The 8th amendment of the US Constitution was referred to, which, though it does not mandate comfortable prisons, is a protection against calculated harassment unrelated to prison needs. Hence, the Court accepted this petition, stating that these allegations are not meritless.
Jane Doe v. Kelly (2017)
In this case, the right to sleep of the detainees who were confined to US customs and border protection facilities was questioned. It was stated that such detainees were denied beds, bedding and sleeping. The District Court here stated that if the detainees were held long enough to require them to sleep in such facilities, then it was the responsibility of the requisite authority to make sure that they provided conditions that met basic human needs. It would not be a question of reconsideration that allowing them to sleep would reduce the capacity of the facility to detain people in comparison to the capacity prior to this decision. It is only logical to assume that every human who arrives at the station in the middle of the night and is transferred only the next day would be required to sleep while in custody, as is part of human nature.
Robert Martin v. City of Boise (2019)
This matter dealt with the right to sleep of homeless people who did not have access to shelter homes. An anti-camping ordinance was passed that criminalised the use of bedding supplies in order to camp on and around public property without providing for any exceptions. It was ruled that the city could not punish homeless people who had been camping or taking shelter on public properties and using bedding supplies, specifically when no beds were available in the city’s homeless shelter. The Court emphasised that such anti-camping ordinances would prohibit individuals from undertaking activities they cannot avoid because they are humans. Depriving people of their basic human rights because they are poor and cannot afford a shelter would not be human-like.
Conclusion
According to Dr. Harish Shetty, MD- Psychiatry, MBBS- Psychiatrist, “sleep is a daily necessity and plays a paramount role in our day-to-day life.” An individual’s immune system is closely related to one’s sleeping cycle. It is, therefore, important to understand why the right to sleep constitutes a pivotal fundamental right that must be available to every individual. As stated by Dr. Shetty, “Our brain processes data and produces long-term memories while we sleep.” Depriving any individual of this process would be inhumane.
The Article’s initiative and judgments stated above show how the loss has been progressing and adapting to the fundamental human needs that were initially overlooked. It, therefore, becomes the duty of a judge to ensure that in these evolving times, the laws continue to evolve and rights such as the right to sleep are not overlooked. At the same time, it is also important to differentiate between when and how these rights are violated and when it is a mere process to safeguard the greater good and avoid the multiplicity of frivolous cases.
Frequently Asked Questions (FAQs)
Is the right to sleep an express right under the Indian Constitution?
The right to sleep under the Indian Constitution is an implied right guaranteed under Article 21 of the Constitution. Considering the innumerous interpretations that can be drawn under the terms “life” and “personal liberty”, it was not possible to specify all the possibilities under the Article itself.
Does the right to sleep permit individuals to sleep anywhere at any time?
No, a fundamental right is an absolute right. It is for this reason that every fundamental right comes with certain restrictions. While exercising one’s right, the rights of others mustn’t be affected. Therefore, no, the right to sleep does not permit individuals to sleep anywhere at any point in time. This right has been designed to ensure a peaceful sleep and that the individuals around you are not disturbed.
Are the homeless people or those in the slums correct when they exercise their right to sleep while sleeping on the pathways?
There have been various judgments, specifically by foreign courts, that state the rights of people without homes. One side of the coin allows them to sleep on the pathways, while the other side condemns this as affecting the rights of others. One resolution to this issue could be setting up shelters for homeless people, like those in the US.
How is noise pollution related to the right to sleep?
The quality of sleep is often linked to the surroundings in which one sleeps. Therefore, the higher the noise pollution rates, the worse the quality of undisturbed sleep will be. Here, precedents and regulations prohibiting higher sound levels at night help regulate the right to sleep.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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In India, whether you are earning or making a purchase of any goods or services, you, as an individual or any corporate entity, are obliged to pay taxes. Tax is a kind of mandatory recurring fee that is paid to the Central and state governments. It is also regarded as the main source of revenue for the government, which helps them build the economy of a country. These tax revenues are used for various important public services such as healthcare, infrastructure development, education and the welfare of the country. Taxes in India are categorised into several types, including income tax, goods and services tax, excise tax, and customs duties.
What is a direct tax
A direct tax is a tax that the taxpayer pays directly to the authority imposing the tax. Here, the taxpayer has to bear the tax and will not be able to transfer this liability to another entity. In India, the Central Board of Direct Taxes (CBDT) is responsible for the collection and administration of direct taxes. CBDT is governed by the Department of Revenue, which provides input to the government related to the implementation of direct taxes.
Examples:
Income Tax, Capital Gain Tax, and Securities Transaction Tax
What is an indirect tax
Direct taxes are levied on taxpayer’s income and profits; however, indirect taxes are charged on goods and services. The taxpayers pay the indirect tax to the government via intermediaries, and thus they are indirectly paid by the government. The Central Board of Indirect Taxes and Customs (CBIC) is responsible for the collection and administration of indirect taxes, which are governed by the Department of Revenue, just like CBDT.
Examples:
Excise Duty, Entertainment tax, Custom duty, Value Added Tax (VAT), Service tax, GST, etc.
History of indirect tax in India
In India, in 1944, indirect taxes were introduced to protect against British made goods. Some new indirect taxes were introduced by the Indian government after India’s independence. But now the GST has replaced many indirect taxes.
Types of indirect taxes
Service tax
Excise Duty
VAT
Custom Duty
Stamp Duty
Entertainment Tax
Securities Transaction Tax
Service tax: When we are going to buy any service from any organisation, we will pay service tax. When a service provider is going to provide any service, the Indian government imposes a service tax.
Excise duty: Manufacturing units pay excise duty on items made in India to the Indian government. The producers charge excise duty from their customers. The excise tax was the first indirect tax in India.
Customs duty: The Government of India imposes customs duty on all imports within and all exports from the country. This tax is typically assessed as a percentage of the declared value of the goods, although it can also be a specific amount per unit of the goods. The primary purposes of customs duties are to generate revenue for the government, protect domestic industries, and regulate the flow of goods into and out of a country.
Value Added Tax (VAT): A Value Added Tax is a consumption tax imposed on the value added to goods and services at each stage of production. It is applied as a percentage of the price of the product or service and it is collected by businesses on behalf of the government.
Stamp duty: Stamp duty in India is a type of tax levied on various types of legal documents and transactions, including property transactions, financial transactions, and commercial and legal agreements. It is governed by state governments, which means that the rates and rules for stamp duty can vary from one state to another.
Entertainment tax: An entertainment tax imposed on commercial entertainment events by the state government. For example, you have to pay an entertainment tax (28% under GST) when booking movie tickets, sporting events and theme parks.
Securities transaction tax: Securities transaction tax is a tax that is similar to tax collected at source. A securities transaction tax is imposed on every purchase and sale of securities that are listed on the recognised stock exchange in India. This includes equity, derivatives, and equity oriented mutual funds.
Introduction of GST
GST is a combined tax system that replaces multiple indirect taxes levied by both the Central and state governments. The GST was introduced on July 1, 2017 by the President of India and the Government of India. There are four GST slabs 5%, 12%, 18%, and 28%. The GST system follows the dual structure Central GST and state GST levied by the central and state governments. Integrated GST is levied on interstate supplies and imports, which are collected by the central government but apportioned to the destination state. The Goods and Services Tax (GST) in India has been established under the “Central Goods and Services Tax Act, 2017” and “State Goods and Services Tax Act, 2017.”
Current status of indirect taxes and how they work in India
In India, the following indirect taxes have been merged into the Goods and Services Tax (GST):
Purchase Tax
Central Excise Duty
Central Sales Tax
Additional Excise Duty
Entertainment Tax
Service Tax
Additional Custom Duty
Value Added Tax (VAT)
Octroi and Entry Tax
Luxury Tax
What are the current rates of indirect tax
Customs duty and goods and services tax are the two principal indirect taxes in India.
The customs duty effective rate is approximately 30.98% – considering the standard GST rate of 18%. While the general rate of basic customs duty is 10%, the exact rate depends on the nature/classification of imported goods and their HSN classification.
All goods and services tax is divided into four categories, 5%, 12%, 18% and 28%. Further, there is a special rate of 0.25% on rough precious and semi-precious stones and 3% on precious metals such as gold, silver and articles.
Petroleum products and alcoholic drinks are taxed separately by the individual state governments. Additionally, Compensation is also applicable on a few items, such as aerated drinks, cars, tobacco products, etc.
Principal indirect tax
The principal indirect tax applicable is as follows:
Union levy by the Central Government
Central GST: Central GST applies to the intra-state supply of goods and services and it’s levied by the central government.
Integrated GST: Integrated GST means tax levied under Integrated Goods and Service Tax Act on the supply of any goods and services in the course of inter-state trade.
Customs duty: Customs duty is levied on goods imported and exported outside of the country.
Anti-dumping duty: It is levied on the goods that are being sold in the domestic market at a price lower than their fair market value.
Safeguard duty: It is a temporary tax imposed by the government on imports of particular products to protect domestic industries from sudden and significant increases in foreign goods.
State Levy by the state government
State GST /Union Territory GST: It is levied on the intra-state supply of goods and services.
Other key indirect taxes:
Professional tax: It is a state level tax that individuals earning an income from their profession are required to pay.
Property tax: It is a tax levied by municipal authorities and local government bodies within their jurisdiction on real estate properties.
Features of indirect taxes
Indirect taxes and annual income- Indirect taxes are a type of taxation system where the tax burden is imposed not directly on your annual income or profits but on the goods and services you purchase or consume. These taxes are collected by intermediaries, such as businesses or retailers, at the point of sale and paid to the government. Indirect taxes generate revenue for the government and provide funds for public services, infrastructure and social welfare
Burden of indirect taxes- The burden of indirect taxes is a key element of how these taxes operate in the economy. While the sellers are responsible for collecting and submitting the indirect tax to the government, the consumer bears the actual burden of the indirect tax at the end. The seller passes on the taxes to the consumer by charging a higher price for the goods and services they offer; at this point, taxes are charged to the customer.
Repressiveness and GST- Indirect taxes tend to be regressive as the burden of taxation is a flat rate. The tax burden takes up a large portion of the income of lower income people compared to higher-income individuals. This system generates income inequity and puts a higher burden on people with lower incomes and those who can’t afford it. The introduction of GST in India represents an important change in the country’s taxation system that aims to reduce some of the regressive aspects linked to direct taxes.
Evasion of indirect taxes- Evasion of taxes is not possible because taxes are included in the price of goods and services. However, it’s important to note that there are still loopholes where individuals and businesses can attempt to evade or avoid paying these taxes. Even though indirect taxes are typically collected at the point of sale and passed on to the government by intermediaries such as businesses, instances of evasion can still occur.
Impact of indirect taxes- The impact of indirect taxes on consumer behaviour and economic decisions is essential; higher taxes result in higher prices of goods and services. A higher price of commodities affects the choice of customers and the overall economy. When prices are higher due to taxes, consumers change their buying patterns.
Analysis of the indirect tax regime in India
Before the introduction of the goods and services tax in India, our tax system was very complicated. But after the GST, things became simpler. GST combines many indirect taxes into one, which helps prevent the problem of taxes piling up on top of other taxes. In the Indian tax system, we have a three- tier tax system created by the central government, state government and local municipal bodies. Taxes can only be collected according to the constitution.
The tax system in India was very complicated, but post GST implementation, the process has become very easy. It includes all the indirect tax, which helps remove the cascading effect of indirect tax. Tax structure in India is a three-tier federal feature that is made by the Central government, state government and local municipal bodies. The Constitution states that “no tax shall be levied or collected except by the authority of law. Tax was first introduced in India in 1860 by James Wilson to cope with the losses incurred by the government on account of the Military Mutiny of 1857. In 1918, a replacement tax was passed and again, it was replaced by another new act passed in 1922. This Act remained in force up to the assessment year 1961-62 with numerous amendments. In consultation with the Ministry of Law, the Tax Act of 1961 was passed. The Income Tax Act of 1961 was brought into force on April 1, 1962. Since then, several amendments have been made to the Income Tax Act.
GST structure in India
GST is a destination-based indirect tax levy on goods as well as services at the national level. The main objective of GST was to combine multiple indirect taxes into a single tax. GST, a well-designed value-added tax on all goods and services, is the simplest method to eliminate twisting and tax consumption.
How did it all go?
November 2009: The Empowered Committee releases its first discussion paper on GST.
November 2012: A committee on GST design is constituted.
December 19, 2014: The Constitution Bill 2014 is introduced in LokSabha by Mr. ArunJaitley.
May 6, 2015: The Constitution Bill is passed in LokSabha. The Bill is also referred to a 21-member Select Committee of Rajya Sabha.
August 3, 2016: The Constitution Bill is passed in Rajya Sabha with certain amendments.
September 2016: The Bill is adopted by a majority of state legislatures, requiring approval from at least 50% of state assemblies.
September 8, 2016: The Bill receives the assent of the President and becomes the Constitution Act, 2016.
April 12, 2017: The CGST Bill 2017, IGST Bill 2017, UTGST Bill 2017, and GST Bill 2017 receive the assent of the President.
GST Council: Formed as the main decision-making body to finalise the planning of GST.
Constitution Act, 2016: Provides that the GST Council, in its discharge of various functions, shall be guided by the need for a harmonised structure of GST and the development of a harmonised national marketplace for goods and services.
GST return
Every registered person other than ISD, NRTP and a person paying tax under the provisions of Section 10 has to file various returns. The relevant legal provisions can be found in the Central Goods and Services Tax Act, 2017. There are many returns that are applicable to different people. We have two different schemes, regular and composite, and have different time periods, rules and returns for both of them. few are as follows:-
Outward supplies: We need to report outward supplies in GSTR 1 on or before the 10th of next month.
Inward supplies: Inward supply is auto-populated in GSTR 2 after the 10th of next month, i.e., on the basis of the outward supply reported by different taxpayers in GSTR 1.
Monthly return: We need to pay taxes along with the monthly return in GSTR 3B on or before the 20th of next month.
The GST late filing penalty has been specified as follows:
If a taxpayer fails to furnish the return on the due date, he is liable for a penalty that depends upon the number of days of delay- The penalty is Rs 100 per day, subject to a maximum of Rs 5000.
If a taxpayer fails to furnish the annual return on the due date, he is liable for a penalty that depends upon the number of days of delay- The penalty is Rs 100 per day, subject to a maximum of a quarter of the person’s registration.
Merits of indirect tax
Convenience
Indirect taxes are less burdensome and inconvenient to the taxpayer than direct taxes. One of the major reasons is that indirect taxes are incorporated into the price of goods and services, which are more expensive and less sensed. Because these taxes add to the overall cost, taxpayers may not recognise or feel the burden of paying taxes early, as the tax-paying process is added to daily routine consumption activities.
It is also convenient because these taxes are not paid in lump-sum amounts, unlike direct taxes. An indirect tax can be avoided by not buying taxed commodities. But once a taxpayer crosses the threshold limit, he or she will have to pay direct taxes. For all these reasons, indirect taxes are both convenient and burden-free.
Broad-based
Indirect taxes are broad-based impacting more or less all the people in the community. Direct tax, on the other hand, has a limited base. In the case of direct tax, a person with a lower income is not required to pay any type of income tax. Still, indirect taxes do not have such exemptions based on income levels, which means that even individuals with lower incomes are subject to these taxes once they engage in the purchase of commodities or services that are subject to such taxes.
Elastic and productive
Elasticity and productivity are the other merits of indirect taxes. It is flexible or elastic in the sense that it can be revised to meet the requirements of the government. The term elasticity, when applied to indirect taxes, means natural flexibility. Indirect taxes can be adjusted or revised in response to changing economic conditions and the requirements of government expenditure. Direct tax, which involves complex legislative processes to alter. The government can alter indirect taxes to increase or decrease according to revenue collection.
Difficulty in evading taxes
The essential structure of indirect taxes presents some notable challenges for tax evasion. Under indirect taxes, the taxes are included in the price of goods and services, so it’s more intricate to evade taxes. The inclusion of indirect taxes within the price of a commodity occurs at the point of sale, with businesses being responsible for collecting and remitting these taxes to the government. The transparency of this process reduces the scope for individuals or businesses to manipulate their transactions to avoid paying the tax.
Social objective
The concept of using indirect taxes as a means to achieve social objectives. Indirect taxes apply to harmful and luxury goods, allowing revenue generators to become powerful tools for promoting public health, reducing inequality, and enhancing the overall quality of life for citizens.
Harmful goods, such as tobacco, alcohol, sugary beverages, and certain unhealthy foods, have a bad effect on health. Governments aim to control their consumption and minimise the linked health risks by imposing higher tax rates on these items. This not only directly improves public health but also lessens the burden on healthcare systems and the economy.
Important anti-Inflationary measures
Indirect taxes are often seen as ways to prevent prices from increasing too much. They can make people change how they spend money, which can help keep the economy stable. But it’s important to know that while these taxes can help stop prices from rising too fast, they can also sometimes make prices go up. On one hand, indirect taxes can stop prices from rising too much. When the government makes certain things more expensive by adding more taxes, people may decide not to buy those things. This means some people are buying, which can slow down the economy and stop prices from going up too fast. So, indirect taxes can help control how much things cost and how people spend money, which can help keep the economy stable.
Demerits of indirect tax
Regressive in character
Indirect taxes are called regressive because they don’t follow the rule of treating everyone fairly when it comes to taxes. This is about sharing the tax burden in a way that makes sense. The problem with the indirect tax is that things become harder for people who don’t have much money. If everyone has to pay a certain tax when they buy things, like food or clothes, it does not matter if someone is rich or poor; they have to pay the same tax. But this hurts people with less money. They spend more of their money on daily things like food, so they pay less tax than their income.
Unproductive
The indirect taxes might not be very useful if you think about whether the money spent to collect them is worth what they bring in for the country. Indirect taxes are already included in the price of the goods you buy. So, when we pay for these things, we’re also paying these taxes. These taxes are meant to help the government by paying them for public welfare, like building schools and roads. When we collect indirect taxes, there are costs like paying people to watch over transactions, making sure everyone follows the tax rules, and dealing with problems like people not paying the right amount or cheating on taxes. Businesses also need to spend money to keep track of their transactions, follow the tax rules and pay taxes.
Civic consciousness is not created
It means that people understand their role in society and how the government works. Sometimes, indirect taxes don’t do a great job of making people feel this way. Unlike direct taxes that come from what people earn, indirect taxes are added to the prices of things they buy, like stuff from stores. This makes it difficult for people to notice these taxes because they’re not clearly shown. Because of this, people might not realise how much they’re contributing to the government’s money. In direct taxes, people know they are paying taxes to the government, like ones from salaries. But with indirect taxes, it’s not as clear. This can make people less aware of how the government is using their money.
Possibility of evasion
Indirect taxes are also evaded by taxpayers. The development of an unholy alliance between buyers and sellers may result in tax evasion. Usually, buyers evade taxes by not accepting ‘receipts of sale’ from the sellers. Sellers also evade these taxes by not maintaining a legal accounting book.
Wage-price push
Finally, instead of being an anti-inflationary device, increased rates of indirect taxes have the potential to fuel cost-push inflationary pressures in the economy. Higher prices consequent upon a high rate of tax result in higher costs, higher wages, and again, higher prices. A wage-price spiral is thus initiated.
Uncertain revenue earning
When taxes are added to products, their prices go up, and people tend to buy less of those things. This can make it hard to guess how much money the government will collect from the taxes. This uncertainty goes against the idea that taxes should be clear and easy to predict, which a famous economist named Adam Smith believed in. When the price of goods goes up, people buy less, so it’s not easy to know how much will be submitted to the government, which goes against what Adam Smith thought about having clear and predictable taxes.
The future of indirect taxes in India
The government aims to streamline and simplify the tax structure in India. For this, the GST has come into existence so that many taxes are merged into one tax, and it will apply equally to goods and services. The tax base should be the same. Also, the government will use technology to simplify compliance for businesses. Currently, there are multiple tax rates applicable to different products and services. In the future, the government will also simplify this for ease of business. Also, customs duties and compliances are simplified on import-export transactions to promote cross-border transactions. The Government introduced many concepts, like E-bill, Restriction on claiming ITC, etc. Due to this, there is a reduction in tax evasion.
Conclusion
In conclusion, indirect taxation in India presents many advantages and disadvantages. Indirect taxes, such as excise duty, value added tax, service tax, and goods and services tax, play a crucial role in generating government revenue and helping with public services, infrastructure, and social welfare programmes. These taxes are included in the prices of goods and services, making them less noticeable to consumers. The broad-based nature of indirect taxes ensures that they impact a wide range of individuals in the community, thereby contributing to revenue collection. However, their regressive structure can disproportionately burden lower-income individuals, posing challenges to income equity. The introduction of GST aimed to address some of these regressive aspects, streamlining the taxation system. Indirect taxes offer elasticity, allowing for adjustments to align with changing economic conditions and government expenditure requirements. Indirect taxes can serve social objectives by discouraging the consumption of harmful and luxury goods. They are also perceived as tools to manage inflation, though their potential to fuel cost-push inflationary pressures should be considered. Moreover, the unpredictability of revenue earnings due to changes in consumer behaviour following price increases poses a challenge in designing a clear and predictable tax system, as advocated by economists like Adam Smith.
In essence, while indirect taxes contribute significantly to government revenue and have several advantages, they also come with limitations. Achieving a balance between revenue generation, economic stability, and fairness in tax distribution remains a continuous challenge for policymakers. A well-structured and balanced approach to indirect taxation, considering the pros and cons discussed, is essential for fostering sustainable economic growth and ensuring that the tax burden is distributed equitably across society.
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This article has been written by Kavita Chandra and updated by Gautam Badlani. This article discusses the doctrine of Caveat emptor. Further, it analyses the gradual fall of the rule of caveat emptor and its replacement with the rule of caveat venditor (seller beware). This article also provides a summary of the landmark national and international judgments relating to caveat emptor.
It has been published by Rachit Garg.
Table of Contents
Introduction
Technological revolution and globalisation have led to a significant increase in the number of commercial transactions. The purchasing power of the consumers has increased manifold resulting in a large number of retail purchases. Laws have been enacted to make it mandatory for manufacturers to display the description of the product on the packaging cover. While the consumers have the right to inspect the description of the product before making the purchase, there are instances where the product conforms to its description but turns out to be of inferior quality and incapable of fulfilling the purpose for which it was purchased.
The issue that arises in such cases is whether the consumer has the right to return the inferior quality product or whether he is to bear the loss himself. The doctrine of caveat emptor states that the consumer takes a risk of quality and effectiveness when he purchases a product and if the product does not meet his expectations, then the consumer will himself be responsible for the inferior quality product. The consumer is expected to make a reasonable examination of the product’s quality and condition before making the purchase.
However, with time, the doctrine of caveat emptor was substituted by the doctrine of caveat venditor. Thus, there was a paradigm shift from ‘let the buyer beware’ to ‘let the seller beware’. This substitution was necessitated due to the changed circumstances of the modern world. The principle of caveat emptor is no longer applied by the judges who are now more inclined towards safeguarding the interests of the consumers.
The doctrine of caveat emptor evolved several decades ago and became a part of the common law. However, with the growth of trade and commerce, several exceptions to this principle were recognized by the policymakers.. Gradually, the exceptions became more prominent and significant than the rule itself.
History of the doctrine of caveat emptor
The principle of caveat emptor reflects the view of 19th-century society towards consumers. At that time, the interests of the businesses were prioritised over the interests of the consumers. Thus, the law recognized the principle of caveat emptor and imposed a responsibility on the buyer to examine the products before making the purchase. The purchaser is thus expected to protect his interests and ensure that the quality and condition of the product fulfil his needs.
The first known case of caveat emptor is Chandelor v. Lupus (1603). In this case, the seller bought a stone thinking it was a bezoar stone. The seller bought the stone thinking that it had magical healing powers. However, the stone turned out to be fake. The seller filed a suit claiming refund of the amount. However, the Court held that the seller had not undertaken any implied warrant of the quality of the stone and the buyer was under a duty to examine the product before purchase. Thus, the seller was under no liability to refund the amount.
Thus, we see that the doctrine of caveat emptor evolved in England during the 17th Century. The courts during those times refused to recognize any implied warranty on the part of the seller. The sellers were only bound by the contractual representations made by them.
The doctrine of caveat emptor forms a part of the law of contract. It states that the seller is under no liability if the product purchased by the buyer fails to fulfil the particular purpose for which it was purchased. The buyer has to purchase the product after conducting satisfactory examination.
The doctrine of caveat emptor is based on the principle that the buyer should examine the product using his skill and judgment. If the buyer is satisfied with the condition and quality of the product and believes that the product would aptly fulfil his requirements, then he should purchase the product. However, once the buyer makes the purchase after examining the product, he will have no subsequent right to return or reject the product or claim any damages from the seller. The buyer would be responsible for his negligence.
The doctrine of caveat emptor originated in England and was rigidly applied under the common law. The duties of the seller were very bleak under the English Sale of Goods Act, 1893. The seller was under no legal obligation to provide full and complete information to the buyer. The law was inclined towards safeguarding the interests of the seller.
Doctrine of caveat emptor in Indian context
The doctrine of caveat emptor has also been incorporated under Indian law through the Sale of Goods Act, 1930. Section 16 of the Act states that when a product is sold under a contract of sale, the law would not presume that the seller sold it under an implied warranty of fitness and quality. It is the consumer who has to examine the quality of the product and satisfy himself that the product is fit to meet his expectations and serve the purpose for which it is purchased.
So long as the seller does not commit any fraud and does not provide any express warranty for the product’s condition or fitness, the buyer will have no remedy against the seller for any defect in the product.
Basis of the doctrine of caveat emptor
The doctrine of caveat emptor is based on the principle that consumers should fully examine the products before making the purchase. They should be satisfied that the product will meet their expectations. They will have no recourse against the seller if the products fail to stand up to their desires. The doctrine of caveat emptor is essential to balance the information asymmetry that exists between the buyer and the seller. The seller generally has more about the defects and potential lapses of the product than the buyer.
The analogy behind the formulation of this doctrine is that consumers should be aware of their rights and should carry out reasonable examinations before purchasing any product. This principle thus puts the onus on the consumers to protect their rights. Consumers are expected to analyse and examine a product using their independent judgement and skill.
The doctrine of caveat emptor is often applied to public auctions. Thus, if any property or product is purchased in a public auction, it is purchased with the underlying implication that the buyer will have to take care of any deficiencies and litigations attached to the product or property.
Contract of sale
The doctrine of caveat emptor is fundamentally related to the contract of sale. The contract of sale establishes the relationship between the buyer and the seller and the doctrine of caveat emptor is aimed at protecting the seller from liability.
As per Section 4 of the Sale of Goods Act, 1930 a contract for sale is a contract where the seller agrees to transfer certain goods to the buyer in exchange for certain considerations. This contract of sale can be absolute or it can be contingent upon certain conditions.
While agreeing on a contract for sale, the buyer and the seller stipulate certain terms and these terms are termed as warranties and conditions. Warranties are such terms which relate to the very essence of the primary purpose of the contract. Conditions, on the other hand, merely correlate with the basic object of the contract. The Sale of Goods Act also provides that there are certain ‘implied’ conditions and warranties which the seller undertakes at the time of entering into a contract for sale. In the event of a breach of these conditions and warranties, whether implied or expressed, the buyer has the right to claim compensation and damages for the injury or loss suffered.
Exceptions to the rule of caveat emptor
The Sale of Goods Act also incorporates certain exceptions to the doctrine of caveat emptor. In cases where these exceptions apply, the seller cannot escape liability on the pretext that the buyer failed to exercise due diligence. These exceptions apply where the consumers purchase the products by relying on the expertise and judgment of the seller. The seller has an additional responsibility where he knows the purpose for which the buyer is purchasing the product. Let’s discuss these exceptions in detail.
Fitness for buyers’ purpose [Section 16(1)]
Section 16(1) of the said Act applies in situations where the seller is aware either expressly or by necessary implication of the purpose for which a buyer needs to purchase a specific product, and where the goods are of such description which the seller supply in his ordinary course of business.
In such a situation, if the buyer purchases a product by relying upon the judgement and skill of the seller, then the goods should be in accordance with the purpose. In other words, this section explains the circumstances where the seller has an obligation to supply the goods to the buyer as per the purpose for which he intends to buy the goods.
Requirements of Section 16(1) are as follows:–
The buyer should explain the particular purpose for which he is making the purchase to the seller.
The buyer should rely on the seller’s skill and judgement while making a purchase.
The goods must be of a description which the seller in his ordinary course of business supplies.
The very first requirement is to inform the buyer of the purpose of the purchase. The buyer can be made aware of the purpose of the product either expressly or impliedly. Where the product can be used in numerous ways, it is necessary for the buyer to expressly specify the purpose of the product to the seller. However, in certain cases, the nature of the product is such that it can only be used for certain specific purposes. In such cases, the seller is deemed to be aware of the product’s purpose by implication. For example, the vendor of oysters is aware that the oysters are being purchased in order to be consumed.
The second requirement is that the consumer should rely on the expertise and skills of the seller. Thus, where the purchaser specifies the special purpose of the product to the seller and the seller accepts the order in the terms enumerated by the buyer, then such an acceptance will fulfil the second requirement. The seller agreed to provide a product which meets the requirements of the buyer and thus, the buyer is considered to have bought the product relying upon the expertise of the seller.
It is pertinent to note that the second condition would be fulfilled only if the buyer relied on the discretion of the seller in the choice of the product and its characteristics, For example, if the buyer and seller enter into a contract in which the buyer had specified the shape, size, form, colour and other characteristics of the product, then the buyer would be said to have relied on his own judgement and skill and not upon the expertise of the seller. The only obligation on the part of the seller was to deliver products bearing such qualities as specified in the order.
Lastly, the goods must be of such a description as are sold by the seller in the ordinary course of business.
Sale under trade name [Proviso to S. 16(1)]
In some cases, a buyer purchases goods not by relying on the skill and judgement of the seller but by relying on the product’s trade name. In such cases, it would be unfair that the seller is burdened with the responsibility of quality. The proviso to Section 16 deals with such cases. It provides that:
“Provided that, there is no implied condition as to fitness for any particular purpose in the case of a contract for the sale of a specified product under its patent or other trade names.”
However, the application of this proviso depends on the facts and circumstances of the case. There may be cases where the consumer relies on the skill and judgement of the seller and makes a purchase under a trade name only on the recommendation of the seller. In such cases, the proviso would not apply as the consumer had relied on the expertise of the seller.
For example, a consumer visits a car dealer and asks the dealer to recommend a car that would meet his requirements. The dealer subsequently advises the consumer to purchase a car of ‘X’ brand and the consumer places an order for a car manufactured by ‘X’. The proviso to Section 16(1) would not apply in such a scenario as the consumer had made the purchase relying on the skill and judgement of the car dealer.
Merchantable quality [Section 16(2)]
Section 16(2) of the Act incorporates the second exception to the doctrine of caveat emptor and states that when the goods are sold by description, the dealer is under an obligation to provide the goods of merchantable quality.
The expression ‘merchantable quality’ provides that the goods should be fit for resale at their full value. They should be capable of fulfilling the purpose for which they are purchased. The goods should also be free from any latent defect.
Merchantability generally implies a guarantee by the seller that the concerned goods are fit for the purpose which they are supposed to serve. The goods must be of a usable quality and should be capable of fulfilling their intended purpose.
As per Section 16(2), if the goods are sold under the pretext that they correspond to a particular description, then there is an implied warranty that the goods must conform to the mercantile quality. Thus, this provision provides that where the goods are purchased for resale, the buyer is entitled to receive the products which are saleable and adhere to the description stipulated in the contract of sale.
It is pertinent that the products should be statutory saleable. For example, adulterated milk might be saleable in the ordinary sense as the consumers might purchase the milk without examining it for adulteration. However, such milk is not saleable under the law. Thus, Section 16(2) mandates that the goods sold as adhering to a particular description must be saleable under the law.
McKenzie v. Nagendra Nath (1919)
In McKenzie and Co. v. Nagendra Nath (1919), the defendants were car dealers who came to know that the plaintiff was thinking of purchasing a car. The defendants approached the plaintiff and represented to him that the Plymouth cars were of excellent quality and convinced him to buy one of the Plymouth cars. However, subsequently, a defect was discovered in the car. The plaintiff was asked to pay for the repair of the car.
The plaintiff filed a suit claiming damages for the defective car. The defendants pleaded that the defect in the car could not be attributed to any fault in the manufacturing process. The defect was due to the mishandling of the car by the defendant.
Applying Section 16(2), the Calcutta High Court observed that the present case involved a seller who dealt with cars of a particular description and thus, there was an implied warranty that the product must be of a merchantable quality. On the issue that the defect in the engine was discovered after using the car for some time, the Court observed that where Section 16(2) applies, any latent defect discovered subsequently would be deemed to have existed ab initio. The only pre-requisite is that the defect should be of such a nature that, if discovered at the time of the purchase of the product, would have made the product non-merchantable.
The Court observed that Plymouth cars do not usually develop the defects that were discovered in the plaintiff’s car. Thus, the defect in the plaintiff’s car was due to faulty manufacturing. Thus, the plaintiff was held entitled to claim damages due to the breach of the implied warranty.
Examination by buyer [Proviso to S. 16(2)]
The proviso to S. 16(2) provides that “if upon examination of the goods to be purchased, the defects ought to have been revealed, then no implied condition as regards to the defect will exist.”
Thus, if the buyer is provided with an opportunity to examine the products, then he would have no remedy for any defect discovered after the purchase, provided that the defect is of such nature that could have been ordinarily discovered in the course of examination. Moreover, if the buyer merely examined the goods cursorily even though the seller had provided him an opportunity to examine the goods more fully, then the buyer would not be protected by the implied condition of warranty. The implied warranty only affords protection against latent defects in such cases. If the defect is of such a nature which could not have been revealed in the ordinary examination, then the proviso to Section 16(2) would not be applicable.
Conditions implied by trade usage [Sec. 16(3)]
Section 16(3) of the Sale of Goods Act gives statutory force to the conditions implied by the usage of a particular trade. It states:
“An implied condition or warranty as to the quality or fitness for any particular purpose may be annexed by the usage of trade.”
In the case of Peter Darlington Partners Ltd v Gosho Co Ltd (1964), a contract for the sale of canary seeds was subjected to the custom of trade and held that if there existed any impurities in the seeds the buyer would get a rebate on the price but he would not reject the goods. However, a custom which is unreasonable will not affect the parties’ contract.
Ordinarily, the buyer is held responsible for his own purchase and there is no implied guarantee as to the quality, merchantability, fitness or saleability of the product. However, if any particular case falls within the three exceptions enumerated under Section 16, then there is an implied warranty. In such cases, the buyer has the right to reject the goods or to claim damages in case of any defect.
The fallacy and the need for change
While originally the courts applied the doctrine of caveat emptor in a strict sense, it was later accepted that the absolute application of this principle would be detrimental to trade and commerce. A very high burden was being imposed on the buyer by requiring him to properly examine the product before making the purchase in all cases.
In many cases, the buyers did not have the requisite skill or information to make a proper examination. But the buyer nonetheless did not have any remedy against the seller in case any latent defect in the product was discovered after making the purchase.
Moreover, the buyers often rely on the skill and judgement of the seller while making the purchase. However, the doctrine of caveat emptor did not provide any remedy to the buyers even where they made the purchase in good faith.
Due to these reasons, it was felt that the principle of caveat emptor should be diluted to a certain extent so that the relationship between the buyer and seller could be made harmonious. A relationship of trust also incentivizes and encourages commercial transactions.
The doctrine of caveat emptor leads to defective goods as it imposes an impediment in the course of recovering damages for injury or loss caused by defective goods.
How did it change to Caveat venditor
With the passage of time, the exception to the doctrine of caveat emptor became more relevant and more valuable than the doctrine itself. This led to the evolution of the principle of caveat venditor which finds its genesis in the exception to caveat emptor. The principle of caveat venditor ensures that the seller can be held liable for any malpractice committed by him.
The principle of caveat venditor requires the seller to be cautious and imposes a liability on the seller for all the hardships borne by the buyer due to the defective or faulty product.
Combined, the doctrine of caveat emptor and caveat venditor implies that both the seller and buyer are expected to perform certain duties while engaging in a sale transaction. The buyer has to be aware and make a reasonable inspection of the product while the seller has to bear the responsibility of ensuring that he does not sell a defective product to the seller. If both the seller and the buyer perform their duties adequately, then it would lead to a harmonious relationship between the two.
Common law developments
The rule of caveat emptor was severely criticised in the English case of Priest v. Last (1903). In this case, the buyer had purchased certain goods in good faith relying on the expertise and judgement of the seller. However, subsequently, a defect was discovered in the hot water bottle. The Court of Appeal, England and Wales held that since the buyer had made the purchase relying on the advice of the seller, he had the legal right to return the product. This is the first recorded case where the buyer was allowed to return the product to the seller due to some defect.
Thereafter, the English courts started laying down the duties and obligations of the seller and there was a consensus among the courts and the lawmakers that the interests of justice would not be served by the absolute application of the doctrine of caveat emptor. Thus, the principle was modified to the extent that the examination was only to be a ‘reasonable examination’.
Further, in Harlingdon & Leinster Enterprises Ltd v. Christopher Hull Fine Art Ltd (1989), the buyer had purchased a painting but subsequently realised that it was not made by the original painter. The painting was a forged one and did not fit the description provided at the auction. The Court observed that both the buyer and seller believed the painting to be genuine.
The Court pointed out that the buyer had not made the purchase by solely relying on the description provided by the seller. He had himself assessed and examined the painting. Thus, he could not be allowed to return the painting.
Development in Indian context
The doctrine of caveat emptor has lost its relevance in the modern technological age. In today’s age, there is stiff and neck-to-neck competition between large corporations to satisfy consumers. One of the mechanisms employed by these corporations to please the consumers is to sell the products with express conditions and warranties. Thus, the contract of sale itself states that the consumers would be entitled to a replacement or refund if the product turns out to be defective. Thus, the exceptions carved out under Section 16 lose their relevance, if not become completely obsolete.
The doctrine of caveat emptor has also lost its relevance due to the enactment of the Consumer Protection Act, 2019. The Consumer Protection Act clearly embraces the doctrine of caveat venditor. Section 84 of the Consumer Protection imposes a liability on the manufacturer for any defect in the manufacturing of the product or for any deviation from the prescribed manufacturing standards. Moreover, if the product fails to meet the standards laid down by the express warranty or the product does not contain proper instructions relating to its usage, then the manufacturer would be held liable for any loss or injury suffered by the buyer.
Section 86 of the Act provides that even sellers who have not manufactured the product can be held liable for a defective product in the following cases-
If he (the seller) had substantial control over the product design, testing, packaging or labelling of the product.
The harm was caused to the buyer due to the modification or alteration made to the product by the seller.
The seller provided an express warranty but the product does not conform to the express warranty.
Thus, the various provisions of the Consumer Protection Act, by imposing the liability on the seller or the manufacturer for the defective product, have adopted the doctrine of caveat venditor. This also signals the declining relevance of the doctrine of caveat emptor.
In Smt.Rekha Sahu vs The Uco Bank (2013), the petitioner had purchased a plot through an auction. However, later he found that there were certain encumbrances (electricity dues) attached to the plot and filed a suit before the Court seeking a direction to the respondent auctioneers to free the property from the encumbrances. The petitioner pleaded that as per the sale certificate, the property was supposed to be free from all encumbrances. The auctioneers relied on the doctrine of caveat emptor and pleaded that the petitioner should have made a proper enquiry before purchasing the plot. However, the Allahabad High Court held that the Indian jurisdprudence has witnessed a shift from the doctrine of caveat emptor to the doctrine of caveat venditor. Thus, the auctioneers were liable to pay the electricity dues.
Reinstatement of caveat emptor
The growth of technology has once again highlighted the importance of the principle of caveat emptor. While the principle of caveat emptor was traditionally used for the purpose of protecting the buyers, today there is a need to use this principle for the purpose of empowering the consumers and making them aware of their rights. Large multinational companies which provide web service often demand the users to accept their privacy policy. Most users inadvertantly accept the terms and conditions unaware of the consequences. In M/S Indsil Hydro Power and Manganese Limited v. State of Kerala and Ors. (2021), the Supreme Court had observed that dotted lined commercial contracts are unreasonable and do not form a fair bargain.
The private data of the consumers is often misused by the corporations. While the consumers have the right to reject the consent to the privacy policy and the cookies policy, most users do not exercise their right properly. This is because of the lack of awareness among the consumers. There is an urgent need to reinstate the caveat emptor principle as an instrument for the empowerment of consumers. The policy makers should come up with guidelines which impose an obligation on the corporations themselves to ensure that the consumers are aware and are properly exercising their rights.
Landmark judgments
Foreign judgments
This section discusses the development of the concept of doctrine of caveat emptor through the lens of the English cases. The English courts have been employing the doctrine of caveat emptor to protect the sellers and have been of the view that this doctrine helps in promoting trade and commerce.
Ward v. Hobbes (1878)
In Ward v. Hobbes (1878), the seller marketed certain pigs to the petitioner. However, the animals sold by the seller were suffering from Typhoid. The seller was aware of the ailment but did disclose it to the buyer.
The House of Lords held that if a seller uses artifice or disguise to conceal the defects in the product which is to be sold, it would amount to fraud on the buyer; still, no duty to disclose the defects in the product is imposed on the seller by the doctrine of caveat emptor. An obligation to use care and skill while purchasing goods is imposed on the buyer by the doctrine of Caveat emptor.
Wallis v. Russell (1902)
In Wallis v. Russell (1902), the plaintiff’s granddaughter had purchased certain craps by relying on the judgement and skill of the seller. The plaintiff and the granddaughter believed that the craps were for human consumption. However, they fell seriously ill after eating the crabs.
The issue before the Court of Appeal was whether the seller bore any liability for the defective crabs.
The Court of Appeal explained the scope of caveat emptor and laid down that the rule of Caveat emptor implies that “the buyer must take care”. It applies to the purchase of those things upon which the buyer can exercise his own skill and judgement, e.g. a picture, book, etc (also known as specific goods); it also applies in cases where by usage or by a term of contract it is implied that the buyer shall not rely on the skill and judgement of the seller.
The Court held that the seller was liable to pay damages to the plaintiff. The seller was informed of the purpose for which the crabs were being purchased and the buyer relied on the skills and expertise of the seller in selecting the crabs. The plaintiff believed that the crabs were fit for human consumption. Thus, this was a case of implied warranty. The seller, who is expected to supply fresh crabs in the course of his business, breached the implied warranty and was thus liable to pay compensation.
Indian judgments
This section provides an overview of the legal developments concerning the doctrine of caveat emptor. It explains how the courts have interpreted the doctrine of caveat emptor in different scenarios.
Manju Bhatia v. New Delhi Municipal Corporation (1997)
Facts
In Manju Bhatia v. New Delhi Municipal Corporation (1997), the appellant had entered into a contract with the builder for the purchase of certain flats. However, it was later discovered that the construction of some of the floors was illegal. As a result, the illegal construction was demolished by the Municipal authorities and the buyers had to suffer a loss.
Issues raised
Sbsequently, the plaintiff claimed damages for the loss sustained by her. A writ petitioner wad filed before the High Court but the same was dismissed. Subsequently, the purchaser approached the Supreme Court.
The issue before the Supreme Court was whether the builder was liable to pay damages or the respondents were responsible for their own negligence under the principle of caveat emptor.
Judgment of the court
The Supreme Court held that the respondents had not been informed of the defects or illegality involved in the construction. Thus, no notice had been served on the respondents regarding the defects in the product. Thus, the builder was held liable to pay damages as compensation for the loss suffered by the respondents.
Commissioner of Customs v. Aafloat Textiles (2009)
Facts of the case
In Commissioner of Customs v. Aafloat Textiles(2009), the buyer had purchased the gold under a Special Import License (SIL). However, it was discovered that the SIL had been forged and subsequently, a penalty was imposed on the buyer for purchasing gold under an invalid and forged SIL.
The buyer pleaded that he did not have knowledge of the forged SIL. The revenue department, on the other hand, pleaded that the principle of caveat emptor applies to the present case. The vendor is under no obligation to inform the consumer of any latent defect on his own. The only obligation on the part of the seller is that if the consumer makes an enquiry as to a potential defect in the product, then he cannot falsely represent to the consumer that such defects do not exist. The buyer is expected to be cautious while making the purchase as he bears the risk of any possible defect and not the seller.
Judgment of the court
Applying the principle of caveat emptor, the Supreme Court of India held that the buyer was under a duty to inquire into the genuineness of the SIL before making the purchase, If the buyer would have had exercised proper and due diligence, then he would have found out that the SIL was forged. In the absence of such due diligence, the buyer would be deemed to have actual and constructive knowledge of the defect in the gold purchase.
Pawittar Singh Walia v. Union Territory (2012)
Facts of the case
In this case, the plot was allotted to the respondent (original allottee) and he had entered into a contract to purchase a plot and he was to pay the consideration for the plot in three instalments. The original allottee paid the first instalment on time but failed to pay the subsequent instalments on time. Thus, the allottee lost his title on the plot.
However, the allottee proceeded to sell the plot to the petitioner even though the allottee did not have the title of the plot. The petitioner also paid certain consideration to the allottee for the plot. However, the petitioner was denied the possession of the plot by the respondents. The petitioner thus approached the court seeking the possession of the plot.
Issue raised
The issue before the Court was whether the sale of the plot to the petitioner was valid or not.
Judgment of the court
The Court applied the doctrine of caveat emptor and held that the petitioner should have acted as a vigilant buyer and should have purchased the plot only after obtaining the No Objection Certificate (‘NOC”) from the competent authorities.
Further, the Court has concluded that the doctrine of caveat emptor also forms a part of the property law. The petitioner had acted negligently and did not contact the respondents or make any other enquiry to determine whether the allottee had the legal authority to transfer the ownership of the plot. Thus, it was held that the respondents were justified in denying the possession to the petitioner. The petitioner made no efforts to find out whether the concerned property was free from all encumbrances. Thus, the petitioner had breached the doctrine of caveat emptor and was responsible for his own loss.
Conclusion
In the modern age, most products are manufactured using extensive technology and are packaged by multinational corporations. However, even in the case of such packaged items, consumers get an opportunity to examine the product’s quality and characteristics using the description cover of the product. By incorporating the doctrine of caveat emptor under the Sale of Goods Act and by enumerating the various exceptions to this doctrine, the lawmakers have tried to strike a balance between the interests of the buyers and the sellers.
However, it can be concluded from the aforementioned analysis that the rule of caveat emptor is being taken over by the rule of caveat venditor and is gradually losing its relevance. The change is taking place in order to create a more consumer-oriented market wherein transactions of a commercial nature will be encouraged. Such change will help to create a more consumer-friendly market and an appropriate balance can be maintained between the rights and obligations of the buyer and the seller. But it should be noted that if this approach is taken too far, it might end up becoming extremely pro buyer and then some people might end up misusing the protection under the law.
One of the major obstacles to the application of the doctrine of caveat emptor or even caveat venditor is the lack of consumer awareness in India. The consumers are neither aware of the due diligence that the law expects them to exercise while making a purchase nor are they conscious of the duties that the sellers owe to them.
Frequently Asked Questions (FAQs)
Is the doctrine of caveat venditor incorporated in the Sale of Goods Act?
While the Consumer Protection Act, 2019 embodies the doctrine of caveat venditor, this doctrine has not been incorporated under the Sale of Goods Act. The Consumer Protection Act stipulates the the seller would be held responsible for the deficiency int eh quality of goods and services. However, no such principle has been incorporated in the Sale of Goods Act.
Why has the doctrine of caveat emptor lost relevance?
In the 20th century, there was a paradigm change and the focus shifted to the rights of the consumers. The relevance of the doctrine of caveat emptor faded with the realisation that it is not possible for consumers to examine and identify all the latent defects of the products at the time of purchase. Moreover, the seller should not be allowed to unfairly enrich themselves at the cost of the buyer.
At the time of the evolution of the doctrine of caveat emptor, limited types of products with largely identical traits were sold. However, the markets of today are filled with various types of goods which have distinct qualities. Thus, it is not fair to expect the consumers to examine all the different and distinctive products.
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In recent years, litigation has been increasing day by day due to non-payment of dues to banks and financial institutions. This may lead to litigation between the parties due to a fear of losing money. Most banks or financial institutions are preferred for litigation, i.e., taking action against SARFAESI, DRT, and the Insolvency and Bankruptcy Code of 2016, instead of adopting arbitration, meditation and so on.
Litigation, which is opposed to arbitration, allows remedial measures, i.e., the issue of notices for non-appearances, interim orders, etc., and such an option is not possible in arbitration. The litigation is public in nature, which may harm the party’s reputation, breach the confidentiality of data and also hinder future investment prospects. Further, it leads to the collapse of the economy due to negative variation and financial distress in the public. Thus, the party needs a private mode of resolution, i.e., arbitration, to maintain the privacy of the proceedings.
Today, a transaction with a financial institution is very complex and the principle of dispute resolution for resolving the dispute has changed and the same requires confidentiality. In such a situation, banks and financial institutions are trying to adopt arbitration instead of litigation. Even in litigation, the judges have more power exercised by the law than the arbitrator. Arbitration is growing with the pace of development and with this growth, India is quite ambitious to emerge as the hub that facilitates international arbitration. Arbitration in India is ad hoc arbitration or institutional arbitration. India preferred international arbitration when foreign companies entered into business contracts with Indian companies. Still, India lacks institutions with international arbitration repute like the ICC, P.R.I.M.E., SIAC, LCIA, HKIAC, etc. Arbitration institutions have taken steps to increase the need for arbitration in the finance sector.
Finance dispute cases are growing interested in arbitration when it identifies that the courts have perceived it as unreliable and there is no document or agreement that can reach the party to the choice of the court. To deal with this situation, several arbitration institutions incorporated the rule and system that seek to address the parties in the finance sector. Arbitration has experienced an abrupt increase in issues in the financial sector.
Overview
Arbitration is certainly a kind of dispute resolution process in which the parties privately resolve their dispute (by agreement of the parties involved in the dispute). When the party faces a dispute about their settlement (the arbitration clause), they seek the help of the arbitrator. The arbitrator is considered a third party who concentrates on both sides of the party in dispute and, in return, tries to remedy their dispute by giving their decision in the form of an arbitral award. This method was adopted to resolve the dispute outside the courtroom, as indicated in the arbitration agreement.
A specialised institutional arbitration that conducts the arbitration process is international arbitration. Each institution has its own set of rules that provide the framework and also administer the process. Institutional Arbitration has organised a procedure that provides advantages to the parties who opt for arbitration.
The manner of resolving the dispute between the investor and brokers, or between brokers, is finance arbitration. Financial institutional arbitration requires a person who has deep knowledge of finance and an understanding of complex transactions. A large number of institutional arbitrations exist across the globe. The benefit of institutional arbitration is that the party can get assistance from the institutional professionals and staff.
In short, international arbitration is the most logical dispute-resolution mechanism for international banking and finance dealings.
Here we discuss the benefits of arbitration and the reasons for the parties to opt for institutional arbitration.
Arbitration benefits in economic area
Arbitration benefits in economic areas:
The choice-making is done with the aid of arbitrators, who are usually appointed by the parties, and the same is not possible when the parties opt for litigation.
Institutional Arbitration has instituted a panel of arbitrators who have specialised knowledge and information in banking and finance for the enforcement of the arbitral award.
It’s far more consensual. In a few circumstances, public courts might also assert jurisdiction over a dispute even in the absence of an agreement between the parties to that effect. In contrast, an arbitral tribunal, which is most effective, has jurisdiction if all parties have agreed to submit the dispute to arbitration. This is typically dealt with by putting an arbitration clause inside the relevant agreement.
The process of arbitration is confidential, unlike other court proceedings; matters are not open to the public at large. Even the arbitral award is not to be had in the public domain.
The arbitration award is generally final and confined to rights of assignment, not like the judgements of public courts, which are normally appealed through various further rounds of litigation, and the same is going on sometimes for an unlimited period.
Arbitration offers a desire for the events to offer a single dispute resolution route of action for those financial instances that comprise a range of associated agreements.
Arbitration provides a flexible procedure for the arbitrator, and the procedure is tailor-made to meet the parties’ needs.
Why parties adapt to institutional arbitration
Institutional arbitration trained the professionals and staff to determine the procedure of arbitration.
The parties, on their own, select the arbitrator to do the process. The parties sometimes choose the institution for instituting the draft clause of the institution arbitration, which may be amended from time to time, and for these changes, there is no ambiguity in the process.
Institutional arbitration employs a lot of arbitrators from various places who have vast experience and knowledge. As and when needed, the parties and arbitrator seek advice from the institution’s arbitrator.
If an arbitral award challenges a tribunal member, then the institution of arbitration assists the tribunal to deal with the matter that arises from the conduct of the arbitration.
Day by day, the use of international arbitration in the financial sector is increasing to resolve financial disputes. However, in the context of dealing with parties from rising markets, the biggest advantage that international arbitration has over national court litigation is enforcement.
Guidelines that led to the growth of arbitration in financial sector
The 2013 ISDA Arbitration Guide
The International Swaps & Derivatives Association (ISDA) has posted after consultation with the ISDA member for the following two years, and on September 9, 2013, it issued a guide regarding tips on how one can use arbitration in the ISDA master agreement. This guide addresses the increasing trend to resolve disputes in the financial sector by way of arbitration.
This guide involves the model clause in numerous elements of arbitration for derivative transactions, and sometimes it may or may not be appropriate for all cases. In addition to that, this guide highlights various matters on which the parties wish to modify their own.
This guide addresses the judgement in a summary manner that other arbitration institutions apply in their rules.
In advance, it included a sample clause in the agreement; later on, an accelerated range of model clauses was delivered around the year 2018 for huge ranges of utilisation of institutional arbitration everywhere in the world and included an expanded range of “ISDAfied” version arbitration clauses for a larger number of arbitral institutions and seats around the globe. This diversification may be considered an attempt to fill the gap between the wide variety of lawsuits and the provision of arbitration with the aid of different arbitrators. In the absence of this, the parties use the personal model of a clause in the agreement that’s being veined and unsettled.
The International Chamber of Commerce (ICC) Commission report
The ICC Commission on Arbitration and Alternative Dispute Resolution prepared a document on financial institutions and international arbitration (the “Report“).
This report was prepared after conversing with at least greater than or about 50 financial institutions from throughout the globe, and banking counsels or sectors with diverse regulations, various policies, scholarly writing, and awards from a minimum of about 13 arbitral institutions were also examined while making this particular report.
It concludes that this seems to be due to a lack of clarity on the benefits of international arbitration, in combination with the traditional view that arbitration does not meet the wishes of specialists in financial disputes. To tackle these two findings, the report seeks to give specific recommendations on how to tailor arbitration to the desires of the finance industry. This means that the specific procedure can be tailor-made as deemed appropriate for the dispute and adapted to the legal culture of parties and arbitrations.
This report speaks approximately of the arbitration that is being carried out within the regulatory method. In international financial matters, disputes between the banking sectors, disputes relating to trade finances, etc., and quite a massive increase in the growth sectors of arbitration were also recognised in this report. The ICC burdened that Article 22 of its rules allows a party to apply for expeditious determination of a claim that is manifestly unmeritorious.
The President of the ICC International Court of Arbitration, Alexis Mourre, said: “The immediate disposition of a manifestly unmeritorious claim or defence may, in the proper circumstances, be a useful tool to increase the time and cost efficiency of the arbitration. This addition aims to clarify that this procedural tool is available under the ICC rules of arbitration.”
This report turns out to be beneficial in determining the rise of financial institutional arbitrations in the world by classifying the forms of disputes and by means of recognising the energy of the arbitration method too.
P.R.I.M.E. Finance Rules
When courts were not able to cope with the nexus disputes arising from the financial sector, this resulted in the creation of an international finance centre known as the Panel of Recognised International Market Experts in Finance (P.R.I.M.E. Finance). PRIME consists of a panel of expert arbitrators with vast in-depth knowledge and extensive practise in this field.
This offer is related to ADR and, in return, provides resolution through the medium of mediation, arbitration, and other dispute resolution services.
They have their own rules and clauses, which were released with this centre on January 16, 2012, situated in the Hague. The purpose of opening this centre was to fulfil the need for arbitration processes in the financial sector. It also offers a default mechanism for the appointment of an arbitrator when the parties fail to reach an agreement. All the provisions made under this had only one aim; that was to encourage the use of arbitration or law in the financial markets and to provide justice to people who suffered or went through the wrongdoing or scam of others in this area.
The P.R.I.M.E. Finance arbitration rules cover a wider scope for resolving financial disputes, including derivatives, private equity, fintech, and sustainable finance.
The P.R.I.M.E. Finance arbitration rules are inspired by, and very closely follow, the UNCITRAL arbitration guidelines. P.R.I.M.E. finance arbitration rules are made to fit the needs of arbitration in financial markets, whereas the UNCITRAL Rules were written for ad hoc arbitration. Under Prime Finance rules, the award may be made available to the general public with the consent of all parties. These provisions are geared towards supporting the overall goal of P.R.I.M.E. Finance and growing a robust framework of law.
These rules undoubtedly enhance the attractiveness of the party to resolve the dispute concerning complex financial products, which is increasing in this competitive market.
General rise in arbitration of disputes in banking and finance sector
This year’s statistic shows a continuation of the growing trend for arbitration in the banking and finance sector since 201According to Queen Mary’s International Arbitration Survey, in 2013, the first choice (82%) for the financial service industry ranked as litigation in terms of dispute resolution mechanisms, and in 2018, it was questioned for resolving cross-border disputes by the use of international arbitration in the sector of banking and finances, which is believed to be 56%. It appears to be a rather conservative view when contrasted with the over 80% expressed by respondents from other sectors, which is increasing from the previous iteration of the survey.
Conclusion
As of now, a number of arbitral domestic and international institutions do exist in India. The P.R.I.M.E. Finance rules, the ICC report, and other tasks are being advocated and set as a means to absolve the disputes through the process of arbitration and are being recognised by the financial institutions or sectors.
In the modern era, the use of arbitration in the finance sector continues to increase, but there are instances in which arbitration is not always a viable tool. It would be determined by the character of the subject matter of the dispute, by the existence of insolvency proceedings, by the characteristics of one of the parties (i.e., a public entity that should be submitted only to the transparency of a public hearing), or by their numbers (multiple-party arbitration won’t be a viable option), or sometimes the parties might not have signed the relevant arbitration clause.
Alternatively, the accelerations of litigation, including default or brief judgement, can be warranted, although they are not presented by courts too comfortably. In the end, there can be instances where the jurisdiction of the courts cannot be ousted.
The legislature and judiciary, as well as the government, played an important role in developing the concept of institutional arbitration, including in the field of the financial sector.
That being said, every factor has its pros and cons, and the same applies to arbitration. It might nevertheless be that arbitration is suitable to solve the maximum number of financial disputes and will retain advantage recognition in the financial sector in the future.
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This article was written by Astitva Kumar, an advocate; and has been further updated by Syed Owais Khadri. This article talks about the Universal Declaration of Human Rights (UDHR). The United Nations General Assembly adopted the Declaration on December 10, 1948. Along with this, the author has also discussed global dynamics before the UDHR’s drafting, and a thorough examination of the articles enshrined in the Declaration.
This article has been published by Rachit Garg.
Table of Contents
Introduction
“All human rights for all’ and ‘the world is one family” are the two notions that have relied on the broadened definition of human rights, ensuring human dignity for every individual of the human race in the global village.
The question of fundamental human rights has been relevant ever since the rudimentary structure of human society came to be established. Such rights can be said to comprise the basic needs of human beings, which include the right to food, the right to breathe clean and unpolluted air, the right to shelter, the right to clothing, and the right to a decent environment, all of which are essential for human beings to live and survive, as against natural rights, which all living beings enjoy from birth and which no human agency can give or take away.
The Universal Declaration of Human Rights (UDHR) declares, from the outset, that its goal is to establish worldwide human rights. The Universal Declaration of Human Rights (UDHR) is a building block in the modern history of human rights since it draws from ancient to contemporary philosophies in response to the horrific events of World War II.
What are human rights
The term “human right” does not have a specific scientific definition. These are moral claims that are inalienable and inherent in all human beings solely because of their existence. These claims are expressed and formalised in what we now refer to as human rights, and have been translated into constitutional/legal rights established through the law-making processes of states/societies, both nationally and internationally.
Human rights are often defined as “inalienable fundamental rights to which a person is essentially entitled just by virtue of being human.” Thus, human rights are understood as universal (meaning they apply everywhere) and egalitarian (meaning they are the same for everyone). Human rights is a generic term that includes and is the traditional civil and political rights and newly developed modern economic, social and cultural rights.
The concept of human rights is also closely linked to human dignity. The World Conference on Human Rights which was held in 1993 in Vienna stated in its Declaration, “All of the human rights are drawn from the basic concept of human dignity, worth inherited in the human being. Human rights and fundamental freedoms revolve around the human individual.”
History of human rights
The sphere of human rights has witnessed consistent and significant developments over the past century, especially after World War II, but at the same time, it is also important to note that human rights have always been a cardinal part of mankind across various cultures and human civilisations.
The earliest evidence of human rights can be traced back to the Persian Empire of Cyrus around 539 B.C. It is a recent theory that Cyrus, after the capture of Babylon, established racial equality and freed all the slaves. He declared that every human being has the right to choose a religion of their own choice. Other principles with regard to human rights were recorded on baked clay cylinders, which were commonly known as Cyrus cylinders. The most recent discussions about the Cyrus cylinder began in 1971, when the UN received a replica of the Cyrus Cylinder with an English translation of it.
Developments in England
Some of the significant developments witnessed in England with regard to human rights. These developments include:
The Magna Carta Principles (1215)
The Petition of Right (1628)
The English Bill of Rights (1689)
The Magna Carta Principles (1215)
One of the major developments in the sphere of human rights was witnessed in England in the form of the royal charter of Magna Carta in 1215 by King John of England. Magna Carta principles are considered a cornerstone in the history of human rights as it is the first and foremost formal document on human rights. It introduced the principle of “rule of law”, which is one of the major facets of human rights. This Charter was drafted as a peace agreement with the main objective of ending the rebellion of barons against the monarch in England. The charter was mainly focused on providing swift access to justice, protection of church rights, and protection from arbitrary arrests. The charter also laid limitations on the feudal payments to the king.
The Petition of Right (1628)
The following development with regard to human rights was the ‘Petition of Right’ in the year 1628, during the reign of King Charles I in England. This petition was drafted by the Parliament of England after prolonged political tensions between the Monarch and the Parliament. The petition consisted of a list of various demands, such as end to arbitrary imprisonment without trial, illegal taxation, etc. The Petition of Right is considered a significant step in the long process of transitioning England from monarchy to parliamentary democracy.
The English Bill of Rights (1689)
The Petition of Right in England was followed by the English Bill of Rights 1689. The bill was converted into law with the assent of William III and Mary II, the then monarchs of England. It gave various civil and constitutional rights, including freedom of speech in the parliament, free elections, consent of the parliament for taxation policies, non interference from the government and equal and just treatment before the court of law.
Developments in the U.S.
The U.S. Bill of Rights, 1789 is another prominent document in the evolution of human rights. Drawing inspiration from the English Bill of Rights, the Congress of the United States in 1789 proposed amendments to the constitution. A total of 12 amendments were suggested, out of which 10 were ratified as Articles 3 to 12 of the Constitution by 1791. These 10 amendments to the U.S. Constitution are collectively and popularly known as the U.S. Bill of Rights. These articles granted various rights, such as freedom of religion, freedom of speech, freedom of the press, protection from cruel punishments, etc.
Developments in France
The next significant development with regard to human rights took place in France ahead of the French Revolution. France’s National Assembly adopted the “Declaration of the Rights of Man and of the Citizen” in 1789. This particular declaration represents one of the fundamental instruments of human liberties; it introduced one of the basic values of human civilisations, which is that all individuals are born free and everyone has equal rights. The declaration guaranteed the freedom of speech, religion, right to property, etc. The principles contained within this declaration inspired the French Revolution which is one of the most remarkable events not just in the history of France but also in world history.
Developments post 18th century
All the rights that were slowly recognised during the long process of evolution are commonly known as first generation rights. These are the various civil and political rights such as right to freedom of religion, freedom of speech, right to property, right to vote, just and equal treatment before the law, prevention from arbitrary arrest and imprisonment, right to vote, etc.
In the late 18th century and the early 19th century, many wars were fought between various countries, which led to the deaths of numerous soldiers. As a concern for human rights during such wars, the first Geneva Convention came into existence in 1864, which focused on treating the wounded soldiers of war. This convention was replaced by the Geneva Convention of 1906, which was further replaced by the Geneva Convention of 1929. In addition to the three Geneva Conventions, the first multilateral treaties between various nations were commissioned in two Hague Conferences of 1899 and 1907 which addressed the conduct of warfare by establishing laws and customs of war. After the adoption of the Universal Declaration of Human Rights, 1948, the 1929 Geneva Convention was replaced by the Geneva Convention, 1949, which is in force to this date.
Classification of human rights
Civil and political rights (human rights of 1st generation)
Civil rights or liberties are rights that protect one’s right to life and liberty. They are essential for a person to enjoy a dignified life. These rights include the right to life, liberty, the right to privacy, home, and correspondence, the right to possess property, the right to be free of torture and cruel or degrading treatment, the freedom of thought, conscience, religion, and the right to move. Political rights are those that allow people to participate in the formation or administration of a government. Examples: the right to vote, the right to be elected in legitimate periodic elections, and the right to participate directly or through chosen representatives in the administration of public affairs.
Economic, social, and cultural rights (human rights of 2nd generation)
Civil and political rights are linked with western capitalist countries (eg. the United Kingdom, the United States of America, and France). On the other hand, human rights, according to socialist states, are those founded on the harmony of individual and collective interests of a socialist society. The Russian Revolution of 1917 and the Paris Peace Conference of 1919 gave birth to economic and social rights. With the emergence of socialism in the twentieth century, these rights gained respect.
These second-generation rights are positive in the sense that they compel states to adopt proper actions to safeguard them. For example, rights include the right to adequate food, clothing, housing, and an adequate quality of life. It also includes the right to work, the right to social security, the right to good physical and mental health, and the right to education. Without these rights, human life will be jeopardised.
Relationship between two generations of human rights:
Even though the two sets of rights are recognized by the UN in two different Covenants, they have a strong relationship. It has been correctly recognised that both kinds of rights are equally vital and that without civil and political rights, economic, social, and cultural rights cannot be fully realised, and vice versa.
Global dynamics preceding the drafting of Universal Declaration of Human Rights
Although the theological, philosophical, and political foundations of human rights intersected early on, providing a diverse variety of viewpoints crucial to the formation of civil liberty as a concept, no universal baseline for human rights was formed until the end of World War I. The Treaty of Versailles, signed in 1919, resulted in the formation of the League of Nations and the International Labour Organisation, two of the earliest international institutions dedicated to achieving peace and promoting social justice.
The League of Nations Covenant guaranteed ‘fair and humane labor conditions’, ‘just treatment’ particularly for people from historically colonial countries and members of minority groups, and ‘freedom of conscience and religion.’
Despite the efforts made to incorporate racial equality and non-discrimination articles, the concept of international protection for human rights was never fully examined or recognised by the global community.
The Institut de Droit International (Institute of International Law), a well-respected worldwide law institution, drafted and adopted the Declaration of the International Rights of Man at its meeting in New York in 1929. This agreement declared that “every individual has equal rights to life, liberty, and property” regardless of nationality, gender, language, or religion.
Ironically, the outbreak of World War II and its numerous losses drew greater attention to the subject of human rights. WWII killed almost 60 million people between 1939 and 1945, including allied and axis soldiers and civilians, making it the deadliest battle in human history. Sexual brutality, forced labor, mass bombings, and human experimentation were among the horrors committed during and after the Holocaust.
With the pledge ‘Never Again’, the international community pledged to strengthen international collaboration to prevent future crimes against humanity. US President Franklin D. Roosevelt issued one of the first major humanitarian responses to the cruel conflict. In January 1941, he proposed the Four Freedoms, which recognise the basic liberties to which all people are entitled as freedom of expression, religion, lack of want, and lack of fear, as well as the ‘supremacy of human rights everywhere.’ Roosevelt’s Four Freedoms were so influential that they were later incorporated into the preambles of the Universal Declaration of Human Rights and other important human rights declarations.
The United States, the United Kingdom, the Soviet Union, China, and 22 other countries signed the Declaration of the United Nations in January 1942. Many states, including Panama, Chile, South Africa, and Mexico, proposed inserting human rights provisions in the UN Charter in April 1945, and as a result, the UN Charter talks about the promotion of ‘respect for human rights and fundamental freedoms that is entitled to each and every individual in this world, with this it also mandated the establishment of a Commission on Human Rights under the Economic and Social Council
About the Universal Declaration of Human Rights (UDHR)
As previously said the concept of inalienable rights and fundamental freedoms is not new; nonetheless, the social and political setting of the mid-twentieth century was unique and left an eternal impact on the development of human rights. At a time when society was undergoing significant changes, the concept of human rights was also compelled to shift as well. Following the end of World War II, the Holocaust inevitably shed light on human rights issues, bringing those concerns to the forefront in the postwar era.
The scars left by World War II on the human fraternity made it necessary for every nation to realise the need for an international instrument that would serve as an attempt or effort towards ensuring peace and the protection of human rights. Therefore, a declaration that was essential and that would serve as a guiding light in the direction of the protection of human rights and the establishment of peace across the globe was drafted by the Commission on Human Rights. This declaration was drafted in complement to and support of the UN Charter, which mentioned the promotion of respect for human rights and fundamental freedoms.
The Universal Declaration of Human Rights (UDHR) adopted by the United Nations General Assembly, is an international declaration that establishes all human beings’ rights and freedoms. It was adopted by the General Assembly on December 10, 1948, at the Palais de Chaillot in Paris, France, after being drafted by a UN committee directed by Eleanor Roosevelt. The UDHR is a foundational text in the history of human and civil rights, consisting of 30 articles in it. Although the declaration is not legally enforceable, the rights are inscribed in the constitutions and national legislation of many countries.
The Universal Declaration of Human Rights, along with the International Covenant on Civil and Political Rights with its two Optional Protocols, the International Covenant on Economic, Social, and Cultural Rights along with its Optional Protocol, forms the International Bill of Human Rights.
The UDHR, as mentioned above, comprises a preamble and 30 Articles that include both civil and political, as well as economic, social, and cultural rights. Though there is no clear classification of articles into the two categories in The UDHR, they can be broadly classified depending upon the rights that each article guarantees. Articles 2 to 21 and Article 28 can be classified as civil and political rights, and Articles 22 to 27 can be categorised as economic, social, and cultural rights. The first article of the declaration is the conveyance of a message to every individual to uphold the spirit of brotherhood, and the last two articles of the declaration, i.e., Articles 29 and 30, are more like an obligation than a right; they impose the duty or obligation upon every individual and state to not exercise any of the rights enshrined in the Declaration in a way that would violate others’ rights and freedoms.
World Human Rights Day is observed every year on December 10th, the anniversary of the adoption of the Universal Declaration of Human Rights.
Significance of Universal Declaration of Human Rights
Since the Universal Declaration is not a treaty, it does not impose any legal duties on governments directly. It is, however, a statement of universal principles that all members of the international community share; it has also had a significant impact on the creation of international human rights law.
The UDHR serves as an instrument that has exceptional significance in the sphere of human rights. It is the primary proclamation that reflects the commitment of every nation towards the protection of human rights. This document has great significance mainly because of two reasons, firstly, for the fact that it is the first international instrument ever that focuses on the need for protection of human rights across the globe. Secondly, the UDHR paved the way for other various instruments on human rights that are legally binding upon the state parties. This declaration became the basis of international human rights law and laid a foundation for the evolution of human rights law not just at the international level but also at the domestic level. It inspired nations across the world to give significance to human rights and to respect each and every individual.
As an impact of UDHR, every nation today, regardless of whether it is a democratic country or not, has provided its citizens with at least the basics of human rights. The UDHR supported by various other international instruments on human rights, has been successful in reducing numerous practices such as racial discrimination, torture, slavery, etc., to a great extent, which were very prevalent during the 19th century. Recognition of women’s rights is another achievement of the UDHR.
Though it is said that the Universal Declaration is not legally binding upon the state parties directly, it is nevertheless important to understand that the mechanism under international human rights law makes the UDHR indirectly binding upon the state parties through the medium of forthcoming instruments on the subject of human rights. The various instruments that have come into existence at the international level are ultimately based upon the principles and rights laid down by the UDHR. Therefore, any nation that is a party to any of the instruments on human rights has an indirect legal obligation to comply with the provisions of the UDHR.
In addition, the Universal Declaration of Human Rights has given rise to several international treaties that are binding on the countries that ratify them. These include:
The basic structure of the Universal Declaration of Human Rights was influenced by the Code Napoléon, a series of regulations written centuries ago by Napoléon Bonaparte.
Though its final shape took form in the second draft prepared by French jurist René Cassin, who also contributed to the first draft prepared by Canadian legal expert John Peters Humphrey.
The Declaration consists of the following:
The preamble of the Declaration outlines the social and historical factors that led to the formation of the Universal Declaration of Human Rights.
Article 1: Free and equal
All humans are born free and equal, and they should all be treated equally.
Article 2: Freedom from discrimination
Everyone is entitled to claim their rights, regardless of their sexual orientation, socioeconomic status, religion, ethnicity, or language.
Civil and Political Rights: Articles 3 to 21
Article 3:Right to life
Everyone has the right to life, as well as the right to live in a free and secure environment.
Article 4: Freedom from slavery
No one has the right to treat anyone as a slave, and you have no right to enslave anyone.
Article 5: Freedom from torture
No one human being has the right to subject any human being to torture.
Article 6: Right to recognition before the law
Each and every individual should be legally protected by law.
Article 7: Right to equality before the law
The law is the same for everyone and it should be applied in the same way to everyone without any discrimination.
Article 8: Access to justice
When the rights of individuals are violated, they have every right to seek legal aid.
Article 9: Freedom from arbitrary detention
No individual has the authority to arbitrarily arrest or detain any individual, or deport them from their nation.
Article 10: Right to a fair trial
Trials should be open to the public and conducted fairly by an impartial and independent tribunal.
Article 11: Presumption of innocence
Until an individual is to be proven guilty in a court of law, they are presumed innocent, and hence they have the right to a defence.
Article 12: Right to privacy
Each and every human being has the right to be protected if someone attempts to damage their reputation, access their house without permission, or interfere with their correspondence.
Article 13: Freedom of movement
Everyone has the right to leave or relocate inside their own country and to return
Article 14: Right to asylum
Everyone has the right to seek refuge in another country if you are being persecuted in your homeland.
Article 15: Right to nationality
Each and every human being has the right to be a citizen of a country and to have its nationality.
Article 16: Right to marriage and to found a family
Men and women have the right to marry (only when they attain their legal age to marry) without any regard to race, country, or religion. The government and the legal system of that country should safeguard families.
Article 17: Right to own property
All human beings have the legal right to own property. No one has the authority to unlawfully take them from any individual.
Article 18: Freedom of religion or belief
Everyone has the freedom to freely express, change, and practise their religion alone or with others.
Article 19: Freedom of Expression
Everyone has the right to think and freely express ideas or whatever they decide.
Article 20: Freedom of assembly
Every individual has the right to hold peaceful meetings and to participate in them.
Article 21: Right to take part in public affairs
Everyone has the right to participate in the political activities of their country and has equal access to public service.
Economic, Social, and Cultural Rights: Articles 22 to 27
Article 22: Right to social security
Every individual should be able to develop freely and take advantage of all the benefits that their country has to offer.
Article 23: Right to work
Everyone has the right to work in just and fair conditions, with the freedom to select their work and pay that allows them to sustain themselves and their families. For equal work, everyone should be paid equally.
Article 24: Right to leisure and rest
Workdays should not be excessively long, and everyone has the right to rest and take paid leave regularly.
Article 25: Right to an adequate standard of living
Everyone has the right to have everything you require so that you and your family do not go hungry, are not homeless, and do not fall ill.
Article 26: Right to education
Regardless of race, religion, or place of origin, every human being has the right to attend school, continue their studies as far as they choose, and learn.
Article 27: Right to take part in the cultural, artistic, and scientific life
Each and every individual has the right to share the cultural, artistic, and scientific benefits of your community.
Article 28: Right to a free and fair world
To ensure that our rights are protected, there must be a court that can protect them.
Article 29: Duty to your community
We humans have responsibilities to the community that allows us to completely develop our personality. Human rights should be protected by law. It should enable everyone to appreciate and be respected by others.
Article 30: Rights are inalienable
No one, neither institution nor individual, should act in any way to undermine the rights guaranteed by the UDHR.
Universal Declaration of Human Rights and Human Rights in India
India, as a democratic and welfare nation, has always given utmost importance to human rights and has always been committed to the protection of human rights, which is also reflected in the Indian Constitution.
The UDHR had a great influence on the Indian Constitution since the drafting of the document was completed a year later to the adoption of the international instrument. India, being a signatory to the proclamation, ensured that the principles enshrined in the UDHR are also reflected in the Constitution of India. The words “Secular, Justice, Equality” in the preamble, the very beginning text of the Constitution, reflect the spirit of India as a nation to promote and protect human rights. The simple terms in the preamble are supported by Part III and Part IV of the Constitution, which discuss the fundamental rights and the directive principles of state policy.
Comparison of the Indian Constitution and the UDHR
The below table shows the comparison between rights provided in the Indian Constitution and the UDHR.
The Supreme Court of India has been playing a significant role in the evolution of domestic jurisprudence with regard to the sphere of human rights. Though the Constitution lists down specific rights under Part III, the Supreme Court through wide interpretation of the provisions under Part III, has always engaged in making the fundamental rights inclusive. The Supreme Court, through its decisions, has added various rights, such as the right to education and the right to privacy, within the meaning of the right to life and liberty under Article 21 of the Constitution, as implied fundamental rights. The Supreme Court of India has also recognised and invoked the UDHR in various cases. Some of the cases where the Supreme Court of India has discussed the UDHR are briefly discussed below.
His holiness Kesavananda Bharati v. State of Kerala & Anr. (1973)
Brief facts:
In the present case, the petitioner was the chief of a religious institution (Mutt) in the state of Kerala. The Mutt’s land was acquired by the state under the Kerala Land Reforms (Amendment) Act, 1969. The petitioner challenged this Act in the Supreme Court, contending that the Legislation is violative of Article 26 which provides for freedom to manage religious institutions.
The petitioner challenged the constitutional validity of these acts and the power of parliament to amend fundamental rights.
Issues:
Whether or not the parliament can amend the fundamental rights.
Whether or not the impugned Constitutional Amendment Acts are valid.
Judgement:
Though the present case is a landmark one that dealt with various issues, the relevant portion of the judgement with regard to human rights is the issue of the power of parliament to amend fundamental rights. The Court in this case held that the parliament has the power to amend any provision of the Constitution, but the amendment should not be violative of the basic structure of the Constitution which includes the fundamental features of the constitution such as equality, justice, or any of the principles mentioned in the preamble of the constitution. The basic structure also includes Part III of the Constitution which includes the fundamental rights. The Court also held that though the UDHR is not legally binding, the way the fundamental rights are drafted by the constituent assembly shows how India understood the nature of human rights. The Court further held that the declaration describes some rights as inalienable.
ADM Jabalpur v. Shivkant Shukla (1976)
Brief facts:
The president of India declared a national emergency through a presidential order under Article 352 of the Constitution citing threat to security of India due to internal disturbances.
The presidential order led to the suspension of fundamental rights guaranteed under Part III of the Constitution. Simultaneously, the court proceedings with regard to the application of Article 14, 21 and 22 of the Constitution were also subject to suspension.
The declaration of emergency was followed by arbitrary detention of various politicians and others.
As a result of the presidential order, the lower courts suspended the proceedings dealing with the application of rights under Articles 14, 21, and 22 of the Constitution. But the decision of a few courts was not in favour of the government, and the government appealed such decisions before the Supreme Court.
Issues:
Whether or not the fundamental rights can be suspended during an emergency.
Judgement:
Hon’ble Justice Khanna, the dissenting judge in this case, while interpreting the presidential order under Article 359(1), held that the interpretation of the presidential order, since it affects the fundamental rights or human rights, should be in conformity with the international customary law. Justice Khanna stressed upon Article 8 and 9 of the UDHR which provide for the enforcement of fundamental rights and protection from arbitrary detention. He observed that the Court should interpret the presidential order under Article 359(1) in a manner which would bring it conflict with Article 8 and 9 of the UDHR. He therefore held that the presidential order should not be construed to permit arbitrary detention or suspension of any remedy for the enforcement of fundamental rights.
Kishore Chand v. State of Himachal Pradesh (1991)
Brief facts:
In the present case, the appellant, along with two other accused, was charged with offences under Section 302 and 201 r/w Section 34 of the Indian Penal Code, 1860 for murder and concealing the dead body of the victim.
The Sessions Court convicted all three accused for the alleged crime and sentenced them to life imprisonment for offence under Section 302 and a rigorous imprisonment of 2 years for offence under Section 201 of the Penal Code.
The High Court, on appeal, acquitted accused 2 and 3 for offence under Section 302 and confirmed the conviction and sentence of the accused.
Therefore, the appellant filed an appeal before the Supreme Court.
Issues:
Whether the prosecution proved the guilt of the accused beyond reasonable doubt.
Judgement:
The Supreme Court, while acquitting the appellant, held that the police failed to establish the guilt of the accused beyond reasonable doubt and that there was fabrication of evidence by the investigating officer. The Court also held that the investigating officer also violated the fundamental right to personal liberty of the accused by framing them for offences punishable with capital punishment. The Court further observed that, though investigating heinous crimes is a difficult task since such crimes are committed with great secrecy, it is necessary to consider the precious fundamental right to life and personal liberty guaranteed by Article 3 of the UDHR and Article 21 of the Indian Constitution. The Court also invoked the right to defend guaranteed under Article 10 of the universal declaration and held that assigning an experienced defence counsel to the accused is an important aspect of a fair trial and the inbuilt right to life and liberty as guaranteed under Articles 14, 19, and 21 of the Constitution.
Chairman, Railway Board & Ors. v. Mrs. Chandrima Das & Ors. (2000)
Brief facts:
In the present case, a few railway employees committed rape of a woman, who was a Bangladeshi national, at the ‘Rail Yatri Niwas’, Howrah railway station.
Mrs. Chandrima Das, an advocate, filed a petition under Article 226 of the Constitution before the Calcutta High Court claiming compensation for the victim. The High Court awarded a compensation of Rs. 10 lakhs to the victim, which was to be paid by the railway board since the offence was committed by the railway employees on the station premises.
The railway board filed an appeal before the Supreme Court contending that it would not be liable to pay the compensation since the victim was a foreigner and not an Indian national. The board also contended that the offence was an individual act of persons, and hence it would not be liable to pay compensation for the acts of concerned individuals. The board had further contended that compensation could not be awarded since the petitioner was not the victim herself.
Issues:
Whether the railway board is liable to pay the compensation.
Judgement:
The Court dismissed the appeal and held the railway board and the central government vicariously liable. The Court, while upholding the compensation awarded to the victim, discussed the right to life under Article 21 of the Constitution. The Court held that fundamental rights guaranteed under the Constitution are in consonance with the rights set out in the UDHR. Therefore the meaning of the term ‘life’ under Article 3 of the Constitution has to have the same meaning under Article 21 of the Constitution. The Court held that the meaning of the term life under Article 21 of the Constitution cannot be narrowed down. Though the fundamental rights are available to the citizens of the nation, a few of them are available to any person, be it a citizen or a foreigner.
Thalappalam Service Co-operative Bank Ltd. & Ors. v. State of Kerala & Ors. (2013)
Brief facts:
In the present case, a person named Sunil Kumar filed an RTI application seeking information about some members of a co-operative society.
The Kerala State government issued a circular stating that all the co-operative societies registered under the Kerala Co-operative Societies Act, 1969 fall within the definition of ‘Public Authority’ under Section 2(h) of the RTI Act, 2005 as a result of it being obligatory to provide the information sought by any citizen under the RTI Act.
The co-operative society filed a writ petition before the Kerala High Court under Article 226 of the Constitution challenging the circular. The Court upheld the circular.
After a series of appeals that involved overturning and upholding decision of the Kerala High Court, the present appeal is filed before the Hon’ble Supreme Court.
Issues:
Whether the Co-operative societies fall within the definition of ‘Public Authority’ under Section 2(h) of the RTI Act, 2005.
Judgement:
The Court in this case answered the issue negatively, holding that the co-operative societies do not fall under the definition of public authority. The Court held that the furnishing personal information of an individual that has no public interest would be a violation of the individual’s right to privacy, which has been recognised as a basic human right under Article 12 of the UDHR and also as an implied right under Article 21 of the Indian Constitution. The Court in this case also observed that the right to information is also a fundamental right under Article 19(1)(a) of the Constitution, though it is not explicitly mentioned. It further noted that Article 19 of the universal declaration also recognises right to information as a fundamental human right.
K.S. Puttaswamy & Anr. v. Union of India & Ors. (2017)
Brief facts:
The government launched AADHAR, which was made mandatory for availing certain schemes.
An individual was required to provide biometric data while signing up for AADHAR.
The petitioner, who is Retd. Justice, challenged the Aadhar scheme before the Supreme Court, contending that it violates the right to privacy of an individual .
Issues:
Whether the right to privacy is a fundamental right and a constitutionally protected value.
Judgement:
The Supreme Court in this case held that the right to privacy is an essential part of the right to life and personal liberty under Article 21 of the Constitution. The Court observed that the right to privacy is recognised as an international human right by Article 12 of the UDHR to which India is also a signatory. The Court therefore observed that recognition of privacy as a fundamental constitutional value is part of India’s commitment to global human rights, as Article 51 of the Constitution requires the state to respect international law and treaty obligations. The Court further held that the importance of the right to privacy cannot be diluted.
Conclusion
In a world where human rights enforcement is still a challenge in both developed and developing countries, the Universal Declaration of Human Rights (UDHR) serves as a lighthouse for the international community on the standards that should be set for the protection and promotion of human rights. The Universal Declaration of Human Rights marked the beginning of a new era of hope for respect for all people’s inherent equality and dignity. It paved the way for the drafting of international human rights treaties and the formation of several human rights organisations. It gave greater legitimacy to the subject of human rights around the world, putting it firmly on the agendas of both national governments and the international community.
Despite these great achievements, the last seventy-three years have also shown that, in the absence of political will and resources, complete respect for human rights remains a pledge on paper. Even in recent scenarios, the fight against crime and terrorism has also put a strain on fundamental rights.
So governments today must show the same degree of vision, courage, and commitment that led the United Nations to adopt the Universal Declaration of Human Rights seventy-three years ago.
Frequently Asked Questions (FAQs)
What is the name of the United Nations first human rights declaration?
The Universal Declaration of Human Rights (UDHR).
Where was the UDHR signed?
It was adopted at the Palais de Chaillot, in Paris, France.
What is the total number of articles in the Universal Declaration of Human Rights?
The Declaration enshrines 30 Articles.
What is the significance of the UDHR today?
One of the most important documents in international human rights legislation is the Universal Declaration of Human Rights. It serves as the foundation for many other human rights documents, including the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Documents like these allow governments, advocates, and attorneys to promote human rights everywhere and take action when they are infringed.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.
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This article is written by Smaranika Sen, from Kolkata Police Law Institute and updated by Subhadeepa Sen. This article deals with the online gambling scenario in India.
Table of Contents
Introduction
Gambling has existed for a long time. It is a game of betting where money is involved as a bet. The game is based on an uncertain event, where the main aim is to win money or any goods. Online gambling has been in existence since the mid-1990s. Online gambling is the same as gambling. The only difference is that in online gambling the whole gaming process takes place over the internet. Virtual poker, sports betting, etc are different types of examples of online gambling. Both gambling and online gambling are prevalent in India. However, there still lies a lot of confusion regarding the prevalence of online gambling, its effects, legality, etc.
History of online gambling
Online gambling, an increasingly popular mode of entertainment, is not a new phenomenon. Interestingly, it has quite a history attached to it. The genesis of the same lies in the rich cultural history of India which dates back to thousands of years. Ancient India reflected certain instances where gambling emerged to be a favourite pastime of people. There have been direct references to the same in the ancient epics like Mahabharata and Ramayana. It can be observed that such gambling activities were quite prevalent in various festivals and gatherings in the form of board gambling, betting and animal fights.
In the early 2000s, online casinos in India rose into prominence. As information technology in India grew leaps and bounds and so did the World Wide Web, Online Gambling platforms saw a huge rise in the demand. Over the last few decades, this online gambling industry gained huge popularity. The burgeoning appeal of Online Gambling had definitely given rise to a very fresh dimension to the nation’s landscape. In India, that constitutes a staggering populace of approximately 1.3 billion individuals, a surprising statistic emerges that reveals that almost 40% of the population that constitutes adults of age 18 and above engage in such gambling activities at least once every year.
Online casinos have become a very sought-after choice for the Indian users who seek to engage in an immersive casino experience. The underlying reason for the same is the manifold advantages that it brings about to its users. Some of the notable advantages would be the convenience it provides to its users, a veritable spectrum of banking options, their sterling reputation, the robust security measures that have been incorporated in such places and the wide array of games accessible to them. Some remarkable initiatives have been taken by certain pioneering online gambling platforms that boast to have embraced cryptocurrency as their primary mode of all their financial transactions, thereby adding their hint of innovation and novelty in their landscape. These online casinos rely themselves on provably fair gambling algorithms that serves as the foundation stone to ensure that utmost fairness and verifiability is maintained at all times and at all levels.
Types of online gambling
Keeping in view of the nature, characteristics and risks associated, Online Gambling can be categorized in a few different types in which they tend to operate.
Online casinos
These casinos are designed in such a way that allows the user to have the same experience as he would if he were at a physical casino. It offers an assortment of entertaining games like roulette, slots, blackjet, etc., with high quality graphics and sound effects that brings it closer to a real casino environment. One of the primary risk that is associated with online casinos is the risk of getting addicted to the same due to its extremely easy accessibility and the online nature of it allows for a very smooth gateway to spend money which often gets spent more than one intends to and later have deleterious consequences on one’s financial and mental health.
Sports Betting
This form of online gambling is another game in which the players involved bet on what the outcome of the game will be. For instance, a particular cricket match is scheduled to take place. The players will now bet on a particular team that they think might win the match and if they actually do, the player would be rewarded. Sports betting can be seen in traditional sporting events like football, baseball etc., but also some niche sports like horse racing, darts, cycling and so on. The risks involving such games are the risk of identity thefts due to its online nature, rigged games as well as unfair payouts. Dishonest operators may also cause trouble to the players due to its unregulated nature.
Online Lotteries
This is a very common and popular form of online gaming that works very similar to a physical lottery that takes place around our local neighborhoods. The players have to purchase the tickets and unlike the ones that place in our neighborhood, the players purchase such lottery tickets from around the world. Some of the traditional lotteries would be Powerball and Mega Millions.
Online Poker
Online Poker is perhaps the most popular form of online gambling and has been very systematic in its working. There are numerous events and tournaments that are hosted by the online poker sites and the players are often lured by the huge prizes that come with it. A wide arena of games including Omaha, Texas Hold’em, Seven Card Stud, allow the players to choose to participate in whichever sparks their interest. A large specter of opponents to play against is what is an unique experience that the players get in online poker however, it is also plagued with risks like cheating and collusion.
Game of chance v. game of skill(Before Online Gambling: the current scenario)
The Supreme Court of India on various occasions has distinguished between game of chance and game of skill. The Apex Court in the case of State of Bombay v. R.M.D Chamarbaugwala (1957)held that a game is required to involve a significant amount of skill in order to not get termed as a game of chance. It must predominantly rely on skill and the term “mere skill” should not be interpreted otherwise. This stance was further clarified in the case of K.R. Lakshmanan v State of Tamil Nadu(1996)where the court laid down the preponderance of skill test. This test essentially means that in order to be classified as a game of skill, the success of the player in the game should in essence rely upon the attention, knowledge, experience, training, application power etc of the player. Even if an element of chance exists, it should not dominate the skill of the player in determining the winner in the game.
Rummy, which is regarded as one of the most popular games online, was declared to be a game of skill by the Supreme Court in State of Andhra Pradesh v K. Satyanarayana & Ors (1967). The Court took into consideration the fact that game involved memorizing the cards, holding them and discarding them which involved significant amount of skill at the same time there was an element of chance involved since the distribution of cards are not predetermined, nor based on the skill of any player rather it is based upon sheer luck. However the court distinguished that a mere element of chance cannot take away the entire character of a game of skill if it is predominantly dominated by the skill of the players. An element of chance is present in every game of cards however this cannot lead to the conclusion that no skill is involved in the game of rummy.
Various High Courts have also expressed their views on this issue. The Bombay High Court in the case of Gurdeep Singh Sachar v. Union of India (2019), distinguished fantasy sports from gambling. This distinction was made based upon the fact that the results in real life sport matches do not determine the results of winning or losing in fantasy games thus it is not a game based on sheer chance. The High Court of Punjab and Haryana in the case of Shri Varun Gumber v. Union Territory of Chandigarh & Ors(2017) held that fantasy sports involved application of skill in building the team based upon various factors in real life.
Online gambling: the current scenario
Online gambling is very popular in India. As the years are passing, online gaming is growing enormously. Some business tycoons have also stated that within 5 to 10 years, this industry will have massive growth and surpass many other online gaming industries. A study shows that in India, almost a huge section of young people, especially those below 45 years of age are involved in online gambling. This section of people consists of almost 75% of India’s population. This will enhance the growth of this industry.
The main attraction of this industry is the winning prize. Online gaming has always been a favorite of youngsters. But when such gaming involves cash or any material goods, more people are interested to play. People in the age group of 30 to 40 years are likely to play this game. A lot of websites are increasing day by day in the field of online gambling starting from casinos to online poker. Even the number of users is increasing day by day. An estimation of India’s online gambling market value is about $60 billion per year. Though 50% of it comes from illegal gambling.
One of the most important factors of online gambling is its prevalence to a huge lot of mass. Previously, for online gaming one has to depend on gaming consoles, desktops, etc. But now with the advancement of technology, online gambling can also be played on our smartphones. And we know that nowadays the availability of android or iPhones etc is very common. Even the way of playing such online gambling has become much easier and thus more and more people are playing it. The year 2020 and the ongoing year 2021 have shown a massive factor in the growth of the online gambling industry. Due to the pandemic, we are all sitting at our homes, and starting from work to education everything is being done over the internet. At this time, online gambling has been a boredom reliever to a lot of people. A huge section of people are now interested in playing it.
Advertisements of online gambling apps have also played a huge role in its growth. We all know how much India loves cricket. Apps like Dream11, Gamezy are being advertised in a huge way on television which is solely based on cricket. This has also influenced a lot of people.
Law and online gambling: the grey area
In India, online gambling or betting is under the control of the State Government. It is not illegal. There is no such particular provision or Act that is solely dedicated to online gambling and which prevents one from engaging in online gambling activities. The Constitution of India states that gambling or online betting is a state subject. It is at the discretion of the State if they want to prohibit any online gambling or exclude any game from the prohibition list in their respective States.
Every State has its legislation regarding online gambling. There is one Central Act i.e. Public Gambling Act, 1867 which is recognized by some states of India. However, provisions of online gambling are not expressly present there. This Act is also of the belief that the laws here are pretty old.
Online gambling is at times governed by the Information Technology Act, 2000. In this Act, online gambling provisions or punishments are not expressly mentioned. However, this Act gives the right to the government to block some foreign websites or illegal websites that might be harmful to the people of which are immoral to public policy. This Act also permits the government to take down any site which deems to be harmful.
One of the other important factors about online gambling which determines its legality in each State is the game of chance and the game of skill. The game of chance is such a type of game where the game is solely based on luck. In games of skill, the game is played predominantly based on skill. The skill needs to be nourished and the game should be such where the players need to have proper knowledge of the skill. For example, Poker is often considered as a game of skill as it involves a player who needs to have a piece of proper knowledge and experience in this field. It is believed that all games are somehow dependent on luck. But the only thing which differentiates the game of chance from the game of luck is the predominant factor applied in the game. Games of skill are often excluded from the prohibition list of online gambling activities in many States.
Regulation of gambling in India: the curiosity
One has to realize that gambling needs to be regulated in India. India consists of a huge population and it has been observed that more than half of the population is somehow involved in gambling. The 276th Law Commission Report gives us a detailed view of the gambling scenario and how laws are implemented or regulated in our society. Online gambling laws are solely governed by state legislatures. Some of the state laws on online gambling are:
Nagaland: Nagaland Prohibition of Gambling, Prohibition, and Regulation of Online Games of Skills Act, 2015 regulates the online gambling laws there. It mostly prohibits online gambling that is solely based on luck. However, it gives licenses to those games which are based on skill. It also allows those corporates who are licensed by the Nagaland government to practice online gambling in other states as well, provided that other states have not banned any of such games.
Sikkim: Sikkim Online Gaming Regulation Act, 2008 regulates gambling activities in Sikkim. It is one of the leading states in India that have legalized most online gambling activities. They have also given licenses to online casinos. However, as it is State legislation it is only applicable to its state and not wholly over India. As Sikkim is not a large State, it is not gaining a profitable market in the field of online gambling.
Goa: Goa is popularly known for its offline gambling activities. But the online gambling activities are still not expressly legalized by any law. It is said that some online gambling takes place but most of them are still illegal in Goa.
Telangana, Andhra Pradesh, Tamil Nadu: These three states have expressly prohibited online gambling activities in their States.
Kerala: Kerala Gaming Act, 1960 regulates all the gambling activities in Kerala. Some of the online gambling activities like online casinos are permitted.
West Bengal: West Bengal has been quite liberal regarding gambling laws. It is the only State that allows card games. Online gambling activities are also prevalent here as there is no such law that expressly prohibits it. West Bengal Gambling and Prize Distribution Act, 1957 regulate gambling activities.
Uttar Pradesh: Uttar Pradesh is most likely to scrap the Public gambling Act, and introduce its laws in the State to regulate over all the gambling activities there. All sorts of betting including online gambling are strictly prohibited here.
Rajasthan: Rajasthan Public Gambling Ordinance, 1949 regulates all gambling activities there. All sorts of betting including online betting are strictly prohibited.
As we know online gambling takes place over the Internet and gambling involves monetary transactions. In India, a lot of e-wallet sites need to be licensed by the Reserve Bank of India to permit any sort of transactions that take place in online gambling. This is regulated by the Payment and Settlement Act, 2007.
Why is there a need to regulate online gambling in India
There are primarily two reasons why there is an ardent requirement to regulate online gambling:
i) It enables fraudulent transactions, and
ii) It causes user addiction
Fraudulent transactions
There are various kinds of fraudulent transactions which have infested the sphere of online gambling. Few of them are as follows:
Chargeback abuse
The concept of chargeback essentially means a user who has faced an unauthorized transaction can claim a chargeback through their banks.The problem arises when the users claim chargebacks even for legitimate transactions. These false claims for chargebacks cause huge losses to gambling establishments. Since upon the grant of these chargebacks the establishments not only lose out on the original revenue but also incur additional processing fees and penalties. The online gambling establishments have to lose out on these amounts primarily because this sector is unregulated and thus it is not convenient for them to pursue these disputes in courts.
Player collision
There are instances where online players use spoof locations to create an illusion to other users that they are in different locations. However, in reality, they are together and use their in-person connection to sway the outcome of the “game of chance” in their own favor.
Multiple account fraud
One of the prominent methods of conducting frauds on online gambling platforms is creation of multiple accounts by players who take advantage of this and trick other players thereby rigging the entire process of the gamble/game. A very widespread manner of using multiple accounts to fraud is ‘bonus abuse’ where fraudsters take advantage of their multiple accounts and misuse perks like free credits for new accounts. The new sign-ups which happen are essentially just superficial in nature since it is being created by the same set of individuals who use up the promotion benefits for new sign-ups and thereby causing losses to the online gambling platforms. Another form of conducting these frauds is by playing against one’s own self through multiple accounts, in this case, regardless of the result, the same person shall reap the benefits of the gamble.
Computer/ AI fraud
With the advent of Artificial Intelligence and its popularization within the masses, the online gambling sector has not remained a stranger to it. Users often use AI to rig the entire gambling process. It is done since the AI has a higher probability and prediction skill than an average human-being therefore when put up against a human it proves to be a better gambler, therefore causing wrongful gain to the fraudster and wrongful loss to the other players.
Problem of addiction and consumer issues
The popularity of online gambling has been on the rise since the past one decade. The easy availability and easy access to gambling through online platforms is one of the prime factors contributing to the growing participation of individuals on a global basis. This also brings along with itself other ancillary problems such as vulnerable populations having access to these gambling opportunities which pose additional risks and harm to them. In absence of regulation there is a high possibility that minors, especially those in the adolescence stage, may fall victim to the addiction of gambling. Online gambling platforms provide their users with interactive, immersive environments. In addition to this, the players use digital forms of money in these transactions which leads to them feeling that they are not losing “real money” and they keep indulging more in such activities. The money that is being spent on these unregulated platforms have a high probability of being utilized in crimes such as money laundering etc. Since people do not realise the amount of spending they do on these websites they end up losing a lot of money.
Lack of certain laws a reason for the fall of a promising industry
Online Gambling is a promising industry because a huge amount of revenue can be earned from it. This will not only enhance growth in online gambling corporate industries but also in the whole online business revenue system. However, it believes that this industry is very hard to establish in Indian society. More than 70% of the online gambling industry start-up fails at a very tender level. Several reasons lead to the failure of the online gambling industry. The first and the foremost reason being the lack of any unified and specific law regarding online gambling in India. Different states have formulated different laws regarding gambling. Most of the states have not expressly addressed any laws regarding online gambling. This has led to a lot of confusion among the online gambling industry. As we know, according to the Supreme Court of India games of skill are exempted from the purview of gambling. However, legislation on gambling is a state subject and many states have also banned games of skill as well. Even most of the States have not expressly defined the games of skill and games of chance. Due to the said reasons, the online gambling industry remains in apprehension to introduce any new apps in the market. Even due to the lack of any proper definition or characteristics that are required to make a game identified as a game of skill, a lot of apps are being banned or not released in the market.
Another important factor that is leading to the decline of this industry is that online gambling corporations are unable to access the wants and needs of the Indian audience. Most of the online gambling industry tries to copy the westernized way of marketing. This does not attract a huge section of the Indian audience. They have to understand the audience’s needs and bring that into their games and marketing nature.
Ways to deal with the problem
There are certain ways in which this online gambling industry can be extricated:
Each State should make proper laws especially dedicated to the online gambling industry.
The laws should be very expressive and distinct.
It should properly define the terms and indicate the requirements of what is legal and what is not.
The industry of online gambling especially games of skill, has to improve its technology and make it much easier so that it becomes accessible to a lot more users. It has to understand the needs of the customer and design accordingly. As many online gambling apps are banned they have to be designed in such a way that it gets approval of the government. While making such apps, the industry needs to abide by the law and make it accordingly.
We have to also understand that many online gambling activities are banned, yet they are prevalent. Some of them are harmful to people and can cause a lot of monetary loss. More strict laws should be created to prevent illegal gambling. Laws can be also made on the limitation of the amount of money one can use in a day for such activities(if it is legal) so that huge money loss can be prevented.
Comparative analysis of online gambling
Different countries and different jurisdictions have opted for different approaches with respect to online gambling activities and hence, it can be a little complex and challenging to compare the legalities of the same. Some countries may boast of a robust legislative framework that regulates the online gambling industry making it legal for its residents and even non-residents to participate in such gambling activities within or outside its borders but some countries may not even have laws relating to gambling or online gambling. These two types of approaches by the countries primarily form the basis of such online gambling sites. There are some countries that deem certain specific forms of online gambling as legal, for instance, lotteries or ‘skill-games’ and certain others as illegal like online casinos. Countries like Finland and Canadian Provinces prevent non-residents from accessing online gambling platforms that are essentially jurisdiction based. Netherlands on the other hand, does not allow the residents to access online gambling sites that are positioned outside its borders. There are some other countries like Australia which prohibits its residents from accessing sites that belong from their own jurisdiction. And lastly, countries like Pakistan, Saudi Arabia do not allow any form of gambling including Online Gambling to be operative within their country.
United Kingdom
The national gambling commission regulates online gambling in the UK. Online gambling activities like horse race betting, online sports betting, games of skill or betting exchanges are deemed as legally operative in the country and the UK residents are allowed to participate in the same. Due to the operation of Gaming Act of 1968 as well as the Lotteries and Amusement Act of 1976, currently, it shall be illegal to set up and operate internet casino or bingo or gaming machine sites but bets can be placed by the UK citizens at offshore online casinos provided no british laws are broken. Online lotteries are barred; however, traditional lottery tickets may be purchased with the aid of Internet and email technologies only if some action by a human operator is undertaken. The new national Gambling Act of 2007 states that online gambling may operate from the UK soil but must adhere to the regulatory requirements and requisite licensing.
Australia
The Interactive Gambling Act of 2001 regulates online gambling in Australia at the federal level. State specific gambling legislations can be formulated by the Australian states and few of the gambling activities that are allowed to be legally played by the Australian residents are skill games and poker rooms. In addition, online sports and race books are also permitted. Online lotteries are permissible to be operated however, instant lotteries, scratch tickets and keno-style games are barred. It is noteworthy that in the government licensed online casinos of Australia, the Australian residents are not allowed to operate.
Conclusion
Online Gambling can be an addiction if it is not taken under control. It can become very harmful to people. It is often observed that in this type of activity the young aged group easily gets involved and eventually destroys their future. The excitement of getting cash on playing any game or betting can be very intriguing. It might lead even the middle-aged group to forget about their responsibilities. Often people involved in gambling are seen to be involved in drugs and other immoral activities. It also leads to a disruption in mental peace. However, online gambling can become a beneficial industry. It has been observed as one of the most recreational online games. Lastly, the government has to put an eye on online gambling activities and make laws accordingly.
Frequently Asked Questions (FAQs)
What can be anticipated for the future of Online Gambling in India?
Gambling overall is a topic of much debate. In July 2018, the Law Commission of India (LCI) had put forth a recommendation requesting the government to critique and explore the legalization of online gambling india as a potential source of government revenue. It can be concluded that this conversation about the future of online gambling in India remains ongoing. With potential legislative adjustments and by garnering the evolved public perspectives, this industry can shape its trajectory.
Why is there a need to regulate Online Gambling in India?
Advocating the need for enforcing a robust regulation for Online Gambling is because this would provide the much needed player protection and better oversight. Countries like the United Kingdom wherein Online Gambling industry is regulated UK Gambling Commission ensures a safer gaming experience for the patrons.
What is the difference between betting, wagering, and gambling?
Wagering basically includes all kinds of actions in which probability underlies. This simply means the event has the possibility of happening and also not happening. These events or actions are completely illegal in India. Betting is somewhat similar to wagering but it restricts itself to certain specific events mostly, the sporting events like cricket, horse race, etc,. It is done on the resulting day of the event. Gambling stands in stark contrast to the other two because Section 65-B (15) defines “gambling” under the Finance Act, 1994. Gambling is an interplay of three aspects, Consideration, risk (chance) and lastly, prize.
How does Online Gambling relate to the Indian Contract Act?
The Indian Contract Act, 1872 governs the legality, validity and enforceability of any contract that is entered into by the parties. And according to Section 23, if the consideration or object of an agreement is not lawful in its nature or it is against the public policy or is considered immoral by the court, then such a contract shall be regarded as void and unenforceable in its nature. Gambling or betting has been questioned several times on the morality grounds. Similarly, a wager agreement too is considered null, void and is unenforceable. The money that is lost by engaging in such an agreement, will also be non-recoverable.
This article has been written by Sarthak Mittal, a student at the Vivekananda Institute of Professional Studies of Indraprastha University, Delhi. This article delves into the actus reus and mens rea, which culminate in the offence of insulting the modesty of a woman. This article also expounds on the punishment relating to the given offence and the way in which it differs from the offence of outraging the modesty of a woman. The article also covers all the important case laws and illustrations relating to the given offence.
It has been published by Rachit Garg.
Table of Contents
Introduction
In the case of State of Punjab v. Major Singh (1967), Hon’ble Justice R.S. Bachawat succinctly defined ‘woman’s modesty’ as the essence of her sex. He succinctly observed that “the modesty of an adult female is writ large on her body. Young or old, intelligent or imbecile, awake or sleeping, the woman possesses a modesty capable of being outraged”. The English Oxford dictionary further defines the word ‘modesty” as “womanly propriety behaviour.” It is, therefore, clear that the legislature deliberately used the word “modesty” in Sections 509 and 354 of the Indian Penal Code, 1860 to extend protection to an automatic attribute that is peculiar to women. Whether an act outrages or insults the modesty of a woman is seen according to the standards of morality prevailing at that time in society. Such kinds of sections are largely based on the concept of public morality; thereby, the acts and words falling within the ambit of the sections will differ throughout time, country, and society.
What crime is defined under Section 509 IPC
The act of insulting the modesty of a woman has been criminalised by Section 509 of the Indian Penal Code. The offence is said to have been committed when any person utters any word, makes any sound or gesture, exhibits any object, or intrudes upon a woman’s privacy with the intention of such gestures or acts being seen by that woman or that such words or sounds be heard by that woman so as to insult a woman’s modesty. In the given offence the guilty conduct, or actus reus, can be construed widely to include any conduct that may not include a physical confrontation with the woman but is sufficient to abuse the woman in obscene terms. The criminal intent, or mens rea, for the given offence is that the person intends to make his conduct noticeable to the woman to intentionally insult her modesty.
In the case of State of Kerala v. Hamsa (1988), it was held by the court that even if the conduct of the accused goes unnoticed by others except by the victim, the conduct will amount to insulting her modesty. In the given case, the conduct of winking and beckoning a woman to the notice of others was found to be insulting to her modesty. Further, in the case of Sau. Anuradha R. Kshirsagar v. State of Maharashtra (1989), the accused hurled the following utterances towards fellow female teachers:- “Catch them by their hair, kick them on the waist, pull them out, and I will see as to how these lady teachers, who did not leave the hall, stay at Akola”. The Bombay High Court in the given case opined that the concept of “modesty” is concerned with the feminity that originates out of the female sex, and whenever there is an assault or insult to this feminity, the offence under Section 509 will be said to have been made. The court opined that in the given case, the threats made by the accused have nothing to do with this femininity, and thereby, they are not insulting the modesty of the woman. The court held that the given utterances hurled by the accused were threats that would amount to a common offence irrespective of the victim’s sex, and thereby sentenced the accused for the offence of criminal intimidation under Section 506 of the Indian Penal Code.
Essentials of crime under Section 509 IPC
For invoking Section 509, the intention of the accused to insult the modesty of the women should be proved. This insult can be caused by the following acts:-
Uttering any word with the intent that such words be heard by the woman.
Making any sound or gesture with the intent that such sounds or gestures be heard or seen by the woman.
Exhibiting any object with the intent that such object be seen by the woman.
Intruding upon the privacy of a woman.
The offence can be divided into two parts. Firstly, the intent to insult the modesty of women, and secondly, the means through which the given intention is given effect. The word “modesty” makes it clear that the conduct of the accused should intentionally target the femininity of the woman. It should be conduct in relation to women that is unscrupulous in the eyes of a reasonable man.
In the case of Swapna Burman v. Subir Das (2003), it was alleged that the accused constantly used to couple his name with the name of the complainant, knowing that the complainant was married. The accused used abusive language targeted towards the complainant, and that one day around 11:30 P.M., the accused entered into the complainant’s house compound and knocked on the door while calling her name and saying that the complainant’s life with her husband will not be a happy family life and that he should be her husband. The Gauhati High Court in the given case held that Section 509 does not only include making suggestions of sexual relations that are of an indecent character, but it will also include various other acts that are indecent and immoral in nature, and held that the acts done by the accused in the given case are of such an indecent and immoral nature. The court in the given case upheld the conviction of the accused.
In the case of Khushboo v. Kanniammal (2010), the court held that to attract Section 509, it should be established that the modesty of a particular woman or readily identifiable group of women has been insulted. Further, in the case of Abhijit J.K. v. State of Kerala (2020), the Kerala High Court held that any act that is affront to the decency and dignity of a woman cannot be considered to be of a trivial nature.
Punishment for crime under Section 509 IPC
The offence of insulting the modesty of a woman is a cognizable, bailable, and compoundable offence. Before the Criminal Law (Amendment) Act, 2013, the offence was punishable with simple imprisonment, which may extend to one year, or with a fine, or both. The suggestion for enhancing the punishment under Section 509 was reiterated by the Justice J.S. Verma Committee’s report on amendments to criminal laws (2013) and was originally suggested by the Law Commission’s 84th Report. The given report opined that increasing incidents of eve-teasing require enhancement of punishment under Section 509. The 2013 Amendment Act thereby, on the given suggestions, enhanced the punishment for insulting the modesty of the woman to simple imprisonment, which may extend up to a period of three years, a fine, or both.
When the accused is found to be culpable by the court for the offence under Section 509, the term of his imprisonment or the amount of fine will depend upon the nature of his conduct. If the conduct being punished is of a grave nature, the punishment will be stringent, whereas if the conduct is of a trivial nature, the punishment will be lenient. The court in such cases can also punish the offender with admonition or probation. While deciding the term of punishment, the court has to consider the ex-ante and ex-post factors relating to his decision. The court in such a case will also consider how far the conscience of society has been shocked by the act of the offender. The offence was made to punish the conduct, which did not include assault but was of grave nature, so as to insult the modesty of the woman and to curb the menace of eve teasing. The purpose of the provision is to provide women in our country with a safe environment, and thereby, the given object is also to be kept in mind while deciding the liability of the offender.
How to seek remedy under Section 509
The law provides two mechanisms for women to seek justice under Section 509. The victim can file an FIR (First Information Report) under Section 154 of the Code of Criminal Procedure, 1973. The offence being cognizable empowers the police to start an investigation without seeking prior permission from the court. The police, after completing the investigation, will submit a charge sheet to court, whereby, if deemed fit, the court will take cognizance against the accused. Once cognizance is taken, the court will frame charges against the accused and try the matter in accordance with the procedure prescribed in the criminal procedure code. The other method to set the criminal law in motion in cases under Section 509 is by filing a complaint before the magistrate under Section 200 of the Code of Criminal Procedure. Filing a complaint is beneficial because the complainant is advantageously placed in comparison to the investigating authorities to collect and present the evidence. It is pertinent to note that it is not necessary for the victim herself to file a complaint; it can be done by any other person as well. It is also pertinent to note that the offence is a bailable offence thereby, the accused will have a right to obtain bail. The court can ask the accused to furnish a bail bond and a security, but in no case can it incarcerate him without a conviction.
Relevance Section 509 contemporaneously
It would be erroneous to think that the given section has lost its relevance after the enactment of the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013. The given Act helps women seek redressal in cases of harassment faced at workplaces. It is imperative to understand that the Act provides for civil remedies and damages, whereas the Indian Penal Code provides for a criminal remedy. The Act is applicable only for incidents that took place at the workplace, whereas the Code provides for no such limitation. We can conclude that the Section has a wider scope than the Act and both are important and relevant in their own way.
Important case laws
In the landmark case of Ram Kripal v. State of Madhya Pradesh (2007), wherein the court held that in cases relating to outraging or insulting the modesty of a woman, the intention of the accused is the crux of the matter, and even the reaction of the victim is relevant; however, the absence of reaction is not always a decisive factor. Thereby, in cases of outraging or insulting the modesty of a woman, the reaction of the woman to such outraging or insulting conduct is always a relevant fact, but the fact of her omission to react may or may not be a relevant fact. The court observed that in a case where the accused with malign intentions touches the flesh of a sleeping woman or where the victim is a person who is unable to communicate verbally, under the spell of anesthesia, or an infant, the accused will be liable under Section 354 or 509 as the case may be irrespective of the absence of any reaction by the victim.
In the recent case of Varun Bhatia v. State and Anr. (2023), the Delhi High Court unfolded various connotations related to Section 509. In the given case, the contention levied against the accused was that he addressed the complainant as ‘gandi aurat’ in front of all the staff, which amounted to insulting her modesty. The court held that the words ‘gandi aurat’ when objectively assessed, seem to be impolite and offensive but are insufficient to provoke shock in a woman to invoke Section 509. The court in the given case also took into account the reaction of the complainant in light of the background to which the complainant belonged and held that the given words would not amount to insulting the modesty of the woman. The court also held that due to the lack of intention on the part of the accused to insult the modesty of the complainant, the court acquitted the accused.
The court also held that merely insulting the woman, misbehaving with her, being rude to her, or not behaving chivalrously as she expects you to behave will not amount to insulting the modesty of a woman. The court clarified that intent is the linchpin of this offence, wherein a deliberate remark or an action to demean the woman’s modesty will amount to the offence under Section 509. The court observed that this is this ‘intent’ that separates ordinary speech and expression from those actions that fall within the ambit of Section 509.
The court in the given case also held that the mere reason that a provision of law is gender specific does not mandate that a presumption be raised in favour of the given gender as well. Such a presumption can only be raised if it is specifically articulated in the given legislation. The court, based on the given legal proposition, held that the court should keep an impartial and neutral approach while deciding cases related to Section 509 and should follow well-established legal principles to adjudicate such matters. The court succinctly held that while dealing with any case, the court should be tipped in favor of justice and not towards any one party.
Conclusion
Section 509 of the Indian Penal Code aims to curb the menace of eve teasing and protect women from such conduct that affronts their modesty without the use of assault or criminal force but only through words or actions. The word “modesty” has been used deliberately by the legislators. A woman’s modesty is inherently linked to her gender, and thereby, all such conducts that are demeaning to the femininity of the woman are covered under the provision. The section is wide enough to include all such demeaning acts; however, it is the intention of the accused that becomes the crux of the matter. The accused to be made liable under the given provision should have a specific intention to use his words or actions to insult the woman’s modesty. In the absence of the given intention, the words or actions of the accused will be indifferentiable from normal speech and expression. To understand whether a word or action is capable of insulting a woman’s modesty, the test of reasonableness is to be applied. Apart from that, the social and cultural background of the victim and the prevailing standards of morality in society are considered.
Hon’ble Justice J.S Verma on 26th December 2012, while discussing the need for amendment in sections relating to offences against women, said, “The humiliating aspect of the crime against a woman is that her status in the hierarchical structure of society also obstructs the way of securing justice for her. Thus, her social status compounds her gender injustice”. Thereby, in all the offences against the woman, the judicial machinery and the investigation agencies should help the aggrieved woman seek justice and implement the provisions for their protection in the true spirit of the law.
Frequently Asked Questions (FAQs)
Does the mere use of abusive language with a woman culminate in an offence under Section 509?
In a recent case of State v. Ankit Shukla (2022), the court held that if the complainant merely alleges that the accused has hurled verbal abuses at her or that the accused has targeted vulgar abusive comments at her, it will not be sufficient to attract Section 509. The court held that the prosecution or the complainant is required to bring on record the exact nature or wording of the abuse alleged to have been hurled at her. If such language is seen as insulting to the femininity of the woman, then Section 509 will be attracted.
Can a woman be convicted under Section 509?
Section 509 starts with the word ‘whoever’ and thereby, it is clear that even a woman can be accused and convicted under Section 509. The section is gender-specific in the context of the victim. Thereby, only a woman can be a victim under Section 509 because the term ‘modesty’ is inherently linked to the female gender. However, modesty can be insulted or outraged by a woman as well as by a man.
What is the difference between Section 509 and Section 354?
Sections 354 and 509 of the Indian Penal Code are both aimed at protecting the modesty of a woman. However, Section 354 is graver than Section 509, as modesty under Section 354 is violated through actions like assault or criminal force. Thereby, Section 354 includes physical force or apprehension of physical force, whereas Section 509 only includes utterances, words, and objects and no physical force. Section 354 provides for a punishment of imprisonment of at least one year, which can be extended up to five years, and a fine, whereas Section 509 provides for a punishment of simple imprisonment for a period of three years, a fine, or both. The difference in the extent of punishment prescribed in both provisions also manifests the difference in the graveness of both offences.
Is Section 509 incorporated in the Bhartiya Nyaya Sanhita Bill, 2023?
Section 509 has been suggested to be replaced by Section 78 in the Bhartiya Nyaya Sanhita Bill of 2023. The Home Minister of India, Hon’ble Mr. Amit Shah, explained in his speech while introducing the given bill that the bill aims to place the provisions relating to offences against women and children before the offences against the state, unlike the Indian Penal Code. Thereby, the given section is renumbered to Section 78 in Chapter V. The verbatim definition of the offence and the extent of punishment remain unamended in the new bill. The given bill was introduced in Lok Sabha on August 11, 2023, and has been referred to the standing committee.
References
Ratan Lal and Dhiraj Lal’s Indian Penal Code (2020, 36th edition)
Indian Penal Code by K.D. Gaur (2020, 7th edition)
Ratan Lal and Dhiraj Lal’s Indian Penal Code (2018, 34th edition, volume III)
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This article is written by Bogineni Naga Jyothi. This article provides a brief knowledge of the Andhra Pradesh Shops and Establishment Act, 1988. The article discusses the concept of the shops and commercial establishments legislation with special reference to the Andhra Pradesh Shops and Commercial Establishments Act of 1988.
It has been published by Rachit Garg.
Table of Contents
Introduction
India is currently the fifth-largest economy in the world. The majority of the economy comes from shops and establishments. The Andhra Pradesh Shops and Establishments Act,1988,(hereinafter referred as the Act) is enacted to control and manage the conditions of work and employment in shops and commercial establishments. This article writes down the materiality of this Act, important interpretations and provisions in the Act, the process of registration, renewal, and cancellation, and important immunities. The Andhra Pradesh Shops and Establishment Act was enacted in 1988 by the government of Andhra Pradesh.
Objectives and applicability of Andhra Pradesh Shops and Establishment Act, 1988
The essential aim of this Act is to protect the rights of the employee and fulfil the obligations of the employer towards the employee. This Act is applicable to all the shops and establishments in the whole state of Andhra Pradesh.
Important definitions
Chief inspector
Section 2(2) of the Act defines the chief inspector as a person who is appointed by the government by official notification.
Child
Section 2(3) defines a child as a person who is under the age of fourteen.
Commercial establishment
Section 2(5) defines an establishment used for commercial purposes. An establishment which carries on any trade, business, profession, or any work in connection with or incidental or ancillary to any such trade, business, or profession, or which is a clerical department of a factory or an industrial undertaking, or which is a commercial, trading, banking, or insurance establishment, and includes an establishment under the management and control of a co-operative society, an establishment of a factory or an industrial undertaking that falls outside the scope of the Factories Act, 1948 and such other establishment as the Government may, by notification, declare to be a commercial establishment for the purpose of the act and but it does not include shop.
Employee
According to Section 2(8) of the Act, ‘employee’ means a person completely or part-time employed in, and in correlation with, any establishment, and it may be an apprentice or a clerical worker in the establishment. It does not include the relations of an employer or his partner who is living with and depending upon such employer.
Employer
According to Section 2(9), ‘employer’ means a person having authority over the set of circumstances of an establishment or an organisation, and the employer may be the manager, agent or other person acting in the general management or control of an establishment or an organisation.
Establishment
Section 2(10) of the Act defines the establishment as a commercial establishment and such other establishments as a shop, restaurant, eating house, residential hotel, lodging house, theatre, or entertainment, and includes a notifiable establishment that is notified by the government through this Act.
Factory
Section 2(11) of the Act defines a factory as a building or buildings where manufacturing processes are carried out.
Registration certificate
According to Section 2(19) of the Act, a registration certificate is issued by the state government under this Act.
Shop
Under Section 2(21) of the Act, ‘shop’ means an area where any trade or business is carried on or where utilities are provided to customers, as well as the shop run by a cooperative society, an office, a store room, godown, warehouse, or work place, and such other establishments that are notified under government notification to be shops for the purposes of this Act.
Wages
Section 2(23) of the Act defines wages as the compensation or remuneration paid for the services rendered by the employee during the course of employement.
Any remuneration or compensation ordered by the court or any tribunal between the employer and employee as a settlement is to be considered as wage.
Any remuneration or salary given for the services rendered by overtime work or work on holiday by the employee is considered as wage.
Any bonus payable during the course and terms of employment is considered as wages.
The sum of the amount payable at the time of termination of employment, with or without deductions comes under the purview of the wages.
An amount of money entitled by the employee through any scheme designed under any law is to come under wages. But the profitable shares as a bonus, house accommodation, medical assistance and water supply, the Provident Fund payable by the employee, and travel allowances are not considered wages under this Act.
Young person
Section 2(25) of this Act defines a young person as a person who is under the age of 18 and who is not a child.
Important provisions of Andhra Pradesh Shops and Establishment Act, 1988
Process of registration under the Act
Section 3(1)(i) of the Act defines that, in the case of an existing establishment, within 30 days of its establishment, the employer has to give the application to the inspector containing such particulars along with the prescribed fee for registration.
Under Section 3(1)(ii), each and every employer, in the case of a new establishment, within thirty days from the date on which the establishment commences its work, has to give the application to the inspector for registration.
On receipt of the application, the inspector, after the process of verification, can issue the certificate of registration to the employer who shall display it at a prominent pace of establishment.
If there are any changes in any particulars, every employer has to disclose the information to the inspector within fifteen days after the change has taken place.
If the employer wants to close the establishment, within fifteen days of its closure, the employer shall intimate that information to the inspector, where the inspector is satisfied with such intimation that the establishment has been closed, he shall remove the name of such establishment from the register and cancel the registration certificate.
Requirements of the registration
Details of the employer.
Permanent address of the establishment.
Name of the establishment.
Category of the establishment.
Additional information that may be required.
Renewal of the registration
After the application is made according to Section 4 of the Act by the employer with a prescribed fee, the inspector renews the registration certificate for a period of one year or for a number of years as prescribed. The renewal application should be done before thirty days of its expiration .
The application for the renewal of registration must be submitted within thirty days of the expiration of the registration. Otherwise, the applicant must pay the penalty after the expiration of the registration for the renewal of the registration.
Revocation and suspension of the registration certificate
Under Section 5 of the Act, the registration certificate will be revoked and suspended if the applicant obtained it by misrepresentation, fraud or suppression of any material facts; or the employer has willfully contravened any of the provisions of this act or the rules made thereunder, the inspector can revoke and suspend the certificate after giving the employer an opportunity to show cause.
Advantages of the registration
After the registration of the establishment, the employer can get benefits under the various government schemes.
can get authorization to operate the business bank accounts.
Will get the legal identity to conduct business in the state or region.
Appeal against the revocation or suspension
Section 6 defines that any person aggrieved by the order made under Section 5 of the Act can appeal to the prescribed authority within 30 days of the communication of the order. The appellate authority can accept the appeal after the expiration of the limitation if he is satisfied by the reasons furnished by the applicant. The appellate authority shall dispose of the appeal within two months after being heard.
Key provisions of shops
Opening and closing hours of the shops
As per Section 7 of the Act, the government notifies the opening and closing hours of the shops by the official notification; no shop shall open the shops before the opening time or after the closing time prescribed by the government. As per Section 7(1), any customer who was being served or was waiting to be served in any shop at the hour fixed for its closing may be served during the quarter of an hour instantly following such hour.
Under Section 7(2) of the Act, the government may fix different hours for different classes of shops or for different areas or for different times of the year.
Selling is prohibited outside the shops
According to Section 8 of the Act, the sale of any goods that are adjacent to or in a public place before the shops is prohibited before opening and after the closing of the shops by government notification.
But this section does not apply to these categories, which are vegetables, newspapers, fruits, flowers, and other goods that have a time interval permitted by the government in the official notification.
Daily and weekly hours of work in a shop
Section 9(1) defines that the employee shall not be allowed to work more than eight hours in a day and 48 hours in a week. If the employee wants to work overtime, the maximum period is only six hours a week.
Employees are allowed to work in any shop for the extra time than usual time described under sub section 2 of Section 9 if the following conditions are satisfied:
The working hours of the employee shall not exceed twelve hours, including overtime.
The spread over shall not exceed thirteen hours a day including rest intervals.
The total number of working hours in a week shall not exceed 62 hours including overtime.
Any employee is not allowed to work overtime for more than seven days at a stretch .
Interval of rest
According to Section 10 of this Act, every employee under this Act shall get an interval of rest at least an hour for every five hours of work.
Closing of shops and grant of holiday
According to Section 12(1) of this Act, on every Sunday, every shop or establishment shall remain closed. The chief inspector may fix the different timings for different shops, for different areas, or for the different classes of shops according to Section 12(3) of this Act.
Closing of shops on special occasions
In addition to the holiday mentioned under Section 12 of the Act, the chief inspector may, by notification and with the previous approval of the government, close the shops and establishments on special occasions.
Keys provisions of Establishments other than the shops
Opening and closing hours of the establishments
As per Section 15 of the Act, the government notifies the opening and closing hours of the establishments by official notification; no establishment shall open before the opening time or after the closing time prescribed by the government.
Daily and weekly hours of the establishment
Under Section 16(1) of the Act, an employee in any establishment shall not be allowed to work therein for more than eight hours in any day and forty eight hours in any week.
Employees are allowed to work in any establishment for the longer than usual time described under sub section 2 of Section 16 for the following conditions are satisfied:
The working hours of the employee shall not exceed twelve hours, including overtime.
The spread over shall not exceed thirteen hours a day, including rest intervals.
The total number of working hours in a week shall not exceed 62 hours, including overtime.
Any employee is not allowed to work overtime in any establishment for more than seven days at a stretch.
Interval for rest of the establishment
Section 17 defines the interval of rest; every employee under this act shall get the interval of rest at least an hour for every five hours of work. The chief inspector may reduce the interval of the rest to half an hour when the time of the work of an employee is less than eight hours.
Spread over the period of work
Under Section 18 of the Act, the work of every employee should be arranged properly with an interval of rest. The work shall not be spread for more than twelve hours a day, and the employees working for the purpose of account preparation shall not exceed the time interval of fourteen hours per day.
Holidays
Every employee in any establishment shall be allowed a holiday under Section 19 of this Act and no deduction shall be made from the wages of any employee in an establishment on account of which a holiday has been allowed in accordance with this section.Giving a holiday once a week can help you work more efficiently.
Employment of children, women, and young person
According to Section 20 of the Act, no child is allowed to work in any establishment.
According to Section 21 of the Act, young persons are not allowed to work in any establishment before 6 AM and after 7 PM.
According to Section 23 of the Act,, women are not allowed to work in any establishment before 6 AM and after 8.30 PM.
Maternity leave and benefits
Becoming a mother is a great thing in every woman’s life. After pregnancy, a woman should be very careful until delivery, and she needs rest as she nears delivery. Every woman employee shall be entitled to maternity leave and benefit under Sections 24 and 25 of the Act. She shall be entitled for six weeks before delivery. No woman employee shall be entitled to receive such benefit for any day during any of the aforesaid periods, on which she attends work and receives wages thereof.
Health and safety
Maintaining the health of employees by the management leads to more productivity in the work and a chance of raising the economy which affects the development of the country. The following sections come under the health and safety measures to be taken by the employer.
Cleanliness
According to the Section 26 of the Act, the premises should be kept clean and free from malodorous use by the methods as may be prescribed.
Ventilation
Section 27 of the Act defines that the premises of every establishment shall be ventilated by the methods prescribed by the GramaPanchayats and Municipalities or other local authorities for the time being in force.
Precautions for the safety of the employees
Under Section 28 of the Act, the employer shall take safety measures for the welfare of the employee.
Key provisions related to wages
According to Section 30 of this Act, every employee who worked for two hundred forty days or more for a continuous period of twelve months in an establishment, the employee shall get paid leave for fifteen days for a subsequent period of twelve months and such paid leaves may accumulate upto a maximum period of 60 days.
Every employee in any establishment shall get twelve days of paid sick leave and twelve days of paid casual leave during his first twelve months of continuous service and during every subsequent twelve months of such service.
Every employee can get eight days of paid leave in a year.
Under Section 35 of the Act, every employer is responsible for the payment of wages for the services rendered by the employees.
Section 36 defines that every employer must fix the wage periods, whether on a monthly, daily, or weekly basis.
According to Section 37 of the Act, the employee can get twice the regular wages when the employee works overtime.
Under Section 39, wages should be paid to the employee using the money in use.
Deductions
Under Section 40 of this Act, the employer shall give the whole wage to the employee without any deductions. In exceptional cases, the employer can deduct the wages, and those are mentioned below:
Retrieval of the advanced amount as a deduction.
For the services provided by the employer to the employee.
For the absence of duty.
Deductions for the taxes payable by the employee.
For the damages or loss caused by the employee.
For the house accommodation given by the employer to the employee.
Deductions are made with the written consent of the employee.
For the amenities and services provided by the employer to the employee.
Deductions for the payments of Co-operative societies like Post- Office and LIC.
deductions necessary to be obliged by the order of a court or other competent authority to make such an order.
Deductions as fines and penalties lawfully imposed to the employee by the employer
Deductions for the subscription of Provident Fund And Income Tax.
Appointment and powers and duties of the inspectors and the Chief Inspectors
Under Section 57 of the Act, the inspectors and chief inspectors are appointed by the official notification of the government. The respective jurisdictions are allotted to the inspectors and chief inspectors.
Section 58 defines that the Chief Inspector can execute the powers and duties of an inspector under this Act.
Under Section 59, inspectors can assist the subordinates and can inspect the premises and the registers during working hours. The inspector can execute the power and duties allotted to him.
Penalties for offences
Under Andhra Pradesh Shops and Establishment Act, 1988, Penalties are discussed in Chapter XI of the Act. Any employer who makes any false or incorrect statement under Section 3 shall be punishable with fine which may extend to one hundred rupees.
Any employer who fails to comply with any of the provisions of the Sections 3, 4, 5, 7, 9 to 12, 13, 15 to 32, 34 to 47, 49, 68 and 69 shall be punishable for a first offence with fine which may extend to rupees one hundred, for a second offence with fine which shall not be less than rupees two hundred and fifty but which may extend to rupees five hundred and for the third or subsequent offences with imprisonment for a term that may extend to three months and with a fine which shall not be less than rupees five hundred but which may extend to rupees one thousand.
The one who violates the provisions of the Section 8 of the Act shall be charged for the first violation with fine which may extend to rupees of one hundred and for the subsequent violation with fine which may extend to rupees of two hundred and fifty .
The one who infringes the provisions of subsection 3 of the section 48 and subsection 2 of the section 48 of the Act shall be punishable with fine which may extend to rupees fifty per each day during the offence proceed with.
If any employer fails to have the possession of a defendable certificate of registration, in fails to comply with the provisions of sections 3, 4 and 5 shall be punishable, if it repeats the offence he shall be punishable with a fine which may extend to rupees two hundred and fifty for each day throughout the offence proceed with.
Miscellaneous provisions of Andhra Pradesh Shops and Establishment Act, 1988
Under Section 68 of the Act, the employer should maintain the records and display of notices, etc that are prescribed by the government.
According to Section 69 of the Act, every employee is restricted from doing double employment on the holiday prescribed by this Act, and also this Act also restricts the employer from knowingly permitting an employee to work on holiday.
Exemptions
This Act shall not apply to any establishment under the state and central governments, the Reserve Bank of India, local authorities, or railway administration operating any railway under clause 20 of Article 366 of the Indian constitution.
This Act shall not apply to the establishment of oil fields and mines.
This Act shall not apply to establishments in bazaars that are held temporarily for a period of not exceeding one month.
This Act shall not apply to the employee whose monthly salary exceeds sixteen hundred rupees .
This Act shall not apply to the caretakers, sweepers, travelling staff, or the persons employed for loading and unloading of goods at godowns.
Sections 7 and 15 of this act shall not apply to the hospitals, chemists and druggists, hairdressing shops and residential hotels and hostels attached to the colleges or schools, or educational institutions.
Sections 7 and 15 shall not be applicable to the employees who are working in the hospitals and those who are chemists and druggists.
The opening and closing hours of the Act shall not apply to the education institutes and hostels attached to the school or college, clubs and residential hotels, hair salons and also to refreshment rooms at airports and railway stations, bus stops and to those establishments whatever selling the carbonated water or ice water and to the establishments selling the funeral necessities.
Under subsection 3(A) of Section 73, sections 7,9,12,15 shall not apply to the persons whose work is irregular like sweepers and caretakers, or travelling staff etc.,.
According to sub-section 3(B) of Section 73, sections 7,9,12,15 shall not apply to those who are employed in the loading and unloading of goods at godowns.
The government may discharge either immutably or for a short time, any establishment or class of establishments or persons or class of persons, from all or any of the provisions of this Act by the notification, subject to such circumstances as they may consider relevant.
Government may by notification, apply any of the provisions of this Act to any class of persons or establishments broached in those subsections other than those mentioned in clause (b) of sub-section (1) of Section 73 and the government may modify or cancel any such notification.
Judicial pronouncements
Gopalakrishnan v. Assistant Inspector of Labour Rayadurg(2000)
Facts of the case
In this case, the petitioner is a chartered accountant practising at Rayadurg and the respondent is an Asst. labour officer Rayadurg has issued inspection orders and notices on 07-03-1991 and stated that on inspection on 20-02-1991 under Andhra pradesh Shops and Establishment Act,1998. The petitioner was asked to show cause notice within seven days as to why penal action under the said Act should not be taken against him. Immediately he gave a reply to that notice stating that the office of chartered accountant and auditors would not be covered under the said Act. After considering the reply of the petitioner, the respondent gave impugned order on 25-05-1991 stating that the petitioner office comes under the said Act. Aggrieved by the order the petitioner filed a writ petition.
Issues of the case
Does the office of the chartered accountant come under the purview of the section 2(21) of The Andhra Pradesh Shops and Establishment Act ?
Judgement
The judgement is given by the Honourable Judge Elipe Dharmarao, J is that the maintenance of the office of the chartered accountant for practice is a profession like an advocate profession. The respondent under the misconception of law thought that the office of Chartered Accountant comes within the purview of Section 2(21) of the said Act and issued the above notice. Therefore the impugned order passed by the respondent is illegal and liable to set aside. The judgement is in favour of the petitioner.
Conclusion
This Act safeguards the rights of the employees and teaches the employer to fulfil his obligations. After the enactment of this Act the employees are benefited, like working hours and holidays, wages, special provisions relating to women and young persons, maternity benefit and many other favourable things for the employee. If this Act works properly in the state, most of the employees will live their lives peacefully without any tension.
Frequently Asked Questions (FAQs)
Is registration compulsory for the establishment under the Andhra Pradesh Shops and Establishment Act ,1988?
What is Form-C of the Andhra Pradesh Shops and Establishment Act,1988?
Form-C means a certificate of verification under this Act.
To whom appeals shall lie against revocation of suspension of registration certificate?
According to Sub-section(1) of Section 6, against the orders of revocation or suspension of the registration certificate shall lie to the concerned labour officer in whose jurisdiction the establishment or shop is located.
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With the rise of globalisation, the financial sector has also changed its way of conducting business. This also led to changes in various other institutions, such as corporate governance and asset management. Corporate governance is a notion that has recently emerged in the corporate field. It is a process that aids the firm in meeting its objectives through its predefined rules and regulations, while asset management helps to ensure the balance of wealth within the firm. This article will focus on the relationship between these sectors, i.e., the financial sector, corporate governance, and asset management. The article will place its emphasis on how these two entities work together to create a balance within or outside the organisation.
What is corporate governance
Corporate governance is defined as the set of rules and regulations that help the firm work effectively. It contains certain corporate practises that help a firm direct and control the organisation. It tries to maintain a balance between the various actors, such as shareholders, stakeholders, senior management, executives, customers, suppliers, etc. The primary aim of corporate governance is to establish transparent and clear regulations among the companies. Transparency will help to protect the interests of shareholders, directors, management and employees, thus fostering leadership within the companies. The Board of Directors is mostly responsible for corporate governance as well as for taking important decisions. The Board of Directors needs to ensure that the strategic objectives and goals of the organisation are met. Corporate governance plays an important role in building trust between investors, the community, and public officials. Aside from protecting the interests of the shareholders, it also helps to protect the interests in relation to social, environmental, and regulatory contexts. To have a good infrastructure, it is important to have proper functions within the organisation. One of the main purposes of corporate governance is to ensure better fund management. If good corporate governance does not take place, it could harm the organisation as well as lead to financial losses to the shareholders.
Principles of corporate governance
Corporate governance works on the basis of these values in order to ensure better regulation within the organisation. These are:
Accountability: It means making a person or a group take responsibility for their actions. Corporate governance ensures that the director stays accountable for their actions and works to resolve any issues that arise.
Transparency: Corporate governance ensures that the company stays clean and transparent to outsiders. This can be done in the form of financial as well as non-financial aspects such as the actions of the company.
Fairness: Corporate governance ensures fairness and balance among the shareholders and the management of the company. It helps to protect the interests of the shareholders, directors, officers and employees of the company. Fairness allows that relationships among management and employees stay positive and healthy, as well as that stakeholders become more accountable for their actions by engaging more in the community.
Responsibility: Corporate governance ensures that the company stays responsible to meet the company’s objectives as well as the shareholder’s interests. It helps to build confidence and trust as well as ensure reliability among creditors, employees and shareholders.
What is asset management
Asset management is a practise that ensures increased wealth over time through trading, investment and maintaining or acquiring various other assets. Some examples of different kinds of assets are stocks, bonds, real estate, commodities, alternative investments, mutual funds, etc. The main objective behind asset management is to maximise the value of an investment portfolio while mitigating the risk involved. Asset management is often conducted by the asset manager, who either works independently or works in an investment bank. They help the clients reduce the risk by looking at all the factors, such as taxes, inflation, and market volatility. Moreover, better asset management helps achieve business goals by determining effective management.
Structural power overview
Structural power refers to a relationship through which one powerful actor or a few actors influences the norms of society, institutions, and interpersonal relationships among organisations. It plays a significant role in shaping the economic and social aspects of the globe. The objective of structural power in a business environment is to ensure the sustainability of the economy, job growth, tax revenue, etc. It also oversees investment decisions and other activities. This can be explained with the help of an example. If Company A is more influential than Company B,it will have a greater impact on society. It will create interdependency among the other actors, such as small industries, as they aspire to become like Company A. This will create a healthy competition among the players to meet the goals set by Company A. Even Company B, which had less influence, would still get an opportunity to compete with Company A. The job will increase, thus creating sustainability in the economy. With the rise of competition, companies will find better opportunities to increase their influence by opting for effective investment decisions. Structural power ensures that all the goals are met, which otherwise would not happen if such power were not given to authority. It also decides whether the firm should exit or not. Structural power exists both in the state and in private entities. One such example is shareholders. The other side of this is that it could also create exploitation of small players if powers are concentrated to few actors arbitrarily.
Relationship between corporate governance and asset management
Corporate governance has started to play a significant role in asset management. It helps the managers work towards the client’s interests by creating transparency, independence, and better supervision within the firm. Investors tend to ignore the capabilities of effective governance, which prevents them from gaining profitable returns. Therefore, they should not overlook corporate governance. Poor governance can lead to various issues, such as misselling of submarine mortgages, incorrect assessment of credit rating agencies, poor risk controls, etc. In the banking sector, it can lead to lower returns. One of the examples that can be given is the Japanese sector. The country had a terrible history of generating shareholders due to its poor corporate governance. Poor governance focuses less on the value creation of the shareholders and creates low-profit margin hoarding as well as low pay-out ratios.
While the establishment of strong corporate management helps to balance a good corporate culture, it also helps to maximise the wealth of shareholders and ensure efficient management of resources. It provides the ability to deal with external factors that impact financial performance. It helps to maintain a favourable balance of working capital elements, which are included in the form of payables, receivables, and cash balances. According to one theorist called Gugler, the systematic ownership structure has a positive influence on investment decisions. Good practises lead to a positive return on equity and promote efficiency in the firm. Since such practises affect stakeholders positively, they also lead to economic growth.
Political influence over asset management
Political changes in society also impact the management of assets. Political risk, also called geopolitical risk, is a type of risk that involves political decisions. Such decisions may have a meaningful impact on the performance of the company or government. Such situations affect policy decisions and shifts such as tariffs, taxes, labour conditions, privatisation, and regulation. Other situations that affect the companies are:
Change in political leadership and government instability.
Political uncertainty due to activities such as terrorism, riots, and coups or wars.
Due to these reasons, the company’s ability to execute strategy and deliver products and services is disrupted. This, in turn, affects the company’s performance and profitability. Instability in politics also affects trade with other countries. Moreover, such instabilities have the potential to influence the performance of individual securities. A decline in the market could affect the share price of the company. Political instability could generate uncertainties among investors, thus causing a decline in the market. A decline in performance or profitability causes the company to be unable to pay the debts, thus increasing the risk of default. Other reasons that could affect asset management are inadequate budgets, political ideologies, coalitions, and minority governments. According to the studies, it has been found that if the public aligns themselves with the political values of the ruling party, it has a positive impact on investment decisions.
Role of banks on asset management
The notion of corporate governance has been extended to banks and other financial institutions. Banks practise corporate governance in its traditional form. The creditor or debtor plays a more important role in shareholder governance. The role of banks is special because it includes a very low capitalisation of banks as compared to non-banking entities. Since banks are extremely important for economic growth, they can be associated with eminent dangers. Corporate governance at the bank also affects the asset management system.
It has been found that banks consisting of higher shareholder representatives on the board undertook greater risk. While the banks with an independent board were run poorly. Lack of competition can also lead to monopolistic profits, affecting asset management. Poor corporate governance also affects the client relationship as well as the lending ability of the banks.
Characteristics of efficient banks
Efficient board of directors: This includes directors who have greater equity share and better attendance rates. They should be part of meetings frequently.
Strong ownership: It includes a group or management whose interests are vested in the bank.
Better compensation for managing officers.
Market and exit
An exit point refers to the price at which an investor or trader closes a position. The reason behind the exit is that the investors wanted to buy assets for the long term. It is one of the trader’s or investor’s strategies. It also helps to determine real-time market conditions. Exit points also help to manage the risk or loss as well as aid in setting profit targets. Most of the conventional corporate governance methods rely on exit strategies, such as stock sales or shareholder activism. Though such methods are considered time-consuming and expensive.
Ways to minimise asset management
Some of the ways in which asset management can be minimised are:
Asset management software: This is the software stored and used to increase asset life. It provides an automated approach to the tracks and helps manage the assets. It aids organisations in various stages, such as procurement, maintenance, and utilisation.
Development of strategy: It is important for the board to have a shared vision, strategy and action plan to ensure a life cycle asset management programme. It helps to assess the current activities of assets as well as provide recommendations for improvement.
Decisions should be made by key makers: Risk-based asset planning should be done by the top management by evaluating the potential risk by looking at past records. It helps to anticipate the assets that might cause risk in the future.
Conclusion
The role of corporate governance and asset management has been interlinked with a series of developments in various sectors. It is important to have effective corporate governance in firms and organisations. Such practises help to ensure better investment decisions, thus ensuring better asset management. Corporate governance and asset management had created their own influences in the banking sector. Though it has also been observed that corporate governance and asset management can be influenced by political decisions or through instability, Therefore, it becomes essential to strike a balance between political agendas and corporate goals, as it may hamper economic growth.
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