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Top technology law firms in India and abroad

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This article has been written by Ishaan Banerjee, Anindita Deb and updated by Stuti Agarwal. The article is an insight into the world of technology law and enumerates various law firms, from India and abroad, that are experienced in the domain and leading in the sector.

It has been published by Rachit Garg.

Introduction 

Technology Law has been one of the most lucrative areas of law in the past few years, and it will gain importance and attention in the years to come. With the continuous evolution of science and technology, many new avenues for practising law have begun to come up. Be it artificial intelligence (AI), intellectual property, or data protection, all these areas will be lucrative in the coming years. Under technology law, there can be transactions involving entities from two different countries, which brings with it complex regulatory issues wherein the role of an experienced technology law lawyer kicks in. Not just that, deal negotiations, intellectual property issues, software development, software usage, and other transactional concerns between parties arise wherein technology law plays a role.

Evolution of Technology Law as a concept

With each and every passing day, there is a constant evolution in some or other technology across the world. Such an evolution means an increased number of regulations to regulate it. An increased number of regulations implies more and more transactions, which has the implicit factor of implying a greater number of disputes. This is where the evolution of ‘technology law’ as a concept emerges and takes shape. Technology law is a fast emerging area of law because of the volatile nature of science and technology. With the growth of science, the implications, complexities, and forms of technology law will keep on growing. 

What exactly is Technology Law

As the term suggests, technology law is the law relating to the handling, usage, and transaction of technology between the creators/developers of technology and the users of such technology. It helps regulate the use and advancement of technology. Today, technology surrounds us and is present in almost every aspect of our lives. It is impossible to imagine our lives without the presence of technology. Therefore, technology law is something that is not confined to a particular area or region. It has implications across the globe, as technology knows no borders. Has an unknown person on social media obtained your pictures to which he did not have access? Has the patent for your new product been infringed by a competitor? Are your phone lines being tapped? Need to upgrade your office storage systems to an online format and need software therefor? Say hello to technology law. Thus, technology lawyers need to have a wide area of expertise, which may include many other different types of law like intellectual property rights, cyber law, information technology, artificial intelligence, and even environmental law. This is exactly why technology law will be a very lucrative area of practice because as technology evolves, the scope of technology law also expands.

In this article, we will explore the wide ambit and applicability of technology law, along with the top 20 law firms already engaged in technology law practice in India and abroad.

Career opportunities in Technology Law

Technology law is a fast emerging area, but it also demands a lot of skills from a lawyer. With an evolution in law, the skills and expertise of a lawyer also need an upgrade. A technology lawyer must have experience in handling tech issues along with skills like drafting software and hardware related contracts, policy making, strategising, risk assessment, etc. Industry expertise is a very crucial skill that should be possessed by a tech law expert, as knowledge of the industry and its workings helps to deal with legal issues therein in an efficient manner. A technology lawyer would also need to stay updated with the latest technological developments. A technology lawyer can work in:

  • Technology contract drafting and negotiation: Handling the transactions in technology and documenting the same are the initial requirements from a lawyer who enters the field of Technology Law. When technology exchanges hands from its developer to the user thereof,  the role of a legal drafter increases manifold as such a lawyer is required to capture the intentions of the parties and at the same time safeguarding the interests of their clients. A technology lawyer must know how to draft contracts like Software licensing agreements, Outsourcing agreements, Standard distributor licensing agreements Software Development Agreements, Service Level Agreements (SLA), Technology Transfer Agreements, Hardware Purchase Agreements, Non-Disclosure Agreements (NDA), Data Processing Agreements (DPA), Software as a Service (SaaS) Agreements, End-User License Agreements (EULA), Open Source License Agreements etc,., which are commonly used in technology companies. Not only this, he must know how to incorporate clauses and draft special contracts specific to the technology industry, along with negotiating deals.
  • Managing Intellectual Property (IP) portfolio: The amalgamation of the IP laws with the technology law is an important field of practising and securing clientele for lawyers practising in the field of IP particularly. Understanding the aspects of IP which are required to be compiled to secure one’s invention and creation of technology to avoid its illegal usage by the competitors etc. is an important practice area. Technology lawyers must learn to manage their IP portfolio and update themselves with the IP laws of the countries from which the parties are involved in the transaction (if it is an international transaction), as they would have to ensure that the patented or patentable technology does not leak to competitors. Thus, they have to work fast to procure patents for the new technologies or software used by companies. They have to know how to mitigate the damage and defend clients from competitors’ suits regarding patents. They would also have to introduce policies to prevent unauthorized usage.
  • Assessing and managing risks: Risk assessment and mitigation is an area that has been very crucial to the technology law sector. A lawyer must be smart enough to have an idea of the present and the potential risks to the company that is developing a particular kind of technology and to the user of such a technology. Identification of risks is one skill; preparing a company to deal with such risks is another. Not only this, but such lawyers must also be equipped to do risk mitigation in case the company actually gets exposed to such risks. He must have an idea about the future of the technology sector and must be cautious to defend the company from potential risks. He must keep up with the developments in technology law, be updated regarding governmental regulations, judicial pronouncements, and the policies of competitors, and know how to manage the risks arising from there.
  • Policy making and implementation: Technology lawyers need to understand the policy making process in organizations like government bodies, companies, etc. In order to know about potential risks and avert them, policymaking is important, as it would provide certain guidelines for what the organization would do in a particular situation. Is your company being sued for infringement of data privacy? How would a technology lawyer deal with this? The next step of action is to be dictated by the policy. 
  • Litigation and dispute resolution: It is obvious that with evolving technology, the number of laws and disputes relating to it will increase with time. The top challenge with litigating technology related disputes would be explaining to the judge what exactly the technology is and how it works. This would enable the judge to understand the facts, circumstances, and reasons under which the dispute has occurred.

Now that you have an idea of the practice of technology law in India and abroad, let us now proceed to the list of the top technology law firms in India and abroad. Please note that this list is only suggestive and not a firm statement.

Top 20 technology law firms in India

Trilegal

  • Highly rated as one of the best law firms in the country, Trilegal has established its dominance throughout the years of their work. It has a wide range of practice areas, including the areas of corporate law, competition law, international capital markets, real estate, etc.
  • It was ranked as one of the top 10 most innovative law firms in APAC by FT- Asia-Pacific Innovative Lawyers and among the top 5 law firms in India by RSG India.
  • It has one of the oldest technology law practices in the country and has deep experience working with companies across different sectors. They have also worked on policy formulation, which includes the data protection law. It has helped the Aeronautical Development Agency commercialize the technology software used for creating materials for aircraft fabrication, and Hewlett Packard structured their telecom system integration service.
  • Their technology law team has been developed to have expertise in matters dealing with the intersection of technology, business, and law.
  • They have been influential in various technology transactions, both offshore and local, and have expertise in advising their clients to protect their interests. 
  • They have their offices in Mumbai, Bengaluru, New Delhi and Gurugram.

Nishith Desai Associates

  • The firm is a leading law firm in the technology law sector, divided into two sets – ‘Information Technology Services’ and ‘Business Process Outsourcing’.
  • The technology law leg of the firm has been involved in various global transactions in which they have played an important role in providing workable solutions to clients, capturing their interests, safeguarding them from competitors, etc.
  • The technology team of this firm is highly reputed, which helps clients formulate strategies to get full use of their intellectual property rights and also helps in value assessments. They have good experience drafting technology and intellectual property rights related contracts. They have also worked on data protection.
  • The firm has an impressive clientele, boasting the likes of eBay, Flipkart, Amazon, Visa, etc.
  • They have their offices located in New Delhi, Mumbai, Bengaluru, California, New York, Munich, and Singapore.

Shardul Amarchand Mangaldas

  • It regularly finds its name among the top law firms in India, including in the technology, media, and telecom sectors. The firm has frequently instructed clients on regulatory and transactional projects, often across the world. 
  • They, in their own firm, have launched a cloud based, AI enabled bespoke e-learning platform branded CLEmentine recently. It will bring about a digital transformation in the learning management platform in the firm for a better learning experience, increasing the efficiency and proficiency of the associated lawyers.
  • They have clients like Saavn, Wal-Mart, Whatsapp, Uber, Facebook Ireland, etc. They have also advised Newgen Software Technologies Limited.
  • An example of a famed member of the team is Tejas Karia, who has been involved in Supreme Court cases regarding the provision of online content, which also included Facebook and WhatsApp as parties.
  • They have their offices in Mumbai, New Delhi, Gurugram, Bengaluru, Ahmedabad, Kolkata and Chennai.

L&L Partners

  • L&L Partners practices in both conventional and non-conventional areas of law, with focus on building lasting client relationships and offering exceptional legal advice. The firm has advised many national and international clients, like Goldman Sachs, ICICI Bank, Yahoo, the Tata Group, and others.
  • They recently assisted K2 Partnering Solutions, a global player engaged in providing consultative technology solutions, in acquisition of Openlogix, a US based technology consulting firm.
  • The firm has a wide practice area, including but not limited to TMT (technology, media, and telecom), dispute resolution, pro bono work, mining, oil and gas, etc.
  • The technology practice is known for joint venture work. The firm recently assisted ANI Technologies with its licensing agreements for the ‘OLA Play’ feature.
  • They have their offices in Mumbai, New Delhi, Hyderabad, and Bengaluru.

Cyril Amarchand Mangaldas

  • The firm specializes in structuring transactions in the technology sector in India. They also advise on regulatory and commercial contracting matters, along with representing clients before the relevant authorities.
  • The firm applies cross-disciplinary knowledge and experience to help its technology advisory clients predict and plan for any regulatory or other changes in the environment they are operating in.
  • They have helped media, telecom, and technology companies in and out throughout their business lifecycle, from ideation to the implementation stage.
  • It has a diverse clientele across diverse service sectors such as online and offline gambling, IT, mobile and fixed line telecom operators, outsourcing, etc.
  • They have their offices in New Delhi, Mumbai, Bengaluru, Hyderabad, Chennai, Ahmedabad, Chennai and Singapore.

Kochhar & Co.

  • The firm started its Technology, Media and Telecommunication practice in 1999 and since then has been representing a number of international and blue-chip companies doing business in India. 
  • Kochhar & Co. has both national and international offices in Dubai, Atlanta, and Jeddah. The firm has hardcore expertise in cloud computing, data privacy, e- commerce. They have also helped the telecom sector with bandwidth structuring and VoIP implementation.
  • The TMT team has had some amazing victories over the past few years. It assisted the Alibaba Group in setting up a cloud computing system, advised Akamai on cloud computing and data privacy, and has been involved in assisting the clients in the use of satellite technology as well.
  • They have assisted technology companies in setting their payment gateways in India, handling their IT, media, and broadcasting spaces, restructuring the organizational structure, data privacy, et al.
  • Mr. Stephen Mathias, the head of the TMT department, is especially known for his specialization in technology related matters such as IT outsourcing, data privacy, and cloud computing. The other team members include Suhas Srinivasiah, Savitha Kesav Jagadeesan, Indrani Lahiri, and others.
  • They have their India offices situated in New Delhi, Mumbai, Chandigarh, Chennai, Bengaluru, Hyderabad and Gurugram and international offices situated in Chicago, Dubai and Singapore.

AZB & Partners

  • The firm has a well reputed technology law practice and has been instrumental in some major transactions in the Technology, Media and Telecommunications sectors. They advised Bharti Airtel on transactions and also helped Google set up its mobile payment service in India.
  • This is one of the big law firms in India, and it has expertise in issues such as net neutrality, IoT (Internet of Things), etc. and advises clients, both international and domestic, across a wide range of sectors such as healthcare, food technology, gaming, education, AI, etc.
  • It has often been involved in the Telecom sector, drafting commercial contracts and advising them on compliance and regulatory issues.
  • Their recent clientele includes Reliance Industries, Jio Platforms, Asian Development Bank, and Coinbase.
  • They have their offices in New Delhi, Mumbai, Pune, Chennai and Bengaluru.
  • Srinath Dasari in the Bengaluru office of the firm have been key persons handling the tech law sector of the firm.

J. Sagar Associates

  • The firm offers outstanding practice in a range of areas, including some major players in the technology sector, including television networks, entertainment companies, film and television production houses, music production, distribution and promotion companies, video game developers, etc. It has an impressive clientele among blue chip IT and telecom corporations. 
  • The firm is respected for its quality of service and has frequently received great feedback from its clients.
  • Recently, the firm was involved in assisting with the fundraising round of a technology start-up company, formed by IIT Bombay and IIT Delhi alumni, known as Solarad. The team that was instrumental in the transaction included Mr. Kartik Jain, Partner; Mr. Debottam Chattopadhyay, Senior Associate; and Ms. Alisha Chawla, Company Secretary.
  • They have their offices situated in New Delhi, Mumbai, Bengaluru, Chennai, Ahmedabad, Gurugram and Hyderabad.
  • Some legal stalwarts include: Sajai Singh, Partner in the Bengaluru office who is a highly experienced member of the firm with complex technology related matters.

Naik Naik & Co.

  • It is a full service law firm based in Mumbai. The technology industry boom has helped the firm build its capacity in recent years. It has advised on matters such as gaming, music and entertainment, sports, advertising, etc.
  • The firm especially has great experience in the film and entertainment industry as it has to deal with clients that include major production houses, including Hollywood studios, Indian Broadcasting Federation, Producers Guild, and the IFTPC (Indian Film and TV Producers Council) on relevant issues.
  • The rapidly evolving data technology subject has been extensively mastered by the firm by providing legal representation to protect its clients from cyber crimes and other digital crimes. Drafting software development and licensing agreements, dealing with data and systems security issues, providing legal advice to technology companies, etc. have been major practice areas of the firm in technology law.

DSK Legal

  • The multidisciplinary team is recognised for their work in various industries like biotechnology, e-commerce, m-commerce. The firm has a speciality in identifying new material for patents and copyrights that will play a huge role in the generations to come. 
  • The firm’s clients include startups, technology developers, and consultants; all of them are using technology to develop their businesses and need some help to fully utilize their technologies.
  • The major work in technology law involves technology transactions, data governance, fintech and payments, advisory to digital businesses, and dealing in tech disputes.
  • Their office is situated across India in New Delhi, Mumbai, Pune, Bengaluru and Hyderabad.
  • The eminent and learned team includes some of the pioneers in the sector, namely Rishi Anand, Siddharth Suresh, and Nakul Batra, Partners of the technology team in the Delhi office.

IndusLaw

  • The firm frequently advises investors and technology companies on transactional and regulatory matters.
  • The technology practice advises on commerce, cloud based delivery of software, drafting and negotiating contracts, privacy and data protection, regulatory framework relating to the ownership and provision of online goods and services, etc.
  • Their office is situated in New Delhi, Mumbai, Chennai, Hyderabad and Bengaluru.
  • The team members to look for include Avimukt Dar, Founding Partner in the Delhi office; Namita Viswanath, Partner in the Bengaluru office; Ranjana Adhikari, Partner in the Mumbai office, amongst others.

Khaitan & Co

  • This firm advises a lot on regulatory, policy, and compliance issues in telecom related matters, having clients that include major software and media companies. The firm has become adept at advising on data and connection services.
  • The firm has experience in advisory services on IT issues, outsourcing of technology, data protection, and joint ventures on tech issues.
  • Media companies have also approached this firm for drafting and negotiating broadcasting and endorsement contracts, along with arranging joint ventures between these companies.
  • Key contacts in the firm for technology, media, and telecommunications related matters are Harsh Walia, Partner in the New Delhi office; Abhinav Chandan, Partner in the New Delhi office; and Tanu Banerjee, Partner in the Mumbai office, amongst others.
  • They have their offices in New Delhi, Gurugram, Mumbai, NOIDA, Chennai, Bengaluru, Kolkata and Singapore.

Mani Chengappa & Mathur

  • This is a boutique law firm, based in Bengaluru, that is fast emerging as one of the major competitors in technology law. It specializes in technology startups and investors, IT outsourcing, data protection, software licensing, etc.
  • The interface of technology and law has been mastered by the firm, which helps them grow their clientele in technology transactions, both domestic and international.
  • Clients have praised the firm as being very ‘solution driven’ and having an in-depth understanding of business needs and interests.
  • The firm recently advised Punjab and Maharashtra Co-operative Bank on the licensing and service contracts for its technology suite.
  • Samuel Mani, the Founding Partner of the firm, specializes in advising clients on technology and outsourcing transactions, including other ancillary and incidental issues thereto. 

TechLegis

  • This Delhi based firm is relatively new, having been set up in 2016, but it has since, built up a reputable practice.  This firm is led by Salman Waris and has some very impressive clients.
  • The firm has dealt with clients like Voxbone, which is a Belgian company involved in providing IP communication services; Quintiles IMS Holdings, which is an American health company; ZTE, etc.
  • The technology, media, and telecommunications team of the firm has been representing clients regarding complex technology transactions and outsourcing their requirements in areas such as procurement, manufacturing, logistics, network, and software support. They have a niche in the transactions involved between technology companies, like mergers and acquisitions, financing, data processing, negotiations, joint ventures, etc.

Ikigai Law

  • This will be one of the topmost and most sought after law firms in the technology sector in the coming years. Based out of New Delhi, this firm has already been sought out by clients who seek advice on unexplored areas like drones and aerospace. The firm also has experience in cryptocurrencies and digital assets, among many others.
  • The firm advised four digital asset exchanges before the Supreme Court, challenging the Indian Central Bank directive to cancel digital asset access to banking services. 
  • The firm also advised a leading social media company on its policies for dealing with fake news. It also assisted Dvara Research in drafting and submitting a draft of the Data Protection Bill to Justice B.N. Srikrishna Committee.
  • The firm has won various awards like being recognized by The Legal500 as a Tier 2 law firm for its technology, media, and telecommunications practice in 2022. It got featured in the India Business Law Journal in 2022 as the leading law firm for data compliance, cyber security, fintech, technology, communications, etc.
  • The wide and diverse range of the firm’s clients includes CoinDCX, Cred, Drone Federation of India, Microsoft, MobiKwik, Sequoia, etc.

Spice Route Legal

  • Founded in 2006, it has offices in New Delhi, Mumbai, Bengaluru, and Kochi. This firm has been working with eight banks on matters like AI, data protection, blockchain, and regulation. 
  • They have been advising a wide range of companies of varied types, like start-ups, mid-sized corporations, and giants of the industry.
  • They claim their expertise in a diverse range of disciplines involving multi-dimensional and growing technological issues like blockchain, AI, crypto-currencies, cyber security, fintech, etc.
  • International clients include leading international law firms such as Dentons and Sheppard Mullin. The clients have given great feedback, with some emphasizing their expertise in cyber law and their inquisitiveness about being updated on technology.
  • The firm has been recognized as the Best Technology Law Practice firm by Indian Business Law Journal for two consecutive years, 2019 and 2020. They have also been recognized by Chambers & Partners and the Legal 500.

Fox and Mandal

  • This is a leading law firm with pan India presence, having offices in New Delhi, Bangalore, Ahmedabad, Pune, Mumbai, Hyderabad, Kolkata, and Chennai.
  • The firm is known for its innovation and expertise in applying legal principles to emerging technology law issues and transactions arising in the cyber world. They have a good grasp of IT and other related laws, cloud computing, SAAS agreements, etc.
  • They are known to advise their clients in matters related to AI, cyber security, fintech, digital e-commerce, privacy, and data protection. They are also one of the few firms in India that practices space law.
  • It has been recognized by Chambers & Partners in the Asia – Pacific 2023 leading firms list released by them.

Majmudar & Partners

  • Recognised for undertaking transactional work for technology companies like outsourcing, acquisition of IP aspects, and M&A. Also advises on cloud computing matters, data protection, and AI.
  • The firm is famed for giving practical advice and is known to be very reliable.
  • The firm recently advised Kwench Global Technologies on data protection, reviewing privacy policies in compliance with GDPR and data protection compliances.
  • The firm has recently advised on the transactions involving Thrasio Holdings in their high value acquisition of a majority stake in Lifelong Online Retail Private Limited, Finicity Corporation in its sale to Mastercard, NFT Studio in assessing regulatory environment for NFT businesses in India, and many more significant technology law transactions.
  • Their Managing Partner, Akil Hirani, is the flag bearer and face of the team working on technology law transactions.
  • Their offices are located in Kolkata, Mumbai and New Delhi.

HSA Advocates

  • Established in 2003, HSA focuses on constant adaptation and client centric approach to legal advisory.
  • The firm specializes in transaction structuring, drafting, negotiating, advisory, and other support and solutions required by clients across sectors.
  • Jivesh Chandrayan is one of the key contacts for technology, media, and telecommunication transactions.
  • Their offices are located in New Delhi, Mumbai, Bengaluru and Kolkata.

Samvad Partners

  • Based out of Bengaluru, the firm has handled corporate, transactional, regulatory, and service agreements and policies and also advises on cybersecurity and data protection.
  • The firm is involved in assisting clients in the areas of software development, licensing resale, cloud services, including SaaS / PaaS / IaaS methods of software delivery, IT outsourcing, etc.
  • They have been involved in advising Manthan Software Services on the implications of GDPR on its contracts from an Indian market perspective. 

Leading global technology law firms

Fish & Richardson P.C.

  • At Fish & Richardson, intellectual property is paramount; the firm focuses on IP litigation and counselling, as well as post-grant matters, although the list of sectors it services reflects its diversity. 
  • They have clients in a variety of industries, including biotechnology, energy, clean technology, consumer products, financial services, aerospace and defense, new media, manufacturing, pharmaceuticals, and telecommunications.
  • With around 14 offices across the US, Germany, and China, they have an amazing team of lawyers who strive to achieve excellence in every phase of the issues dealt with by them.

Cooley

  • Cooley is the go-to firm for startups and early-stage enterprises, and it’s great for individuals looking to work on cutting-edge projects with forward-thinking clients. The firm has a strong commitment to diversity and inclusion, as well as a very sociable culture that will no doubt appeal to affable personalities. 
  • They combine elements of IP practice with commercial transactions, making it a diversified advisory for clients, giving them holistic experience with their issues and transactions.
  • Cooley is identified with technology and venture capital work, with over 1,200 lawyers working across the United States, Europe, and Asia. The firm’s cleantech, cyber/data/privacy, IP, M&A, private equity, and securities practices are also well-regarded.
  • Recently, they advised Instacart on their $660 million IPO.

Kirkland & Ellis

  • Kirkland & Ellis is the ideal firm for self-starters who are ready to take control of their legal careers, both in terms of size and reputation. 
  • They represent clients ranging from Fortune 100 companies to middle-market companies to growth stage businesses.
  • Kirkland & Ellis is a global legal company that specializes in corporate, intellectual property, litigation, Mergers and Acquisitions, private equity, and restructuring. The firm is consistently ranked as one of the most successful in the world, with over 2,900 lawyers.

Morrison & Foerster LLP

  • At MoFo, excellent work is expected, with the firm specializing in a variety of practice areas, including intellectual property and privacy, and being a standout in the pro bono community, assisting in a variety of situations. 
  • MoFo’s experience in IP, finance, life sciences, technology, and litigation is complemented by a global reach that spans the Pacific Rim and, more recently, Europe.
  • The clientele at the firm ranges from emerging innovation drivers to iconic brands in the technology sector.
  • The key contacts include Erin M. Bosman, Partner; Tessa J. Schwartz, Partner; and Marian A. Waldmann Agarwal, Partner, amongst the others in their talented team.

Wilson Sonsini

  • With a rock solid experience spanning more than six decades, Wilson Sonsini is a go-to firm for customers in the tech industry, a pioneer in venture capital work, and a top-ranked firm for intellectual property. 
  • The firm’s lawyers have an entrepreneurial mindset and strike a good balance between hard work and friendliness. 
  • Wilson Sonsini Goodrich & Rosati is a worldwide player with extensive tech roots, with 950 attorneys spread over 16 offices around the world. The firm has established itself as a market leader in technology licensing, technological financing, M&A, and intellectual property.
  • The lawyers at Wilson Sonsini have been recognized as leaders in their field by Chambers USA, Chambers Global, and the Legal 500 (US).
  • The firm has gained reputation with clients by achieving successful advisory roles in the tech sectors, including fintech, IoT, AI, 3D printing, e-commerce, edutech, and many more.
  • Recently, they have advised JURA Bio on their $16.1 million financing and replay collaboration.

Fenwick

  • To work with its inventive client base, handling global legal issues, Fenwick works for tech-oriented, entrepreneurial type clients and thrives to build a team that lives on autonomy and flexibility. Associates who go above and beyond are rewarded here, with trips to the tropics being a common occurrence. 
  • Fenwick has almost 500 attorneys spread across seven offices and is noted for its innovative work with technology and life sciences clients. 
  • The firm has been guiding clients through industry shaping transactions across various sectors, including digital media, fintech, AI and machine learning, blockchain and cryptocurrency, consumer technologies, healthtech, space, and aerotech, et al.
  • With three successful offices in California, an established office in Seattle, a fast-growing office in New York, an international office in China, and a newly opened office in Washington, DC, the firm has expanded beyond its Silicon Valley beginnings.

Orrick Herrington & Sutcliffe LLP

  • The firm has acquired a niche in the Technology & Innovation, Energy & Infrastructure sectors globally.
  • They have been recently awarded with “Legal Advisory of the Year 2023” in the Wind Investment Awards.
  • They believe in transforming traditional approaches to the practice of law and aim to innovate the ways in which they can advise their clients. They have also been recognized as the most Innovative Law Firm in North America.
  • The work culture at the firm has been one of the best, as they have been named on the Fortune 100 Best Place to Work list for the 8th time in a row.

Gibson Dunn & Crutcher

Morgan Lewis

  • The team at Morgan Lewis is known to provide quality advice on legal issues across disciplines, including litigation, corporate, labour, and IP, across sectors and regions all over the world.
  • They have been recognized as the leading innovative set of lawyers in the US and other countries for their work on complex tech issues. They are known to provide an integrated and timely solution to each and every issue arising across the phases of a particular transaction.
  • The key contacts include Barbara Murphy Melby, Partner (Philadelphia / New York), Doneld G. Shelkey, Partner (Boston / Pittsburgh), Mike Pierides, Partner (London), Ksenia Andreeva, Partner (Dubai), Rahul Kapoor, Partner (Silicon Valley / San Francisco), and Anastasia Dergacheva, Partner (Dubai), amongst others.

Mayer Brown

  • A global firm that is involved in advising top tech companies across the globe has extensive reach across four continents. Their main offices are situated in New York, London, and Hong Kong.
  • Their ‘one-firm’ culture ensures that the clients receive the best of their experience in the various practice areas.
  • Jon Van Gorp, Chair of the firm, has been consistently ranked as an outstanding lawyer by Chambers USA, Chambers Global, Legal 500, and IFLR 1000 each year since he has held the position of Partner.

Baker Mckenzie

  • The firm has been certified by Thomson Reuters as the No. 1 law firm brand for 12 years.
  • They have more than 70 global offices with a team of around 13,000 people.
  • The firm has also launched AI collaboration with SparkBeyond to reimagine the legal industry.
  • They have been regarded as the top 3 for number of lawyer rankings (around 392 lawyer rankings) achieved as per the list released by Chambers.

Bird & Bird LLP

  • Clients at this firm benefit from their decade old experience and understanding of the subject. They have been instrumental in various technology deals, including technology transfers, strategic alliances, joint ventures, etc.
  • The tech transactions team includes Dr. Fabian Niemann, Partner (Germany), Mark Leach, Partner (UK), and Roger Bickerstaff, Partner (UK), amongst others.

Bristows LLP

  • With a rich history of experience in tech law, Bristows LLP has been at the forefront of big transactions related to technology law and other disciplines.
  • They have represented some of the big names in the sector and have advised them in various matters. The firm has helped all types of clients, whether it be technology creators, technology transformers, or technology disruptors; they have experience across all facets of technology law.

Sidley Austin LLP

  • Sidley is a law firm possessing a rich history of advising world’s leading technology companies. Their forte is to have a tailor made advising approach to the clients by applying new age solutions.
  • They have secured a ‘First-Tier National Ranking in Technology Law’ in 2023.
  • They have represented Accelera by Cummins in its joint venture to advance battery cell productions in the U.S.

Linklaters

  • The Linklaters is known for their relentless and individualistic approach to client service and for maintaining long lasting relationships.
  • Their technology law specialists have market leading experience and expertise in providing commercial and innovative support to all clients. They have strong experience in sectors involving technology law, media law, energy law, etc.
  • They have been instrumental in their role as legal advisors in various multi-jurisdictional transactions, defying the regulatory challenges arising therefrom.
  • The firm has been awarded the M&A Advisor’s Law Firm of the Year and Restructuring Deal of the Year, among other awards, in 2023.
  • Some of the key people in the team who deal in technology law matters majorly include Ieuan Jolly, Partner and Chair of U.S. TMT & Data Solutions practice; Adrian Fisher, Partner, Asia Head of TMT; and Sonia Cisse, Partner, TMT / IP, amongst others.

Simpson Thacher & Bartlett LLP

  • The firm is a global technology powerhouse and represents leading tech companies globally. Their diverse team has helped the firm achieve expertise in the technology law domain by covering national and international deals from their New York, Palo Alto, Los Angeles, Washington D.C., Houston, Hong Kong, Beijing, Tokyo, Sao Paulo, and London offices.
  • Since 2018, the firm has achieved over $400 billion in transaction value on over 270 capital markets representations across the tech industry. They have also achieved over $1 trillion in transaction value on more than 290 M&A matters across the tech industry since 2018.
  • Overall, they have been involved in some significant and high-profile tech matters recently.
  • They have been influential in some mega tech transactions, including Microsoft’s acquisition of ZeniMax Media, K2M’s acquisition of Stryker Corporation, and Apple’s largest corporate debt offering in history, amongst the other big deals.

Venable LLP

  • The team dealing in tech law at the firm holds prior industry experience as engineers, programmers, and scientists, along with a financial background as well.
  • They counsel clients on various tech law transactions and other transactions involving issues in the entertainment and media sectors.
  • The key contacts at the firm for tech law include William T. Russell, Partner (Washington D.C.), and James E. Nelson, Partner (San Francisco), amongst others in their illustrious team.

Wilmer Cutler Pickering Hale and Dorr

  • The team at the firm understands legal, business, and policy issues affecting the prevailing and evolving technology and the impact it leaves on clients.
  • They achieve outstanding results through a collaborative approach across various disciplines.
  • The key contacts include Mick Bain, Partner, Jamie Gorelick, Partner, and Mark D. Selwyn, Partner, amongst others.

Reed Smith LLP

  • Their belief in building a diverse team has helped them create a strong clientele.
  • In the entertainment and media space, they have a century of experience and have since been advising clients on various evolving issues in the industry. They have never stopped learning and thriving. 
  • They have represented BT and EE in the Supreme Court appeal relating to court ordered blocking by ISPs of sites infringing intellectual property.
  • They have also advised Microsoft on the UK aspects of its $7.5 billion deal to purchase Nokia’s devices and services business.
  • Gregor Pryor, the Managing Partner, Europe and the Middle East region, is the key contact person of the team.

Proskauer

  • The firm has an established TMT practice and has been tapping the opportunities created by rapidly changing technology across the world.
  • The team has been experienced in technology law issues and, thus, has been helping the clients efficiently, helping them to capitalize on and protect the use of new and emerging technologies.
  • It has received top tier rankings across 54 practice areas in the 2023 edition of Chambers USA. Their technology law practice has been recognized in the category ‘Additional Practices Recognized”.
  • Six of their lawyers have earned recognition in the Eminent Practitioner, Star Individual, or Senior Statespeople categories.

Conclusion

Technology law is a dynamic and evolving field with a wide range of career opportunities. As technology continues to advance, the demand for skilled technology lawyers is expected to grow. Professionals in this field can pursue careers in technology contract drafting and negotiation, managing intellectual property portfolios, risk assessment and management, policy-making and implementation, as well as litigation and dispute resolution.

To excel in technology law, lawyers must possess a diverse skill set, including legal expertise in areas such as intellectual property, cyber law, information technology, and environmental law. Staying updated with the latest technological developments is crucial, as it helps lawyers adapt to the ever-changing legal landscape.

The top technology law firms in India and abroad provide valuable services to clients in need of legal guidance in the tech sector. While this list is suggestive, it showcases the prominent players in the field, and aspiring technology lawyers can explore opportunities with these firms to build a rewarding career in technology law.


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.

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

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All about a directors’ responsibility statement

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This article has been written by Utsav Pachouri, pursuing a Diploma in Advanced Corporate Taxation and Tax Litigation from LawSikho and edited by Shashwat Kaushik.

It has been published by Rachit Garg.

Introduction

A statement is given by the directors of a company that states their responsibilities,  obligations, and duties following the respective laws and regulations. The directors in this statement assure the shareholders, auditors, creditors, and other stakeholders of the company that they have acted in the best interest of the company and have maintained good corporate governance, accountability, and transparency standards.

In the Indian Companies Act of  2013, it is a legal requirement for directors’ responsibility statements. The Indian Companies Act of 1956 was replaced with the Indian Companies Act of 2013. It introduced several changes and reforms in the Code that improved the ease of doing business, protected minority shareholders’ interests, enhanced corporate social responsibilities, and prevented fraud.

In this article, we will examine the concept and significance of a director’s responsibility statement, as well as the challenges and risks directors might face when preparing and presenting the statement. We are also going to discuss the legal provisions and principles that govern director’s responsibility statements under the Indian Companies Act of 2013 and other relevant laws and regulations in India.

Obligations and risks associated with directors’ responsibility statement

It is a tough task for a company’s directors to prepare and present the director’s responsibility statement, which is full of various challenges and risks. These factors can significantly affect the quality and credibility of the directors’ responsibility statement, as well as the directors’ reputation and potential liabilities. We will discuss the following obligations and risks of the directors’ responsibility statement.

  • Compliance with accounting standards and policies: Directors should ensure that the company’s financial statements comply with relevant accounting standards and principles. They must provide adequate explanations of any significant differences between these standards. These standards and principles are formed based on recording, measuring, reporting, and disclosing financial transactions and events. The correct application of these standards and principles ensures that the financial statements accurately describe the financial results and condition of the company.
  • Maintaining appropriate accounting and internal controls: Directors are bound to maintain the financial statements and records of accounting controls. These records usually contain the accounts, ledgers, invoices, contacts, and other financial documents that are used to record the company’s accounting. Internal control documents include policies and procedures of the company’s members. These documents are used for the checks that guarantee the accuracy and completeness of accounting records. These documents protect and control the assets from being misused.
  • Disclosure of important events: Directors are bound to disclose major events or transactions that have taken place during the financial year, as they might impact the company’s operations. These events may include the change of share capital, mergers, divestments, joint ventures, litigation, and other major liabilities. There must be transparent disclosure from the director, which plays a huge role in gaining the trust of stakeholders. Disclosure of important events also affects the financial health of the company.
  • Reporting on subsidiaries, affiliates, and joint ventures: The board of directors has to report the performance and financial position of subsidiaries, associates, and joint ventures in the financial statements of the company. These consolidated statements in the company’s financial statement provide a comprehensive view of the company’s financial standing and performance as a single entity.

Possible liabilities and consequences which directors may face

Directors may face possible consequences and liabilities if they make any false, misleading, or incomplete statements or fail to provide the required information, which includes the following: 

  • Civil or criminal penalties: Directors may face penalties imposed by the courts and other respective regulatory authorities of the country. These penalties can be either civil or criminal, depending on the violation. Penalties can range from fines and disqualification to imprisonment, depending on the violation committed.
  • Damage to the reputation: If there is a violation, it can lead to the loss of reputation, trust, and confidence among investors, customers, suppliers, employees, and other partners. Such reputational damage can have a lasting impact on the director’s reputation.

As we have discussed in this section about obligations and risks that are associated with the director, as we move past the practical challenges and potential risks faced by the directors, it is important to look at the legal framework that supports the director’s responsibilities.

Legal provisions and principles

Now, we will discuss the legal provisions under the Indian Companies Act of 2013 that deal with the director’s responsibility statement in India. We will also discuss the other relevant laws related to it. These laws and regulations play a huge role in ensuring accountability and transparency in the workings of the country.

  • Section 134(3) of the Companies Act of 2013: This section defines the specific content and format requirements of the directors’ responsibility statement and it also assures its validity.
  • Section 134(5) of the Companies Act of 2013: This section defines the responsibilities that the directors’ responsibility statement must address. This provision of the statute plays a huge role in ensuring disclosure.
  • Section 134 (6) of the Companies Act of  2013: This section defines the precise procedure for approval of the directors’ responsibility statement and improves authenticity. 
  • Section 134(8) of the Company Act of 2013: This section makes it mandatory to file and publicise the director’s responsibility statement along with the company’s annual report. This provision helps to build transparency.
  • Section 447 of the Companies Act, 2013: This is a critical section of the statute that defines fraud, imposes penalties for fraudulent activities committed in the company, and promotes ethical conduct.
  • Section 448 of the Companies Act of 2013: This section prohibits publishing false statements in the company’s documents. It helps improve truthfulness and commitment to accuracy.
  • Section 449 of the Companies Act of 2013: This section penalises the recording of false statements made under the company’s document. It reinforces the seriousness of accurate reporting.

Now, these are some other relevant laws that may apply depending on the company’s operations, in addition to the Companies Act of 2013. These laws are as follows:

  • The Securities and Exchange Board of India (SEBI) Regulations Act, 1992: The S.E.B.I. Regulations Act of 1992 mandates that every listed company should comply with disclosure and corporate norms that are prescribed under the SEBI Regulations Act of 1992.
  • The Banking Regulation Act, 1949: The Banking Regulations Act of 1949 mandates that every banking company should comply with the accounting standards that are set by RBI and shall maintain a balance sheet of profits and loss account along with the director’s report and auditor’s report.
  • The Income Tax Act, 1961: The Income Tax Act of 1961 imposes many joint liabilities on every director of the company for the recovery of tax. The directors of the company are responsible for signing and verifying ITR, and can be held liable if they attest to any misleading or false information.
  • The Central Goods and Services Tax Act (GST), 2017: The Central Goods and Services Tax Act of 2017 mandates that every director must comply with this Act or any rules and notifications issued.
  • The Customs Act, 1962: The Customs Act of 1962 requires every importer or exporter of goods to comply with this act. The directors of a company engaged in importing or exporting are responsible for ensuring compliance with the Customs Act of 1962.

Now, several fundamental legal principles help in the interpretation and application of the above provisions. These principles are as follows:

  • Principle of Substance: This principle speaks about how companies should record their financial statements as an economic substance rather than being recorded in legal form. This principle helps to avoid the misrepresentation and manipulation of financial statements.
  • Principle of Prudence: This principle speaks about how companies should consider uncertainties while forming a financial statement. This principle ensures that companies should not overstate assets and income and understate expenses and liabilities.
  • Principle of Consistency: This principle speaks about how companies should maintain stability and comparability while forming financial reports. This principle ensures the application of accounting policies and methods, barring valid reasons for change.
  • Principle of Disclosure: This principle, as it sounds from its name, makes it mandatory for a company to do transparent reporting that provides users with sufficient relevant information to understand the true financial position and performance of the company.

Now, we will see some  real-life examples of a director’s responsibility statement in Indian companies, as we have understood all the legal provisions and principles regarding the director’s responsibility statement. This will help us to deeply understand the best practises and challenges in financial reporting.

Examples and cases

Criminal litigation

Now, in this section, we will discuss the examples and cases of many companies in India that deal with director’s responsibility statements. We will analyse and compare their data, format, and quality on both practises and challenges as the following: 

Deneb Investments Limited 

Deneb Investments Limited is a publicly listed company that is involved in business in various sectors, which are worthy of the illustration in this article. They published their director’s responsibility statement, which was featured on page 43 of their annual report for the year that ended on March 31, 2021. They published a comprehensive coverage of the director’s responsibility statement in their annual report. They have mentioned all the required outlines in Section 134(5) of the Companies Act of 2013. Also, the responsibility statement was attested and certified by the CEO and CFO of the company, which states that they have reviewed the financial statement and there is no untrue or misleading information. This statement clarifies and completes the underscored commitment to transparency.

HAT Group

HAT Group is a private company that specialises in professional services. They published their director’s responsibility statement, which was featured in their financial annual report for the year that ended on December 31, 2020. However, their director’s responsibility statement only addressed the obligations of the directors, which are specified under Section 134(3) of the Companies Act of 2013, which concerns the director’s responsibility for preparing the financial statement concerning the applicable laws and regulations. This director’s responsibility statement omits the elements that are mentioned under Section 134(5) of the Companies Act of 2013. This Act raises the question about the completeness of the director’s responsibility statement for the Hat Group.

Indian Law Offices LLP 

Now, for the last example in this section of the article, we will look at Indian Law Offices LLP, which is a limited liability partnership registered in India. Indian Law Offices LLP is a specialist in legal services. They released their director’s responsibility statement, which can be easily found on page 1 of their financial statement for the year ending March 31, 2020. This director’s responsibility statement marks all the requirements of Section 34(2) of the Limited Liability Partnership Act of 2008 and closely marks all the requirements under Section 134 (5) of the Companies Act of 2013. Additionally, they have also included a declaration from the partners that affirms their responsibilities under the Limited Liability Partnership Act of 2008. The statement’s details and accuracy are of high-standard quality.

As above, we have discussed the practises and challenges that we may face in real-life events while complying with the director’s responsibility statement. We have explored the directions for crafting a director’s responsibility statement. Additionally, we have explored the statements that have come under scrutiny or praise from regulators, auditors, and stakeholders. By doing that, we aim to identify best practises and standards while complying with the corporate world’s critical aspects.

Conclusion

In conclusion, the director’s regulation statement plays a huge role in the corporate world. It helps in reflecting the director’s commitment to transparency and accountability towards the legal requirements of the company. In this article, we have discussed various ideas revolving around the responsibility statement, from its significance to it’s challenges and risks that we may face while dealing with it in real life.

We have looked into the legal provisions that deal with a director’s responsibility statement and also mentioned the essential role of complying with these rules and regulations to make a director’s responsibility statement valid. These legal provisions are mentioned under the Indian Companies Act of 2013 and other relevant rules and regulations of the country. These laws provide us with deep knowledge about the framework for accurate reporting under the responsibility statement. They also underscore the consequences for the directors in cases of omissions and inaccuracies.

In addition, we have also looked at real-life examples of the director’s responsibility statement. These examples were taken from various companies in India, which underscores different levels of best practises in director’s reporting. 

In the end, we have discussed the legal provisions that guide us in the application and interpretation of the director’s responsibility statement. That shows how these statements include substance over form, consistency, and disclosure. These principles play a huge role in serving the ethical conduct of the directors, ensuring that the financial statement of the company reflects accurate data on the company’s financial position.

In conclusion, the director’s liability statement is not limited to the compliance requirement but is also a critical tool that is used for maintaining transparency, accountability, and ethical conduct within the company. It builds the trust of the company’s stakeholders and safeguards the integrity of financial reports. To understand the complexities and challenges while drafting these responsibility statements effectively, directors must remain vigilant, follow legal requirements, and embrace best practises in the corporate world. At last, a well-made director’s responsibility statement reflects the ethical and responsible conduct of the company.

References


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.

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

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Responsibilities of an independent director

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This article has been written by Golock Chandra Sahoo, pursuing a Course on Personal Branding Program for Corporate Leaders from LawSikho and edited by Shashwat Kaushik.

It has been published by Rachit Garg.

Introduction

With so many scams in so many companies, public or private, limited or unlimited, national or global, the role of independent directors has been enhanced manifold. This paper discusses some points where the involvement of ID at some signal points is supposed to be noteworthy and their responsibilities to recommend solutions to these issues can never be undermined by the management.

Independent Director (ID), as the name of this position indicates, is never dependent. Id is not an employee working for remuneration; rather, it is a fee and commission based position. It has its own uniqueness. Under Section 178 of the Companies Act 2013, ID is a position for which nomination is made from the Nomination and Remuneration (NRC) Committee. To maintain good governance, the NRC does everything with fairness and transparency. Next, the appropriate candidate is finalised by the board out of the nominated list and the appointment part is approved by calling a meeting of the shareholders.

Roles and responsibilities of an independent director

The role of ID after being appointed is too challenging. For not being an employee, the ID is to see all activities that are in the interest of the entity. The Satyam issue of 2009 is worth discussing here, based on which the concept of retaining IDs was strengthened in the Act. Satyam management showed profit inflated fictitiously, exhibited so many fake debit entries, and showed many employees on paper and the net effect was just to attract more share from the market. In this way, Satyam could lure investors, while no ID was there then. Finally, the truth came to light and the IT company could return to earth from a heavenly position. Now, IDs are duty bound for all irregularities with vast responsibilities, more not spoken but on paper. The sword is about to fall on the non-performing IDs. A sharpened edge of the facing down sword from the top may guide the IDs, who perform and venture to act against management but in the interest of the entity. Certain points of the red sign where IDs need to perform and act meticulously are discussed here.

IDs are to check the computation of all financial ratios and study their impacts. Some ratios where red flags are noticeable may be given as follows.

Expense ratio

This ratio is computed with reference to net sales for a particular financial period. As ID, one should see that unwanted expenditures are controlled and sales revenue is increased. This ratio, if rising, shows that expenditure is getting inflated and so to control this situation, the cause of expenditure is to be investigated. Please keep in mind that there may be opposition, while one attempts to control all expenses not warranted for a purpose. Since ID is not an employee and cannot watch this situation all the time, some action at any time may signal management to watch the situation.

Gross profit ratio

This ratio is normally computed at the end of the financial year. But yet, this can happen at the end of each quarter to have a comparison between various quarters. The formula is the gross profit divided by sales. With an increase in sales revenue, gross profit rises and if ID comes across a situation of decreasing profit, S/he attempts to see the cause, inquire as to the percentage of decrease in sales, check if the purchase of raw materials is in excess of the need with dumping in store and also check the cost of the final product, comparing the same with the cost of local availability. Final alertness may be given to management to act with the prescribed means of controlling the situation.

Stock turnover ratio

This ratio shows efficiency in managing inventory. This ratio is calculated by taking the cost of goods sold (please note the cost of goods that were sold) and dividing the same by the average stock. The standard is fixed as per financial Management in practise, as 5-6 times. Let us suppose that ID notices something unusual in this ratio, as computed as 2.5. It is concluded that the stock is not movable and that results in the blocking of funds. It is informed to management with the conclusion that either the procurement is in excess of the need or the procured materials are not in process. So either of these two actions is to be taken immediately.

Current ratio: Any business entity needs to be alerted to its current ratio, which is computed as the ratio of current assets (CA): to current liabilities (CL). The standard ratio of 2:1 is significant for business. CA takes into account all debtors, stock, loose tools, accrued income, bills receivables and the position of cash and bank balances as of the date of computation of the current ratio. Similarly, CL takes every amount booked in a financial year under sundry creditor, including bills payable, outstanding expenses, unclaimed dividends, all provisions, any proposed Dividend amount, all overdrafts, etc. The computation of current liabilities is for testing short term solvency or knowing the financial strength of an entity. Let us suppose that ID notices that CA is lower than the prescribed standard of 2:1 and it is concluded that a lower ratio indicates inadequacy of working capital and the red sign of inadequacy of working capital may lead to a devastating situation affecting production and other ancillary items linked with production. So accordingly, ID may alert management to initiate the necessary action to maintain the working capital as per the need.

Suppose ID notices some high employee turnover. This is a very bad scenario. ID should call for reasons as to why employees are leaving. The feedback of such employees may be reviewed and the board may be advised accordingly based upon the feedback. The high turnover needs to be controlled with certain measures. The measures may include taking certain welfare measures to retain the old employees on roll, incentivising active employees as a reward, taking regular up-gradation measures, taking seniority and performance into consideration and finally checking strict measures at the time of recruitment in terms of obtaining a bond from the recruited employee or recruiting with the agreement that in case of leaving the job, the employee is to deposit a certain amount towards compensation. ID may opine the best measure to the management.

Criminal litigation

Role of an Independent Director as member of audit committee

While ID is a member of the audit committee, the board has naturally bestowed all responsibility on ID to manage the audit, manage audit compliance and finally settle all past audit objections pending in the audit. So ID is to be careful in all drafting of compliance and be vigilant in supplying records to audit after checking all pros and cons of the available documents. Hiding any data, though not advisable, is in the interest of the entity, so ID may be tactful in handling all cases. It is better to comply with audit observations on the spot for settlement without any lingering so that observation goes without reporting. ID needs to have had access to the audit reports for at least the past three years. If it is a public company, the findings of government auditors should be reviewed. Normally, chartered firms certify the accounts as per management needs, but in reality, they never audit. So government auditors get the opportunity to comment straightaway, relying on the certified figures. ID, hence, is to see the deficiencies pointed out by the government auditors and how that affected the assurance of management. All compliances with such audits from the past years may be examined. ID may recommend certain actions based on the audit findings that act as an active action to deal with red flags. ID should attend the entry meeting of the audit team to the company and should inquire about the detailed audit criteria based upon which audit shall be performed to conduct the audit. The records they need may be detailed by them in a complete format. This in turn will help to maintain the supply of documents after due verification during the audit. It is advisable that the supply of records be made piecemeal and not at a time in a lump. The audit duration is pre-fixed and it may be difficult for the audit to obtain extra man-days which may help the ID safeguard its interest in the audit of the entity. ID should maintain his/her position and should know how to talk tactfully with audit people. Generally, the audit team tries to talk more with a specific purpose to elicit hidden messages. In the message they get, they usually check the details with reference to records. So ID is to be seen to maintain precaution. To the extent possible, s/he may get the audit team diverted. Any audit memo should be responded to in reply during the course of the audit. It may be yes or no, yes or no, but If no, that should be justified in writing to audit camping on the spot to see that the objection is dropped/ closed then and there without any continuance in the audit report. If yes, ID may comply, stating yes but mentioning the constraints that result in lapse. This may result in, in the long run, making that objection lose its value. With a reply of yes, the audit has little scope to include that objection in their report as they are duty bound to report all the replies in their final report. Similar is no, but ID is denying the audit observation with some mention.

IDs should see that the audit report is ready on the closing day of the audit. Under no circumstances should the audit team be allowed to draft their report after taking off from the audit camp. This will create scope for any additional issues with data collection and usage by them. ID should see this aspect. Since the report of findings in the audit is there, ID should see that every page of the report is signed by the head of the audit team.

In the audit exit meeting, ID should see that the Chairman and Managing Director are there to discuss with the team his express his/ her satisfaction or displeasure for the audit or for others involved in the audit. This will boost the spirit of working for ID by pointing out some important issues as a warning sign and raising some red flags for the MD and Chairman.

So far as reviewing various contracts is concerned, ID is to see that all contracts are well drafted as per norm, safeguarding the interests of the entity. While all past contracts are out of the reach of the ID, current cases should be entered under the full supervision of the ID. Even past contracts can be amended if scope exists. Audit tries their best to find out deficient contracts and they usually stick to all ambiguous clauses where the organisation has incurred monetary losses on the pretext of weak clauses. The audit observes all deficiencies in monetary terms that can’t be complied with to their satisfaction and there, the credibility of the entity is put in danger. So ID is to personally study all contracts in vogue before handing over those documents to audit.

Shareholders are interested in the profit of the entity. ID should see that profits are exhibited after meeting all provisions. Anything left behind records profit on the higher side and that very much affects the payment of dividends. The certified accounts should be reviewed by ID to see that profit has appropriately been apportioned among different funds, such as sinking fund, depreciation fund, provision to meet future liability, the creation of the reserve fund, etc. As already mentioned, chartered firms certify accounts based on management needs, and this makes audits advantageous to observe and comment on.

ID may (let us suppose) notice the liabilities increasing at a high rate. As a result, interest liability is showing a higher trend, which in turn affects profitability. Stakeholders look at this side attentively. The cause of increasing liability may be reviewed to find means to control it. This may be due to excess purchases of raw materials or unprocessed work in progress blocking the fund without any usage.

Suppose ID finds a sudden change in the auditor. The reason may be that one auditor may have raised some objection, which is not suited to management. Another reason may be a significant reduction in audit fees or the client’s intentional non-sharing of information. Poor financial reporting may be another cause. In any case, auditors, while resigning from their assigned task, must have indicated this in their application. ID must inquire about everything, including the audit notes of the auditor who resigned. Choosing a second auditor may be a biassed decision that should be carefully watched.

In the area of environment and social governance, ID may look at the funding provision and how the same has been incurred. Good governance is an indicator of better trusted management. Employees prefer to continue in an organisation that is well governed. There should be specific means of waste disposal, carbon reduction exercises, plastic disposal, and disposal of e-waste to save the environment, save the climate, and care for society, looking at the impact on social issues covering the development of nearby areas, etc., and in a way creating an organisation specific culture. If anything is wanted, ID may point it out, and every time, a written note should be there with management. S/he should not feel the need to point out anything and everything that is surpassed, which affects the credibility and trust of the entity.

Suppose ID finds some unusual rise in profits. That may be by inflating profit through various ways of adopting unusual practises. That should be surveyed and reviewed. If the inflating profit is exhibited only in books of accounts, that should be immediately attempted to be stopped. All IDs on the forum/ or board should voice their commonality. Attracting shares from the market at higher rates based on this exhibition of high profits may act in the short run and may cause devastation afterwards. In the past, so many companies have suffered and closed due to the adoption of this policy.

Conclusion

The role of the ID is to march on the face of a falling sword or to manage to walk on the edge of the sword. S/he is to keep his/her eyes and ears open all along. It is challenging to fairly and accurately evaluate every situation because you are not employed on a regular basis. But in any case, while coming to attend the board meetings, all relevant data or information is to be collected by the ID. She/he must be attentive to all the activities of the entity, even without his or her availability on the premises. 

References


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.

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

https://t.me/lawyerscommunity

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All about Section 173 CrPC

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This article is written by Upasana Sarkar. This article deals with Section 173 of the Code of Criminal Procedure, 1973, which provides details with respect to the report of an investigation made by an officer in charge of a police station.

It has been published by Rachit Garg.

Table of Contents

Introduction

Section 173 of the Code of Criminal Procedure, 1973, lays down the rules and procedures for the investigating agencies to file a report upon the conclusion of an investigation. It deals with those offences where the Magistrate is empowered to take cognizance of an offence. This provision mandates that the police authorities, after having completed the investigation, make a report on it and submit it to the court. The police report is then sent to the Magistrate to proceed with the case. It should be made in the format prescribed by the State Government. This Section also deals with the powers of the police for further investigation.

Police report

Section 2(r) of the Code of Criminal Procedure, 1973, states the meaning of a police report. It is defined as a report that is forwarded to the Magistrate by the police officer under Section 173(2). This is the report that includes the final conclusion of an investigation. The charge-sheet that is submitted to the court is considered the End Report. The police report must be made in accordance with the provisions that the State Government has prescribed, which are given under Section 173. This following police report is sent at different stages of investigation-

  • A preliminary report made by the investigating officer or officer-in-charge of a police station that needs to be given to the Magistrate under Section 157.
  • A report that deals with the offence committed by a subordinate officer needs to be sent to the officer-in-charge of the police station concerned under Section 168.
  • A final report, also called a challan, made by the investigating officer after the completion of an investigation needs to be given to the Magistrate under Section 173. This report is also known as a completion report.

The police report will include information relating to the facts of the case and the final conclusion drawn by the investigating officer. It consists of both oral and documentary evidence. The Magistrate, after going through this report, will decide whether to take cognizance of a case or not. The Magistrate is obligated to examine the report thoroughly and see whether it is accompanied by the appropriate documents and materials required for the court to start the trial. 

Scope of Section 173 CrPC

The police start to investigate a case when a complaint is filed at the police station for cognizable offences only. The investigation is assumed to be ongoing unless a police report (also known as a charge sheet) is filed by the police officer. This provision directs the police to investigate without unnecessary delay and then hand over the report to the Magistrate. The police cannot be compelled by the magistrate to submit the charge-sheet within a fixed period. After the filing of the charge-sheet following the completion of an investigation, the trial begins. The Magistrate can, at his own discretion, accept or reject the report filed by the police authorities.

Report made by the police officer on the completion of an investigation

Section 173(1) CrPC

This subsection states that an investigation of a matter must be completed by the police officer without any kind of unnecessary delay. In other words, it means that an investigation in a case under this section should not be delayed without reasonable grounds.

Section 173(1A) CrPC

Section 173(1A) states that the date for any investigation regarding the offences mentioned below shall be counted from the starting day when the police officer or the investigating officer of the police station recorded the information. The phrase “rape of a child may be completed within three months” under this subsection shall be replaced with the words, letters, and figures “an offence under sections 376, 376A, 376AB, 376B, 376C, 376D, 376DA, 376DB, or 376E of the Indian Penal Code shall be completed within two months”. 

Section 173(2) CrPC

(i) It states that the police authorities, after having completed the investigation, should  submit the report to the Magistrate, who has been empowered to take cognizance of the offence. The report must be submitted in a way that is already prescribed by the State Government. It shall contain the following things:

  • The names of all those parties involved in the case;
  • The nature of the information regarding the matter;
  • The names of those persons who are familiar with the facts and circumstances of the case;
  • If an offence seems to have been committed, and if so, then details of those who might have committed the said offence;
  • If the person accused of committing the offence has been arrested;
  • If the accused has been released on bond, with or without sureties;
  • If the accused has been forwarded into custody as per Section 170;
  • If it relates to any offence under Sections 376, 376A, 376AB, 376B, 376C, 376D, 376DA, 376DB, or Section 376E of the Indian Penal Code, 1860, then whether the medical examination report of the victim has been attached or not;

(ii) This subsection states that the police officer must inform the person, if any, who had initially given the information about the occurrence of an offence, about actions taken by him regarding the information, in such a way that the State Government  may specify. 

Section 173(3) CrPC

As per this section, if a Superior Official of the Police has been appointed for a case under Section 158, the report must be submitted by such official to the Court, if the State Government has directed so by general or special direction. If there is no direction from the State Government, the Investigating Officer may submit the report. The superior officer of police is empowered to direct the Investigating Officer for further investigation, even if such an order is not passed by the Magistrate. 

Section 173(4) CrPC

It states that in case the magistrate finds from the report that the accused has been released on his bond, the Magistrate can make such a discharge order of that bond, if he deems fit. 

Section 173(5) CrPC

It lays down the procedure for preparing reports in cases that come under the purview of Section 170. It is the duty of the police officer to give the following details to the Magistrate along with the report:

  • All other documents or relevant facts and evidence on which the prosecution proposes to rely on apart from all the information that has already been sent to the Magistrate previously at the time of investigation;
  • When the police have recorded statements of people under Section 161 and the prosecution is willing to examine those people. The police must forward those statements to the magistrate.

The types of documents this provision anticipates are usually reports on post-mortem examinations, handwriting experts, chemical examiners, fingerprint experts, etc. The accused is also allowed to ask for the recordings of the statements of those persons from the police officer who were questioned during the investigation and use relevant information as his defence.

Section 173(6) CrPC

It deals with those matters where the police officer does not disclose any part of a statement made by those who are examined during the investigation because it is immaterial to the subject matter of the case or disclosing it to the accused is not necessary in the interests of justice and is detrimental to the public interest. In such a situation, the police officer shall specify the portion and attach a note requesting the Magistrate not to include those portions in the copies to be given to the accused and expressing his reasons for such a request. 

Section 173(7) CrPC

It states that if the police officer, while investigating a case, thinks it appropriate to do so, he can provide the accused with copies of all or any documents that are mentioned in sub-section (5) of Section 173.

Section 173(8) CrPC

This subsection says that if the police submit a police report or a charge-sheet to the Magistrate under sub-section (2) of this Section, it will not prevent them from investigating further into that matter. While investigating further, if the police officer gets any new oral or documentary evidence, he shall make a report on it in the prescribed format and send it to the Magistrate. That report can be stated as a supplementary report or supplementary charge sheet or additional challan.

In the case of Luckose Zachariah v. Joseph Joseph (2022), it was observed by the Supreme Court that the Magistrate, while deciding whether the accused person has committed a particular offence or not for which he was taken into custody, must take into consideration the police report filed before him under Section 173(2) and at the same time go through the supplementary charge-sheet. The supplementary charge-sheet is also known as additional challan. The Magistrate needs to take into account the evidence that was submitted along with or before the charge-sheet (challan) as well as the evidence submitted along with the supplementary report (additional challan) of the further investigation.

In the case of CBI v. Hemendhra Reddy (2023), the Supreme Court observed that nothing bars the conduct of further investigation into a matter under Section 173(8) after the submission of the final report under Section 173(2) that the court has already accepted. It was also made clear that the principle of double jeopardy will not be applicable for further investigation as it is a mere continuation of the initial investigation. Double jeopardy means that a person cannot be prosecuted twice for the same offence. It does not mean that the accused is investigated twice for the same offence. Investigation is totally different from prosecution and punishment. Hence, it is not on par with prosecution. It was further stated that the court has no obligation to hear the accused while taking into consideration the application for further investigation under Section 173(8).

Reasons for the incorporation of Section 173(8)

Sub-section (8) was incorporated to uphold justice and protect innocent people from getting punished. It happens at times that after the submission of the police report, they get new evidence that shows the accused person is not guilty. So to avoid injustice for the innocent accused, this Section is used to reopen an investigation if it seems that the accused is innocent. It gives the police the power to further investigate a matter for the collection of new evidence and then hand it over to the court so as to avoid unfair prosecution. Its copies are furnished to the accused.

This Section deals with the power of the police for further investigation only. No power to a fresh investigation or re-investigation is given to the police officer. Further investigation means the continuation of a previous investigation, not a new or fresh one. It means getting more evidence in addition to the previous ones. After conducting further investigation, a further report is forwarded to the Magistrate, not a new one. The police start to investigate further in case they find something new in connection with the offence that has been committed, on the basis of which a police report was made.

What the Magistrate can do when a chargesheet is submitted

When a charge-sheet is submitted stating a crime has been committed, the Magistrate can proceed in the following three ways-

(i) When the Magistrate accepts the charge-sheet

Criminal litigation

The Magistrate can accept the charge-sheet and take cognizance of the offence. Section 190 of the Code of Criminal Procedure, 1973, states that any first-class Magistrate and only those of the second-class Magistrate who are specially empowered by the Chief Judicial Magistrate to deal with such cases, can take cognizance of any offence under Section 190(2)-

  • Upon personal complaint of facts constituting an offence;
  • Upon a police report of such facts constituting an offence submitted by the police officer;
  • Upon receiving information from a person apart from a police officer, or suo moto upon his own knowledge of the commission of such an offence.

(ii) When the Magistrate rejects the charge-sheet

The Magistrate can reject the charge-sheet and drop the proceeding. In such a situation, the aggrieved party or the complainant may submit a protest petition before the concerned Magistrate if the police report does not seem satisfactory to him. The aggrieved party may do the following things-

  • He may state the reasons in the protest petition why he is dissatisfied with the police report.
  • He may pray for further investigation under the supervision of the Magistrate.
  • He may also pray for further proceedings under Section 200 and Section 202 of the Code of Criminal Procedure, 1973.

(iii) When the Magistrate directs further investigation under Section 156(3)

The Magistrate is given the authority to direct any investigation of a cognizable offence under Section 156(3) after taking cognizance of a matter under Section 190 of the Code of Criminal Procedure, 1973. If a police officer fails to properly investigate a matter, then the Magistrate who has the competency to take cognizance of that case can direct the investigation. The Judicial Magistrates are empowered to take cognizance of cognizable offences, not the Executive Magistrates.

What the Magistrate can do when a final report is submitted

When a final report is submitted stating no offence seems to have been committed, the Magistrate can proceed in the following three ways-

(i) The Magistrate can accept the final report

When the investigating officer submits the final report under Section 173, the Magistrate can accept the final report. If the Magistrate agrees with the final report of the police officer and its  conclusion, he can drop the proceeding.

(ii) The Magistrate can reject the final report

When the investigating officer submits the final report under Section 173, the Magistrate can reject the final report presented to him and take cognizance of the offence under Section 190(1)(b) of the Code of Criminal Procedure. If the Magistrate is not satisfied with the conclusion of the investigation, he is not bound to accept it. If the Magistrate is satisfied with the facts of the case and sees sufficient grounds to take cognizance of the case, he can proceed further to the trial stage.

Discretionary power of the Magistrate

  • It is within the discretionary power of the Magistrate to accept or reject the final report submitted to him by the police officer.
  • The Magistrate, at his discretion, can disagree with the report and reject it and may take cognizance of an offence based on other documents and evidence submitted to him or annexed to the police report.

(iii) The Magistrate can direct further investigation

The Magistrate can direct the investigating officer to further investigate the matter if he is satisfied that the investigation was made in a casual manner and that it needs thorough and proper investigation. The Magistrate may direct further investigation under Section 156(3). The Magistrate is empowered to exercise his power to investigate further into a matter under this section even after the final report is filed by the investigating officer. In short, the Magistrate may not agree with the conclusion made by the investigating officer in the final report and order for further investigation. 

What a Magistrate can do when a protest petition has been filed 

When the protest petition has been filed, the Magistrate can proceed in the following three ways-

(i) The Magistrate can reject the protest petition

The Magistrate may approve the police report submitted by the police officer and may reject the protest petition filed by the aggrieved party. He may agree with the opinion of the investigating officer and accept the final report.

(ii) The Magistrate can accept the protest petition

The Magistrate may approve the protest petition, reject the final report, and take cognizance of the offence in accordance with Section 190 of the Code of Criminal Procedure. He may disagree with the opinion of the investigating officer and at once summon the accused who has committed the offence, as can be concluded from the materials collected during the investigation.  

(iii) The Magistrate can treat the protest petition as a complaint petition

The Magistrate may, before approving the final report, issue a notice to the complainant. If the complainant files a protest petition against the final report, the Magistrate may treat it as a complaint petition and process the protest petition in accordance with the provisions laid down in Chapter XV of the Criminal Procedure Code.

(iv) The Magistrate can direct further investigation after the protest petition is filed

When the complainant is informed, he can file a protest petition with proper justification for why he is filing it. He can bring to notice that the investigation was not done in accordance with the provisions of the law. If the Magistrate is satisfied with the reasons of the complainant, he can direct further investigation into the matter.

Relevant judicial pronouncements with respect to Section 173 CrPC 

  • In the case of Samaj Parivartana Samudaya v. State of Kerala (2012) 7 SCC 407, the Supreme Court of India held that if the police officer who is in charge of an investigation of a case gets further information or evidence, it is obligatory for him to forward it to the Magistrate with a supplementary report in the prescribed format. It was also observed that re-investigation is not permissible, but further investigation is not prohibited. The police officer can investigate further after filing the charge sheet. Further investigation is necessary for discovering the truth and serving effective justice to the public. It won’t be stopped just because it is delaying the process of concluding the trial. The police officer has a statutory right to further investigate a matter under Section 173(8), though it’s up to the Magistrate whether to agree or disagree with the report presented to him.
  • In the case of Vinubhai Haribhai Malviya & Ors v. State of Gujarat & Another (2019) 17 SCC, the High Court’s judgement was set aside by the Supreme Court. An FIR was filed on the ground that the legal heirs of Vinubhai have hatched a conspiracy by forging a power-of-attorney in respect of the land in Surat due to a price hike. The accused had tried to take the land from the legal owners of the land. The Apex Court was of the opinion that the Magistrate can use his power under Section 156(3) of the Code of Criminal Procedure even in the post-cognizance stage of a case. Hence, the Court passed a decree stating that the Magistrate can direct for further investigation in a case before going to the trial stage as per Section 173(8) read with Section 156(3) and Section 2(h) of the Code of Criminal Procedure, 1973, even after having the police report of an investigation.
  • In the case of Sri Desaraju Venugopal v. Central Bureau of Investigation (2021), the Delhi High Court observed that Section 173(8) of the Code of Criminal Procedure gives the investigating agency or police officer who is in charge of a particular case an unfettered power to investigate in a matter even after submission of the charge-sheet or the report without any conditions or restrictions. It is not compulsory for the investigating agency to obtain previous permission from the Magistrate for further investigation. It was also stated that just because any evidence is filed at the trial stage (i.e., after the submission of the police report) does not mean that it can be rejected. The power to further investigation is a statutory right of the officer-in-charge of a case. 
  • In the case of Bhagwant Singh v. Commissioner of Police and another (1985), it was observed that notwithstanding the First Information Report (FIR), in case the police officer decides not to investigate the matter because it seems to him that sufficient grounds are not available for investigating, he is required to inform the complainant under Section 157(2). It is his duty to communicate his actions about the matter to the complainant, and the report that he has submitted to the Magistrate must be given to the complainant. After getting the report from the police officer, where it is concluded that a crime has been committed, the Magistrate can either approve the report and take cognizance of the case, reject the report and drop the proceeding, or order further investigation under Section 156(3) and submit the further report to him. If, on the other hand, the report states no offence has been committed, the Magistrate can either approve the report and drop the proceeding, or may disagree with the report and take cognizance of the matter and proceed further on the availability of sufficient grounds, or order to investigate further under Section 156(3). The Supreme Court stated that the complainant must be given an opportunity to be heard by the Magistrate while considering the report. 
  • In the case of State Of Bihar And Anr v. J.A.C. Saldanha And Ors. (1980), the Supreme Court stated that the Magistrate power to investigate further under Section 156(3) is in no way in conflict with the State Government’s power. It is the independent power of the Magistrate to direct further investigation if any cognizable offence has been committed. This power can be exercised by him even after the investigating officer files the final report. The Magistrate, at his discretion, can either approve the report or order further investigation. 

Conclusion 

Any case begins on the basis of the police report filed under Section 173 CrPC, which deals with all the evidence and information that have been discovered by the police while investigating a matter. It contains all the facts and list of evidence that are forwarded to the Magistrate for a particular proceeding. It also states what the police concluded was the end result of the investigation. The report is transferred to the Magistrate who has the jurisdiction to proceed with the case and discretion to dismiss it after going through the police report. The police officer does not have the authority to decide whether enough evidence is available in a particular case to proceed to the trial stage. 

Frequently asked questions (FAQs)

What is a protest petition?

The protest petition is submitted by the complainant or an aggrieved person when he is not satisfied with the police report that is submitted by the police officer to the Magistrate, and the person may file a petition against the police report. This petition is termed a protest petition. It is nowhere defined in the Code. In short, it is an objection submitted against the final report.

When does the Magistrate order further investigation?

The Magistrate orders further investigation mainly on the basis of the protest petition filed by the informant against the police report that is submitted by the police in court under Section 173(2) of the Code of Criminal Procedure, 1973.

Whether the Magistrate can start an investigation suo moto?

It is not a discretionary power of the Magistrate to suo moto give instructions for further investigation in a criminal case as per Section 173(8) of the Code of Criminal Procedure, 1973.

Who can cancel, stop, or proceed further with the report?

When any report is submitted under Section 173(2), the Magistrate can exercise his power to cancel, stop, or proceed with the report. The police or the investigating authorities are not empowered to do so. Only the competent court with appropriate jurisdiction can deal with the case and can cancel, stop, or proceed further with the matter. 

Does the Investigating Officer need to get formal permission from the Magistrate to carry out further investigation?

It is not mandatory to get formal permission from the Magistrate to carry out further investigation. The law does not make it compulsory to obtain prior permission from the Magistrate for further investigation.

Can the Investigating Officer initiate further investigation without the order of the Court?

The Supreme Court stated that further investigation in any case can be initiated only with the court’s order where the final report has already been submitted. The Investigating Officer has no power to do it. The Supreme Court observed this in the case of Peethambaran v. State of Kerala & Anr. (2023).

References 


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All you need to know about the concept of trading on trademarks

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This article has been written by Nagesh Karale, pursuing a Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho and edited by Shashwat Kaushik.

It has been published by Rachit Garg.

Introduction

A trademark may be any word, phrase, symbol, design, or a combination of these things that is used for recognising the source of a product or service. It gives customers visual clues to distinguish products from others. It may be registered or unregistered. A company logo may be used as a trade mark. A registered trade mark is shown by the symbols ® or ™. As long as the company uses a trademark, it protects the product or service for which it is used. The word or phrase used in a trade mark does not give it ownership. The strong trademark is inherently distinctive. It is suggestive, fanciful, or arbitrary. A trademark that is descriptive or generic in nature is treated as a weak trademark.

A trade mark is part of the branding strategy of any product or service. A brand deals with the image of a company. It is a general impression about a company or its products. A trade mark not only provides legal protection for a brand but also protects against counterfeiting and fraud. Trade mark rights are territorial. A registered trademark provides broader rights and protections.

Overview on exploring trademark trading

Trading on trademarks deals with generating profits by using the brand’s worth and popularity in the market. Famous trademarks give the company a unique position and competitive leverage to generate new markets and profits. Proper brand strategies build strong trademarks. The strong IP policies protect the trademark effectively. This leads to brand dominance in the market. Trading on trademarks primarily deals with  activities related to selling, buying and licencing trademarks.

Here are some key aspects of trading on trademarks:

  1. Licencing and franchising: In licencing arrangements, valuable trademarks are allowed to be used by other parties. The licencing agreements determine the use of trademarks. The licenced company gets the benefit of the licensor’s popular brand. In exchange, the licensee gives royalties or fees to the licensor. In a franchising arrangement, the different franchisees use a similar business plan provided by the company. The franchisees take advantage of the product’s brand image and the good will of the company. They use the same brand name.
  2. Trademark sales and assignments: Trademarks are sold as property. Through written assignments, the purchasing company gets ownership of trademarks. The purchaser then benefits from the brand’s image and popularity.
  3. Mergers and acquisitions (M&A): In this business process, trademark ownership transfers to the acquiring company. Before M&A activity, the valuation of the trademark is carefully done. Then the registrations are updated to ensure the transfer of ownership. The newly acquired trademarks should be matched with the new company’s brand strategy.
  4. Trademark valuation: The trademark valuation is carried out before merger or acquisition activity. The trademark valuation depends on the popularity of the trademark, its market share and reputation. This important information is useful for financial tracking and taxation purposes.
  5. Brand extension and merchandising: Popular trademarks are further used for new products through brand extension. This gives company additional income through                                                                                             merchandising.

The infringement of trademarks leads to dilution and confusion among existing customers. The trademark infringement must be stopped to avoid losing business. For that, trademarks should be monitored to detect any infringement or improper use of trademarks. Legal action should be promptly taken against the infringer.

If the product brand is internationally famous, then the associated trademarks are registered in multiple countries for protection. Due to the growth of E-commerce, the trademarks have become beneficial for creating customer trust and loyalty globally on various online platforms. Nowadays, companies maintain their trademarks, copyrights, patents, and other intellectual property assets in different portfolios.

Under restructuring, mergers, or acquisitions, companies acquire popular brands, which leads them to enter  new markets. They can also offer new product categories. As a result, the image of the company is enhanced.

The company can sell or licence their unused trademarks to raise funds. Acquiring global trademarks allows companies to grow internationally. While trading trademarks, the overall benefits and drawbacks are considered to avoid risk.

Trademark licencing and franchising

Under a licencing agreement, the licensor allows the licensee to use a trademark. The use may be exclusive or non-exclusive. The written terms and conditions in the agreement determine the use of the trademark. The licensor should take care of the quality of the products to avoid damaging their trademark reputation. He should monitor the quality of the product or service throughout the licenced territory. This helps the brand image stay intact.

Trademark licencing takes various forms, like franchising, merchandising, brand extension and co-branding. The licencing strategy generates more revenue by entering new markets. Licencing old, underutilised trademarks gives extra revenue to the company. Licencing reduces overall advertising costs.

In licencing, there is a big danger of damage to brand image due to the poor quality of the product. So it is the responsibility of the licensor to control the quality of the product to avoid damaging the brand’s reputation. Misuse of trademarks is another problem. Excessive licencing may lead to consumer confusion and the trademark may lose distinctiveness in the market.

In franchising arrangements, the franchisee gets permission to use another party’s trademark to sell a product or service. In exchange, the franchisee gives royalties and fees to franchisors. The franchisor provides business plans and training to carry out business. The big brands, like McDonald’s and Clarks Shoes, are examples of franchising.

Trademark assignment and transfer

In trademark assignment, ownership is transferred to the assignee from the assignor. The goodwill of a trademark may be transferred through an assignment agreement. The new trademark owner gets permission to exploit the transferred trademark.

Trademark assignments can be done in many ways. In a complete assignment, all the rights, along with royalties, are transferred to the assignee. In partial assignment, as it is partial, not all but some goods and services rights get transferred. In an assignment with goodwill, the rights, value and entitlements get transferred to the assignee. Trademarks for unused goods and services are generally assigned without goodwill.

Before assignment, many factors affecting trademarks are considered. It includes ownership, validity verification, existing licences and the territory of trademarks. The legal disputes against any trademarks are also taken into consideration. The decision about the type of assignment, such as complete or partial, with or without goodwill, will be taken after thorough research. The assignment of a trademark should be beneficial to both parties. After due diligence, the risk can be minimised.

During the assignment of trademarks, all the related legal documents should be made available. The assignment agreement should be well structured to avoid disputes in the future. The agreement should include scope, consideration, dispute resolution, confidentiality and indemnity clauses. The local law and stamping rules should be followed.

Trademarks in mergers and acquisitions

Before mergers and acquisitions, the brand’s ownership and possessions should be checked. Any existing legal dispute may create problems in the future. Next, the trademarks should be checked for registration status. The assignment agreements should include warranties, indemnities, and pre-completion corrections to lower the risk.

After the transfer of trademarks, the assignments should be recorded with authority within specific time limits to avoid loss of entitlement to remedies and enforcement. The assignment agreement should include a “further assurance” clause to bind the assigner to provide post-assignment assistance. In agreement, a domain name and social media account transfer clause should be added. The help of a legal specialist ensures the smooth transfer of trademarks. After proper transfer, the trademarks will be exploited and enforced properly.

Online marketplaces and trademark trading

arbitration

Online shopping allows global consumers to buy products from anywhere in the world. The ease of online purchasing and secure payments contributed to the growth of different internet platforms. These websites, like Amazon, attract sellers around the world to sell their products at competitive prices on their websites. But there are risks to cyber security and the online sale of counterfeit products.

Third party help for trademark infringement is the major problem faced by the online seller. To detect online infringement of trademarks, it requires monitoring real name authentication and indirect information collection. Deciding the jurisdiction for infringement and enforcement of the law is the other big problem. Selling products imported in a different way in online stores can lead to legal problems.

To avoid online brand piracy, the seller should register their brand’s name and symbols. Continuously monitoring for online infringement and promptly taking strong legal action against infringement is the best policy. Facebook and Google also help to stop infringements.

The companies can educate their online customers about their brand using special symbols that show it’s their brand.

Future trends in trademark trading

As more and more companies are selling their products internationally, foreign traders should register their trademarks in multiple countries to avoid disputes. The Indian courts take care of the protection of unregistered and foreign trademarks. The trans-border trademark reputation of foreign trademarks is protected by Indian courts.

The changing technologies and global business practises compel the countries to modify their trademark laws .The major problems are  fake websites and domain name infringements.

There is a new challenge in drafting trademark laws for non-traditional trademarks like sound, colour, and smell marks. As  businesses are rapidly growing globally, the trademark laws of each country should have common and simple registration procedures. The compatibility of trademark laws between countries makes international business easier.

With the help of artificial intelligence, it will become easy to find out the trademarks that are already in use by searching the trademark databases. The trademark registration process can become safer by using  block chain technology. Domain name conflicts will become a prominent problem due to the increase in internet use.

Trademark offices use AI tools to check trademark applications and search trademarks in their databases. Online tools can help  find unauthorised trademark use and take action against trademark infringements.

Conclusion

A trademark is a business tool to protect a brand. Trademark trading gives many opportunities to become unique in the market and expand business globally. For trademark trading purposes, licencing, franchising, sales, assignments, mergers and acquisition strategies are used. In this digital age, trademarks play a vital role in increasing revenue, international trade and preventing infringement. Future technologies like AI and blockchain will shape trademark law. Proper trademark trading will ensure the success of businesses and their competitive position in the future.

References


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.

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

https://t.me/lawyerscommunity

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

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All about the Hathras case

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This article is written by Nimisha Dublish. This article discusses various nuances of the Hathras case that took place in the year 2020. The case is a landmark and a reminder that our justice system needs many updates and reforms to tackle sensitive matters like gang rape and the murder of women, especially those who belong to marginalised groups of people. 

It has been published by Rachit Garg.

Table of Contents

Introduction

It was September 2020, the month that shook the whole nation with the spine-chilling crime committed in Hathras, Uttar Pradesh The nation, which was trying to recover from various rape and murder cases like Nirbhaya’s case (2012), witnessed another traumatising and heart-shaking crime. The crime was not only committed against a young Dalit girl but also against the women of India. The girl was brutally raped and left to die in the fields of Hathras, Uttar Pradesh. The people are dependent on the police authorities as they play a crucial role in the justice delivery system. They are responsible for our protection. They are the ones through whom one can feel safe and believe that justice will be delivered to them one day. Police officers are the carriers and bearers of justice. They investigate wrongs committed in society and deliver information regarding the same to the justice authorities of the country. But here, in this case, the police yet again failed to do so. The crime in itself was not enough; police officers in Uttar Pradesh burned the body of the dead young girl while the family was locked in their house. There are many questions that arise in our minds. What if the girl was from the upper caste? Would the police have done the same with her in that case? And why did the police try to remove the evidence, i.e., the dead young Dalit girl’s body? It’s normal to have these questions raised in your mind. There were many rumours and debates all over the country regarding the case, but there were very few people who bothered to find out the real story and waited for justice to be delivered. 

After almost 2.5 years of fighting between the young girl’s parents and the accused, the judgement was passed on 2nd March 2023. The Scheduled Caste/Scheduled Tribe Court acquitted three out of four accused, and none of them was found guilty of gang rape. The accused were of a higher caste, and there were many questions in the air about the caste system and the injustice due to it. The investigation was then handed over to the Central Bureau of Investigation (CBI), and only Sandeep, who is 20 years old, was found guilty of culpable homicide not amounting to murder under Section 304 of the Indian Penal Code. The accused have been charged with certain offences under the SC/ST (Prevention of Atrocities) Act of 1989. The other three accused, Luv Kush (23 years old), Ramu (26 years old), and Ravi (35 years old), were found not guilty by the Court. 

Facts of the Hathras case

The incident – 14th September 2020

A 19-year-old Dalit girl was gang raped by upper-caste men in the village of Hathras, Uttar Pradesh. The event took place in the morning at 9.30 a.m. The victim, along with her mother, went to the field to cut the grass. The victim was then raped by the four accused men and left to die in the fields. Her mother discovered her body after hearing her scream. She was taken to the police station, where the police allegedly refused to report the case. Later, she named one of the accused, Sandeep Sisodia, and the FIR was then registered under Section 354 of the Indian Penal Code. This Section deals with the assault or criminal force of a woman with the intent to outrage her modesty. 

Later the same day, she was taken to the local primary health centre by the police. They referred her to the Aligarh Muslim University’s Jawaharlal Nehru Medical College. She was admitted at 4.30 P.M. The total travel time was supposed to be two hours, but she was admitted in the evening, i.e., more than the actual time that would have been taken to admit her. The delay was caused because the police authorities refused to file an FIR in the beginning.  

Critical condition – 15th September 2020

The victim’s condition worsened, and she regained consciousness to talk to her family. 

Statement recorded – 19th September 2020

The victim’s statement was taken, in which she mentioned the name of the accused. The police added Section 307 of the Indian Penal Code for attempt to murder. Sandeep was arrested after recording the statement of the victim. She mentioned that she was attacked because she resisted the sexual advances of the accused. 

Supplementary statements recorded – 21st September 2020

Supplementary statements were made by the victim in front of the magistrate. She names Sandeep, Ravi, Ramu, and Luvkush as the assailants. She accused them of sexual assault, and the police charged all four of them with gang rape and murder. The medical reports showed that there was some use of force, but the doctors waited for the forensics report to confirm the penetrative sexual abuse. 

First swab test – 22nd September 2020

The very first swab test was performed to ascertain the sexual assault. But the point to be noted is that this was conducted after a week. Thus, it was nearly impossible to find any evidence regarding the sperm trace. The remaining accused were also arrested, and the victim’s condition began to worsen.

Victim shifted to Delhi – 28th September 2020

The victim was shifted to the Safdarjung Hospital in Delhi. Her condition was continuously deteriorating, and the chances of her survival were decreasing. AMU doctors claimed that they had referred her to AIIMS, but she was shifted to the Safdarjung Hospital.

Victim’s death – 29th September 2020

The victim succumbed to her injuries and subsequently died on the morning of 29th September 2020. Protests by the political parties erupted in the hospital. An attempt to secretly cremate the victim’s body took place. Later, the victim’s body was taken to Boolgarhi village. 

Victim’s body cremated – 30th September 2020

As per the allegations put forth by the victim’s mother, the body was forcibly taken from them by the police and they cremated her at 2.30 A.M. The officials denied the allegations and said that it was consensual.

The state government formed a Special Investigation Team to investigate the matter. Many protests and criticisms were faced by the government and the administrative system due to the event that took place. The UP ADG, Prashant Kumar, claimed that the reports confirm that the victim was not raped. He was also criticised for passing such statements because the swab test was done more than a week after the assault took place. Post-mortem reports mentioned that she suffered severe injuries in her spine and that there were several marks on her neck, which were a result of attempted strangulations. 

Section 144 of the CrPC imposed – 1st October 2020

Section 144 of the CrPC was imposed in Boolgarhi village. The Section deals with the prohibition of the assembly of more than four people in the village. This prevented many leaders from entering the village and meeting the victim’s family.

Suo moto cognisance taken by the Allahabad High Court – 1st October 2020

The Allahabad High Court took suo moto cognisance in the case and issued summons to the administrative authorities to be present at the hearing of the case. The Court was upset by the fact that the authorities allegedly cremated the body of the victim without any consent. 

UP government files an affidavit – 6th October 2020

The UP government filed an affidavit justifying the act of the police authorities. The government claimed in front of the Supreme Court that the crime was registered immediately by the police. There was a necessity to cremate the body to avoid the chaos. The victim’s family was also present during the cremation. 

Letter by Sandeep – 8th October 2020

A letter is written by Sandeep to the police, claiming that he was friends with the victim. They used to talk over phone calls once in a while. He accused the victim’s mother and brother of torturing her. He indicated that there were chances of honour killing. The call history shows that there were 104 calls made between them.

Police and security deployed – 9th October 2020

Personnel have been deployed by the authorities for the safety of the family. CCTV cameras were also installed to monitor the area and ensure safety. 

CBI’s involvement – 11th October 2020

The CBI took over the investigation immediately after registering the FIR. The need to investigate the matter was felt due to increasing protests and demands for justice. Also, they received wide criticism for cremating the victim’s body in the middle of the night. 

Victim’s family before the court – 12th October 2020

The victim’s family appears before the Allahabad High Court’s Lucknow Bench amidst high security. The Court adjourned the matter till 2nd November 2020. The District Magistrate mentioned that the decision to cremate was taken after considering the law and order of the situation.

CBI carries on the investigation – 13th October 2020

The CBI met the family and collected evidence from the cremation spot. The local police were also questioned and asked to give all the information and evidence that was collected during the case. The local hospital where the victim was taken after the incident didn’t have the CCTV footage of that day. They said that they only kept the backup for 7 days. 

Allahabad High Court monitors the CBI probe – 27th October 2020

The Allahabad High Court was ordered to monitor the CBI probe and provide CPRF security and protection to the victim’s family and all the witnesses. The said order was given by the Supreme Court of India.  

Questions raised on cremation – 4th November 2020

The SIT report raises several questions on the cremation of the victim’s body. Further actions were to be taken by the authorities against those who were involved in the cremation, which was done without the family’s consent.

Status report from CBI – 6th November 2020

The Allahabad High Court sought a status report from the CBI and asked how much more time they would need to complete the investigation of the case. They were directed to file a status report before 25th November 2020, which was also the next hearing date.

Brain mapping and polygraph tests – 23rd November 2020

The four accused underwent Brain Electrical Oscillation Signature tests (BEOS), which are non-invasive in nature. They were taken to Gujarat for BEOS and polygraphic tests.

State Counsel appears – 25th November 2020

The state counsel appears to justify the hasty cremation of the victim. The Court heard the counsel. The counsel narrated the facts and contended that the District Magistrate did not commit any wrong. Submissions were given by the victim’s family, the state of Uttar Pradesh, and the CBI. 

Chargesheet filed by CBI – 18th December 2020

The CBI filed a chargesheet in the Court of Special Judge BD Bharti against the accused. They were charged for the provisions under the IPC and SC/ST Act. They also mentioned that there were lapses on the part of the UP police.

The charge sheet was filed against the four accused. The Sections that were invoked by the CBI were as follows-

  1. Section 302 of the Indian Penal Code for the punishment for murder.
  2. Section 376 of the Indian Penal Code for the punishment of rape.
  3. Section 376A of the Indian Penal Code for the punishment for inflicting injury upon the victim (while committing rape) and resulting in the death of the victim.
  4. Section 376D of the Indian Penal Code for the commission of gang rape.
  5. Section 3(2)(v) of the SC/ST (Prevention of Atrocities) Act for the protection of the victim’s rights as a Dalit girl. 

Battle ends – 2nd March 2023

After almost 2.5 years of battle, the Court passed its verdict on 2nd March 2023. The decision convicted one out of the four accused. Sandeep was convicted of offences under Section 304 of the IPC and provisions of the SC/ST Act. He was not held guilty of rape and murder. He was punished with life imprisonment along with a fine of Rs. 50,000. The police authorities were widely criticised for the delayed collection of samples, which eventually led to the botching up of the investigation. 

Brief background of the accused in Hathras case

Sandeep Sisodia (Chandu)

Sandeep Sisodia was the main and primary accused in the Hathras gang rape case. He was initially charged with many offences. These offences included rape, an attempt to murder, and offences under the SC/ST Act. His name was heavily highlighted in the victim’s statement, and his arrest was made soon after the incident.

Ravi

Ravi was one of the other three accused. He also faced charges of gang rape, murder, etc. Ravi was mainly accused of assault, as per the victim’s statement.

Ramu

Ramu was also one of the other three accused, who were charged with gang rape, murder, and other offences. He was also implicated for assault, as per the victim’s statement.

Lavkush

He was the fourth accused named by the victim and was charged with assault, gang rape, and murder. 

All four accused belonged to the same village but were of different caste groups. 

UP government and its administration in the Hathras case

There were several concerns raised by the public about the justice system in India. After the tragedy of the Hathras case took place, the UP’s administration came under intense scrutiny for suppressing and destroying the facts and information. They also undermined the victim’s family and challenged the relief granted by the court orders to provide help and compensation to the victim’s family. They tried to justify the event of cremation as a strategy suggested by intelligence to avoid mass violence. Some of the actions taken by the administration and government are as follows-

Cremation 

The police officers cremated the bodies of the dead in a hasty manner, which in turn raised many questions about them. The victim’s body was cremated without even the consent of the victim’s family. They were not able to justify properly why they did so, and there were no reasonable justifications given by them to prove the cause of action taken by them. The family was requesting the administration allow them to cremate their daughter and complete her last rites. But the administration didn’t allow them and cremated her on their own in the middle of the night at around 2:30 A.M. This act of the administration was seen as an attempt to dispose of the evidence and prevent the protests that might occur due to the caste system and the girl being from a Dalit family. The acts of the administration were widely criticised and later on, the government took some appropriate actions, setting up a team to investigate the matter properly, but some things cannot be undone. 

Media restrictions 

The government of Uttar Pradesh imposed media restrictions, and the victim’s family was not allowed to meet anyone. The step taken by the government was to maintain the secrecy of the case. However, it was said that the security given to the family was to prevent them from any harm; it was to limit the flow of information regarding the case to the general public via media houses. This act of government gave rise to concerns relating to transparency and accountability in the investigation. 

Restricting politicians

Many political leaders were restricted from meeting the family. The act was done to prevent the manipulation of the family against the system, but critics say that the act was done to prevent the victim’s family from getting any support from people. Also, the act was done to prevent scrutiny of the case and to find the facts from the family itself.

Challenging court orders

Court orders in favour of the family were challenged by the administration and government. When the Allahabad High Court passed an order for a special investigation by the CBI, it was challenged by the government. However, later on, this appeal was withdrawn by them, seeing the condition of the case.

Compensation

Initially, the government denied compensation to the victim’s family. This act of the government was also widely criticised, citing the insensitivity of the government towards the rape case. Such reluctance on the part of the government increased the distress of the victim’s family. Compensation is something that is given to the victims of crimes, especially sexual violence cases. 

Intimidation and lack of empathy

The administration was criticised for intimidating the family to change their statements, and they were under pressure as they were not allowed to speak freely. Especially in the initial stages of the investigation, the police officers were insensitive towards the case and failed to understand the trauma that the family was going through. 

Analysis of Court’s judgement in the Hathras case

Here’s the breakdown of the judgement given by the Allahabad High Court. 

Conviction

Sandeep Sisodia (Chandu) was found guilty by the Court. He was found guilty under Section 304 of the Indian Penal Code and Section 3(2)(v) of the SC/ST (Prevention of Atrocities) Act. This deals with culpable homicide not amounting to murder. The Court said that Sandeep was involved in the incident, and there’s no question about that, but the act done by him was not a premeditated murder. The victim died as a result of getting dragged by her dupatta. This made her unconscious, and later she died during the treatment. 

They found Sandeep guilty by relying on evidence such as the post-mortem medical reports and the mother’s testimony in Court. The key factors were the ligature marks and the testimony given by the victim and her mother. However, the Court ruled that though the death of the victim was a result of her getting dragged, there was no clear intent to murder her.

Acquittal

Ravi, Ramu, and Lavkush were acquitted in this case. Three out of the four accused were released by the court. The dying declaration and evidence were not able to conclusively establish their involvement in the case. All the charges, including those of rape and murder, were withdrawn. There was no sufficient evidence found by the court to prove them guilty of murder and gang rape. There were several uncertainties and ambiguities in the victim’s statement, due to which a clear conviction was not proved against these three. There was a remote possibility that the victim might be tutored by the political influence of the leaders who met her. It was also noted that the principle of ‘Falsus in Uno Falsus in Omnibus’ is not applicable in India. This maxim means that what is false in one thing is false in everything. This means that just because there were inconsistencies in the victim’s statement doesn’t mean that her whole statement is not true. 

Factual examination

The court went into the depths of the case and conducted a detailed examination of the facts involved. The fact that the girl is from a Dalit family was highlighted as one of the circumstances that led to the heartbreaking incident on 14th September 2020. It was observed by the court that the family faced problems while registering the FIR at the initial stages. The police were also insensitive to the case, which led to widespread criticism of India’s administrative system. There were several criticisms received by the police because of their handling of the case. 

Charges and proofs 

Charges were framed against the accused under 

  1. Section 302 of the Indian Penal Code for the punishment for murder.
  2. Section 376 of the Indian Penal Code for the punishment of rape.
  3. Section 376A of the Indian Penal Code for the punishment for inflicting injury upon the victim (while committing rape) and resulting in the death of the victim.
  4. Section 376D of the Indian Penal Code for the commission of gang rape.
  5. Section 3(2)(v) of the SC/ST (Prevention of Atrocities) Act for the protection of the victim’s rights as a Dalit girl.

The statement made by the victim while she was counting her last breath in the hospital was considered a dying declaration under Section 32(1) of the Indian Evidence Act. This piece of evidence served as a crucial part of the case. The conviction of Sandeep Sisodia (Chandu) heavily relied on the dying declaration and the statements given by the victim’s mother.

Post-mortem report corroborated the injuries suffered by the victim. It proved that the ligature marks on her neck were due to the dupatta and her being dragged by Sandeep Sisodia by that dupatta. 

Principle of Falsus in Uno, Falsus in Omnibus

It was noted by the court that the principle of ‘Falsus in Uno, Falsus in Omnibus’ is not applicable in India. This principle means false in one thing, false in everything. There are chances that the victim’s statements might be an unnecessary exaggeration of facts and events. The question raised in the statement might have some element of falsehood in the testimony. The Court said that it is the duty of the court to identify the credible part of the evidence, and analyse it with the utmost care, and separate it from unreliable portions. However, it cannot be said that the statement by the victim is false in its entirety. 

Intentions

The Court observed that the evidence did not establish a clear intent to murder the victim. Since the victim died after a battle eight days after the incident took place, no clear motive for murder can be established in this case. 

Mishandling by police

Even after getting circumstantial evidence, the local police didn’t frame charges for rape at the initial stage. In the initial FIR, no charges of rape or gang rape were mentioned. It contained Section 354 of the IPC, which deals with a milder provision. The rape charges were added after a week. After the CBI took over the investigation, it registered an FIR invoking the IPC sections and the SC/ST Act. However, there were several pieces of evidence that were lost in the initial phase of the investigation. They also declared that, as per the Forensic Science Laboratory (FSL) report, the girl was not raped because no semen was found. The medical experts criticised the idea that the samples should be collected within 72-90 hours of the commission of the actual crime/offence. It is also preferred that the victim not have ideally urinated, defecated, or bathed. The court noticed that in cases of rape and murder, the investigation heavily depends on the physical evidence. The incompetence of the police authorities can be seen in this case due to the mishandling of evidence and delayed collection.

CBI arguments

The CBI filed a charge sheet in a special court in Hathras and invoked the provisions of gang rape and murder along with the SC/ST Act. They contended that if the police had properly conducted the investigation, the victim would have been able to speak about it in the initial stage itself. They also stated that the victim and her family were not given attention and respect by the police authorities because of their Dalit identity. The verdict could have been different if the case had been properly investigated by them in the initial stage itself.     

Reforms and afterthoughts for the Hathras case

After the Nirbhaya case took place in 2012, the Criminal Law (Amendment) Act, 2013 was introduced in India. It is also known as the Nirbhaya Act. It came into being to provide strict penalties to the perpetrators of sexual offences. It also includes the death penalty in certain cases. Despite these changes and provisions, there still exists a lack in the procedural part of the law. The perpetrators succeed in finding loopholes in the procedural aspect of the case and manage to get away with minimal or no penalty at all. 

Looking at the historical backdrops of caste-based discrimination and gender-based sexual violence, one must understand the nuances and seriousness that these sensitive matters carry with them. Going back several thousands of years, one can appreciate the fact that caste-based discrimination is rooted in the nerves of India. It is a system where a person is judged based on his/her societal hierarchy and the category in which he or she stands. The hierarchy indicates the ‘Brahmins’ to be on top and the ‘Dalits’ to be at the bottom of the societal hierarchy. Historically, Dalits were subjected to caste-based discrimination, social exclusion, economic marginalisation, etc. Hathras vase showed the vulnerabilities faced by the girl for belonging to this community. They are more vulnerable to violence, exploitation, and abuse. 

Gender-based violence has been persistent in India. This includes rape, domestic violence, acid attacks, and other forms of abuse. The Hathras case triggered memories of past heartbreaking cases of sexual violence like that of Nirbhaya. This case led to nationwide protests and demands for justice, along with changes in the legal framework. Despite all these protests and demands for reforms, the cases kept on happening one after the other.   

Conclusion

The Hathras gang rape raises many deep questions and concerns about the state of the justice system in India. Special concerns are raised for the marginalised communities of India. There were several complexities in the case, and it was quite difficult to prove guilt due to the nature of the evidence and its delayed collection. The judgement created significant scepticism and disappointment. The acquittal of the three accused highlights the deficiencies within the justice system. Despite having the evidence and dying declaration, the three accused were acquitted with a clear chit. 

The verdict points towards the shortcomings of the current justice system and requires major and effective reforms for the police and administrative systems to promote unbiased investigations. The case points to the fact that the battle for justice, equality, and caste discrimination is far from over. There’s still a dire need for change in society to lead a safe and unbiased life. However, the Hathras case is a stark reminder to address the gender-based violence and caste-based discrimination in India. Along with the legal reforms, there is a need for society to change its mindset. The issues are somewhere or other deeply connected to each other and need comprehensive action to be taken along with sustained efforts to fight the setbacks effectively and ensure a more just and equitable society.

Frequently Asked Questions (FAQs)

What was the decision in the Hathras case?

Sandeep Sisodia, one of the four accused, was convicted of culpable homicide not amounting to murder under Section 304 of the Indian Penal Court and Section 3(2)(v) of the SC/ST (Prevention of Atrocities) Act.

Which state in India has the highest rape statistics?

As per the report, Rajasthan has the highest number of rape cases across India in 2021. It is followed by Madhya Pradesh. Overall, 31 thousand cases of rape came out that year. 

References


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Understanding compulsory licences in India : an overview of patent regulations

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This article has been written by Nagesh H. Karale, pursuing a Diploma in US Intellectual Property Law and Paralegal Studies from LawSikho and edited by Shashwat Kaushik.

It has been published by Rachit Garg.

Introduction

A patent provides inventors with exclusive rights to their inventions. It covers new products, processes, or solutions.

A limited exclusive right is necessary to provide the patent owner with the ability to utilise the invention, recover the costs associated with its development, and incentivize further research and innovation. This exclusive right allows them to have a competitive advantage in the market for a specific period, encouraging investment in new inventions and driving technological progress.

Role of patent in promoting innovations

Patents play the following roles in promoting innovation:

  • Patents allow the patentee exclusive rights to use the patent for over 20 years to commercially exploit. This motivates scientists, researchers and companies to carry on R&D in different fields. The exclusive rights for their invention benefit them with higher returns and more profits, which leads to more hard research work and advancement of science and technology. 
  • Technical information about the invention must be disclosed to the public in a patent application. Due to patenting, information regarding patented products/processes comes into public domain so further research on that technology becomes easy for scientists around the world.
  • Patents provide not only monetary benefits but also recognition for their efforts in society. The innovator gains additional revenue through licencing the patented product/process.
  • Patents encourage competition among companies, which results in the most favourable pricing, quantities, and quality of goods and services for consumers. The successful smartphone industry was made possible by a robust patent system that allowed the licencing and cross-licensing of proprietary technology across telephony, electronics, computing, and software industries.
  • Patent protection is costly but an alternate way to protect the invention may be to protect it as a trade secret. But trade secrets have limited options for monetisation beyond bringing a product to market yourself. It’s difficult to licence or sell a trade secret, as opposed to a patent. Trade secret protection does not protect your rights as the exclusive owner. Trade secrets are less beneficial to the public than patents because they do not involve any sharing of technical information. 
  • A patent makes a small business more attractive to investors and helps to stop third parties from free riding on the efforts of the inventor.
  • The patent system incentivises technological progress, boosts productivity, and improves a country’s world trade position, thereby strengthening its economy. By granting exclusive rights, patents encourage innovation, leading to economic growth and competitiveness in the global market.

However, this grant of exclusive right to use a patent is not absolute and under certain conditions and circumstances, third parties could be allowed to use a patent by granting a compulsory licence. By granting compulsory licencing, the government allows a third party to produce a patented product or process without the consent of the patent owner or plans to use the patented invention.

Article 8 of the TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement permits members to adopt measures for protecting public health and addressing intellectual property rights abuse or unfair trade practices. The focus is on protecting public health. The provision emphasises the need to balance intellectual property rights with public health concerns.

Article 31 of TRIPS, which, with the use without authorization of the right holder, lays down the set of conditions that govern the use of compulsory licencing by WTO members.

The important key conditions outlined in bullet points are:

  • Authorisation of use without the authorisation of the right holder should be considered on its individual merits.
  • Efforts to obtain authorization from the right holder on reasonable commercial terms should be made before such use is permitted.
  • Use may be allowed in cases of national emergency, extreme urgency, or public non-commercial use, with notification to the right holder.
  • The scope and duration of use should be limited to the authorised purpose, except in semiconductor technology for public, non-commercial use or to remedy anti-competitive practises.
  • Use should be non-exclusive and non-assignable, except with the relevant part of the enterprise or goodwill.
  • Use should predominantly supply the domestic market of the authorising member.
  • Authorisation may be terminated when the circumstances leading to it cease to exist and are unlikely to recur, subject to review by the competent authority.
  • Adequate remuneration should be provided to the right holder, taking into account the economic value of the authorization.
  • Decisions regarding authorization and remuneration should be subject to judicial or independent review.
  • Conditions for use may be waived in cases of anti-competitive practises, with consideration given to the amount of remuneration.
  • Additional conditions apply when use is authorised for a second patent that cannot be exploited without infringing a first patent, including important technical advances, cross-licensing, and non-assignability of the first patent.

Legal framework for compulsory licences in India

Under the Indian Patent Law, compulsory licences have been dealt with under Chapter XVI of the Patents Act of 1970. Sections 82 to 94 and Rule 96 to 102 deal with the working of patents, compulsory Licences and revocation of patents.

According to Section 83 of the Patents Act of 1970, the following points summarise the general principles applicable to the working of patented inventions.

  • Patents are granted to encourage inventions and promote their commercial implementation in India without undue delay.
  • Patents should not be granted solely to monopolise the importation of patented articles.
  • Protection and enforcement of patent rights contribute to technological innovation, technology transfer, and social and economic welfare, balancing rights and obligations.
  • Patents should not hinder the protection of public health and nutrition, and the government can take measures to safeguard public health.
  • Patentees should not abuse their rights or engage in practises that unreasonably restrain trade or hinder international technology transfer.
  • Patents aim to make the benefits of patented inventions available to the public at reasonably affordable prices.

Section 146(2) and Rule 131 of the Patents Act 1970 require every patentee and licensee to provide information on the extent to which the patented invention has been worked on a commercial scale in India in Form 27 every calendar year, within three months of the end of each year.

Non filing of such information is a punishable offence and invites a fine, which may extend up to Rs. 10 lakh. Imprisonment for up to six months, a fine, or both will be imposed for providing false information.

Conditions for granting compulsory licences

After three years from the date of patent grant, any interested person, including the licence holder, can apply in Form 17 for a compulsory licence on the patent. Section 84 and Rule 96 of the Patents Act 1970 deal with the grounds for the grant of a compulsory licence on a patent.

  1. Reasonable requirements of the public regarding the patented invention have not been met.
  2. The patented invention is not available to the public at a reasonably affordable price.
  3. The patented invention is not being worked on within the territory of India.

Reasonable requirements

In considering the application under this section, the controller shall take into account:

  1. Nature of the invention, time elapsed since patent sealing, and measures taken by the patentee or licensee to utilise the invention.
  2. Applicant’s ability to work the invention for the public’s benefit.
  3. The applicant’s capacity to undertake the financial risk associated with capital investment and working of the invention.
  4. Whether the applicant has made reasonable efforts to obtain a licence from the patentee and such efforts have been unsuccessful within a reasonable period determined by the Controller. The “reasonable period” shall be construed as a period not ordinarily exceeding a period of six months.

This clause does not apply in cases of national emergency, extreme urgency, public non-commercial use, or instances of anti-competitive practises by the patentee.

The other sections related to compulsory licences

Section 91 and Rules 96 to 98 for licencing of related patents -Any person, whether a patentee or a licensee, who has the right to work on another patented invention, can apply to the Controller for a licence of the first mentioned patent. The application can be made on the grounds that the person is prevented or hindered from efficiently and effectively working on the other invention without the licence.

Section 92 for special provisions for compulsory licences on notifications by the Central Government- In circumstances of “national emergency” or “extreme urgency” or “public non-commercial use,” if the Central Government is satisfied that it is necessary that compulsory licences be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect by notification in the Official Gazette.

Section 92A of the Indian Patents Act 1970 states that a compulsory licence shall be available for the manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided a compulsory licence has been granted by such country or such country has allowed importation of the patented pharmaceutical products from India.

As per Section 86 of the Indian Patensts Act 1970, if the patented invention has not been worked on a commercial scale in the territory of India to an adequate extent or to the fullest extent that is reasonably practicable, the controller may, by order, adjourn the further hearing of the application for such a period not exceeding twelve months in the aggregate as appears to him to be sufficient for the invention to be so worked.

According to Section 85(1) and Rule 96 of the Indian Patents Act 1970, after two years from the date of granting the first compulsory licence for a patent, the Central Government or any interested person can apply to the Controller in Form 19 for an order to revoke the patent.

Grounds for revocation of patents

Patent revocation grounds include:

  1. The patented invention is not working within the boundaries of India.
  2. The patented invention does not fulfil the reasonable expectations of the public.
  3. The patented invention is not available to the public at a reasonably affordable price.

The controller can terminate a compulsory licence granted under Section 84 according to Section 94 and Rule 102(1) of the Indian Patents Act 1970. The patentee or any other person with title to or interest in the patent can apply for termination of a compulsory licence using Form 21. If the reasons for the grant of a compulsory licence no longer exist and are unlikely to recur in the near future, then it can be terminated. However, the holder of the licence has the right to contest the termination decision.

The Central Government and authorised individuals can use the invention for government purposes under Section 100 of the Indian Patents Act of 1970. For this purpose, a patent application should be filled out or a patent should be granted. This provision enables the government to employ patented technology for the advancement of its own interests and objectives.

For public purposes, the Central Government has the power to acquire an invention or patent from the applicant or patentee. Section 102 of the Indian Patents Act of 1970 deals with this power. When the government publishes a notification in the Official Gazette, the invention/patent’s rights automatically go to the government. The government fully owns and controls it. The government pays royalties to the inventor as mutually agreed.

Key implications for patent holders

  • Compulsory licences weaken patent rights. They should be rare exceptions.
  • In developing countries, the government may adopt certain policies of affordability and local manufacturing. This discourages investment in developing countries in the pharmacy sector. Pharma is an inherently risky business. At the end, the   collaborations become unattractive and potentially isolate these countries. So these affected countries have limited control over essential medications for future population needs. Finding the right balance between low costs and innovation is very important.                                                                                                                                
  • Cheap compulsory licences discourage research by generic manufacturers. Developing nations are keen to acquire technology through transfers only.
  • Foreign patent owners might hesitate due to a nation’s perceived lack of patent-friendly policies and uncertainty about its intellectual property regulations.
  • Issuing compulsory licences in developing countries might reduce foreign investment. Companies might hesitate to invest where intellectual property isn’t well protected. This affects local industries reliant on foreign direct investment (FDI) inflows.
  • Compulsory licences can hinder economic growth. Countries with weak intellectual property laws become less competitive. Talented scientists leave the country, causing a brain drain. This hurts development and innovation prospects.

Balancing public interest and patent protection

  • Generic drug makers help the public, especially in developing nations. They provide cheaper options, making medicines accessible. This fosters competition, innovation and the employment of many.
  • Compulsory licences in pharmaceuticals spur innovation. They let low-cost companies create new inventions. Governments issue licences, enabling tech transfer and affordable treatments.
  • More generic companies mean more inventions and products. Due to this, patented drugs are sold at lower prices. 
  • Due to compulsory licencing, only efficient inventions are allowed to survive in the market.
  • Generic manufacturers can produce drugs at affordable prices due to compulsory licences. This helps patients in underdeveloped countries continue medical treatments for a long time.
  • Due to the government’s intervention in compulsory licencing, both parties—patent owner and licensee—get fair price negotiations for essential drugs.
  • Due to compulsory licencing, developing countries get opportunities to exploit developed countries’ intellectual property at cheap prices. This gives a developing country a chance to progress.

Case studies of compulsory licences in India

Bayer Corporation vs. Natco Pharma Ltd. (2013)

In this case, in India, Bayer Company was selling the kidney cancer drug Nexavar. Due to the high price in India, most of the patients were unable to buy the drugs. Natco Pharma wanted a voluntary licence in India. So it approached the Bayer Company. But Bayer denied a voluntary licence to Natco Pharma. So they applied for a compulsory licence. In March 2012, the Controller General of Patents granted Natco Pharma the licence for high cost of drugs. This allowed them to produce and sell a more affordable version of Nexavar.

Bayer justified high prices due to heavy expenditures on research and development. In reply, Natco Pharma argued that the burden of cost should be distributed to the other countries where this drug was sold.

The Patent Controller and the Indian Patent Appellate Board gave verdicts in favour of Natco Pharma. They gave paramount importance to reasonable affordability for the common public. This case highlighted the importance of the common public’s interest in India’s legal system.

Bristol-Myers Squibb Holdings … vs. Bdr Pharmaceuticals … (2020)

In this case, BDR Pharmaceuticals requested a compulsory licence for the leukaemia drug Sprycel. The Delhi High Court pointed out that evergreening violations are not sufficient grounds for a compulsory licence. Before applying for compulsory licencing, the applicant must try for a voluntary licence. In India, compulsory licences are granted based on valid reasons only. 

Challenges and controversies

Using compulsory licencing blindly will cause damage to innovation. Though compulsory licencing provides benefits for a short period of time, it is detrimental to R&D in the pharma sector in the long run. 

Due to compulsory licencing, there may be less revenue generated by selling drugs at cheap prices, which leads to low profits. The diminished royalties fail to cover R&D costs. Nexavar, which was made by Bayer, is used for the treatment of liver and kidney cancer. Under compulsory licencing, it was sold at a much cheaper rate but paid just 6% royalties to Bayer.

The United States and foreign multinational companies criticise some countries’ compulsory licencing laws. The compulsory licensee can get heavy profits without investing in R & D. This demotivates others who are involved in research or investing in R & D. Compulsory licencing can create trade tensions with drug-producing nations.

There are different views on compulsory licencing. Developing countries look at it as a human rights issue. They think that every patient should have access to life-saving medicines. But the pharma companies in developed countries look at it as a violation of patent protection. In 2001, the UN Sub-Commission on Human Rights recognised conflicts between the TRIPS Agreement’s intellectual property rights and international human rights law.

The government should consider all important factors, like affordability, accessibility, and motivation for research, for societal well-being.

Conclusion

The advantage of the patent system is that it motivates innovation. But the exclusive rights are owned by patentees. This leads to monopolies in the market and high prices for drugs. The patenting system is more suitable and profitable for developed countries but detrimental to underdeveloped and developing countries. Compulsory licencing is required for affordable lifesaving drugs for the poor. It is a powerful tool for the government to deal with the health crisis in the country. A study by Johns Hopkins suggests India saves about $843 billion annually through generic substitutions.

Compulsory licencing in India ensures access to medicine for all. It balances innovation and affordability simultaneously. Proper use of compulsory licencing keeps a balance between motivation for innovation and easy access to medicines. Strict voluntary licencing and quality regulations are important factors in the success of compulsory licencing.

References


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Wildlife First vs. Union of India : an analysis

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This article has been written by Saloni Mahawar, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) and edited by Shashwat Kaushik.

It has been published by Rachit Garg.

Introduction 

The Forest Rights Act of 2006 stands as an important law in India, with the primary objective of recognising and safeguarding the rights of the people who live in forests. However, its constitutional validity has become a subject of intense legal study, giving rise to fundamental questions about the equilibrium between the conservation effect and the rights of disregarded communities. This has led to important questions about finding the right balance between protecting nature and the rights of ignored communities. This article aims to explain deeply the background of the case, elaborate on the key arguments of both petitioners and respondents, thoroughly examine relevant constitutional provisions, study what the Supreme Court decided, and see how it all affects the Forest Right Act and the people who live in the forest it seeks to empower.

Background of the case

The case of Wildlife First and Ors. vs. Union of India and Ors. (2019) is a landmark case in Indian environmental law. In 2008, Wildlife First, a non-governmental organisation (NGO), filed a writ petition in the Supreme Court of India challenging the constitutional validity of the Scheduled Tribe and Other Forest Dwellers (Recognition of Forest Rights) Act, 2006 (FRA). The FRA is a law that grants certain rights to forest dwellers, including the right to live in and use forest land, the right to collect and use forest produced, and the right to manage forest resources.

Wildlife First argued that the FRA was unconstitutional on several grounds. They claim that the FRA violates the fundamental rights of the forest-dwelling communities, specifically Article 14 (Equality) and Article 21 (Right to Life) of the Indian Constitution. The petitioners express concerns about the FRA potentially endangering the basic structure of the Indian Constitution, which safeguards certain core features that cannot be changed. They argued that the FRA  was beyond the legislative competence of Parliament. They argued that the FRA deals with matters that fall under the State List, and therefore, the Parliament did not have the power to enact it.

The people defending the FRA say it’s essential for protecting poor forest communities that have suffered a lot in the past. They also argue that the Act is not against the Indian Constitution but helps correct old mistakes and make things fairer. They believe that we can take care of the forests and help these communities at the same time. The Act, according to them, allows us to manage the forests responsibly and keep them safe for the future.

Key arguments of the petitioners

  1. Violation of fundamental rights- The petitioners claim that the FRA oversteps upon the fundamental rights of forest-dwelling communities, specifically Articles 14 (Equality) and 21 (Right to Life) of the Indian Constitution. They argue that these communities are being unfairly deprived of their right to live and make a living in their ancestral forest homes. They argue that this deprivation contradicts the constitutional principles of equality and the right to life.
  2. The basic structure doctrine-  An essential argument advanced by the petitioners revolves around the perceived threat to the basic structure of the Indian Constitution posed by certain provisions of the FRA. The basic structure doctrine, established by the Supreme Court, firmly upholds that certain core features of the Constitution are absolute and cannot be amended. The petitioners argue that the Act endangers these core features by potentially undermining the protection of fundamental rights and the overall rule of law.
  3. Legislative competence- The petitioners further raise concerns regarding the legislative competence of the Indian Parliament to enact the FRA. They argue that the Act oversteps upon the powers vested in the states, creating a contentious interplay of federalism. The debate centres on whether the Act oversteps its boundaries and intrudes into the domain of state legislation. 

Key arguments of the respondents

  1. Protection of marginalised communities- The respondents strongly argue in favour of the FRA, positioning it as a vital instrument for the protection of the rights and livelihoods of marginalised forest-dwelling communities. They state that these communities have tolerated the effects of historical injustices, enduring dispossession, and being deprived of access to the very resources on which their survival depends.
  2. Constitutional validity- Respondents strongly maintain that the FRA is not at odds with the Indian Constitution; rather, it aligns harmoniously with its principles. They contend that the Act is a crucial step towards addressing historical injustices and ensuring social justice for forest-dwelling communities. In their view, the Act represents a progressive step towards rectifying historical wrongs.
  3. Environmental conservation- Respondents underline the vital importance of striking a balance between the rights of forest dwellers and the urgent need for forest conservation. They argue that sustainable development can coexist with conservation objectives. Furthermore, they posit that the Act provides the framework for responsible and equitable forest management, ensuring the preservation of these vital ecosystems for future generations.

The Forest Rights Act, 2006

Purpose of the Act

The Forest Rights Act was made for three main reasons:

  1. Recognising and vesting the rights of people living in the forests.
  2. Secure their livelihood and take care of the forest resources responsibly.
  3. Amend historical injustices when their rights were ignored. 

Provisions of the Act

The Act provides a comprehensive framework for the recognition of both individuals and communities living in the forest. It has helped to secure their tenure rights over forestland, and it has given them greater control over forest resources. This has allowed them to improve their livelihoods and better protect their environment.

For example, the FRA has helped to reduce the number of forest evictions. In the past, the government evicted the forest dwellers from their homes to make way for development projects. The FRA has made it more difficult for the government to evict forest dwellers without their consent.

The FRA has also helped forest dwellers improve their lives by giving them access to education and healthcare.

Challenges of the Act 

Even though it’s a good law in theory, it has some problems in practise. Some people say it’s not working well and it’s even causing more harm to the forest in some cases.

Despite the positive impact, the implementation of FRA has met difficult challenges on multiple fronts. The challenges are:

Lack of awareness- The lack of awareness of the FRA among forest dwellers Many people who live in forests are not aware of their rights under the Act, and this has made it difficult for them to claim their rights.

Lack of resources- The government does not have enough resources to implement FRA effectively. This has led to delays in the process of granting forest rights, and it has also made it difficult to provide education and healthcare services to forest dwellers. 

The way forward

The government has a key role to play in implementing the FRA. The government needs to ensure that all forest dwellers are aware of their rights under the FRA. The government also needs to provide the resources necessary to implement the FRA effectively.

In addition, the government needs to work with NGOs and other stakeholders to ensure that the FRA is implemented in a way that is fair and equitable. The FRA is a landmark law that has the potential to improve the lives of millions of people. However, it is important to ensure that the law is implemented effectively so that it can achieve its full potential.

The Supreme Court’s judgement

The Supreme Court heard the case for several years and finally delivered its judgement in 2019. The Court upheld the constitutional validity of the FRA, but it also made some important modifications to the law. The Court held that the FRA does not violate the right to equality, but it did strike down a provision that gave preferential treatment to tribal forest dwellers. The Court also found that the FRA does not violate the right to life, but it did impose some restrictions on the rights granted under the FRA. For example, the Court held that the FRA does not allow forest dwellers to cut down trees without permission from the authorities. 

The judgement in Wildlife First vs. Union of India is a significant victory for forest dwellers in India. The FRA is now the law of the land, and it has helped to protect the rights of millions of forest dwellers. However, the judgement also shows that there are still challenges to be overcome in the fight to protect India’s forests. The Supreme Court’s modifications to the FRA show that there is a need to balance the rights of forest dwellers with the need to protect the environment.

In addition to the legal challenges, there are also practical challenges to implementing the FRA. The FRA is a complex law, and it has been difficult for the government to implement it effectively. There have been reports of corruption and inefficiency in the process of granting forest rights. There have also been cases of violence against forest dwellers who have tried to assert their rights.

Despite the challenges, the FRA is a step in the right direction. It is a recognition of the rights of forest dwellers and their importance to the conservation of India’s forests. The FRA is a work in progress, but it has the potential to make a real difference in the lives of millions of people.

Conclusion

In the end, this legal fight isn’t just about a law; it’s about finding a way for people and forests to live together in harmony. The case of Wildlife First vs. Union of India is a complex and important case that has had a significant impact on the lives of millions of people in India. The Supreme Court’s decision is a turning point in the ongoing journey towards justice and sustainability in India’s forests. The case is a victory for forest dwellers, but it also shows that there are still challenges to be overcome in the fight to protect India’s forests. 

References


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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Liquidated damages in a contract

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This article is written by Naincy Mishra. The article discusses the meaning and importance of liquidated damages in contracts and some of the famous judicial pronouncements related to it. 

It has been published by Rachit Garg.

Table of Contents

Introduction 

In every contractual agreement, there exists a presumption that the parties to the contract will fulfil their part of the duties and obligations mentioned in the contract. In fact, Section 37 of the Indian Contract Act, 1872 (hereinafter referred to as the “Act”) also mentions that the parties to a contract must perform/offer to perform their respective promises, unless such performance is either dispensed with or excused under the provisions of the Act, or of any other law. However, this is not the case every time. That is why there is a need for some recourse with the parties, which can be sued by them when there is a ‘breach’ of contract. 

A breach is nowhere defined in the Act, but as per Section 39, the promisee may put an end to the contract when another party to such contract has refused to perform/has disabled himself from performing his promise in its entirety. But the story doesn’t end here. Many times, due to such non-performance/breach of contract by a party, the other party might suffer damages arising in due course of time, and thus, the Act also provides for ‘compensation’ for loss or damage to the party complaining of the breach. 

Damages in a contract

The term damages means a form of monetary compensation caused due to a breach, loss, or injury [Common Cause v. Union of India (1999) 6 SCC 667]. Importantly, it must not be confused with the word ‘damage’, which simply means a loss or injury for which a compensation is sought. In the Contract Act, the word ‘compensation’ has been used to refer to damages, and it is provided in the context of ‘liquidated’ as well as ‘unliquidated’ damages. Damages can be of following types:-

  • General Damages – arose in the normal course of events
  • Special Damages – arose under situations that were reasonably anticipated by the contracting parties while they were entering into the concerned contract. Specific proof of such damage is mandatory to be established in this case
  • Nominal Damages – granted in a case where the party has not suffered actual or substantial loss or even if it has, it can’t be calculated with mathematical accuracy
  • Substantial Damages – involves considerable amount of money for the breach of contract 
  • Speculative Damages – damages that are definitely attributable to the wrong but are uncertain in respect of their amount
  • Aggravated Damages – where the loss incurred by the plaintiff are aggravated due to the mala fide conduct of the other party
  • Liquidated and Unliquidated Damages – While the above types of damages can be understood under general classifications, the damages that have been used in the Act are categorised as ‘Liquidated’ and ‘Unliquidated’ damages which will be discussed in detail hereunder. 

What are liquidated damages 

In a contract, when there are stipulations relating to the payment of a certain amount in case of breach of the contract, it is called liquidated damages. Under Black’s Law Dictionary, the clause of liquidated damages is defined as “a contractual provision that ascertains in advance the measure of damages in case a party breaches the agreement.” These stipulations are those terms of the contract that deal with certain circumstances that would be deemed a breach by the parties. 

For example, non-performance due to delay, discrepancy in certain quality or quantity standards, etc. Compensation to be given becomes easy in contracts involving these damages as the amount is already ascertained by the parties mutually during the formation of the contract. 

Section 74 of the Indian Contract Act

Section 74 of the Indian Contracts Act deals with liquidated damages. As per this rule, when a sum is named in a contract payable in case of its breach, regardless of the fact whether it is a penalty or not, the aggrieved party thereby suffering from the breach is entitled to receive reasonable compensation that must not exceed the amount so mentioned in the contract. Thus, the sum constitutes the maximum limit of liability. It can be understood by looking at some illustrations below.

Illustration 1: A contracts with B that if he fails to pay B Rs. 500 on a given day, he will pay B Rs. 2000. A fails to pay B Rs. 500 on such a day. Thus, B is entitled to recover from A a compensation not exceeding Rs. 2000, as the Court would consider reasonable. 

Illustration 2: X contracts with Y to pay Rs 3000 if X practises as a surgeon within Calcutta. X practises as a surgeon in Calcutta. Y is entitled to such compensation, not exceeding Rs. 3000, as the Court would consider reasonable.

Exception to Section 74 of the Indian Contract Act

Section 74 of the Act also mentions an exception to the provision as per which if a party concludes a contract (which includes  any bail-bond, recognizance, or other instrument of the same nature) with the State or Central Government under any law or order of such government to carry out an act in the interest of the general public, then a breach of such a contract or instrument makes the party responsible for paying the entire amount as specified in the contract.

When the stipulated amount is more than actual damage 

When the stipulated amount of compensation is more than the loss/damage occurred to the aggrieved party, the issue arises as to whether such an amount is reasonable or enforceable. In Fateh Chand v. Balkishan Das, AIR 1963 SC 1405, the Apex Court, while discussing the meaning of liquidated damages, stated that if a genuine pre-estimate of damages is made by the contracting parties at the time of entering into a contract and the stipulated amount is not extravagant or unconscionable, then it would be considered valid and enforceable as liquidated damages. This is because a significantly higher stipulated amount than the actual damage caused could indicate that the clause is operating as a penalty rather than a means of compensation.

Explanation to Section 74 states that a stipulation in the contract for an increased interest from the date of the default may be a stipulation by way of penalty. In such a case, the court might refuse to enforce the clause as mentioned in the contract. 

In case the stipulated amount of compensation is more than the loss/damage occurred to the aggrieved party, the concept of waiver or forfeiture might come into existence. In Chuni Lal Mehta & Sons v. Century Spinning and Manufacturing Co., AIR 1962 SC 1314, it was observed that where the parties to the contract have deliberately specified the amount of liquidated damages, there can’t be a presumption that simultaneously, they intended to allow the plaintiff to give a go-by to the sum so specified and claim instead an amount that was not ascertained/ascertainable at the date of the breach.

Calculation of liquidated damages

Mere presence of a clause of liquidated damages and pre-determined sum to be awarded doesn’t actually make the story easy. The court also takes into consideration factors such as reasonability of the sum, mitigation of losses, and other facts and circumstances in order  to compensate the aggrieved party adequately as he would have been in the case of performance of the contract and not to put him in any profitable position as a result of breach of the contract.

Essential conditions to claim liquidated damages 

In order to claim liquidated damages, the following conditions need to be fulfilled:- 

Existence of a valid contract

The first and foremost condition is that there must be a valid contract between the parties concerned. A valid contract is one where there is free consent of the parties and involves valid consideration. Basically, the contract must fulfil all the conditions of a valid contract under the Indian Contract Act 1872, i.e., valid offer and acceptance, competent parties, intention of the parties to create a legal obligation, valid consideration, lawful object, etc. 

Breach of contract

Secondly, the contract must be breached by any of the contracting parties. This  essentially means that there must be contravention of any terms of the contract. In other words, if there is no breach, there cannot be any argument for damages. Moreover, the plaintiff does not need to show that actual damage has been caused to him due to the breach. However, the court surely takes into consideration the degree of loss/damage suffered in certain cases. 

In Maula Bux v. Union of India (1969) 2 SCC 554, the Hon’ble Apex Court held that where the court is unable to assess the compensation to be given, the sum named by the contracting parties may be taken into consideration as the measure of reasonable compensation if it is regarded as a genuine pre-estimate, but not if the sum so named is in the nature of a penalty. Where the loss in terms of money can be ascertained, the party claiming compensation must prove the loss suffered by him. In State of Kerala v. M/s United Shippers and Dredgers Ltd., AIR 1982 Ker, it was held that there cannot be an award of any compensation if there is no legal injury to the party.

Clause of Liquidated Damages

Such a breach must be mentioned in the contract and secured against a stipulated amount of compensation. 

Reasonable relationship with the Actual Damage

The compensation sought through the clause of liquidated damages must be reasonable to make it enforceable. Unconscionable and extravagant agreements are generally struck down by the courts. The courts thus have the discretion to reduce the amount of damages to what appears to be reasonable in the circumstances. In Kailash Nath v. Delhi Development Authority (2015) 4 SCC 136, the Apex Court ruled that the plaintiff can recover the damages only to the extent of the claim being reasonable compensation for the damage caused to him, and he cannot claim the entire sum laid down as liquidated damages in the contract. As per Section 74, the amount mentioned as liquidated damages reflects the upper limit beyond which the party can’t claim damages. 

In ONGC v. Saw Pipes Ltd. (2003), the Supreme Court held that if there is no proof or an honest estimate by the claimant (party seeking damages), the court must award compensation that is less than the stipulated liquidated damages in the contract, and it must be based on a reasonable assessment of the consequences of the breach of such a contract.

It must be noted that in Indian law, unlike English law, the court does not reject the amount if it appears unreasonably high. It may either accept it or reduce it to what appears reasonable. 

Is actual loss necessary for liquidated damage 

As stated in the provision itself, “whether or not actual damage or loss is proved to have been caused” due to the breach of contract is not necessary. Therefore, generally, the plaintiff does not need to show that actual damage has been caused in the scenario for him to seek damages. But the damages sought must not be exorbitant or unreasonably high by taking advantage of the ‘upper limit’ as stipulated in the contract. In that case, it would be treated as a penalty, and the court shall assess the extent of the loss/damage caused to the aggrieved party and shall award a reasonable compensation to it, as held in Fateh Chand’s case (supra). In this case, it was said that giving compensation is to make good the loss, and thus, there can be no compensation when there is no loss. Thus, while showing that there has been some loss due to breach would be a prerequisite to claiming damages, it is not necessary to prove the extent of it strictly. 

Liquidated damages where no loss is caused or loss is not proven

As already stated, where there is no loss or injury, there cannot be a question of damages. Thus, while the court has stated in Fateh Chand and Maula Bux that the aggrieved party would be awarded some reasonable damages owing to the breach of contract even if actual loss was not proven, he surely has to show that there has been some loss or injury incurred to him due to such a breach. In Union of India v. Motor & General Sales Ltd. (2019), there was a delay in providing delivery of certain goods, and the issue involved was whether such a delay in the performance of a promise would attract the provisions of Section 74 of the Act. The Bombay High Court in this case refused to give any reasonable compensation to the claimant as they were unable to “prove” the loss incurred by them.
In Haryana Telecom Ltd. v. Union of India AIR 2006 Delhi 339, when the contractor delayed in supplying the cables and the Government had to procure the same from other sources but ultimately got it at cheaper rates, it was held by the Delhi High Court that there can be no damages for breach as there was no loss caused.

Importance of liquidated damages clause in a contract

The following advantages can be laid down for having a clause for liquidated damages in a contract:-

  • Ensures transparency and certainty 

In every contract, the most important thing is to ensure transparency between the parties in order to make them clearly aware of their part of the obligations to be fulfilled as well as to prevent any future conflicts. By mutually deciding the events of breach and the specified amount to be compensated in such a case, the certainty increases with respect to the same and, hence, saves the time of the parties as well as the courts.

  • Security of the plaintiff against a breach 

By laying down the situations that the parties can reasonably foresee and ensuring that they are secured for any loss or injury that occurs to them in case of non-performance of the contract as decided, the importance of stipulating liquidated damages becomes all the more important in the contractual transactions. 

  • Promotes fulfilment of obligations under the contract 

The clause of liquidated damages will promote the fulfilment of the mutual obligations of the contracting parties as it increases their accountability. This would cast a mandatory and deterrent effect on the parties against non-fulfillment/performance of their obligations. 

  • Protects defendant against any arbitrary claims for a breach of contract 

This not only helps the parties make a genuine and reasonable claim that the other party cannot refuse, but it also assists the court in determining the claims when a case is instituted before it. Moreover, since it signifies the upper limit within which the court can grant reasonable compensation, it also protects the defendant from any arbitrary claim by the plaintiff in order to gain undue advantage of the clause. 

Mode of recovering liquidated damages 

Forfeiture of earnest money 

The term forfeiture generally means loss or giving up something as a penalty for wrongdoing. In the contractual agreements, parties usually set up a clause regarding forfeiture of the money (for example, earnest money in the case of sale deeds or security amounts in other cases) if the contract is broken in the future due to their fault or failure. The amount involved is the money paid to confirm the contract. The courts in India upheld the validity of such a forfeiture in cases of failure to perform the party’s obligations. For example, due to a delay in the completion of the work, as in the case of Mountain Movers v. State of HP (2008).

In Fateh Chand, the court observed that the expression “contract containing any other stipulation by way of penalty” is comprehensively applicable to every covenant involving a penalty, irrespective of whether it is for payment on breach of contract of money/delivery of property in the future or for a forfeiture of the right to money/other property already delivered. Therefore, in all the cases where there is a stipulation in the nature of a penalty for forfeiture of an amount deposited pursuant to the terms of the contract, the court has jurisdiction to award such a sum only as it considers reasonable, but it must not exceed the amount specified in the contract as liable to be forfeited.

Other relevant cases in this respect

Conditions when liquidated damages can’t be recovered

1. When the contract is frustrated 

As per Section 56 of the Act, if the party knows or is likely to know with reasonable diligence that the act (to be performed under the contract) per se is impossible or unlawful to be done, then such a contract becomes void and the aggrieved party cannot, for the non-performance of such an act, seek damages/forfeiture of any advance paid from the other party. In Thiriveedhi Channaiah v. Gudipudi Venkata Subba Rao, AIR 2007 SC 2439, it was held that since the performance of the agreement had become impossible, the forfeiture of the advance paid would be improper. In this case, the deed of sale of land could not be completed due to a government notification for the acquisition of the said land.

2. Existence of force majeure event

Force majeure is an event that is outside human control and thus relieves the parties from performing their respective obligations under the contract. The Indian Contracts Act doesn’t explicitly mention the term ‘force majeure’ but it is implicit in Section 32 of the Act, as per which, if an uncertain event becomes impossible, the contract contingent on such an event becomes void. Thus, damages cannot be given in cases involving force majeure because the breach due to non-performance is outside the control of the parties. However, such should not become an easy excuse for the parties, as was seen often during COVID times. In Standard Retail Pvt. Ltd. v. M/s G. S. Global Corp. & Ors. (2020), it was held that mere hardship to perform obligations of the contract cannot be covered under the definition of impossibility to avoid relief under the force majeure clause.

3. Waiver of the breach

In case of a breach of a contract, the aggrieved party has the option to affirm such breach and claim damages or to waive the breach and continue with the contract. If the party waives the breach, he loses his right to claim any damages, even if the clause for damages exists in the contract. In a recent judgement by the Supreme Court in Welspun Specialty Solutions Limited v. ONGC (2021), it was held that ONGC was not entitled to recover the liquidated damages as they had waived their imposition while granting the first two extensions.

4. Aggrieved party himself at fault

There may be circumstances in which the aggrieved party may himself be at fault for leading the other party to breach the contract. In such a case, it would be difficult to claim damages from the breaching party, as it was he who put the other party in such a position. 

Difference between liquidated and unliquidated damages

While the damages are clearly stipulated in the contract in the case of liquidated damages, the court comes up with an ascertainment of the compensation in cases where there aren’t any stipulations relating to the damages for breach of contract, and this is known as ‘unliquidated damages’. Thus, the unliquidated damages would be considered to be given in two cases. First, when the parties have not mentioned any terms for compensation in case of breach of contract; and second, when there is breach of contract due to any unforeseen circumstances about which the parties might not have thought but the damages should definitely be provided. 

Section 73 of the Act deals with  unliquidated damages, wherein the amount for compensation is decided as such to make good the loss or damage naturally arising in the usual course of business or which the parties knew to be likely to result from a breach at the time of making the contract. Therefore, the damages are awarded by the courts based on an assessment of the injury/loss caused to the party against whom the breach has occurred.

Moreover, there is no need to show actual loss or damage caused in the case of liquidated damages, but on the other hand, the plaintiff must necessarily prove the loss due to the breach of contract in the case of unliquidated damages. Therefore, loss or damage is important here, and there must be a reasonable connection between the breach and the damage caused.

Serial No.Basis of DifferenceLiquidated DamagesUnliquidated Damages
1.Provision Governed by Section 74 of the Indian Contract Act, 1872.Governed by Section 73 of the Indian Contract Act, 1872.
2.DefinitionA pre-estimated amount of damages specified in the contract and payable in case of its breach.Damages that are determined by a court as compensation for actual losses suffered due to a breach.
3.EnforcementCan be enforced even if actual damage/loss has not occurred. However, the amount sought should be genuine and not exorbitant.Can be enforced only when actual losses are proved and on their basis 
4.CertaintySince it is already stipulated, it provides certainty about the compensation to be sought.Causes uncertainty as the estimates are not known 
5.SettlementCan be settled within the parties themselves, as the amount stipulated is already mutually decided between the parties.Might lead to legal proceedings, and the courts will ascertain the actual losses and appropriate compensation.
6.ExamplesConstruction contracts, lease agreements, and commercial contracts etc.Applicable to various contracts where actual losses can be proven, such as sales of goods or services.

Difference between penalty clause and liquidated clause in a contract

Section 74 of the Act also provides for a penalty to be received by the party who has suffered the loss/damage due to the breach of contract by the other party. While the liquidated damages are payable as a pre-ascertained amount of compensation for the loss, the penalty is generally disproportionate to or higher than the loss that could result from the breach of the contract. For example, A borrows from B Rs. 200 and gives him a bond for Rs. 500 payable in ten yearly instalments of Rs. 50, with the stipulation that the whole shall become due in default of payment of any instalment. This can be said as a stipulation by way of penalty. 

Another example can be given in the form of an explanation in the provision itself that a stipulation for increased interest from the date of default may be a stipulation by way of penalty. E.g., X gives Y a bond for the repayment of Rs. 2000 with interest at 15 per cent at the end of 10 months, with a stipulation that interest shall be payable at the rate of 70 percent in case of default from the date of such default. This is also a stipulation by way of a penalty, and Y is only entitled to recover from X such compensation as the Court would consider reasonable.

Discussing the difference between liquidated damages and a penalty, the Apex Court in BSNL v. Reliance Communication Ltd. (2011) 1 SCC 394 observed that to treat a provision of a contract as a penalty is a matter of construction, and it has to be resolved by asking whether the predominant contractual function of the provision, at the time of formation of the contract was to deter a party from breaking the contract or to compensate the innocent party for a breach. It can also be determined by considering the stipulated sum. That is, if it bears a reasonable correlation to anticipated loss, it would be construed as a liquidated damages clause and, if not, then as a penalty clause [M/s 3I Infotech Limited v. Tamil Nadu E-Government Agency, 2019 SCC Online Mad 33295]. Thus, the alleged penalty clause must pass muster as a genuine pre-estimate of loss.

The Court in Fateh Chand v. Balkishan Das, AIR 1963 SC 1405, has held that statutorily under Section 74, the duty of the courts is only to award reasonable compensation and not to enforce the penalty clause. The expression ‘stipulation by way of penalty’ used in the provision only applies where a sum is named as ‘penalty’ to be paid in the future for a breach,and not to cases where a sum is already paid and thus liable to be forfeited by a term in the contract. 

It can therefore be said that the question whether a particular stipulation shall operate as a penalty would be answered by the court while considering a variety of factors such as intent of the contracting parties, the character of the transaction concerned, consequential injury to the plaintiff, etc.

Serial No.Basis of DifferenceLiquidated DamagesPenalty
1.DefinitionA pre-estimated amount of compensation specified in the contract and payable in case of its breachA kind of specified sum in the contract which acts as a punishment for a breach
2.PurposeTo ascertain and compensate for actual losses suffered due to a breach of the contractTo deter the other party from committing a breach by imposing a punitive cost.
3.EnforceabilityIf they are genuine pre-estimates of damage, they are enforceable and held valid by the courtsThese are generally non-enforceable by the courts as they are considered punitive in character
4.Calculation of damagesGenerally, based on a reasonable estimate of the actual damages that are likely to occur from the breachUsually, the amount is arbitrary and is not based on a genuine estimate of damages
5.Modification of the amount by the courtIf the amount appears high and disproportionate to the actual damages caused, the court can reduce itThe court would always avoid putting unreasonable penalties on the defaulting party, so requisite modifications are generally executed

Judicial pronouncements 

Bharat Sanchar Nigam Ltd. v. Motorola India Ltd., 2009 (2) SCC 337 

Facts 

In the case of Bharat Sanchar Nigam Ltd. v. Motorola India Ltd. (2009), parties entered into an agreement by way of bidding that included the terms for the payment and the schedule for delivery of the goods. It also provided for liquidated damages in the event of failure on the part of the respondent to meet the delivery schedule. Later, the appellant invoked the clause of liquidated damages due to a delay in the purchase of goods. 

Issue 

Whether the liability of the respondent to pay the Liquidated Damages and the entitlement of the other party to collect the same from the respondent are excepted matters for the purposes of the concerned clause in the contract?

Judgement 

The Apex Court held that the question of holding a person liable for Liquidated Damages and the question of assessing the amount payable by way of Liquidated Damages are entirely different. While fixing the liability is primary, the quantification of the amount that is provided for is secondary. The court held that quantification of liquidated damages could be an exception, as argued by the appellant, but there has to be a delay in the first place for the levying of the liquidated damages. Therefore, it cannot be treated as an excepted matter because it does not provide for any adjudicatory process for a decision on a question, dispute, or difference, which is the condition precedent to the stage of quantification of the damages.

Sir Chuni Lal Mehta & Sons v. Century Spinning and Manufacturing Co., AIR 1962 SC 1314 

Facts 

This case revolved around a contract for the sale of goods in a managing agency agreement wherein the respondent wrongfully terminated the agreement before the stipulated period could end, and therefore, the appellants filed a suit for the recovery of damages for a breach of contract based on the stipulated amount in the agreement. 

Issue 

The issue was regarding the calculation and validity of damages for the breach of contract.

Judgement 

It was observed that where the contracting parties have knowingly specified the amount of liquidated damages in such a contract, there can’t be a presumption that, at the same time, they intended to allow the plaintiff to give a go-by to the sum specified and claim instead an amount that was not ascertained/ascertainable at the date of the breach. The court further stated that by providing for the compensation in express terms, the right to claim damages is necessarily excluded under the general law. Therefore, the seller’s claim for damages was held valid, and they were entitled to the difference between the contract price and the resale price as compensation for the buyer’s breach of contract.

Maula Bux v. Union of India (1969), 2 SCC 554

Facts

In this case, Maula Bux had entered into a contract with the Indian Government for the supply of certain goods and had deposited a certain amount of security for its due performance. It was stipulated in the contract that such an amount was to be forfeited if the appellant neglected to perform his part. Maula Bux defaulted on the supply. The government didn’t only rescind the contract but also forfeit the security deposit. 

Issue 

Issue was related to the validity of such a forfeiture of the security deposit for due performance of the contract.

Judgement

The Supreme Court pointed out that a case of forfeiture of earnest money was different from forfeiture of the security deposit for due performance of the contract and held that under Section 74, only a reasonable amount can be forfeited if a contract is not performed. But where, under the contractual terms, the party in breach has undertaken to pay an amount or to forfeit a sum of money that he has already paid to the party complaining of such a breach, the undertaking is in the nature of a penalty. Thus, performance of the contract could not be regarded as earnest money. 

Kailash Nath Associates v. Delhi Development Authority and Another (2015)

Facts

This case involved a public auction of land conducted by the DDA, wherein the highest bidder was required to pay a sum as earnest money, and such a sum was to be forfeited in case of default, breach, or non-compliance with any of the terms and conditions of the auction. The appellant, Kailash Naith, paid the earnest money and sought to extend the date for the rest of the payment, which was even granted, but later the land was auctioned. The appellant thus approached the Court to seek a refund of the earnest amount and the specific performance of such a contract.

Issues

Whether Section 74 of the Act can be applied to contracts demanding forfeiture of the earnest money upon a breach of the terms of the contract?

Judgement

The Supreme Court held that where a contract incorporates provisions for liquidated damages, such an amount can be received in totality only if the amount of damages suffered by the aggrieved party is similar to the pre-established amount of damages. It was further observed that the compensation awarded by the court must not at any point exceed the amount mentioned in the contract in the form of liquidated damages. The court in this case held that there was no breach of contract on the appellant’s part, and thus no penalty can be imposed in order to forfeit the earnest amount under Section 74 of the Act. The law does not provide for a windfall in the case of a breach when there is no damage suffered by the parties to the contract.

Conclusion 

In the dynamic landscape of modern business and commerce, where time and resources are of the essence, including a clause for liquidated damages contributes to the overall effectiveness of the contracts. The contracting parties can thus enter into agreements with greater confidence, knowing that the potential consequences of non-performance of the contractual obligations have been carefully contemplated and agreed upon. Such clauses promote transparency and ultimately foster trust between the parties.

However, it is important to understand the necessity of a clear and reasonable clause for  liquidated damages in the contract. The risk of such clauses being struck down or deemed unenforceable by the courts due to ambiguity or exorbitant fees further emphasises the need for thoughtful drafting. Legal practitioners and contract drafters therefore must necessarily be aware of the evolving jurisprudence relating to liquidated damages, ensuring that such clauses reflect not only the parties’ future intentions but also adhere to the legal parameters set forth by the statute and precedents.

Frequently Asked Questions (FAQs)

Can I get damages for breach of contract by the other party?

Yes. Under the Contract Law (of any country), damages are provided for a breach committed by one of the contracting parties. This is done to make up the loss incurred by the aggrieved party. In the Indian Contract Act, damages can be sought under Sections 73 and 74.

Which section talks about liquidated damages in the Indian Contract Act?

Section 74 of the Act talks about liquidated damages in the Indian Contract Act of 1872.

Which section talks about unliquidated damages in the Indian Contract Act?

Section 73 of the Act talks about unliquidated damages in the Indian Contract Act of 1872.

Are damages and indemnity the same things?

No. While damages can be claimed for the actions of the parties to the contract, indemnity can be claimed for the actions of the third party even if the contract is not breached. 

Are liquidated damages and penalties the same things?

No. Liquidated damages are a genuine pre-estimate of loss incurred due to breach of contract, but penalties are generally disproportionate to the loss incurred. 

Is it mandatory to include a clause for liquidated damages in a contract?

No. It’s totally at the discretion of the parties to include such a clause in the contract. However, it is definitely recommended to have the clause in order to avoid future conflicts in case of breach of the contract and to easily make a claim and get compensation for the same.

References


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Punishment for credit card defaulters in India

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Image source: https://www.helcim.com/article/overview-credit-card-transaction-types/

The culture of credit cards has become very famous in India, especially among the middle class. The number of cases of credit card default has also increased as a consequence. This article aims to discuss the concept of credit card default, the consequences of a credit card default, the provisions attached in such a scenario, and the landmark judgments related to it.

It has been published by Rachit Garg.

Introduction 

The use of credit cards in India has become very common. Lately, banks have relaxed the procedure for obtaining a credit card to a great extent. This provides consumers with the option to avail credit from the bank up to the pre-defined credit limit. However, the bank levies hefty interest in case of a credit card default. When a customer defaults on payment of the credit card bill, the bank seeks legal recourse to recover the outstanding amount. The legal recourse is of both a civil and criminal nature. This article discusses what legal remedy is available with the banks to recover the credit card defaults and what the punishment is for credit card defaulters in India.

What is a credit card default

When a bank issues a credit card to a consumer, it provides the option to avail a short-term credit with the bank. Whenever a credit card is used with a merchant, the bank makes the payment on behalf of the consumer, and this credit has to be paid back to the bank within a specified period (generally 20 days from the billing date). When a customer fails to repay the credit, a situation of credit card default arises. From the date of default, the bank has the right to recover the amount due.

Consequences of credit card default

The consumer is legally bound to repay the credit to the bank. This bestows upon the bank the legal right to recover the amount. For the same, the bank does not take recourse directly to a legal proceeding. Rather, it takes certain steps to recover the amount without any judicial intervention. Some of the consequences of a credit card default are as follows:

  1. Late payment fee 

The bank can levy a late payment fee in case the payment is not made before the due date.

  1. Higher interest rate 

The bank has an option to levy not only a late fee but also a very high rate of interest on the outstanding amount. The rate of interest can be as high as 40% per annum. This leads to a debt trap for the defaulter.

  1. Credit score 

The credit score of a person can be understood as his creditworthiness. In other words, a credit score is an indicator of how likely it is that a person will make the payment of a debt on time. The higher the credit score, the better the interest rates one gets on loans. If a person is a credit card defaulter, his credit score could be adversely impacted. This also ultimately affects an individual’s ability to get a future loan. 

  1. Blocking of the credit card 

The bank has the option to block the credit card account in case of a default, which in turn, impacts the credit score and makes it difficult for the defaulter to obtain new credit cards or even a loan.

  1. Asset acquisition 

In a few cases, the bank also has the option to seize the assets of the defaulter. Any condition to the same effect must be checked in the “Most Important Terms and Conditions” while applying for the credit card.

  1. Legal action 

If the person fails to make timely payment of a credit card bill, the bank can approach a civil court of proper jurisdiction for the recovery of money due by the cardholder. In certain circumstances, if the default is continuing and the bank is able to identify the mala fide intention of the defaulter, a criminal action under Section 420 of the Indian Penal Code, 1860, may be initiated. However, this is not a common practice as the mala fide intention is difficult to prove.

  1. Recovery by Agents 

Most of the banks and financial institutions have their own recovery houses. In prolonged delay of repayment of debt, a bank may even send a recovery agent to put pressure on the debtor and recover their debt. Though this method is unethical and may not be true in all cases, banks do exercise this option to recover their debt.

Legal provisions surrounding a credit card default

The default in payment of a credit card is treated as a default in payment of a loan. So, the law that is applicable in cases of loan default is also applicable in cases of credit card default. Many times, it happens that the debtor repays the pending amount through the medium of cheque. In such a scenario, in the event of a cheque bounce, banks often resort to Section 138 of the Negotiable Instruments Act, 1881. Accordingly, the bank reserves the right to initiate a criminal suit against the debtor just as in any other case under Section 138, i.e. to say that, the cheque should be presented within the stipulated period of six months, and notice should also be served within thirty days of receipt of the information of cheque bounce. If  both of these conditions are fulfilled, the bank can proceed with the initiation of a lawsuit. For example, recently, the State Bank of India, in its prospectus for SBI Cards, disclosed that it has filed more than 19000 cases under Section 138 against credit card defaulters.

As for the civil remedies for a credit card default, a recovery suit under Order XXXVII of the Code of Civil Procedure, 1908 can be filed by the bank. Order XXXVII Rule 1 provides that the Order shall be applicable in suits involving bills of exchange, promissory notes, hundies, etc., and where the plaintiff seeks to recover a debt from the defendant, with or without interest. The debt may arise out of either a written contract, an enactment, or a guarantee. Suits under Order XXXVII are of the nature of a summary suit, which provides for expedient disposal of a suit, thus providing additional procedures than an ordinary suit.

Apart from the civil and criminal provisions discussed above, the provisions of the RBI guidelines are also attracted when a credit card default takes place. The RBI issued the Master Circular on Credit Card Operations of Banks in 2011, which includes the procedure to be followed by the banks for credit card operations. The Master Circular also provides guidelines to be followed by the banks in cases of credit card default. The annexure to the Master Circular provides that the bank should clearly notify the cardholder regarding the charges and interest rate in case of default, as well as the procedure that would be followed in such cases, in the Most Important Terms & Conditions (MITC) of the credit card. Moreover, in cases of chronic default, the bank shall notify the Credit Information Companies (like CIBIL) regarding such default in order to alter the credit score accordingly.

Credit Information Company

A Credit Information Company (CIC) is an RBI-licensed entity that collects, maintains, and analyses the consumer and business credit information of individuals and companies across the nation, as provided by the financial institutions. This allows the company to maintain a credit score for the individuals, which could be perused by the banks to check their credit-worthiness. One of such companies, which is widely renowned in India, is TransUnion CIBIL [formerly known as Credit Information Bureau (India) Limited]. Thus, it is a common saying that in case of a credit card default, the CIBIL score may be adversely affected.

Judicial pronouncements

ICICI Bank v. Prakash Kaur [(2007) 2 SCC 711]

In this case, a writ petition was filed by the respondent before the Allahabad High Court for directing the police officers to register the FIR against the bank and its agents for unlawfully seizing the respondent’s vehicle. She took a loan from the Appellant bank to purchase a truck, and had defaulted in the payment of one of the instalments. On such default, the bank hired third-party recovery agents, who unlawfully seized the said vehicle. The Allahabad High Court disposed of the writ petition directing the registration of the FIR. However, the Hon’ble Supreme Court overturned the decision and directed the parties to reach an amicable settlement.

In a concurring opinion, Justice Dr. AR Lakshmanan provided certain guidelines that could be followed by the banks to avoid harassment of customers in default of a credit card bill or a loan. The suggestions included a defined threshold for a chronic defaulter, avoiding third-party agents for recovery, providing clear information regarding charges and interest rates in each and every statement, automatic blocking of the card on first default, etc. It was also opined that the guidelines issued by the Reserve Bank of India should be properly followed. 

Praveenkumar v. HSBC Ltd. [(2014) 2 CTC 828]

In this case, the issue before the Madras High Court was the maintainability of a summary suit under Order XXXVII of the CPC. The Appellant herein used various credit cards issued by the Respondent bank and defaulted on the repayment of the same. The maintainability of the summary suit was challenged on the ground that the credit card was neither a bill of exchange nor a hundi, as provided under Rule 1 of Order XXXVII. However, the Court held that since the customer has to sign the terms and conditions prior to using a credit card issued by the bank, it becomes a valid contract. In the absence of a written and binding contract between the bank and the customer, the bank would not be liable to pay any amount to the merchant on behalf of the customer. Thus, a valid contract exists where a credit card is issued, and in case of a dispute, the plaintiff (the bank) has the right to file a summary suit under Order XXXVII. Hence, the suit was held to be valid, and since the appellant had not filed the written statement within the stipulated time, the case was rightly dismissed.

Conclusion

The entry of various multinational banks has spread the culture of using credit cards among all classes, including the middle class, lower-middle class, and low income families. However, the hardships arising out of this culture are to be faced only by the lower income groups. The banks often sell these services while withholding crucial information regarding the consequences of a credit card default. Information about the high interest rates, charges, and fines in the event of a credit card default is hidden in the fine-print of the terms and conditions, which is more than often ignored by a consumer. It is only when a credit card default takes place that the “witch-hunt begins”. Such instances have been reported in judgments, as has been discussed above. The Court also took note of how the credit card default becomes a difficulty for the defaulter. In ICICI Bank v. Prakash Kaur, the Court took the opportunity to suggest changes in the system, which can be seen in the RBI Master Circular of 2011. The RBI obliges the banks to follow such mandates in order to protect consumers. 

Suggestions

The following are a few easy steps that could be adopted by cardholders to avoid credit card default:

  1. Timely payment of bills – Third-party apps and websites often send notifications before the due date. Such notifications must not be ignored.
  2. Judicious use of credit – One must not use more than the credit limit of the card. Moreover, it is recommended that one use only 30% of the credit limit in order to manage the credit card in a better manner
  3. Payment of the full credit card bill – The credit card companies often specify the minimum amount to be paid towards a bill. The cardholder should be cautious because if only the minimum bill is paid, the bank starts charging interest on the remaining amount and treats it as a default after a certain period.
  4. Approach the bank for resettlement plan – In various cases, the credit card default is not wilful but because of any compelling circumstances or mistake. In such cases, if the defaulter is able to make his or her case, they are helped by the bank in structuring a resettlement plan, through which the defaulted amount can be paid in installments.
  5. Credit card balance transfer – In cases where credit card dues are very high and the cardholder would not be able to pay the dues on time, they may opt for credit card balance transfer. It allows the cardholder to transfer the dues of one credit card to another, which has a lower interest rate. This helps the cardholder pay a lower interest rate in case of default as well as a relaxation in the payment due date.

Frequently Asked Questions (FAQs) 

The bank sends the minimum bill amount in the monthly statement. Should I pay just the minimum bill amount or the full amount?

The banks often send only the minimum bill amount rather than the full amount. This is done so that a cardholder pays only a part of the bill, and the banks can charge interest or late fees on the remaining amount. The details about the charges and interest rates are often put in the fine print, which is ignored by the majority of cardholders. To avoid any charges, the cardholder should check the detailed statement and make the full payment before the due date. 

After a credit card default, can the cardholder approach the bank for a planned repayment?

If the cardholder is a loyal customer of a bank, the bank will often allow a repayment structure or even waive interest or late fee charges. The cardholder should always check with the bank in case of a default before availing of such options.

References


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.

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

https://t.me/lawyerscommunity

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