As we all know, AI, or artificial intelligence, is rapidly changing the world today. It has impacted various industries, and the field of instructional design is no exception. One of the most widely discussed topics in this context has been its potential to disrupt the role of instructional design. The automation power of AI has raised concerns about whether it will eventually replace instructional design altogether.
In this article, we will explore the benefits that AI can bring to the instructional designer field and then also look at some of its limitations. After getting this balanced view, we will conclude with the future of instructional design and education in the AI driven world.
Who is an instructional designer
An instructional designer is a professional who works towards designing learning experiences based on the science and art of instructional design. In simple words, it starts with analysing learning needs, using the inputs to plan the appropriate instructional strategies, then designing and developing the content, and finally assessing learning outcomes. The field of instructional design is rooted in a deep understanding of cognitive psychology and pedagogy and has evolved over time to serve the changing needs of learners.
Instructional design and AI
With the advent of artificial intelligence (AI), there has been a lot of buzz about AI potentially replacing instructional design job roles in the economy. There have been speculations regarding the potential threat of AI to job profiles in training, learning, and development, as well as the field of instructional design. Let’s examine the benefits of AI and how its capabilities can be optimally utilised, as well as the limitations of AI in terms of what it cannot achieve for instructional designers.
Benefits of AI for instructional design
There are various benefits to using AI for instructional design. They are:
Adaptive learning,
Personalised instruction,
Content creation,
Immersive experiences,
Resource optimisation, and
Providing valuable insights.
Adaptive learning
AI has the potential to significantly improve the existing adaptive learning capabilities to enhance learning. AI-powered robust adaptive learning systems can facilitate competency-based and differentiated instruction. These systems create generative pathways dynamically based on how learners respond to tasks, the time taken to complete the task, and the difficulty level of the activity. This data gets generated and is leveraged to improve learners’ performance, as training can be crafted to target the actual needs of learners based on the results of adaptive testing and assessment. Thus, AI powered apps will enable a system wherein learners are challenged enough to perform at their optimal level and improve their learning outcomes incrementally.
Personalised instruction
Closely related to adaptive learning is personalised instruction. AI has increased the possibilities of personalising instructional opportunities based on adaptive testing results. The learning experiences can be customised to each user’s individual needs and preferences. For instance, consider an English language course that is driven by an AI platform. The system will measure the reading, writing, and comprehension of a learner to determine his/her current proficiency. If a user shows proficiency in reading but struggles with grammar, the AI based app will set up exercises focused on improving grammar. The system will monitor the progress continuously and adapt to the user’s personalised needs.
Content creation
AI can generate high-quality course content to develop highly engaging course content. Instructors can create quizzes and assessments by providing carefully crafted text prompts that are aligned to the learning outcomes of the course. Some examples include generating eLearning content that is created based on learner data, suggesting personalised flashcards and quiz questions, suggesting personalised learning materials, etc.
By harnessing AI’s assistance, instructors can streamline the course creation process, saving time while maintaining the quality of the content.
Immersive experiences
AI has capabilities that provide rich learning experiences through immersive virtual reality and augmented reality-based learning modules. Users have a chance to get closer to things they learn about, and this immersive experience has a profound effect on how users learn and retain learning.
Resource optimisation
In K-12 or academic settings, AI can help instructors optimise resource allocation. AI can automate repetitive tasks such as grading and administrative work. Teachers can be away from administrative tasks and spend more time focusing on maximising the effectiveness of their instruction.
Provide valuable insights
AI’s powerful algorithms and machine learning capabilities can process vast amounts of data to generate patterns by analysing data, leading to unique design solutions. Instructional designers and other professionals involved in the design field, such as graphic designers, can use AI to explore new possibilities, generate initial design concepts, and gain inspiration. They can make informed decisions by optimising design elements.
Disadvantages of AI for instructional designers
Now that we have understood the advantages of AI, let us look at some of its disadvantages. They are:
Content curation,
High investment,
Lack of human interaction,
Ethical considerations, and
Lack of creativity.
Content curation
It is true that AI can process vast amounts of data and provide high quality content in a matter of few seconds. However, the original content or source of information still needs to be created or curated by humans. AI can occasionally provide incorrect responses or invalid information. So, there are limits to how much one can rely on AI generated content.
High investment
AI can offer immersive learning experiences, but the development and implementation costs of AI-powered tools can be substantial. Although learning experience design is beneficial, the financial barrier can be significant, particularly in academic and corporate settings where allocating additional resources for AI technology might not always be feasible.
Lack of human interaction
AI powered tools, although capable of personalised learning and adaptive feedback, cannot replace the human touch or emotional support that learners need to succeed in academics or corporate training. Too much reliance and dependency on AI-powered educational tools may have negative consequences as well.
Ethical considerations
Corporate and edtech companies must ensure that they consider the ethical implications of AI technology in education. Privacy and security concerns need to be carefully addressed. The personal data collected from users has to be properly secured and maintained. It is important that they develop AI tools in a fair and responsible manner as per the laws and regulations governing data privacy, security and intellectual property.
Lack of creativity
AI generates responses based on data analysis, generating solutions and decisions based on analytics. It formulates responses based on the data and the analytics it can do with the data. But the proposed solution may not be the best solution or sometimes it might sound incorrect. Human creativity and judgement are irreplaceable and hence there are some limitations to how much one can rely on AI. More investment and research are required to improve AI’s capabilities to overcome such limitations and come up with more advanced and effective AI tools for users, both academic and corporate.
AI is not completely new; AI tools such as Knewton and Ahura were used to support learning in both classroom and corporate settings. However, the AI tools have now become more robust and effective. For instance, AI-powered tools such as Querium help tutor students with step by step lesson plans and guidance. These tools are recognised for their ability to provide individualised learning paths tailored to each student’s unique needs and preferences. They save educators considerable time by automating the grading process, enabling instructors to provide personalised attention to students.
Can AI be perceived as a threat
It is thus clear that rather than perceiving AI as a threat, instructional design and academic teaching professionals should consider it a collaborative partner that helps them in their endeavour to improve and enhance students’ learning experiences. The power of AI tools has to be leveraged for what it does the best – automating mundane tasks, deploying high quality content, data analytics, predictive analytics, adaptive assessment and feedback, and so on. These tools will not replace human practitioners but will assist them in their work. This can free up time for humans to focus on the human aspect, which is also a vital component of any user’s learning journey, right from theory to practise and then actual performance.
It is imperative to understand that instructional designers and teaching staff need to adapt to the new realities and collaborate with AI and other leading technologies that will shape the education and corporate learning sectors. The technological landscape changes as technologies evolve continuously.
Conclusion
AI will continue to evolve, and humans need to adapt and act as a collaborative force to reach business goals. Instructional designers can adapt to AI by learning about it, analysing the impact of AI on the market segment, evaluating what can be done using AI technology, and thinking critically about how to achieve success with AI technology.
In conclusion, we can say that AI is and will continue to impact the field of instructional design. However, what matters here is that instead of looking at it as a threat looming large over us, it needs to be seen as an “ally”. Instructional designers should ensure that they are aware of the potential benefits as well as its limitations and leverage its power in the most optimal way possible so that it is most effective in furthering the interests of learners in an ethical and responsible manner.
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Corporate social responsibility (CSR) refers to the set of social responsibilities that is designed as the etiquette for the corporate sector to make them responsible for the industrialization of society and the environment. This leads to the ethical and responsible conduct of businesses.
While the concept of CSR could be seen in earlier times, as the root of socially responsible business practises can be found in early philanthropic efforts, the modern understanding and recognition of CSR gained prominence in the late 20th century. In recent years, various standards and frameworks have been developed to guide and assess CSR practises. These include the Global Reporting Initiative (GRI), the United Nations Global Compact, and ISO 26000, among others. These standards provide guidelines and a framework for companies to report on their CSR activities and performance.
In simple terms, CSR policy refers to a set of guidelines, principles, and initiatives adopted by a company to ensure its business operation has less or no negative impact on society and the environment. It is more like a commitment made by companies to run their business ethically, responsibly, and sustainably. While one needs to bear in mind that CSR not only focuses on legal obligations but also voluntary considerations of social and environmental issues.
This article is going to help you grasp a descriptive understanding of “corporate social responsibility” and the factors affecting the implementation of CSR.
Components and examples of a successful CSR
The components of a CSR policy are as follows:
Mission statement
A CSR policy begins with a clear and concise mission statement, which could be considered the basis of a CSR policy as it defines the company’s commitment to social and environmental responsibility.
Ethical business practises
This is another most critical component of the policy; it emphasises the importance of ethical conduct throughout the organisation, including fair treatment of employees, suppliers, and customers, as well as the avoidance of corruption, descrimination and other unethical practises.
Environmental sustainability
A CSR policy includes initiatives to minimise a company’s negative environmental impact while maximising its positive impact. It covers aspects such as carbon emissions, conserving energy and water, waste management, and sustainable sources.
Transparency
Transparency is an essential component as it underlines the engagement of each stakeholder in the organisation for fair communication and to incorporate the diverse perspectives of its employees, customers, local communities, investors, and NGO’s.
All these points mentioned above are the most critical components that need to be considered while preparing CSR policies. There are examples of several such policies that have become sufficiently enforced with these components. For instance, Microsoft Company has a comprehensive CSR policy that includes neutrality, renewable energy, diversity and inclusion, and community engagement.
Benefits of implementing CSR policy
The benefits of implementing CSR policies are very wide. To discuss them thoroughly, we have divided them into four sub-categories which would cover every essential element.
Positive impact of CSR on corporation and society
It is the primary benefit obtained from the implementation of CSR policy, which includes promoting environmental sustainability, supporting community development and social welfare, fostering ethical business practices and contributing to economic growth and stability.
Enhance brand reputation and customer loyalty
Another advantage of this policy is that it enhances brand reputation and customer loyalty by building trust and credibility with stakeholders, strengthening the corporate brand image, attracting socially conscious customers, and increasing customer loyalty and advocacy.
Improve employee morale and engagement
By providing a fair chance of engagement, it improves employee’s morale and engagement with the community. It fosters a sense of purpose and pride to keep them motivated and make them feel satisfied about their jobs. Which ultimately leads to increased employee loyalty, participation and volunteerism.
Competative advantage and long term sustainability
While achieving long term sustainability, CSR policy plays a crucial role as it guides an organisation to differentiate from competitors in the market by providing a reputation for the brand. Along with this, it opens up a new scope to connect with new markets and customer segments. Moreover, its long term sustainability involves ensuring business continuity and resilience.
Factors affecting CSR policy implementation
Any policy’s implementation process necessitates the availability and control of a number of additional factors. These affecting factors are also considered challenges for the execution of “CSR Policy”.
A few of them are mentioned herein below:
Financial constraints
While implementing the policy, a company needs decent funds to manage everything efficiently. This could be for the allocation of resources, moving to renewable energies, or fostering positive environmental effects. All these depend on figuring out a cost-effective initiative. Hence, limited financial resources have a huge affect on the process of implementing CSR policies.
Organisational culture and values
Another important element is the organisational structure and culture of the company. This policy emphasises the importance of supportive corporate culture, employee fair engagement, and clear organisational values and mission so as to make the implementation effective.
Stakeholders expectations and influence
As the above factor mentions, fair engagement of every entity in the organisation is necessary to ensure stakeholders personal expectations are linear to the organisation’s future goals, which helps in building trust and maintaining open lines of communication to prevent disputes. Since stakeholder expectations and influence eventually affect the functioning of CSR policy.
Regulatory and legal requirements
Regulatory and legal requirements deal with compliance with local, national, and international CSR regulations. Staying up to date with evolving legal frameworks and reporting requirements, along with incorporating CSR into risk management and compliance strategies, makes it the most prominent affecting factor in implementing CSR policy.
Company’s specific consideration
Each company has its own specific structure and function, owing to which each company follows their own unique set of considerations, wherein while implementing the policy, there is a possibility of arising some new or uncommon adverse factors out of the specific structure of a certain company. This could be pertaining to its different work environment, benchmarks within the industry, or industry associations.
Strategies for effective CSR policy implementation
Setting clear goals: Clear objectives and goals are the key factors to consider while seeking effective implementation of CSR policy. To achieve this, one also needs to ensure that CSR goals align with the company’s mission,value, and long-termbusiness strategy. These goals must establish measurable targets, which would be tracked through key performances.
Implementation program: Another strategy for effective implementation is to prepare a well structured comprehensive implementation plan. It refers to the creation of a road-map that outlines the steps, actions, and timelines for implementing CSR initiatives. This plan should cover the concept of allocation of resources, including budget, personnel, and technology, to support the implementation plan.
Engaging community work: Community engagement refers to encouraging all the workers of an organisation to participate and be involved in CSR initiatives by promoting ethical behaviour, diversity and inclusion, and sustainability practises. All these foster a culture of responsibility. It is crucial to recognise and reward employees for their contribution to CSR efforts to keep them doing it.
Collaborating with external agencies: This strategy deals with the identification of key external stakeholders, such as local NGOs, government agencies, and industry associations, that share common goals. Establishing partnerships with such stakeholders can provide access to new expertise, resources, and networks. Thus, it is crucial to make CSR effectively embedded.
Evaluating CSR initiatives: To assess the effectiveness of policy, it is crucial to follow a monitoring and evaluation framework. This framework would emphasise regular data collection and measure CSR goals and targets in terms of the social, environmental and economic outcomes of CSR initiatives. In order to facilitate the same, asking for feedback from stakeholders, including employees, customers, etc., could be a great step.
Future trends and outlook
While measuring the outlook of CSR policy, it is subcategorised into three segments, which describe the future emerging trends in CSR, the process of CSR integration into core business strategies, and expected potential challenges or opportunities for future implementation.
Emerging trends in CSR and sustainability: In upcoming years, CSR is going to consider environmental, social and governance facts as priorities. It includes climate action, circular economy, and social impact investigation. All this factors play a key role in the journey of maintaining sustainability pertaining to growth, production, development, etc.
Integration of CSR into core business strategies: This outcome is more of a measure step of integrating CSR policy into core business strategies to ensure the final goal is common between business and CSR policy. It will lessen the scope of conflicts and disputes.
Potential challenges and opportunities for future implementation: CSR policy has a high potential for new challenges and opportunities for future implementation in terms of navigating evolving regulations and compliance requirements related to CSR and sustainability. Along with the challenges of allocating sufficient resources, managing stakeholder expectations, and cross-sector collaboration, all of these would also become challenges for future implementation.
Conclusion
In conclusion, the significance of implementing corporate social responsibility is gaining more importance in today’s business model. This article discussed various aspects related to CSR policies, such as their execution, need, benefit, nature and challenges while implementing.
However, while considering future trends, it becomes crucial to find ways to deal with their challenges and lessen the obstacles that come in the way of successfully implementing CSR. Looking ahead, we observe several common grounds connecting CSR and sustainability. It will include trends such as the integration of ESG factors into business strategies, increased focus on climate action and circular economy principles and the growing importance of stakeholders engagement, etc. This also emphasises the need for organisations to align CSR initiatives with core business strategies that would help in the smooth functioning of the companies without violating social responsibilities.
In the end, organisations have a great ability to adapt to emerging trends by integrating CSR into core business strategies and addressing the challenges and opportunities ahead.
References
Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders Business Horizons, 34(4), 39-48.
Epstein, M. J., & Buhovac, A. R. (2014). Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers.
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The article is written by Ansruta Debnath, and further updated by, Ziya ur Rahman Karimi. This article talks about the doctrine of eclipse which is a legal doctrine that has been used to validate pre-constitutional laws that violated fundamental rights.
It has been published by Rachit Garg.
Table of Contents
Introduction
The doctrine of eclipse under Indian laws is a legal doctrine that states that any existing law which is inconsistent with fundamental rights does not completely become invalid. It can be made valid if appropriate amendments are made to the Constitution of India, 1950, making that impugned law in sync with the fundamental rights. This doctrine rests on the premise that fundamental rights are prospective. Thus, any pre-Constitutional law which violated fundamental rights would not become void because at the time of the creation of that law, the fundamental rights of the Constitution of India, 1950 was not in existence. However, questions have arisen as to whether this doctrine becomes applicable to post-Constitutional laws as well, all of which has been addressed in this article.
The doctrine of eclipse and the Indian Constitution
This doctrine is related to Article 13 of the Indian Constitution which talks about laws inconsistent with or in derogation of fundamental rights. Article 13(1) states that any existing law in force before the start of the Constitution within the territory of India which goes against or is inconsistent with fundamental rights, present in Part III of the Indian Constitution, becomes void to the extent of such inconsistency. Further, Article 13(2) states that any new law becomes void the moment it comes into violation of fundamental rights, to the extent of such violation. These provisions are directly in consonance with the doctrine of severability. This doctrine states any provision of a statute which is against the Constitution will be severed from that act and will be considered void to that extent only. Thus, the courts can declare that provision, instead of the entire act, void. However, Article 13(4) states that Article 13 does not apply to constitutional amendments. This implies that if any constitutional amendment law gets passed that takes away certain fundamental rights or is in violation of them, those laws, although inconsistent with the rights, is not void.
Origin and evolution of the doctrine of eclipse
After the passing of the Indian Constitution, numerous existing laws could be challenged for being in contravention with fundamental rights and could be challenged in courts. Likewise, judicial review has played a huge part in establishing the doctrine of eclipse. While Bhikaji Narain Dhakras and Ors v. State of Madhya Pradesh (1955) was the case where this legal doctrine was formally pronounced by the Supreme Court judges, the doctrine was used in principle in certain other previous cases.
The first case where traces of the origin of this doctrine can be found is Keshava Madavan Menon v State of Bombay (1951). In this case, the appellant had a case against himself under Indian Press (Emergency Powers) Act, 1931 with regards to a pamphlet published in 1949. The appellant contended that such a case could not be constituted against him because that pamphlet aligned with the right to freedom of speech and expression are given in Article 19(1)(a). The Court opined that because at the time when the pamphlet was published, fundamental rights of the Indian Constitution did not exist. Thus, the appellant could not claim to have them. This case thus established that fundamental rights did not have retrospective but only prospective application. In the case of Article 13(1), the Court held that it was prospective and not retrospective, especially since any statute is prospective, unless specifically stated otherwise. Because the language of this article does not imply any kind of retrospective application, the same could not be assumed. This opinion was reiterated in the case of Pannala Binaraj v. Union of India (1957).
The next important case, which spoke about the nexus between Article 13(1) and the validation of pre-Constitutional laws infringing on fundamental rights was Behram Khurshid Pesikaka v. State of Bombay (1955). Here, the appellant was accused under Section 66(b) of the Bombay Prohibition Act, 1949. This section spoke about driving under the influence of alcohol. The appellant used the case of State of Bombay and Anr v. F.N. Balsara (1951) where Section 13(b) of the Act was declared to be void to the extent of its application to the use of alcoholic medicinal and toilet preparations because the same was violative of fundamental rights in Article 19. By extrapolation, the appellant contended that Section 66(b) should also be considered void insofar as alcoholic medicinal and toilet preparations were concerned.
The Supreme Court judges initially held that the Balsara case did not repeal or amend the section. But in reference to a larger constitutional bench, the majority opinion held that the section was “notionally obliterated” from the statute for the determination of rights and obligations of the citizens. It was further held that the ruling in Balsara was a good defence to a charge under Section 66(b) in relation to alcoholic medicinal and toilet preparations. It was for the prosecution to prove that the accused was driving under the influence of any prohibited alcohol other than alcoholic medicinal preparations and for the accused to prove otherwise.
Salient features of the doctrine of eclipse
Pre-constitutional law
The Doctrine of Eclipse applies to laws that were enacted before the commencement of the Indian Constitution. These laws are commonly referred to as “pre-constitutional laws.” They may have been in existence and enforced during the colonial period or under previous constitutional arrangements. When the Constitution came into effect in 1950, it brought forth a new legal framework that established the supreme law of the land. However, there were existing laws that might have been inconsistent with the newly guaranteed fundamental rights under the Constitution.
Conflict with fundamental rights
It is necessary that a pre-constitutional law directly conflict with the fundamental rights enshrined in the Constitution. If a pre-constitutional law violates or curtails any of these fundamental rights, it creates a conflict with the constitutional provisions.
Inoperativeness of law
When a pre-constitutional law is found to be in conflict with fundamental rights, it doesn’t automatically become null and void. Instead, it becomes inoperative or unenforceable against citizens whose fundamental rights are affected by the law. In other words, the law loses its legal efficacy to the extent that it infringes upon constitutional rights. This principle distinguishes the Doctrine of Eclipse from the Doctrine of Repugnancy, which renders a law wholly void if it is inconsistent with the Constitution of India.
Potential for future operationality
One of the distinctive features of the Doctrine of Eclipse is that the law, which was earlier eclipsed due to its conflict with fundamental rights, retains the potential for future operativeness. If there is an amendment to the relevant fundamental right in the Constitution that removes the conflict with the pre-constitutional law, the law automatically regains its power and comes into operation. This means that once the Constitutional impediment is resolved through a Constitutional amendment, the law becomes fully enforceable again.
It is important to note that the Doctrine of Eclipse aims to maintain a balance between safeguarding the sanctity of fundamental rights and recognising the continued existence of pre-constitutional laws. It allows these laws to remain dormant until they can be brought into harmony with the constitutional framework through appropriate amendments. The Indian judiciary has employed this doctrine to uphold the supremacy of the Constitution while recognising the historical context of pre-existing laws.
Bhikaji Narain Dhakras v. State of Madhya Pradesh
The most important case which was responsible for articulating and propounding the doctrine of eclipse was Bhikaji Narain Dhakras and Ors v. State of Madhya Pradesh (1955). In this case, the petitioners challenged the constitutional validity of the C.P. & Berar Motor Vehicles (Amendment) Act, 1947 which amended the Motor Vehicles Act, 1939. The petitioners contended that the passing of the Indian Constitution rendered the Amendment Act void as it violated Article 19(1)(g) or the freedom to practise any profession or to carry on any occupation, trade or business. The Amendment had allowed the Provincial Government to establish a monopoly over the motor transport business in the state, which the petitioners stated was violative of the fundamental rights enshrined in the newly minted Indian Constitution of 1950.
The respondents contended that although the Act was initially violative of the Indian Constitution, after the passing of the Constitution (First Amendment) Act, 1951 and Constitution (Fourth Amendment) Act, 1955, the inconsistencies were removed through the addition of Article 19(6) and the C.P. & Berar Motor Vehicles (Amendment) Act was functional again. The petitioners in response categorically stated that the Act had become void pursuant to Article 13(1) and was considered dead unless re-enacted again.
The petitioners’ claims were however rejected and the arguments of the respondents were accepted. The following are certain key points from the judgement of the Bhikaji case-
For starters, the judgement relied on the Keshava case. Further, it stated that the term “void” in Article 13 meant void to the extent of inconsistency with fundamental rights.
This implied that the entire operation of the Act did not get stopped. The true effect of Art. 13(1) was to render an Act, inconsistent with a fundamental right, inoperative to the extent of the inconsistency. It is overshadowed by the fundamental right and remains dormant but is not dead.
This is the doctrine of eclipse. The inconsistency with the fundamental right eclipses the Act until the inconsistency, hence the eclipse, is removed.
With the Constitution (First Amendment) Act, 1951 and changes in Clause 6 of Article 19, the provisions of the impugned Act were no longer inconsistent therewith and the result was that the impugned Act began to operate once again from the date of such an amendment.
Application of the doctrine of eclipse to the Indian Penal Code
In the case of P. Rathiram v. Union of India (1994), the constitutional validity of Section 309 of the Indian Penal Code, which punishes attempts to commit suicide, was questioned. It was ruled that Section 309 was violative of Article 19 which along with the right to freedom of speech also gives the right to not speak. Further, it was said that the section was violative of Article 21 which by extrapolation also gave the right to not live.
This was held to be an invalid finding in Gian Kaur v. State of Punjab (1996). Thus, in essence, the Rathiram case had eclipsed Section 309 with fundamental rights which got removed by the Gian judgement.
Application of the doctrine of eclipse to post-Constitutional laws
While Article 13(1) applies to pre-Constitutional laws, Article 13(2) applies to post-constitutional laws. An important distinction between these two clauses was drawn up in Deep Chand v. State of Uttar Pradesh (1959). Here, it was said that while a pre-constitutional continues to exist except to the extent of inconsistencies with rights given by Part III of the Indian Constitution, no post-constitutional laws in contravention of Part III can be made and the same if made is void ab initio. Thus, from the plain reading of Article 13, the doctrine of eclipse cannot apply to post-Constitutional laws. In Sagir Ahmed v. State of Uttar Pradesh (1954), it was held by the Supreme Court that any law enacted after the commencement of the Indian Constitution and not protected by Clause 6 while being in violation of Article 19(1)(g) could not be made valid.
Another important case in this regard isMahendra Lai Jaini v State of Uttar Pradesh (1963). In this case, it was authoritatively established that the doctrine of eclipse did not apply to post-Constitutional laws and the latter could not be automatically revived by Constitutional amendments. Thus, the impugned act would become void ab initio if its contravention of any fundamental right as is given in Article 13(2). To give effect to that statute, the Constitution will have to be amended and the former would have to be re-enacted. This principle was reiterated in K.K. Poonacha v. State of Karnataka (2010). The main question, in this case, was whether any act is liable to be declared void on the ground that the same was not reserved for the consideration of the President and did not receive his assent as per the requirement of Article 31(3) of the Constitution. It was held that an act did not become nullified just because it did not receive assent. It remained eclipsed until the irregularity had been removed. In the present scenario, Article 31 was repealed and thus, the act became revived again.
This doctrine has also been used in other circumstances. For example, in the case of K.P. Manu, Malabar Cements Ltd v. Chairman, Scrutiny Commt (2015), the Court held that when a person is converted to Christianity or some other religion the original caste remains under eclipse and as soon as during his/her lifetime the person is reconverted to the original religion the eclipse disappears and the caste automatically revives. Further, in the case of UOI & Ors. v. Duli Chand (2010), the court held that a penalty order upon being stayed would remain eclipsed and not dead. When the same stay is vacated, from that moment, the penalty would revive on its account.
Difference between doctrine of eclipse and doctrine of severability
Serial No.
Basis of differentiation
Doctrine of eclipse
Doctrine of severability
1
Definition
Renders inconsistent laws or provisions inoperative if they are in conflict with fundamental rights guaranteed by the Constitution until such conflict is resolved.
It allows for uphold valid portions of the law while striking down the unconstitutional parts; the rest of the law remains in effect after it is severable from invalid provisions
2
Nature of nullification
Under this doctrine, laws are not nullified but temporarily suspended until brought in line with the Constitution.
As per the doctrine of severability, only the unconstitutional portions of the law are nullified, and valid provisions remain enforceable.
3
Applicability
Applies to pre-constitutional laws that are contrary to fundamental rights.
Applies primarily to post-constitutional laws.
4
Purpose
To protect the rights of citizens by ensuring the supremacy of fundamental rights over conflicting laws
To maintain the functionality of laws by removing unconstitutional parts while preserving valid provisions.
5
Consequence
Once the inconsistency is resolved, the suspended law regains power and again comes into force.
After the removal of unconstitutional parts, the remaining provisions continue to be validly enforced.
Landmark judgements
Bhikaji Narain Dhakras v. State of Madhya Pradesh (1955)
Facts
In this case, a provision of the C. P. and Berar Motor Vehicle (Amendment) Act, 1947, authorised the monopoly of the State Government to take over the motor transport business in the Province. As this was pre-constitutional legislation, this provision was valid, but when the Constitution of India came into force in 1950, it became void as it was contrary to Article 19 (1) (g) of the Constitution. Even though the Constitution (First Amendment) Act, 1951, added clause 6 to Article 19, so as to authorise the government to monopolise any business, the constitutional validity of the Act was challenged, and the following issues were raised before the Apex Court.
Issues
Whether the C.P. and Berar Amendment Act, 1947, which amended the Motor Vehicles Act of 1939, is constitutionally valid.
Whether the effects of the Constitutional Amendments are retrospective or prospective in nature,
Judgement
The Supreme Court held that this law was merely eclipsed on the ground of violation of fundamental rights provided under Article 19. As soon as the eclipse is removed by the Constitution First Amendment) Act, 1951, the law begins to operate from the date of such removal. The Court further held that Article 19(6) was not retrospective in nature.
Keshav Madhav Menon v. the State of Bombay (1951)
Facts
In this case, Keshavan Madhava Menon (the petitioner) published a pamphlet without permission from the relevant authority in September 1949. As a result, he was charged with publishing unauthorised news sheets and newspapers under Section 15(1) of the Indian Press (Emergency Powers) Act, 1931. The Constitution of India came into force while the case was pending. He approached the High Court under Article 226 to question the constitutionality of Sections 15(1) and 18(1) of the Act because they breached his fundamental rights under Article 19(1)(a), which deals with freedom of speech and expression.
Issue
Whether a prosecution initiated before the enforcement of the Constitution of India should be continued despite the fact that the Act in question is unconstitutional due to a violation of fundamental rights under Article 19(1)(a) and 19(2).
Judgement
The Apex Court held that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation, and this rule of interpretation applies equally to the Constitution. The language of Article 13(1) is far from showing any intent to make it retrospective. Since the article is prospective, the conflict with fundamental rights would occur as of the date those rights were formed. In this case, the petitioner had no fundamental right under Article 19(1)(a) when he committed the offence in 1949; therefore, no relief was granted.
The Court further held these disputed Sections to be void on the ground of violation of fundamental rights only after the enforcement of the Constitution.
State of Gujarat v. Ambica Mills (1974)
Facts
After the bifurcation of the State of Bombay, the legislature of the State of Gujarat adopted the Bombay Labour Welfare Fund (Gujarat Extension and Amendment) Act, 1961, which amended the Bombay Labour Welfare Fund Act, 1953. The 1953 Act was enacted to provide for the establishment of a fund to finance initiatives promoting the welfare of workers in the state of Bombay. The respondents were a corporation incorporated under the Companies Act, 1956, and they challenged several aspects of that Act and the rules made under it. The High Court of Gujarat held that the Act violates Article 19 of the Constitution.
Issue
Whether a law infringes the fundamental rights of citizen-employees under Article 19(1)(f) can be challenged by the respondent, a non-citizen employer, on the grounds that the law is void also against non-citizen employers under Article 13(2).
Judgement:
The Court held that Ambica Mills, as a non-citizen, could not invoke Article 13(2) to declare the law void against them. The Court reasoned that if a law violates the fundamental rights of citizens under article 19(1)(f), it is void against citizens who have been conferred such rights, but it is operative in regard to non-citizens because the law is void only to the extent that the rights conferred on citizens are violated and non-citizens have no right under Article 19.
Conclusion
Thus, the application of the doctrine of eclipse is quite clear. While it can validate pre-constitutional laws that violate fundamental rights by allowing for Constitutional amendments, the same does not apply to post-constitutional laws. This is because pre and post-Constitutional laws have different standings under Article 13. With regards to pre-Constitutional laws, this doctrine allows for saving unconstitutional laws from being wiped out in exceptional circumstances by making those laws dormant until they can be revived in the future.
However, the question of whether the Doctrine can be extended to revive post-Constitutional laws is a matter of debate among jurists and judges as well. It has also raised fascinating constitutional questions that require unambiguous judicial decision, such as the exact meaning of the word “void” in Article 13(1) and (2) and whether the American concept of “relatively void” is applicable to the Indian scenario. The truth is that the Supreme Court has yet to make an unambiguous pronouncement on this topic. As of now, Ambica Mills decision is followed, and the Doctrine of Eclipse has not been applied to post-Constitutional statutes.
Frequently asked questions
What is the doctrine of eclipse?
The doctrine of eclipse is a principle that states that if there is anything that is inconsistent with the fundamental rights guaranteed by the Indian constitution, such a law or provision will be ineffective until the fundamental right is amended so that it no longer overshadows such law. When such inconsistency is removed, the law or the previously inoperable Section becomes valid and operative again. This doctrine aims to ensure that constitutional rights hold precedence over inconsistent laws, and in the event of any contradiction between a law or legal provision and the fundamental rights enshrined in the Indian Constitution, the said law or part thereof that contradicts these rights will be rendered non-functional until the fundamental right in question undergoes an amendment to no longer cast a shadow over said law. This doctrine was incorporated into the Indian Constitution through Article 13.
How does the doctrine of eclipse apply to pre-constitutional laws?
The Doctrine applies to laws that were enacted before the commencement of the Indian Constitution. If these laws conflict with fundamental rights, they are not nullified but rendered inoperative, creating a temporary eclipse over them.
Does the doctrine of eclipse apply to everyone, citizen and non-citizen?
In the case of citizens of India, yes, this doctrine is applicable to every citizen of India, as they have all the fundamental rights mentioned under Part III of the Constitution of India. But in the case of non-citizens, this doctrine is available only against those fundamental rights that are available to them, not against every fundamental right under Part III of the Constitution of India, as the case is with citizens.
When was the doctrine of eclipse formulated?
The Doctrine of Eclipse is not expressly mentioned anywhere in the Constitution of India, however, it derives its authority directly from Article 13 of the Constitution. Furthermore, this doctrine was upheld by the Madhya Pradesh High Court in the landmark case of Bhikaji Narain Dhakras v. the State of Madhya Pradesh (1955).
Which Article of the Constitution of India provides for the doctrine of eclipse?
Article 13(1) of the Indian Constitution affirms the Doctrine of Eclipse. It provides that any law enacted prior to the enforcement of the Constitution of India must be in compliance with Part III of the Indian Constitution.
Does the Doctrine of Eclipse render pre-constitutional laws permanently invalid?
No, any law or provision that is overshadowed under the Doctrine of Eclipse is not rendered obsolete permanently. It can be reinforced or revalidated through subsequent constitutional amendments or judicial decisions that eliminate the conflict with the Constitution, reinstating its function.
What is the significance of the Doctrine of Eclipse?
The Doctrine of Eclipse makes sure that laws that are in conflict with the Constitution of India do not lose their validity forever. Instead, it provides them with an opportunity to regain validity in the future. This doctrine provides a mechanism to resolve conflicts between laws passed prior to the enforcement of the constitution of India and the constitution itself.
Would Doctrine of Eclipse be applicable to post-constitutional Law?
The Doctrine of Eclipse is not applicable to post-constitutional legislation, as the Court stated in the case of Deep Chand v. State of Uttar Pradesh (1959). In this case, the Supreme Court ruled that post-constitutional legislation that violates a fundamental right is void ab initio therefore, the doctrine of eclipse would be irrelevant when it comes to post-constitutional law, and any Constitutional Amendment would not revive it. Hence, it is can be said that the Doctrine of Eclipse would not apply to post-constitutional law but would only apply to pre-constitutional law.
How does the Doctrine of Eclipse differ from the Doctrine of Repugnancy?
The Doctrine of Eclipse renders a law inoperative due to its conflict with fundamental rights, whereas the Doctrine of Repugnancy nullifies a law when it conflicts with a superior law in cases of legislative conflict between the Centre and States.
Can the Doctrine of Eclipse be invoked in cases of legislative conflict between states?
No, the Doctrine primarily deals with conflicts between pre-constitutional laws and fundamental rights. In cases of legislative conflict between states and the centre, the Doctrine of Repugnancy is invoked.
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In a technology driven world, it is crucial to have legislation that checks and balances the efficient functioning of online financial transactions. Financial service providers are one of the top money makers in India. When we talk about the financial market, we can see an accelerated hike in institutional and retail investors in the country. As fintech companies grow, regulation has become the government’s foremost concern.
One such concern is online bond trading platforms (OBPs), as there is a rapid increase in the number of investors, especially non- institutional investors, in bond trading platforms. Additionally, these platforms are not registered with any regulator; hence, they do not fall under SEBI’s regulatory purview. In a tech-savvy world, a number of OBPs have shot up in the last 2-3 years post pandemic, which sell debt securities and the process of buying is similar to the functioning of the stock exchange market.
To deal with this scenario and the problems that have arisen or may arise in the future, the Securities and Exchange Board of India (SEBI) proposed a regulatory framework that was needed for the working of bond trading platforms and the protection of investors who may fall prey to online fraud.
The board meeting held on June 29, 2021, led to major changes in the regulation of the Indian bond market. SEBI unified the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and the SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013 into a single regulation, the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
In this article, we are going to discuss this regulatory framework, the conditions that led to these new regulations and their impact in the short and long term.
What is a bond
In layman’s language, a ‘bond’ is the proof of the debt taken and issued by organisations to the buyer or investor of the bond. The bond in India is usually issued by institutions, i.e., governments or corporations.
Bonds are recognised as securities under Section 2 (i) of the Securities Contract (Regulation) Act, 1956. Bonds have a definite maturity date, which is usually a longer period. A bond is a type of debt securities that involves relatively lower risk and is a long term investment as compared to stocks. In most cases, bond providers are the same as stock providers. This is because both stocks and bonds are issued by corporations. The face value is paid back to the lender by the issuer.
Types of bonds
There are different kinds of bonds that are traded in the Indian market. There are separate categories of foreign bonds. But in this article, we are concerned with the bonds that are primarily categorised into four types. These are as follows:
Corporate Bonds : These categories of bonds are issued by companies to investors. They are relatively riskier than government bonds but give higher yield depending on growth of company and the terms and conditions of bond.
Government Bonds: These are securities issued by the central,state, local or municipal governments at various points in time. They possess taxes imposed by the government, which can be increased based on circumstances. These bonds are safe as the government repays the face value of the bond at maturity and in lump sums.
Agency Bonds: As the name suggests, the issuer of bond in this case is an agency (enterprise) acting on behalf of the government. These are some of the safest investments and are often compared with Treasury bonds.
Municipal Bonds: These are bonds issued by municipalities or states to fulfil responsibilities on a day to day basis. Generally, these are free from federal tax. These are issued for infrastructure and other kinds of projects that the government is planning to start.
What is online bond platform provider
Regulation 51A of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), inter-alia, defines “online bond platform provider” as ‘any person operating or providing an online bond platform’ and “online bond platform” as ‘any electronic system, other than a recognised stock exchange or an electronic book provider platform, on which the debt securities which are listed or proposed to be listed are offered and transacted.’
Just like in stock, there are providers like Grow, Zerodha and other fintech companies that offer the platform to buy and sell shares to investors. A bond trading platform provider also gives investors and institutions a platform to buy and sell bonds. As we have discussed above, bonds are debt securities issued by the government or corporations. An OBP must also be a SEBI registered institution.
OBPPs are operators, providing investors with opportunity to engage in bond trading and offering a number of options to invest in. Additionally, they create awareness about the kinds of bonds available to invest, provide information about the risks and profits involved in investing and explain the consequences of the actions taken by investors on these platforms.
Today, investors have access to a wide selection of bonds and can browse through their details, credit ratings, interest rates, maturities, and offer documents. They can evaluate the risk-return profiles of various bonds and compare them, enabling them to make wise investment decisions.
Usually, bond trading platforms are either backed by stock brokers or are the same. SEBI, in its consultation paper issued in July 2022, discussed that in the previous few years there has been a rapid increase in online bond trading platform providers and a lot of money has been transacted through them, which is not regulated by any government authority or enactment.
In short, online bond platform providers operate electronic systems for “offering or transacting” listed or proposed-to-be-listed debt instruments.
SEBI’s regulatory framework for bond trading platform
Absence of legislation for regulation
Before 2021, the bond trading platform was governed by the SEBI (Non-Convertible Redeemable Preference Shares) Regulations, 2013, which were also for the governance of stock and other debt securities exchanges. Hence, new legislation was needed that mandated the registration of these bond platforms. As a result, the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, were introduced and consequently amended in November 2022.
Standard requirements on Know Your Customer (KYC) provisions
KYC in the financial industry is the common procedure that a financial institute has to go through before issuing debt securities. The motto behind the process is to prevent crimes like money laundering, fraud, etc., which are there. Verification is very much needed; hence, SEBI introduced the regulation that before bond trading, the OBPs must go through the procedure and establish the relationship between broker, borrower and provider. The KYC process ensures that there is no fraud and the government can even opt for the history of money transacted by the customer, hence monitoring the trading platforms.
Uncertainty in redressing investor grievances
When carrying out online bond transactions, there is a need to deal with the problems that are faced by investors in an effective manner. This was missing in the previous framework so SEBI introduced the investor grievances redressal mechanism’. Now the Bond platforms should mandatorily provide for solutions and must take steps to deal with the issues within one month’s time frame. An online bond platform provider must receive SCORES accreditation and set up a clear procedure for handling any complaints that may or are likely to emerge while operating an online bond platform, as determined by SEBI.
No supervision on product offerings and information
As there was no compulsory registration of online bond trading platforms, there was a lot of confusion and different kinds of information regarding bonds, like the kinds of bonds and whether they were listed or unlisted. The sellers were taking advantage of the scenario by providing the listed and unlisted debt securities both on the same platform and in the same section of the website. This gave tremendous powers to the brokers, which would lead to fraud or other kinds of financial crimes due to less obligation on the provider’s part. This was one of the major concerns of the SEBI and steps had to be taken in this framework to protect the buyer.
Possible mis-selling by issuer
We know the Latin phrase ‘Caveat emptor,’ which means “let the buyer beware.” Its significance is that an individual buys at their own risk. This is one of the fundamentals of the bond trading market but this does not relax any obligation on the seller’s part. When there is no legislation governing a transaction or market, there are a number of problems that may lead to Mis-selling. Here, online bond traders were free to sell any bond according to their will without any specific provisions; hence, they were prone to exercising misleading practises.
Concerns regarding deemed public issuances
According to SEBI’s board, issuing securities to more than 49 but no more than 200 people in a fiscal year would be considered a deemed public offering, and companies/promoters would be required to offer investors an exit option at a price that is 15% higher than the subscription amount in order to avoid penalties. Many bond trading platforms keep listed and non-listed bonds on the same page, and there are no restrictions on the trading of bonds or their extent. There is a high possibility that companies may sell their bonds through private placement and since there is no regulation on limits, it might lead to deemed public issuance.
Monitoring of bond trading platforms
Even though OBPs give investors, especially non-institutional investors, a way to enter the bond market, their operations are not subject to SEBI’s supervision. There is a need to set up balances and checks because the bond market has a great deal of room for growth, especially in the non-institutional space. These checks and balances should take the form of operational transparency, disclosures to investors dealing with these OBPs, actions to reduce payment and settlement risk, the availability of redress mechanisms in the event of complaints, and more. The use of names that are similar to those of the Online Bond Platform Provider for unregulated activities is prohibited, and limitations must be included for goods that are subject to laws.
In order to guarantee the long-term expansion and success of India’s bond market, SEBI implemented a regulatory framework inNovember 2022 that included OBPPs. This action was intended to safeguard investor interests and build systemic trust, laying the groundwork for the market’s growth.
Major changes introduced by SEBI for OBPPs
Mandatory registration
The bond trading platforms should register themselves as stock brokers (debt segment) with SEBI under the SEBI (Stock Broker) Regulations, 1992. This would lead to in-built trust in OBPs by non-institutional investors, as now they will be regulated by SEBI. Among other advantages, it mandates that these bond platforms be registered as stock brokers, causing the transactions to be routed through the trading platforms of the exchanges. OBPs must be incorporated under the Companies Act, 2013.
Advantages
Registration of OBPs as a separate class of Intermediary
Any entity wishing to run an OBP must submit an application to SEBI for the issuance of a certificate of registration. The aforementioned registration certificate will be eligible for renewal under certain terms and conditions outlined in the regulations after a three-year period of validity.
An exit opportunity for investors
With the regulated bond trading opportunity, investors can easily sell their bonds and equity stakes and have a history of transactions with SEBI. Registration will lead to easy monitoring of bond trading through fintech companies in the market.
A risk management and surveillance mechanism
With steps like risk management policies, disclosure requirements, provisions pertaining to mitigation of conflict of interest, data governance norms, a code of conduct, reporting and monitoring overall, there will be the establishment of a surveillance mechanism by SEBI and enhanced interest of the investors in the market.
Concerns
Differences in functions of OBPPs and stock brokers
Bond platforms strive to give investors a way to find, evaluate, and invest in debt securities as opposed to stock brokers, who operate as the investor’s agent and keep their funds as well as provide margin funding. Registration of stock brokers and bond trading platforms within the same legislation might create confusion and inconvenience on the part of platform providers.
Difference in Revenue model of OBPPs and Stock Brokers
While stock brokers make money through commissions on trades, margin funding, and other expenses, bond platforms often make money through fees from bond sellers, spreads on bonds, revenue shares, or commissions from bond sellers.
Complexity in Compliance formalities
Stock brokers and OBPPs operate very differently. Since many of the SEBI’s (1992) regulations are irrelevant to how online bond platforms operate, they are not subject to the same compliance requirements as stock brokers. This would lead to a lot of complexity.
Trading eligible securities only
SEBI suggests that only listed debt will be eligible securities and would qualify for subscription using a bond platform. Currently, only 200 potential allottees can be selected for a private placement of bonds under the Companies Act. By exceeding this limit, the private placement becomes considered a public issuance (“DPI”), giving rise to further DPI-related requirements in the Companies Act and its rules. A DPI was automatically created when unlisted bonds issued through private placement were made available for investment on bond platforms, according to SEBI, since some bonds were sold to more than 200 investors, in violation of DPI rules. In order to reduce the risk of a DPI, particularly where bonds are involved.
Many suggested that there should be trading of unlisted debt securities too but SEBI said that permitting unlisted debt will enable companies to skip the registration formalities and mixing of listed and unlisted debt securities. Further, there will be a false notion that unlisted securities are also regulated by SEBI.
Lock-in period for the eligible securities
Listed debt securities issued on a private placement basis and offered for sale on bond platforms shall be locked-in for a period of six months from the date of allotment of such debt securities by the issuer.
SEBI suggested The listing of securities issued through a private placement would be accompanied by disclosures made by the issuing company in accordance with the ILNCS Regulations of 2021 and the LODR Regulations of 2015. This would prevent any circumvention of important public issue requirements. As a result, the Companies Act of 2013’s presumed public issue rules may not be broken by offering listed debt securities issued on a private placement basis on online bond platforms within six months of the date of their allocation.
Transactions through either exchange trading platform (ETP), the debt segment or Request for Quote Platform (RFQ)
The OBP transactions must go through either the RFQ platform of the stock exchanges or the trading platform of the debt portion of the exchanges, where they will be cleared and settled on a Delivery Versus Payment (DVP-1) basis. The RFQ platform was created as a “participant-only” approach that only institutional investors could use.
Further, in order to engage in any activity or to offer products, securities, or services (including the offering of unlisted securities) that are not regulated by a financial sector regulator such as SEBI, RBI, IRDAI, or PFRDA, a holding company, subsidiary, or associate of an online bond platform provider, as well as any third party, are prohibited from doing so.
Investors grievance redress mechanism
An online bond platform provider must get SCORES accreditation and set up a clear procedure for handling any complaints that might come up or are likely to come up while operating the online bond platform, as the board may from time to time specify. Within one month of the date of the complaint’s receipt, the provider of the online bond platform is required to take appropriate action to address the investors’ complaints. Consequently, the OBPPs must receive the SCORES registration. This will open the door for complaints by investors in the event of a default by the government.
Net-worth criteria requirement
In order to be eligible for registration under these regulations, an entity must have a net worth of at least Rs. 5 crore (five crore only), of which at least 25% must be kept in liquid marketable securities. This minimum net worth requirement must be maintained at all times.
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For online bond platforms, a provision for the advertisement of qualified securities has been made.
Issuance of deal sheet and order receipt
When an order is executed, the provider of an online bond platform must immediately send a deal sheet for all transactions to its users and investors. This deal sheet must include information like the date and time of the order, the date and time of the settlement, the quantity and amount transacted, etc. On receiving an order from a user or investor, an online bond platform provider is required to immediately send the user or investor an order receipt that includes information such as the date and time of the order, the number and amount that were transacted, etc.
Issues with the framework
Issues with the framework are:
As the proposals by SEBI are new, there are some issues that should be considered in order to establish the framework without any bugs. Several regulations that were in existence earlier, such as the SEBI (Merchant Banker) Regulations, 1992, SEBI (Investment Advisers) Regulations, 2013, and the SEBI (Research Analysts) Regulations, 2014 are not taken into account in the recent laws. These are the enactments that also mandate compulsory registration in order to be a broker or merchant and bond trading platforms could have been brought under these acts.
Nevertheless, putting out such a proposal without also changing other existing rules that might apply to bond platforms could cause problems with how the legislation is interpreted and used.
Another issue is mixing stock broker registration with that of bond traders. Although it is agreed that most of the bond trading platforms are backed by stock brokers, both of them operating with the same registration might lead to confusion and result in frustration over the separate regulation.
Although it is recognised that the regulator intends to increase confidence and control risks, the minimum transaction size limit may prevent ultra-retailers from participating in the market. There has to be more clarity on how individual investors who invest less than Rs 2 lakh will participate in the market.
According to the new regulation, only eligible securities, i.e., listed debt securities, need to be traded. But listed securities already have a market; it is the unlisted securities that lack liquidity. The very purpose of the OBPs will be in danger with imposition of such restrictions. This may completely end the market for trading in unlisted debt securities.
In the end, SEBI is a really efficient body and several measures will be taken in order to address and provide solutions to these issues. One of the industries with the most regulations worldwide is the finance sector. As a result, as fintech companies grow, regulation has become the government’s top worry. Companies in the finance sector have increased financial inclusion and reduced operating expenses by utilising fintech. Fintech finance is expanding, but there are regulatory issues. In this scenario, this framework was much needed and the steps taken by SEBI are really crucial to the effective functioning of the market.
Impact of the framework
Impact of the framework:
As this framework is new, it is really early to give any judgement on its impact. However, there are really good changes made that would lead to the structuring of online bond platform providers and their regularisation by the government.
This approach also expands investment exit options for listed debt securities, which is likely to enhance secondary market price discovery.
A law will not only guarantee that bond platforms are developed and that retail investor engagement is encouraged, but it will also strike a balance between the protection of potential consumers and the expansion of the debt market at a rate comparable to that of the digital economy.
Small and Non-institutional investors are highly impacted by this framework, that has imposed mandatory registration, minimum face value, incorporation of company, stock broker backed investors, etc.
Additionally, there is no explanation as to unlisted debt securities and their trading, as it won’t be allowed on online bond trading platforms. SEBI has refused to take into account ‘unlisted debt securities’ under its purview.
Conclusion
The limitations on product offers, divestiture requirements, and authorizations for offering particular securities on online bond platforms are described in SEBI’s Regulatory Framework for Bond Trading Platform. At times, people will be required to abide by the registration requirements set forth by SEBI. The entity would be responsible for ensuring that the minimal disclosure standards were met. Additionally, it would be required to disclose on its platform any and all potential conflicts of interest resulting from its dealings or transactions with connected parties. The Framework emphasises that OBPPs must abide by the prohibitions on selling goods or providing services other than listed debt securities and debt securities that are being proposed for listing through a public offering. It places a strong emphasis on the need to post warnings for regulated products and the restriction against using names that sound like those of the Online Bond Platform Provider for illegal activities.
However, the framework has faced many oppositions and SEBI has dealt with many of those problems that were put forward by the public. There are a lot of unresolved issues, like ‘unlisted debt securities’, that need to be addressed by SEBI.
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Private equity (PE) is a type of financial investment strategy in private and public companies. PE firms acquire a majority stake in the companies to influence the management of the companies; after investing, PE firms get control of the company. The structure of PE firms is usually a limited partnership. The minimum amount of investment may vary and depend on the firm and funds. PE firms believe that they can turn an underperforming company into a well-profitable, established company through their strategies and by investing as PE investors, who get partial ownership of that company.
PE firms always invest in companies for a minimum period of 4–7 years. Before investing in a company, PE firms’ investors do complete research on that company. Whereas venture capital (VC), a subcategory of PE, is a type of firm that provides financial support to startups or small businesses with high potential growth that have access to the stock market and need capital for them.
Venture capital is the seed capital for any startup. A venture fund is usually invested in new technology, new ideas, and new marketing concepts that have not proven themselves in the market. Many entrepreneurs do not have sufficient funds to execute their ideas, so they seek outside financial help to reach their goal. Here, VC firms play the role of investors. Usually, the structure of venture capital is a partnership, with the general partner serving as managers and investor advisers to the venture capital funds raised.
Objects of private equity
The main object of PE is to generate high net worth by acquiring complete control of many PE investments taking the form of LBOs, i.e., acquire a company entirely to improve its value and sell it for profit, or conduct an Initial Public Offering (IPO). A private equity fund’s main objective is to realise growth in the portfolio of private assets purchased over a period of 10 – 12 years.
Private equity firms add value by using various strategies in their portfolio, including :
Strategic guidance: In order to accelerate development and profitability, private equity firms adopt technologies, enter new markets, and bring their own team management.
Operational improvement: Private equity firms think they have the knowledge and skill to turn a weak business into a stronger one by increasing their operational efficiency. Which results in higher earnings and wealth creation.
Financial optimisation: To raise more funds and benefit from tax advantages, private equity firms sometimes use debt financing. This enables them to maximise cash flow and margin development.
Selling expertise: Private equity firms are adept at locating purchasers willing to pay a good price for their portfolio companies, whether for monetary or strategic reasons, which enables them to produce big profits.
Who invests in PE and VC
High-net-worth investors who have a high risk appetite should consider PE to earn a high return on investment; however, established companies also turn to PE investment for a fresh infusion of capital to finance their stalled projects.
Types of PE funding
Distress funding- Also known as “vulture financing,” invests in troubled companies that are underperforming assets, like if ABC is a PE firm and BCD is a non performing company, and ABC firm is investing funds in BCD company, so that is called distress funding.
Venture capital funding- Venture capital funding is a seed of startups VC works on the policy of high risk high returns. Funding firms believe that if they invest in a hundred startups, one or two will make billions of dollars in revenue, and from there, the investing firm will make a profit.
Growth capital- Usually, growth capital focuses on stable companies that are developing new products and expanding into new markets, like Byju’s.
Methods of value creation in private equity
There are three ways a private equity firm uses leverage, multiple expansions, operational improvement, and Since 1980, leverage has been the first way to add value to portfolio companies. Every firm has its own strategy. They already have a plan. Private equity firms often focus on operational improvement; they improve the performance of employees. They develop new business and service offers for customers, bring new equipment, and other methods include cost cutting and pricing reductions. Over all, private equity firms are all about supporting a company by identifying its value creation in its early stages.
List of top private equity firms
The Blackstone Group Inc.– This was founded in 1985, and it’s headquarters are located in New York, with branch offices in Hong Kong, Dubai, Beijing, and London. They invest in the market sector, including energy retail and technology.
KKR & Co., Inc.– Kohlberg Kravis Roberts & Co.—founded in 1976, and it’s headquarters are located in New York. They invest in consumer health care, industrial technology, and media and communications finance services.
CVC Capital Partners– CVC Capital Partners is a British private equity firm founded in 1981. It’s headquarters are located in Luxembourg City. They invest in the core consumer and service sectors.
The Carlyle Group, Inc. – The company was founded in 1987, and its headquarters are in Washington. They invest in the aerospace and government sectors, media and retail, health care, U.S. real estate, and global infrastructure.
Thoma Bravo– This is an American private equity firm; it’s headquarters are located in Chicago, and it invests in software and technologies.
What is the disadvantage of private equity
The disadvantages of private equity are:
Private equity firms invest a large amount, and investors need to wait for the long term to get returns; it takes 4 to 7 years to complete its life cycle. Private equity also involves high risk profit, as PE firms will have to convince investors to take stock of that company.
The PE firm will have complete control over the management of the liquidated company.
How private equity firms exit a deal
The exit of a deal plays a major role in private equity investment. Private equity firms use several strategies, i.e.
Trade sale- PE firms generally acquire a company for specific periods (usually four to seven years) with the goal of exiting a PE deal through a sale above the initial investment price.
Initial Public Offering (IPO)- this is the most common way to exit the PE. A private company gets listed publicly for the first time to exchange their stock. An initial public offering provides the highest valuation in comparison to other exits.
Secondary sale- In a secondary buyout,also known as sponsor-to-sponsor, a company is sold to another company active in the same industry. This is quite a different way to exit the deal.
Management Buyouts (MBOs) – MBO is a type of strategy where existing management purchases assets and operations from the present owner. This is the most risky way to exit.
Liquidation- Liquidation is a process where a company sells its assets and closes the business. Liquidation is not a highly valued exit; mostly failing companies use this way to exit.
Types of venture capital funding
Seed capital- This is a type of capital that is to be provided to startups that have no product or organised company. Mostly, this fund is provided to startups for market research to create a sample product and cover administration costs.
Startup capital- Startup capital is provided to new businesses for launching their first product; startup companies only rely on venture capital funding.
Early stage capital- Early stage capital is provided to those companies that have samples of their product and want to grow their business more.
Expansion capital- Expansion capital is provided to established companies that want to expand their business in a new market.
Late stage capital- Late stage capital is provided to well – established companies that have already proven themselves. This funding is used for their growth in acquisitions or preparation for an initial public offering (IPO).
Bridge financing stage- Bridge financing is a type of venture capital finance that helps companies bridge a gap between funding rounds or prepare for an IPO. This is a short term funding while waiting for a larger one to be secured.
List of top venture capital firms
Sequoia Capital – This is one of the oldest and most successful venture capital firms in the world, investing in startups across various industries like healthcare, consumer goods, and technology.
Andreessen Horowitz – This is an American venture capital firm founded in 2009. It is located in Silicon Valley, California, and they provide funding to startups across various industries like Healthcare, Software and Fintech
Kleiner Perkin – This is an American venture capital firm located in California. mainly provide funding to early stage and growth companies and startups; they also invest in the industries of hardtech, healthcare, and fintech.
Kholsa Ventures – This is an American venture capital firm founded by an Indian, Mr. Vinod Kholsa, in 2004. They invest in early to late stage startups and are mainly active investors in the space sector.
How venture capital firms exit deals
Although there are various ways to end the deal depending on company’s situation, some common methods are listed below –
Strategic acquisition- Strategic acquisition, or trade sale, is a popular exit route for private equity funds. This is because the buyer can have a strategic advantage in acquiring the business. Which may complement their existing portfolio of businesses. As a result, the buyer is often willing to pay a premium to acquire such a business.
Initial Public Offering (IPO)- The second way to exit the deal is to go public for the first time, sell their stake, and generate returns.
Secondary sale- A secondary sale is known as a secondary buyout (SBO). A secondary sale allows investors to exit the deal by selling their shares to other investors. The benefit of secondary sales is that investors may exit the investment without going through the process of taking the entity public.
Management buyouts (MBOs)- MBOs come into play when the corporate manager or team purchases the company from its owner; this acquisition includes everything related to the company, like its liabilities and assets. In some situations, startups may buy out the VC firms to exit the deal.
Liquidity or bankruptcy- If a company is unable to pay bank debt and is going through a highly depressed situation, VC firms may exit by selling its assets. This is an undesirable situation for a company.
Control over exit- By controlling the board of directors and inserting negotiating exit rights in the investment agreement, VC firms may exit the deal.
Conclusion
Nowadays, PE investment is the most preferable investment, as PE funds provide funding to financially depressed companies, which helps the depressed company grow again, and it is like giving a second life to a company by increasing its value. However, investors invest in established companies too, which is beneficial for both investors to get high returns and control over the management and operations of that company, and the company gets financial support in order to restart or accelerate their companies. Every investor uses different strategies to reconstruct the company according to its current situation. PE could be a great investment; this may leave a positive impression on the economy and create job opportunities.
Whereas venture capital works with startups that face financial crises, this is risky as compared to private equity, as the return chances are low in VC, but this is seed capital and gives wings to startups to start their operations to achieve their goal.
There are many pros and cons to VC firms because, often, a company needs additional funding, and in that case, an entrepreneur starts losing his stake and power to make decisions for the company.
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Business law is the study of laws that govern the formation, rights, relations, conduct, dissolution, etc., of individuals and business corporations around the globe. Business law is synonymously used with commercial or corporate law as well. The primary objective behind the business law is to provide a regulatory framework on the conduct of business for these corporations, the practises followed, ways to protect the interests of shareholders, ensure proper implementation of laws, ensure validity of business transactions, ensure healthy competition, etc.
No matter the type, work, size, or location, every company engaged in some business has to comply with the business laws made applicable to the particular jurisdiction. It is with proper implementation of business laws that an economy can thrive.
As per a recent report, there are around 334 million businesses transpiring across the world, with more than 1.5 million of them coming up in India alone. With several businesses cropping up every single second in the world, understanding how these businesses function around the world assumes even greater significance.
Business laws in India
Businesses in India are regulated by a set of laws. The major business laws in India are as follows:
The Companies Act, 2013
The Indian Contract Act, 1872
The Insolvency and Bankruptcy Code, 2016
The Income Tax Act, 1961
The Partnership Act, 1932
The Goods and Services Tax, 2017
The Minimum Wages Act, 1948
The Consumer Protection Act, 2019
The Limitation Act, 1963
The Specific Relief Act, 1963
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
The Patents Act, 1970
The Trade Marks Act, 1999
The Designs Act, 2000
The Copyrights Act, 1957
Functions of business law
Business law governs countless aspects of the functioning of any business. The functions of business law can be summarised as follows:
Incorporation
This feature of business law is the most basic one. It describes the incorporation laws for businesses according to the jurisdiction. In India, the incorporation laws are dealt with under the Companies Act, 2013. To initiate the process of incorporating a company in India, you first have to get the name approved by the registrar of companies. Then draft a Memorandum of Association and Articles of Association. After approval of the relevant documents, the company is granted a certificate of incorporation in India.
A deep understanding of business laws helps to set up business in a nation and then expand across the globe. There are a plethora of formalities to be completed in order for a business to start functioning. Since the law sets up the formalities that need to be completed for the business to be set up, it becomes easier to follow through with the process. Even a person from a non-legal background can understand the complex procedures easily.
Transactions
Business law is fairly wide, and it includes within its ambit every branch of law that directly or indirectly deals with any aspect of the functioning of a company. The law helps to protect the interests of concerned parties, including the shareholders, debtors, and creditors of the company. For example, India has these laws to ensure the betterment of its employees:
The Minimum Wages Act, 1948, fixes the minimum wage rate for employees, and the employer can’t deny his responsibility for paying him that minimum wage rate.
The Industrial Disputes Act, 1947, ensures that fair terms and conditions are met between the employer and the employee in case of any dispute.
The Maternity Benefits Act, 1961, as the name itself suggests, is to provide monetary benefits to female employees who can no longer continue employment because of their pregnancy.
The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 aims to prevent any kind of sexual harassment that might occur in the workplace. Business laws make the daily transactions in a company much smoother and reduce the possibility of conflicts between the interested parties. It regulates the internal activities of the business.
Other than that, all the intricate details regarding the working of a company and its daily transactions are well covered under the Companies Act, 2013. These are as follows:
Establishment of company,
Constitution of Board of directors,
Capital structure,
Conduct of the shareholders of the company,
Meetings of the company,
Dissolution and much more.
Regulatory compliance
A good understanding of business laws also allows for better compliance with the regulatory framework that any business is expected to comply with. Depending on the jurisdiction where the business is situated, there are a slew of laws that need to be abided by.
Corporate governance
It is only business laws that set up the framework for corporate governance in a company. It outlines the roles and responsibilities of the directors and shareholders of the company. With proper corporate governance mechanisms in place, investors can make investments in the business with much more confidence.
Modern businesses have started focusing more on the concept of corporate social responsibility, which simply encourages companies that earn well to step up to their social responsibilities. Businesses have started getting actively involved in community development, environment protection, philanthropy, and achieving sustainable development goals, and it imposes certain accountability on these huge multimillion-dollar companies to do their bit for societal development.
Rights of shareholders
Business law also plays a vital role in protecting the interests of shareholders in a company. It is essential to deal with issues concerning minority shareholders, constitutional documents, and others. The business laws, specifically the Companies Act, 2013, grant voting rights to shareholders, impose duties on directors and managers, and prevent any oppression or disturbance in the dealings of a company.
Contracts
Every corporation survives on well-drafted contracts. A precisely drafted contract offers certainty, security, and stability to the parties. It lays down all the required formalities, the rights and obligations of the parties involved, the purpose of the contract, the time period for performance of the work, the consequences of a breach, the liabilities of the parties, and even the termination of the agreement. These well-articulated documents go on to ensure a seamless transaction for the company and a plethora of other parties.
Consumer law
Every business is supposed to cater to the needs of consumers, and ensuring the best interests of consumers is what keeps any business going. It sets guidelines for quantity, quality of products, safety standards, advertising regulations, and the liability of manufacturers and sellers as well. In India, all these aspects are governed by the Consumer Protection Act, 2019. It grants certain rights to consumers and imposes liabilities on the sellers.
Dispute resolution
These disputes can be resolved amicably and cordially through specific contracts enacted before. The contracts mention what procedures have to be followed in case a dispute arises. For example, a majority of contracts in India have a clause that, if any dispute arises, it shall be resolved as per the provisions of the Arbitration and Conciliation Act, 1996.
A lot of corporations around the world prefer settling disputes rather than prolonging them in years of courtroom battles. So, alternative modes of dispute resolution, such as mediation and arbitration, are preferred over litigation.
Intellectual property
Business laws also cover the laws concerning the intellectual property rights that a company acquires over time. How a company acquires these rights, how it licences these rights, and how it earns through these rights are all governed by business laws. It protects the business ideas that may arise and assures protection for the intangible assets of the business firm. It fosters creativity and grants the creator exclusive rights to his ideas. For example, India has the Patents Act, 1970; the Trade Marks Act, 1999; the Designs Act, 2000; and the Copyrights Act, 1957 to govern the grant of intellectual property in India.
Competition law
Business laws also cover, within their radius, competition and antitrust laws. These laws prevent the establishment of monopolies and ensure fair competition among businesses. This also covers, within its ambit, the rules dealing with the mergers and acquisitions of the companies. The Competition Act, 2002, governs all aspects of the competition laws.
Insolvency and bankruptcy law
Business laws also provide for a mechanism to handle situations where people get insolvent or businesses go bankrupt. It provides for an elaborate process of insolvency and bankruptcy, ensures that the rights of creditors aren’t affected, appoints liquidators or trustees to oversee these proceedings, and allows a smooth transition.
Employment law
No business can exist without the efforts of its employees, who work hard in their respective roles to keep the company functioning. Employment laws govern the relationship between the employer and the employees. It sets standards for minimum work hours, safety regulations, the rights of the workers, the minimum wage to be provided, and ensures that there is no discrimination amongst the workers. In the Indian setting, the applicability of the Workmen’s Compensation Act, 1923; the Prevention of Sexual Harassment Act, 2013; the Payment of Wages Act, 1936, etc., must be complied with.
Taxation
It entails taxation systems that the business needs to abide by. Another facet of business law dictates what taxes must be paid by the company and when. The taxation laws govern the taxation liability imposed on a company and any tax exemptions. If a company expands its business to another country, it needs to abide by different taxation laws. Neglecting these laws may result in huge penalties being imposed on the company. In India, the major tax law is the Income Tax Act, 1961.
Environment law
Another aspect of business laws includes environmental laws. These laws impact the role of business in the environment. Parts of business laws also regulate the use of chemicals and fertilisers by the business, waste management, resources utilisation, adopting eco-friendly approaches, etc. The Environment (Protection) Act, 1986 directs the actions to be taken by these businesses to control air, water, and soil pollution. It goes on to impose liabilities on these corporations for their acts.
Technology law
Gone are the days when business laws could be studied in isolation. To get a clearer understanding of business laws, one also needs to be updated on the technology laws that are cropping up. Businesses aren’t carried out the traditional way now. With new software and technologies coming up all the time, laws to regulate them are much needed. The Information Technology Act, 2000, regulates the technology law in India.
Privacy law
The right to maintain privacy has been widely recognised as a basic human right across countries, even as a fundamental right in our country. For the business to function, it needs the personal information of its consumers, but how they acquire, retain and dispose of that information needs to be governed by separate laws. So, businesses also need to delve into privacy laws to safeguard the right to privacy of individuals, no matter where they are.
Conclusion
The importance of being vigilant about business laws can’t be undermined. They help corporations establish themselves, maintain proper order, get into contracts and enforce them, and get hold of other aspects of business laws, as have been described above. Business laws provide a legal framework for all commercial transactions, safeguarding the property of the company, ensuring hassle-free transactions, and protecting the interests of the company itself. Business law is a complex but crucial field of law that keeps changing drastically. No matter the size or type of business, it is mandatory for every business to comprehend these laws and act in accordance with them. It is only then that a business can flourish in its true sense.
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This article is written by Akansha Gupta. The article seeks to give an overview of protection of industrial designs in India, including important provisions such as registration of designs and piracy of designs under the Designs Act, 2000, as well as landmark cases related to industrial designs.
It has been published by Rachit Garg.
Introduction
Intellectual property rights are rights that are given to protect the creation of human minds. Whenever a new product is created, it is not only the use of the product that guides the consumer’s decision, but also how that particular product looks. In other words, with advancements in science and technology, the market has a large variety of products that have the same function but different designs, to which buyers are more attracted. The design of a product can be a unique composition of colours, shapes or patterns that are appealing to the eye. In simple words, ‘design’ is a human touch given to any product in the form of a composition of colours, shapes, patterns, etc., which adds aesthetic value and attraction to the product. Design involves some creativity and distinctiveness, and thus, if the shape of a product is due to some function that it needs to perform, then it will not fall under the subject of design. Moreover, it includes industrial designs which can be two-dimensional or three-dimensional.
This article briefly covers how designs are protected under Indian law. This article gives an insight into the important provisions of the Designs Act, 2000, such as the procedure related to registration of design, followed by examination and publication of design, as well as infringement of design. Towards the end, certain landmark judgements have been discussed to give an idea of what kind of cases take place under industrial design and what is admissible as evidence while proving a case of infringement of design.
What is industrial design
Industrial designs are those designs that give ornamental or aesthetic value to a product, which is then manufactured industrially. An industrial design may consist of three-dimensional (3D) features such as the shape of a bottle or vase used in various industries or two-dimensional (2D) features such as patterns for textiles and wallpaper that serve the purpose of decoration.
How is industrial design different from other IPR
One must be able to distinguish industrial design from other common forms of intellectual property rights. Industrial design is different from copyright, as copyright exists in artistic works but is not necessarily applied to an article. For example, a unique sketch by an artist acquires copyright, but it becomes a subject matter of design only when such design is applied to articles in an industry. Industrial design is different from a patent, as a patent is granted for a new product or process, whereas design is granted when it is applied in a creative way to an old or new product. Industrial designs are different from trademarks, as trademarks are generally symbols used to distinguish one product from other products in industry, whereas designs are those aesthetic features in one’s product which are appealing to one’s eyes.
Origin of industrial designs
In the mid-1800s, when large-scale production of goods was becoming more common, Peter Behrens, a German architect and designer, became the architect advisor for Allgemeine Elektricitäts Gesellschaft (AEG), a German electrical company, in 1907. He not only designed the architecture of the Company’s factories and industrial buildings but also other products such as fans, tea kettles, and other household items. Due to this, he is considered a pioneer in the field of industrial design. With this, industrial designs began and today, design registrations are heavily created and registered in different sectors such as clothing, health, food and beverages.
Tools and techniques used in Industrial designs
In ancient times, designers used traditional tools to create designs for industries. As a result, most designs were handmade and involved sketches and paintings on finished goods, which resembled ancient Indian people in different civilisations.
Today’s industrial designers use a wide range of tools and techniques to create products that are both appealing and functional. Some of these tools include 3D printing, such as articles with shapes with a 3D effect that are more appealing to the eye. For example, Apple design registrations include claims to the icon layout and black rectangular edge-to-edge glass embodied in its iPhone, as well as the flat, rectangular, rounded corners embodied in its iPhone and iPad. Moreover, artificial intelligence is also creating more scope for industrial designers to create unique designs in less time.
Laws relating to industrial designs in India
The need to protect industrial designs was first felt in the 19th century and at that time, the Act No. XV of 1859 was consolidated to provide protection relating to designs. It was then renamed as “The Patterns and Designs Protection Act”. The Patterns and Designs Protection Act, 1872 was enacted to provide protection as well as to grant exclusive rights, such as making, using and selling designs associated with the product, for a short period of time. This Act augmented the Act of 1859, which the Governor General of India passed in order to protect industrial designs and grant privileges to inventors. This Act was replaced by the Inventions and Designs Act, 1888, which consolidated and amended the law relating to the protection of the designs of inventors in a separate part of the Act. After this, the Act of 1888 was replaced by the British Patent and Designs Act, 1907 which forms the basis of the current patent law and new design law in India. Thereafter, a need for two separate laws was felt, as patents and designs were two different intellectual property rights associated with any product. Thus, two separate laws were enacted, namely, the Designs Act, 1911 and The Patents Act, 1970. Most recently, the Designs Act, 2000 replaced the Designs Act,1911, with the objective of protecting designs in India as well as bringing the Indian design law at par with international law, which was lacking in the 1911 Act. In all, the Designs Act, 2000 consists of about 11 chapters and 48 sections. The Controller-General of patents, designs and trademarks under Section 4(1) of the Trade and Merchandise Marks Act, 1958 (43 of 1958) is the Controller of Designs authority for registration of designs
Essential features of the Designs Act, 2000
The Designs Act, 2000 is an enactment to consolidate and amend the law relating to the protection of designs in India. Its main objective is to protect new or original designs from being copied, thereby protecting the proprietor from incurring losses. Following is the list of unique features introduced in the Designs Act, 2000:
Adoption of Locarno Classification
Under the Designs Act 2000, India adopted the Locarno Classification system. Unlike the previous provisions that classified designs based on materials used, the Locarno Classification categorises designs solely based on their subject matter. This shift simplifies the design registration process and ensures a more efficient classification system.
Introduction of ‘absolute novelty’
A significant feature of the Designs Act, 2000 is the introduction of the concept of ‘absolute novelty.’ This provision (Section 4) allows the assessment of novelty based on the prior publication of any article, not only within India but also in other countries. Designers can protect their creations from imitation or unauthorised use, even if they have been disclosed in other jurisdictions.
Restoration of designs
The Act includes a provision for restoration of design that was not present in the previous enactment. This provision benefits designers who may have unintentionally missed the opportunity to register their designs. Now, they have the opportunity to restore the registration and enjoy the associated rights and protections under Section 12 of the Designs Act, 2000.
Transfer of cases to high courts
The Act empowers district courts to transfer cases to high courts, under Section 22(4) of the Designs Act, 2000, when the validity of a design registration is challenged. This provision ensures that such disputes are resolved in the appropriate judicial forum, streamlining the legal process and facilitating the resolution of disputes efficiently.
5. Delegation of powers and duties of examiners
The Designs Act, 2000 includes the delegation of powers of the Controller of Designs to other examiners under Section 3(2) of the Designs Act, 2000. These provisions promote transparency, accountability and efficiency within the design registration process, ensuring an effective design registration system.
Power of controller of designs
The Controller-General of patents, designs and trademarks under Section 4(1) of the Trade and Merchandise Marks Act, 1958 (43 of 1958) is the Controller of Designs authority for registration of designs as mentioned under Section 3 of the Designs Act, 2000. The Controller of Designs is assisted by other examiners who are appointed by the Central Government.
As mentioned under Section 32 of the Designs Act, 2000, with regard to the proceedings going on before the Controller of Designs, he has powers of a civil court, such as:
Receiving evidence;
Administering oaths;
Administering the attendance of the witnesses;
Proceedings for the discovery and production of the essential documents;
Issuing commissions for the examination of witnesses; and
Awarding costs, which can be executable as a decree of a civil court.
Procedure for registration of industrial designs
Application filing
The first step of the registration is filing Form 1, which includes necessary details such as the name, address and nationality of the applicant/ owner of the design. In the case of a company, information regarding the place of incorporation and the legal status of the entity is asked in the application form. Another essential entry in the form is regarding the class and the sub-class under the Locarno Classification, of the article enclosing the design. Along with this, the applicant also needs to mention the name of the product to which the design has been applied.
The form should be submitted along with all the necessary documents and the prescribed fee at any branch of the Indian Patent Office (IPO) situated in Ahmedabad, Mumbai, Chennai, Delhi and Kolkata. The government fee in India for filing an industrial design is Rs 1,000 for individuals, startups, and micro, small, and medium enterprises and Rs 4,000 for other entity types.
The following are the necessary documents to be submitted along with the application form to get design registration:
A certified copy of the extract of disclaimers, which mentions what the application does not wish to include for protection (or what it wants to exclude).
For example, if the design consists of lines as well as a combination of colours, then a disclaimer saying that the lines are not to be included but only a unique combination of colour applied to the article is to be included. This is needed to give a clear picture of what is not to be protected.
Affidavits in relation to declaration of truth and verifiability of design, applied to a particular product.
Other public documents, such as Aadhar card of proprietor, incorporation certificate in case of company, a description outlining the article’s unique features that make it distinctive from other designs present in market, as well as two photographs giving a whole view of the article.
As soon as the application is submitted, a date and number are given to the applicant.
Examination by the controller of designs
The Controller of Designs has powers to either approve or abandon the registration of design under Section 5 of the Designs Act, 2000. This provision basically discusses that for a design to be approved by the Controller of Designs, it should be new, not published anywhere and not of a scandalous nature. Moreover, such a design shall only be approved on an application made by the designer, as mentioned above and after that application is accordingly examined by examiners, as mentioned under Section 3 of the Designs Act, 2000.
Besides this, the Controller of Designs also examines whether the application contains accurate details for the prescribed fees. The examination section also mentions the class in which the design needs to be registered, and it makes clear that the design can be registered only in one class at a time, and if there is confusion of classes, then the Controller of Designs decides which class is fit for that particular design. This section also makes it clear that the Controller of Designs has sole power to refuse the registration of design on reasonable grounds and, at the same time, provides that the proprietor shall have the right to appeal in the high court on the ground of refusal by the Controller of Design.
There can be abandonment of the application if proper details are not provided by the designer in specified time. Moreover, this section gives information related to the registration date. For example, if the proprietor filed for registration on 22nd June, 2017 and he/she obtained the registration finally on 20th August, 2020, then the design will be registered in the register of Controller of Designs on 22nd June, 2017, i.e., the registration filing date.
The main criteria under which the examiner will be judging the application was reteriated in the case of Bright Auto Industries vs. Raj Chawla (1976), the Delhi High Court held that just a slight variation in the registered design from a pre-existing design would not qualify for registration. In this case, there is a well defined shape of a rear view mirror; just having a curve to it will not make it different. Thus, it depends, from case to case, whether slight variation will be part of innovation or not.
Prohibition of registrations of designs
There are certain grounds on which registration of industrial designs can be prohibited. Such power to prohibit the registration of industrial designs on certain grounds is given to the Controller of Design under Section 4 of the Designs Act, 2000. The grounds are :
If the design is neither new nor original.
If the design is already available in public domain, either in India or in any other country, by publication in written form before the filing date.
If the design is not novel, which means it is not distinctive from the known designs.
If the design either comprises obscene matter or is of scandalous nature, it is thus immoral in the eyes of the public.
For instance, in the case of Wimco Ltd Bombay vs. Meena Match Industries (1983), the Delhi High Court held that ‘publication’ means that design is no longer a secret and is not only known to the author but is now available in the public domain. Publication of a design takes place in two aspects: either the public is in possession of the design or it has been disclosed to the public. Thus, the pattern on matchboxes claimed by Wimco, which was in rectangular form with multiple diamond shaped spots, was not distinct as it was already available in the public domain and hence prohibited under Section 4 of the Designs Act, 2000
Communication of objection
Another situation can be where objections are raised in relation to the novelty or any other particulars of the application. In such a case, a hearing has to be given within three months to the applicant. The objections should be resolved within six months of the hearing, or else the application will be abandoned. During this examination process, the objections are resolved in the prescribed time period, before a certificate of registration is issued to the proprietor.
Registration certificate
After the examination, one situation can be that no objections are raised; in this case, a registration certificate is issued under Section 9 of the Act. Once the certificate is granted, all exclusive rights, such as to sell and import, as well as the right to file a suit against piracy of such a registered design, will be solely in the hands of the proprietor.
Publication of design
The design registration is published in the Patent Office’s journal in the name of the proprietor. The Controller of Designs will himself notify it in the public domain as well as on the portal, as mentioned under Section 7 of the Designs Act, 2000. This will help others to check whether their design resembles the registered one, and if it does, upon receiving such objection from the general public, if found true, the application stands rejected on the ground of similarity.
Register of designs
All the entries regarding the name, address of proprietors with respect to registration, as well as information regarding assignment and transmission, are entered in a book called the Register of Designs located in the patent office. It is prima facie evidence of any matter authorised to be entered in it.
Term of protection of design
Once the owner is granted a registration certificate of design, the design is protected for a period of 10 years from the date of registration, as mentioned under Section 11 of the Designs Act, 2000. This protection can be further extended for a period of 5 years if the proprietor pays a certain fee within the specified period. The government fee in India for renewal of an industrial design is Rs 2,000 for individuals, startups, and micro, small, and medium enterprises and Rs 8,000 for other entity types.
Cancellation of registered design
To cancel a registered design, a petition has to be made to the Controller of Designs. If the cancellation proceedings are unsuccessful before the Controller of Designs, then an appeal can be filed in the high court.
Any person can file for cancellation of a registered design on the following grounds, as mentioned under Section 19 of the Designs Act, 2000:
The design is not new
The design is previously registered in India
The design is already in the public domain
The design does not fall under the subject matter of design as defined under Section 2 (d) of the Act
The design is not registrable under this Act. For example, stamps and emblems are not designs, as these are not finished goods and hence not registrable under the Designs Act, 2000.
In the case New Holland (Fiat) India Pvt. Ltd. (Presently CNH Industrial India Pvt. Ltd). vs The Controller of Patents And Designs And Ors (2021), the High Court of Calcutta answered in negative to the question of whether the Controller of Designs has the discretionary power to remove the design from the register during the pendency of cancellation of registration proceedings. The High Court of Calcutta observed that the Controller of Designs has the power to not remove the design from the register as long as the proceedings for cancellation are going on.
Piracy of registered design
With a rapid wave of competition in the market based on the novelty and distinctiveness of the products, there is always a necessity for innovatively designed products. Thus, designers tend to invest more and more hard work in building their designs for products and then registering them. The ultimate goal of registered designs is to make profits and seek legal protection for their creation. However, both the monetary gain and the protection are hampered when another party infringes on the exclusive rights of a registered design. The sellers in the market tend to copy the design so that they can steal the brand value of a well known design in the market and reap more monetary gain. To deal with such issues of infringement, Section 22 of the Designs Act, 2000, mentions the ingredients of design piracy in India so that no one takes advantage of someone else’s hard work.
Piracy of design includes the following Acts, as mentioned under Section 22 of the Designs Act, 2000:
Unauthorised application of registered design to the other article for sale
Any fraudulent imitation of the design
Any obvious imitation of design without consent of proprietor
Importing the article, which has registered design on it, without the permission of the proprietor
Publishing the pirated design as owned by an unauthorised person
Assignment and transmission of designs
‘Assignment of designs’ and ‘transmission of designs’ both are different terms; the first is a complete transfer of ownership by the proprietor, whereas the latter is a part transfer of ownership of design by an agreement. In both cases, an application has to be made to the Controller of Design so that the transfer can be entered into the register of assignment and transmission accordingly, as mentioned under Section 30 of the Designs Act, 2000. Also, the agreement authorising such assignment and transmission, which consists of terms and conditions, must be laid before the Controller of Designs within six months of framing such agreement.
Designs regime at international level
Paris Convention (1883)
The Paris Convention for the Protection of Industrial Property, 1883 was the first international convention which discussed and recognised the concept of industrial property. The Paris Convention, concluded in 1883, was revised at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, and at Stockholm in 1967. It further included another provision that compulsorily required member states to provide protection for industrial designs. India is a member of the Paris Convention, so it needs to follow the mandate of protecting industrial designs. Thus, the provisions for the right of priority are applicable, as, on the basis of a regular first application filed in one of the contracting states, the applicant may within the next six months apply for protection in other contracting states, and the latter application will be regarded as if it had been filed on the same day as the first application.
Geneva Act (1999)
Another important international registration system that built a foundation for the protection of industrial property on a global basis is the Geneva Act of the Hague Agreement concerning the international registration of industrial designs, which was adopted in 1999. This Agreement was governed by the International Bureau of World Intellectual Property Organisation (WIPO). The international registration obtained under this Agreement produces the same effects in each of the designated countries as if it were registered in that country.
TRIPS Agreement (1995)
Next in line was the TRIPS Agreement, which provided for minimum standards for the protection of industrial designs. The TRIPS Agreement came into effect on 1 January 1995. The TRIPS Agreement protects intellectual property in trade-related regions to a large extent and is regarded as a comprehensive new framework for intellectual property protection. While incorporating the minimum standard provisions of the TRIPS Agreement, in India, the Designs Act, 2000 was passed in light of the rapid changes in technology. Article 25 and Article 26 deal with the subject matter of industrial design. It mentions that members can frame their domestic laws related to industrial design in extensive form as well. It also includes provisions for infringement of design as well as a term of protection for design.
Landmark cases
S. D. Containers Indore vs. M/S. Mold Tek Packaging Ltd. (2020)
Facts of the case
In the present case, the respondent had initially filed a suit to obtain a permanent injunction in order to restrain the appellants from using the design of their containers and lids, which had been duly registered under the Designs Act, 2000. Whereas the contention of the defendant was that the design is not novel and hence the registration should stand cancelled under the Act.
Issues involved
Whether the case of infringement is made out by the respondent under Section 22 of the Designs Act, 2000.
Judgement
The Supreme Court held that there are two modes of cancellation of a certificate of design present under the Designs Act, 2000; first, the power of cancellation shall lie with the Controller of Designs, and the appellate authority shall be the high court; second, in an action of piracy suit before the civil court, the defendant can urge for cancellation of the design. In such a case, the defendant has the right to urge revocation of registration if such design is not novel and is included in a prior publication. As a result, the suit is to be transferred to the high court as per Section 22(4) of the Designs Act, 2000. Thus, both are independent provisions giving rise to different and distinct causes of action.
M/s Kamdhenu Limited vs. M/s Aashiana Rolling Mills Ltd. (2021)
Facts of the case
The plaintiff, in the present case, has claimed to have created a unique design with new features of a surface pattern consisting of double ribs applied to steel bars, for which he also obtained design registration in 2013. Plaintiff became aware in the first week of June 2013 that the defendant copied the same design and was selling the goods in south Delhi. Thus, the plaintiff filed the suit, claiming that Aashiana applied and copied, adopted and imitated a design identical to Kamdhenu’s registered design, which causes infringement, whereas the respondent argued that the design was already available in the public domain, for which before plaintiff had claimed registration. Accordingly, it was prayed that the registration of plaintiff design should be cancelled.
Issues involved
Whether the defendant has caused any infringement under Section 22 of the Designs Act 2000.
Whether the plaintiff design registration should be cancelled as per Section 4 of the Designs Act 2000.
Judgement
The court held that such designs were already available in the public domain and also registered as a part of British and ISO standards for such articles. Thus, registration stands to be cancelled by virtue of Section 4 of the Act, and since no case of infringement is made out as registration of proprietor was itself invalid. The court added that, in order to succeed in cases of piracy, it is necessary to have a valid certificate of registration issued to the proprietor and for the design to not be available in public domain.
Relaxo Footwears Limited vs. Aqualite Industries Pvt. Limited (2021)
Facts of the case
This case involves Relaxo (plaintiff), which has a business manufacturing shoes. The plaintiff got registration done in 2017 for a unique design on their shoes. In 2018, the plaintiff learned about a look-alike footwear product being traded in the market by the defendant and, thus, filed suit for injunction related to piracy of registered design.
Issue involved
Whether a suit for infringement is made under the Designs Act, 2000.
Judgement
The court held that just because the plaintiff has a registered design, it does not increase the likelihood of success in a piracy claim. Defendants can still raise an objection regarding its novelty or prior publication at any point. The court added that the real test was whether, when judged solely by the eye, the essential features present in the new design were substantially different. The Court, after examining the design of two footwear products of the appellant and the respondent, concluded that the products are similar and issued an injunction to the defendant not to use a similar design, as it is already registered in the name of the plaintiff.
TTK Prestige Ltd. vs. Gupta Light House (2023)
Facts of the case
The plaintiff (TTK Prestige) in the present case got its design registered for its ‘Svachh Deluxe Alpha’ (Handi) pressure cooker in 2020. The plaintiff noticed the same design used by the defendant (Gupta Light House). Thus, the plaintiff claimed that there was piracy being done by KCM Appliances Pvt. Ltd. with respect to Impex Dripless’ pressure cooker. However, the defendant sought to invalidate the registration of the plaintiff’s design, as it was not a novel one and was completely function based. Thus, the present case came before the Delhi High Court.
Issue involved
Whether a suit for infringement is made under the Designs Act 2000.
Judgement
In this case, the Delhi High Court passed a judgement preserving the exclusive rights of proprietors (TTK Prestige Ltd.) with regard to pressure cooker design against a challenge by KCM appliances Pvt Ltd. The court rejected the arguments of the defendant and upheld the prima facie validity of TTK’s design registration. The court found that the registration validly covered multiple-size pressure cookers as a “set” under the Designs Rules, 2001. Though novelty resided mainly in the pressure cooker lid design, the overall shape and configuration of all pressure cookers were substantially the same, barring size variations.
Thus, this judgement clarifies essential concepts like sets, novelty on the one hand, and prior art on the other hand, as well as functionality on one side and ornamental value on another.
Conclusion
It can be very well understood that the essence of design resides in the visual impression cast on buyers by the proprietor and not in elements of functionality or utility. A product is sold not only because of its utility but also because of the design it possesses. With respect to the registration of a design, it is the novelty of the design which has a major role, as a certificate issued previously by Controller of Design stands to be cancelled even at a later point in any infringement claim if it is proved to be a matter of prior publication and not distinct.
Moreover, it also becomes clear that the present Design Act, 2000 is more suitable and adequate for design protection in India as compared to old legislation due to two major reasons: one, for including the absolute novelty concept, that is, whenever novelty is to be judged for design originality, prior publication not only in India but other jurisdictions are also to be checked; and second is the Locarno Classification, that is, the design to be classified for registration on the basis of their subject matter (what category of goods they belong to) and not on material used in the article or goods. Thus, the present Act aims to create a favourable environment for the upbringing of, as well as supporting proprietors to contribute a novel design to aid the country’s economic and technological development.
Frequently Asked Questions (FAQs)
What do you mean by “article” under the Designs Act, 2000?
Under the Designs Act, 2000, “article” means any article of manufacture and any substance, artificial or partly artificial and partly natural, and includes any part of an article capable of being made and sold separately.
Do stamps, labels and cards be considered as subject matter of design for the purpose of filing registration of design?
No, as in such cases only a piece of paper, metal or like material is left once the alleged design is removed. An article must have its existence independent of the designs applied to it or not.
How can one enquire whether registration already exists in respect of any design?
One can enquire whether registration exists for a design by making a request to any patent office. If you know the design number, then Form 6 needs to be filled out; otherwise, fill Form 7 and pay the prescribed fees. You can make only one request at a time.
What is the penalty for the piracy of a registered design?
Section 22(2) of the Act talks about penalties related to piracy in design. If anyone breaches the exclusive right of the proprietor, then such person is liable to pay a fine which cannot be above Rs. 25,000 to the registered proprietor. Only in the case of contractual debt, it can raise up to Rs. 50,000. In addition, the registered proprietor may also bring a suit for the recovery of the damages for any losses to business and for injunction against imitation of the same design. Moreover, all these suits, including the infringement and recovery of damages, should be filed in any court but not below a district judge.
Is there a difference between a patented object and industrial design?
An industrial design right protects only the appearance or ornamental features of an article, whereas a patent protects a product or process that is novel, offers an inventive step, and is capable of industrial application. Thus, industrial design rights are not there to support the technical features of the article. Such technicalities can be protected under patent rights.
What is the most recent development related to design adjudication?
After the COVID-19 pandemic, hearings before the design office can now take place through video conferencing.
Is there any criminal prosecution for invalid design registration?
There is no criminal liability under the Designs Act, 2000.
Can design infringement cases be time barred?
Yes, it can be time barred once three years have elapsed since the last act of infringement.
Can a design licensee sue for piracy of registered design?
The licensee cannot sue for piracy of registered design. Only the registered proprietor has the right to institute proceedings for design infringement.
Where is the head office for the Controller of Designs located?
The head office for the Controller of Designs is located in Kolkata.
This article has been written by Priyanka Jain and edited by Shashwat Kaushik.
It has been published by Rachit Garg.
Table of Contents
Introduction
During “dissolution of marriage” in the State of California, by way of divorce or death of the spouse, several issues are to be settled, like spousal support, child custody, child support, child visitation, characterization, valuation and division of movable as well as immovable property. There is always an equitable distribution of assets between the splitting couple. The division of assets is a huge task in such dissolutions.
The concept of quasi community property is a legal system that governs the division of property in California in some situations. Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are the other eight states in the union that adhere to the community property doctrine, which holds that marital property is usually equally owned by both spouses. California is one of those nine states. However, quasi-community property comes into play when couples move to the State of California from another state that does not follow the community property rules, like Florida, which is an equitable distribution state.
Meaning of quasi-community property
The concept of quasi-community property usually has two concepts:
divorce;
death of a spouse;
In the context of divorce, we have the California Family Code:
As per California Family Code § 125, all real or personal property wherever situated, acquired in any of the following ways is quasi community property.
Either spouse, while domiciled elsewhere, would have been community property if the spouse who acquired the property had been domiciled in California at the time of its acquisition.
In exchange for real or personal property, wherever situated, that would have been community property if the spouse who acquired the exchanged property had been domiciled in California at the time of its acquisition
Both spouses must have changed their domicile to the State of California, and
after the change of domicile, the spouses must seek legal alteration of their marital status in the State of California.
Thus, when one party does not move to the State of California, the court does not have jurisdiction over out-of-state property that was separate property in the other state.
In the context of the death of a spouse, we have the California Probate Code:
As per Section 66 of this Code, “quasi-community property” means property other than community property as defined in Section 28:
If the deceased had been residing in this state at the time of acquisition, all personal property, regardless of location, and all real property located in this state, whether acquired by the deceased while residing elsewhere, would have been the community property of the deceased and the surviving spouse.
If the decedent had been residing in this state at the time the property was exchanged, then all personal property, wherever it may be located, and all real property located in this state, whether acquired previously or subsequently, in exchange for real or personal property, wherever it may be located, would have been the community property of the decedent and the surviving spouse.
Section 28 of the California Probate Code defines community property as follows:
Community property heretofore or hereafter acquired during marriage by a married person while domiciled in this state
The laws of the location where the acquiring spouse resided at the time of the acquisition apply to all personal property, regardless of location, and all real property in this state that was previously or subsequently acquired during the marriage by a married person while residing elsewhere. This includes community property and other substantially equivalent types of marital property.
Here, we can understand that quasi-community property is exclusive to community property. The main difference involves the address of real estate. In divorce matters, quasi-community property means all estates are independent of their location. In death cases, quasi-community property means all estates situated only in the State of California.
Normally, quasi-community property is divided like community property for the purpose of property division after the death of one of the spouses.
Real aspect of quasi-community property
One of the most essential matters in divorce cases is the division of property held by both spouses at the time of divorce proceedings. This poses various questions before the Hon’ble Courts, depending on the facts of each case. Few are as follows:
Who is who?
What do both the divorcing spouses show this time, like what they have?
Who is about to get what?
Where are both parties staying currently? Inside California or outside California?
If the answer to the fourth question is outside the State of California or in another place than the State of California, division of property becomes tricky.
Let’s understand the meaning of the Quasi-Community property in a simple way:
Let’s suppose A and B get married. Where A is the husband and B is the wife. A moved out of California for any purpose, like running a business, carrying out research, or pursuing a good job, outside the State of California. Now, he has to acclimatise there to ensure professionalism, performance, meeting to turn around time or simply speaking to deliver his hundred percent to his commitment. So he and his wife B both decided to have a capsule apartment for A to stay in and manage his life-style to do justice to his endeavour.
Character of the property
Now let’s understand the character of this property. This property was purchased:
During the subsistence of marriage of both A and B;
Outside the State of California.
Now the question is what is the character of this property? If this property had been purchased in the State of California, it would be community property. Since it was purchased outside the State of California, it is in the form of community property, so it is quasi-community property.
In death cases, in matters of intestate succession, fifty percent of the decedent’s quasi-community property is considered of the surviving spouse, and the rest fifty percent is of the decedent’s. But the same calculations are not meant for the surviving spouse. The quasi-community property of the surviving spouse is only that of that spouse. has no ownership, either joint or several, over it.
When a property is characterised as quasi-community property, the court will look into whether both spouses relocated outside their home. If yes, the doctrine of quasi-community property applies; otherwise, no.
Now the next question is: What does it include? The answer is that it can include movable assets like cars, furniture, etc. It also includes the earning of one’s spouse’s earnings outside the State of California, savings accounts, business accounts, insurance, and intellectual property as registered patents.
What does it not include? The answer is separate property as defined under California Family Code § 2502. According to this provision, separate property can be acquired before one gets married or after getting divorced. It can be acquired during marriage when it is gifted to one of the spouses exclusively. Or it is inherited by only one of the spouses. If any asset is further bought by the spouse from his inherited property, that will be separate in nature.
Property is not necessarily divided by the Hon’ble Court. Both spouses can also enter into an agreement for the division of assets. This agreement can be pre-nuptial or post-nuptial.
Conclusion
The quasi-community property doctrine says that “property gained during the marriage will be divided equally, as it belongs to both of the spouses.” It will be divided equally.
This approach solves the complexities of questions regarding the division of assets in a just manner without giving any precedence to either spouse over the other. Even if the property was acquired by one spouse through intellect and sheer hard work, it is still jointly owned by both spouses. Here, the Hon’ble Court assumes that the married couple would have acquired this property by doing planned and continuous hard work if they had been staying with each other in the State of California.
In divorce proceedings, quasi-community property encompasses all assets irrespective of their location, whether in the State of California or outside the State of California and they are considered community property if acquired while living in the State of California. The foundation of this doctrine is based upon the principles of natural justice like equity, justice, fairness and good conscience. This doctrine is not so appealing in divorce cases as it suggests division of property, but in death matters where one spouse is juggling social expectations on the one hand and emotional imbalance on the other hand, this doctrine acts as a safeguard for the economic status of the surviving spouse. This doctrine goes beyond the legal landscape, focusing more on the bond of love that a family shares , stability of finance and equitable treatment during the transition of family life from ‘we’ to ‘I’, from ‘ours’ to’mine’, and from ‘us’ to ‘me’.
It can be a guiding light for other legal systems to evolve their personal property laws too.
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The author of this article is Ayush Kumar. In this article, the author provides an in-depth overview of the legal principle of eminent domain. One of the most debated aspects of eminent domain is defining “public use/purpose.” Traditionally, this encompassed projects like roads and schools, but there’s ongoing discussion about broadening this definition to include economic development and other initiatives indirectly benefiting the public. The article then delves into the ethical considerations surrounding eminent domain.
It has been published by Rachit Garg.
Table of Contents
Introduction
Eminent domain is a legal principle that allows governments to take private property for public use, also known as forced acquisition or expropriation. This principle highlights the balance between promoting societal welfare and protecting private property rights. The historical background, legal foundations, ethical implications, and practical application of eminent domain have been the subject of intense scholarly and public debate. Governments can only acquire private lands if it is reasonably shown that the property is to be used for public purposes only. The central government, the state government, and local governments can seize people’s homes under eminent domain laws as long as the property owner is compensated at fair market value. The government can only exercise this power if it provides just compensation to the property owners.
Eminent domain, also known as compulsory purchase or expropriation, is a legal principle that grants governments the authority to acquire private property. The power of eminent domain was intended to be a narrow power and has rightly been called a “despotic” power of government, given its vast potential for abuse.
Background of the doctrine of eminent domain
The origin of the doctrine of eminent domain dates back to ancient civilisations, where rulers wielded authority to acquire land for public purposes like infrastructure and project development. The contemporary idea of eminent domain stems from English common law, where the Crown’s power to acquire private property for the greater good was established. Gradually, this idea transformed into a more systematic legal framework, encompassing restitution to safeguard landowners from unjust expropriation. The historical context, legal underpinnings, ethical considerations, and real-world implementation of eminent domain have sparked discussions both within academic circles and with the general public.
Evolution of the doctrine of eminent domain
Eminent domain is a legal principle that allows governments to take private property for public use, also known as forced acquisition or expropriation. The concept of eminent domain is a prominent part of modern governance. In India, the eminent domain has undergone significant historical evolution, impacted by a variety of social, economic, and political factors.
Colonial era
During the colonial period, India witnessed the consolidation of British power, which in turn led to the establishment of Crown rule. The British introduced the concept of greater sovereignty, empowering them to acquire larger territories and resources for economic and strategic gains, followed by the Land Acquisition Act of 1894.
Post-Independence period
India confronted the task of nation-building and growth after gaining its independence in 1947. Land acquisition has been an important tool for carrying out public projects and thus boosting the economy. The Indian government retained the Land Acquisition Act of 1894. However, significant changes, like in 2009 with the “Land Acquisition (Amendment) Act, 2009” wherein the Social Impact Assessment study was made mandatory, have been made in it. Moreover, concerns have been raised about the Act’s provisions and their affect on impacted people’s rights and livelihoods, specifically farmers and indigenous populations.
The 1970s and 1980s
In the decades of the 1970s and 1980s, social movements and protests triggered the acquisition of land. Significant industrial projects, dam construction, and mining activities led to the displacement of numerous marginalised individuals, resulting in extensive discord. During this period, a change in the strategy for land procurement with increased attention on achieving a harmonious blend between developmental objectives and the preservation of the rights of the impacted populace took place.
The 2013 Land Acquisition Act
The Central Government believed that public concern about land acquisition was growing and that inadequate knowledge of land acquisition among the public was heating the issue. Despite the formation of the bill, many concerns were expressed about its amendments, as the bill was formed under the British Raj in 1894; hence, mentioning fair compensation for acquiring private land and fair rehabilitation of landowners and those affected by the acquisition of the land was important. The Central government believed that a combined approach was necessary, one that legally explains clauses of rehabilitation and resettlement and assists the government in acquiring the lands for public purposes.
In 2013, the government of India passed the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (LARR Act) in response to the criticism faced by the previous act of 1894. This act sought to address the drawbacks of the previous Land Acquisition Act of 1894. The 2013 Act included various provisions to protect the interests of landowners and affected populations. It prescribed provisions related to the appropriate compensation, rehabilitation, and relocation for persons who had been displaced because of land acquisitions.
Supreme Court interventions
In addition to the legislative measures, the role of the Indian judicial system has been instrumental in protecting the rights of individuals affected by the land acquisition. The Hon’ble Supreme Court of India has passed several landmark judgements that have defined the extent and limits of the power of the state governments in exercising the doctrine of eminent domain. The court has emphasised the importance of public use/purpose, transparency in the land acquisition process, and just and fair compensation in the process.
There have been several Indian case laws related to the Doctrine of Eminent Domain. One such case is the Singur case, where the Supreme Court of India declared the acquisition of land for a Tata Motors project illegal and ordered that the land be returned to the original owners.
Sooraram Reddy v. Collector, Ranga Reddy District (2008): In this case, the court has discussed the grounds for review of this power, namely – malafide exercise of power, a public purpose, an acquisition without following the procedure under the Act, etc.
Basantibai v. State of Maharashtra (1986): The Bombay High Court in this case held that under the common law of eminent domain, the State cannot take the property of its subject without compensating the owner for its loss.
What is eminent domain
The Doctrine of Eminent domain is a legal doctrine that gives the government authority and empowers it to acquire private property for public use, having regard to the fact that the landowners are fairly and proportionately compensated. The provision related to the doctrine is enshrined under Article 300A of the Constitution of India, which provides that the state cannot take individual property except by legal authority.
The ‘doctrine of eminent domain’ has evolved in the English common law. The source of eminent domain and the power to acquire private property for the public’s welfare is the sovereignty of the state. The concept has been modified in India to match its legal system and socioeconomic needs.
The Scope of term “Public Use”
This has been one of the most debated issues. What constitutes the ‘Public Use/Purpose’ has nowhere been defined. This is one of the most critical aspects of eminent domain. This expression has traditionally been attributed to public-benefit projects such as roads, bridges, schools, hospitals, and public utilities. However, the definition of public use has evolved over time, sparking a debate about its expansion, including economic development, and other aims that indirectly benefit the public. This broader perspective has been very often than not been criticised and legal challenges in other areas.
Ethical Considerations
The use of eminent domain gives rise to ethical considerations due to its ability to encroach upon the property rights of the owners in the pursuit of the public welfare. Critics argue that such actions could have a disproportionate impact on marginalised communities and individuals with lower property, thereby worsening the problems related to social equity . The ethical considerations at hand revolve around safeguarding individual property rights and balancing the societal and economic advantages that public undertakings have the potential to yield.
Legal foundations of the doctrine of eminent domain
The maxims on which the Doctrine of Eminent domain is relied on, have been discussed below:
Salus Populi Supreme Les Esto
This maxim means that the welfare of the people is the supreme law, and it enunciates the idea of law. This can be achieved only when justice is administered lawfully, judicially, without fear or favour, without being hampered or opposed, and this cannot be effective unless respect for it is fostered and maintained (Pritam Pal v. High Court of Madhya Pradesh (1992). The maxim ‘salus populi suprema lex’ i.e., ‘the welfare of the people is the supreme law’ adequately enunciates the idea of law. This can be achieved only when justice is administered lawfully, judicially, without fear or favour, and without being hampered or thwarted, and this cannot be effective unless respect for it is fostered.
Necessita Public Major Est Quan
This maxim means that public necessity is greater than private necessity. The requirements of the public good are stronger than those of the private good. The law imposes upon every subject that he or she must prefer the urgent service of the country over the service of his/her own. When this is applied to criminal law, then in that case, a man’s necessity to preserve his/her own life will be defeated by the state’s necessity to preserve law and order.
Statutes
The procedure for exercising eminent domain in India is governed primarily by two statutes:
Land Acquisition Act, 1894
For many years, the Land Acquisition Act, 1894 continued to govern land acquisition procedures in India. Under the provisions of the Act, the government was empowered to acquire private land for public uses/purposes, including infrastructure development, urban development, industrial growth, and other uses deemed necessary for the public good. At the same time, this act faced criticism due to deficiencies, arguably for inadequate compensation and a lack of attention to rehabilitating and resettling individuals adversely affected by such actions. Consequently, this backlash prompted the repeal of the Act and the implementation of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013. The new act was enacted with the aim of ensuring fair compensation for individuals impacted by land acquisition.
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act)
Pursuant to the criticism of the previous act of 1894, the Government of India enacted the RFCTLARR Act in 2013. The new Act had a dual objective:- rectifying the deficiencies in the previous Act and simultaneously effecting substantial changes in the land acquisition process. The RFCTLARR Act underlines a commitment to the welfare of landowners and families affected by the process, ensuring fairness through just compensation, comprehensive rehabilitation, and active involvement of impacted stakeholders in the decision-making process.
The LARR Act attempted to strike a balance between the government’s demand for land acquisition for development projects and the rights of landowners and impacted communities. Some key features of the LARR Act are discussed below:
Public Purpose: The land must be acquired for a public purpose/ use, such as infrastructure development, industrialisation, urbanisation, etc.
Social Impact Assessment (SIA): Before land acquisition can take place, the LARR Act prescribes for getting the approval of a certain percentage of landowners (depending on the type of project). It also requires a Social Impact Assessment to be done prior to the acquisition to assess the probable impact of the acquisition on the impacted families and communities.
Compensation: The Act provides explicit guidelines for the appropriate compensation amount, which must be fair and just. It consists of various elements, including market value, the value of assets tied to the land, and rehabilitation and relocation processes for impacted families such as those who have been displaced.
Rehabilitation and Resettlement: The current Act prioritises the rehabilitation and resettlement of displaced families by providing them with improved living conditions and employment prospopportunitites.
Review of past cases: The Act also introduced provisions for reviewing and reassessing land acquisition cases conducted under the older Land Acquisition Act, of 1894 to ensure that the affected parties receive fair compensation and rehabilitation benefits.
In spite of the introduction of the 2013 LARR Act, hurdles and concerns persist in the utilisation of eminent domain in India. A couple of the challenges are as follows:
The challenge of accurately identifying displaced landowners who needs rehabilitation and relocation
Delays occurring in the land acquisition process
Complications arising from issues linked to land ownership documents
In an endeavour to tackle some of these challenges, the government proposed amending the LARR Act in 2015. However, these proposed amendments encountered criticism and ultimately failed to be enacted. The LARR Act holds important legal authority in India, governing both land acquisition and the use of the doctrine of eminent domain.
Elements of the doctrine of eminent domain
Eminent domain is a legal principle that empowers the government to acquire private property for public use while at the same time mandating that adequate compensation be provided to the landowners. The eminent domain is governed by legal frameworks in the majority of nations or jurisdictions. The following points summarise the fundamental elements of eminent domain:
Public use
The primary objective of the doctrine of eminent domain is to ensure that the acquired property serves a valid public purpose, such as the development of infrastructure like roads, bridges, railways, schools, hospitals, and public utilities. Eminent domain can be invoked only when a legitimate requirement for acquisition is proven. Furthermore, governments are bound to show that there is an absence of other alternatives to realise the public purpose.
Just compensation
When governments exercise eminent domain, they must provide “just compensation” to the property owner. Just compnesation refers to the property owner is fairly compensated for the value of the property being acquired. The measure of just compensation is the fair market value of the property to be ascertained on the date of acquisition, which is determined by assessing a price a willing buyer and a willing seller would agree to. Fair market value is that value assigned by parties freely negotiating under normal market conditions based on all prevailing circumstances at the time of the acquisition. Typically, compensation is based on the market value of the property at the time of the acquisition.
Due process
The doctrine of eminent domain necessitates the implementation of due process, which means that the property owners must receive prior notification of the acquisition. They should be granted sufficient opportunity to contest the acquisition or engage in negotiations regarding compensation.
Necessity
Eminent domain can be used only when there is a genuine need for an acquisition. The government must show that there are no other viable options for achieving the public purpose and that the property is critical to the success of the proposed developmental project.
Government authority
Eminent domain can only be exercised by the government or authorised public agencies with the legal backing to take property for public use. As mentioned earlier, in the majority of jurisdictions around the world, the doctrine of eminent domain is governed by some legislation and legal authority.
Involuntary transfer
It is an involuntary process for the property owner. This means that the owner does not willingly sell or transfer the property but is compelled to do so by the legal authority.
Fair process
The eminent domain process should be fair and transparent, with clear rules and guidelines that safeguard both the property owner’s rights and the public interest. It should allow for negotiation, appeals, and, if required, judicial scrutiny.
Constitutional provision surrounding the doctrine of eminent domain
The Indian Constitution safeguards the doctrine of eminent domain and enforces specific regulations to ensure its just and equitable application for the welfare of the people. The relevant constitutional provisions pertaining to eminent domain in India can be summarised as follows:
Article 31A of the Constitution
Although no longer in force, this provision granted immunity to specific laws from being contravened on the grounds of infringing upon fundamental rights. This provision encompassed subjects related to land reform and acquisition, and their immunity was intended to streamline the implementation of the doctrine of eminent domain.
Article 19(1)(f) of the Constitution
This article of the Fundamental Rights section safeguarded citizens’ rights to possess, acquire, and dispose of property. However, Article 19(1)(f) is now repealed.
Article 300A of the Constitution
This article distinctly addresses the right to property, and states that property cannot be seized from an individual except through lawful authority. This means that the government can only acquire private property through a legally valid process, adhering to relevant laws, and providing just and equitable compensation.
Article 31 of the Constitution
Despite its abolition in 1978, this Article contained provisions related to compensation for property taken over or requisitioned by the government. Following its abolition, the right to property is no longer a fundamental right but remains a constitutional right under Article 300A.
Directive Principles of State Policy (DPSP)
The DPSP, enshrined within Part IV of the Indian Constitution, provides guiding principles for making laws and policies. Notably, Article 39(b) and (c) of the DPSP are particularly relevant to the eminent domain, as they stress the necessity to ensure a balanced allocation of resources for the greater public good and to curb the aggregation of wealth and productive resources to the detriment of the public interest.
These constitutional provisions are designed to ensure that the exercise of eminent domain remains impartial and just, safeguarding property owners’ rights while simultaneously advancing the collective welfare.
Importance of the doctrine of eminent domain
The doctrine of eminent domain is important due to various reasons namely – promoting Infrastructure development, urban planning, national security, economic growth, etc. These are elaborated below:
Infrastructure Development: The State governments, while exercising the eminent domain can acquire properties needed for infrastructure developments such as roads, bridges, railways, airports, schools, hospitals, and other such utilities.
Public Welfare and Services: The doctrine empowers the government to act in the public good. This includes endeavours in the field of education, healthcare, disaster management, environmental conservation, and other areas that benefit society as a whole.
Economic Growth and Development: Eminent domain contributes significantly to economic growth by permitting large-scale development initiatives. It promotes investment, job development, and enhanced access to resources, which in turn increase economic activity and prosperity.
Ensuring Fair Compensation: It emphasises the importance of compensating the landowners whose lands are acquired. This ensures that impacted persons are fairly compensated for the loss of their property in possession.
Balancing Individual Rights and Common Good: Individual property rights should not hamper societal well-being. It provides a method for balancing individual interests with the public’s collective interests.
National Security: The doctrine is crucial in safeguarding strategic places and resources for national security, defence, and emergency response.
Despite its importance, the idea of eminent domain should be used with caution and subject to appropriate checks and balances. To protect property owners’ rights and guarantee that the public interest is truly served, governments should adhere to the principles of transparency, due process, and fair compensation.
Limitation of the doctrine of eminent domain
The doctrine is subject to some limitations in India so as to protect the rights of the individual and prevent abuse. These restrictions find place and have been defined in the Land Acquisition, Rehabilitation, and Resettlement Act of 2013 (LARR Act) and some important court judgements, which have been discussed in the later part of this article. Here are some key limitations of the doctrine of eminent domain in India:
Public purpose
Eminent domain can only be used to acquire land for “public purpose.” The LARR Act broadens the definition of public purpose to encompass initiatives related to national security, infrastructure development, industrialisation, and urbanisation. However, the courts have narrowly defined the phrase to ensure that it is not misused for private or commercial purposes instead of public use.
Social Impact Assessment (SIA)
The LARR Act mandatorily requires the consent of 80% of affected families for private projects and 70% for public-private partnership projects. Apart from that, a Social Influence Assessment must also be completed to assess the project’s influence on the impacted families and communities.
Just compensation and rehabilitation
The Act mandates that the impacted families be compensated fairly for their property, such as land and other assets. Compensation must be assessed using market rates and the possible future value of the land. Furthermore, displaced families must be provided with rehabilitation and relocation measures, including housing and livelihood facilities.
Limits on multi-crop land acquisition
To ensure food security, the LARR Act prohibits the acquisition of multi-crop agricultural land. Multi-crop land can only be acquired in an extraordinary circumstances subject to strong reasons have been provided.
Time-bound process
The LARR Act sets time limits for all the stages of the land acquisition process so as to avoid unnecessary delays and provide compensation and rehabilitation to impacted families expeditiously so that their means of livelihood are not greatly impacted.
No retrospective application
The new act does not apply retroactively, which means that land acquisition proceedings commenced before the commencement of the Act, are still governed by the old land acquisition act of 1894.
Prohibition on speculative transactions
The RFCTLARR governs land acquisition in India. The act aims to ensure a participative, informed, and transparent process for land acquisition for industrialisation, development of essential infrastructural facilities, and urbanisation with the least disturbance to the owners of the land and other affected families and to provide just and fair compensation to the affected families whose land has been acquired or is proposed to be acquired. The Act puts a bar on the acquisition of land that has been given by a farmer under pressure or within a certain time frame to avoid speculative transactions.
Role of gram sabhas
In tribal areas, the approval of the Gram Sabha is required for the process of land acquisition. This mechanism gives the local populations a role in the process.
Judicial review
The courts play an important role in determining land acquisition cases to ensure that the process follows the law and that the rights of affected individuals are safeguarded.
Despite these limitations, there are still problems in implementing the eminent domain in India. The Indian government and its institutions are always working to ensure that the process is transparent, fair, and respects the rights and well-being of affected persons and communities.
Power of eminent domain in India
The power of eminent domain in India is derived from the Constitution of India and is exercised by the government and its authorised public undertakings, such as corporations. Under the doctrine, the state can acquire private land for public purposes, and it should be proved beyond doubt. The doctrine empowers the government to take private property against the consent of the owner for a valid ‘public purpose’. The LARR Act, 2013 strives to strike a balance between public good and private rights. On the contrary, the lack of due process in the exercise of eminent domain in the country has been a cause for concern. Some of the important features of the power of eminent domain in India has been discussed below:
Constitutional Basis: The power of eminent domain in India has a constitutional basis. This derives from Article 300A of the Constitution, which deals with the right to property. This article states that no person shall be deprived of their property except by the authority of law. It provides that the property can be acquired by the government only through a legal process and by providing the affected communities with just compensation.
Public Purpose: The Constitution does not explicitly define ‘public purpose’. However, the government can acquire land under eminent domain for projects that benefit the general public, such as infrastructure development, public utilities, defence, social welfare schemes, and other activities aimed at promoting the public welfare. For example, the government can acquire land for a public park, a highway, or a school, as these projects serve a broader public purpose.
Land Acquisition Act, 1894 (Repealed): In the early times, the power of eminent domain was exercised in India primarily through the Land Acquisition Act, 1894. This act provided the legal framework for land acquisition by the government for public purposes. However, due to lack of proper and robust provisions related to compensation, rehabilitation, and the impact on affected communities, the act was repealed and replaced by a new law in the year 2013.
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (LARR Act): The LARR Act, at present, is the legislation that governs the procedures related to land acquisition in India. It provides the procedures for acquiring land, providing compensation, and rehabilitating and resettling the affected families. The LARR Act places emphasis on public purpose, just compensation, consent, and social impact assessment to ensure that the power of eminent domain is exercised responsibly and in the best interest of all stakeholders.
Limitations and Safeguards: The power is subject to specific limitations to protect individual property rights and prevent its misuse. Consent requirements, social impact assessments, just compensation, and rehabilitation and resettlement measures are some of the important safeguards provided by the LARR Act.
Advantages of the doctrine of eminent domain
The advantages of the doctrine have been discussed herein:
Balancing individual rights and common good
The concept of eminent domain represents the idea that private property rights should not be allowed to disrupt the broader welfare of society. It provides a method for balancing individual interests with the collective interests of the public.
While the doctrine of eminent domain provides numerous benefits, it is critical to recognise its possible downsides as well as the requirement for responsible and transparent execution. Using eminent domain for the greater good while protecting private property rights requires fair compensation, careful planning, and public consultation.
Infrastructure development:
To acquire property needed for important infrastructure projects such as roads, bridges, railways, airports, schools, hospitals, and utilities, Governments can exercise the authority under eminent domain. It makes it easier to expand and modernise public services, transportation, and utilities, thereby increasing the quality of life for the common people.
Economic growth and job creation
Eminent domain boosts economic growth and attract investors by making it easier to acquire land for large-scale development related projects. Infrastructure and industrial initiatives, in turn, result in job creation and contribute to overall economic growth of the country.
Public Welfare and Services
The doctrine gives the government authority to carry out projects that benefit the general public, such as projects in the sectors of healthcare, education, disaster management, and environmental preservation.
Urban renewal and revitalisation
Eminent domain can be quite useful in urban planning and renewal activities. It enables the development of the deprived regions, resulting in ameliorating living conditions, higher property values, and overall urban development. For example, when a National Highway is constructed in an area, the value of the land in that area increases.
National security and defense
It is useful in protecting crucial places and resources required for national security and defence. It contributes to a protection and sovereignty of the country.
Overcoming market failures
In some circumstances, market failures may delay the acquisition of property for important public projects. Eminent domain can step in to overcome these barriers and solve collective demands that markets may not be able to solve effectively.
Facilitating public-private partnerships
The eminent domain can encourage collaboration between the public and private sectors in large-scale initiatives. By providing the appropriate land, the government can attract private players and skills to improve project execution.
Effective land use planning
Eminent domain can assist in overcoming inefficiencies in land use and maximising the potential of available land for public initiatives that fulfil greater societal requirements.
Cons of the doctrine of eminent domain
The doctrine of eminent domain serves the public interest. At the same time, it has drawbacks and potential negative consequences. Some of the cons of eminent domain are discussed below in brief:
Violation of property rights
The government, while exercising eminent domain, can acquire private property from individuals, sometimes against their will. This forced acquisition can be understood as a violation of property rights, which are often regarded as essential human rights in many nations. In India, the Hon’ble Supreme Court in the case of Vidaya Devi v. The State Of Himachal Pradesh (2020) has held that the right of a citizen to own private property is a human right. The state cannot take possession of it without following due procedure and the authority of law.
Unjust compensation
The doctrine mandates that affected property owners receive appropriate compensation; nonetheless, a disagreement over the value of the property and the compensation thus provided may arise. In some circumstances, property owners, for example, may consider that the compensation provided does not reflect the full value of their land or assets.
Displacement and Social Impact
The use of doctrine of eminent domain may result in the displacement of families and communities. This can cause serious emotional and financial suffering, especially when people are displaced from their homes and livelihoods without adequate rehabilitation and relocation processes.
Disregard for Community Heritage
Eminent domain can potentially destroy cultural and historically valuable sites and neighbourhoods. This has the potential to destroy residents’ sense of community and identity that they have created over generations.
Corruption and abuse
There is a risk that the authority of eminent domain will be misused or abused. With powerful actors exercising the process for personal benefit or private interests rather than legitimate public goals sought to be achieved.
Administrative delays and inefficiency
The eminent domain procedure can be administrative and time-consuming. These can be due to necessary approvals, etc., resulting in project delays and enhanced costs for the government and other stakeholders.
Environmental impact
If not properly handled, eminent domain can lead to environmental destruction. Deforestation, water diversion, and other ecological changes can impact ecosystems and biodiversity in the long run.
Loss of agricultural land
Acquiring agricultural land may decrease the availability of fertile agricultural land in the long run, potentially affecting food security in the region.
Chilling effect on investment
The possibility of eminent domain seizures deters investors from committing money to projects, particularly in countries where the procedure lacks transparency or clear norms.
To address these disadvantages and mitigate the negative effects of eminent domain, governments must establish strong legal frameworks that prioritise protection of property rights, ensure just compensation, involve affected families or communities in decision-making, and implement robust rehabilitation and resettlement measures. Furthermore, transparency and public accountability are critical to preserving public trust and confidence in the exercise of eminent domain for the greater good.
Important case laws around the doctrine of eminent domain
There are various landmark cases related to the doctrine, and some of these are mentioned below. These landmark cases have largely affected the legal environment in India pertaining to eminent domain and property rights. They have played a crucial role in defining the boundaries and conditions under which the government can exercise its power of eminent domain while upholding the principles of justice, fairness, and the protection of individual rights.
Project Director, NHAI v. M. Hakeem (2021)
In this case, Mr. Hakeem approached the Supreme Court, requesting ‘fair’ compensation for the land that the government had acquired under the National Highway Authority of India Act, 1956 (NHAI Act). The compensation decided by the District Revenue Officer was much lower than the market value of the land. Hakeem opposed the value decided by the officer. An “arbitrator” was assigned to determine the dispute. The arbitrator could only be appointed by the Central Government, and could be another government employee. He again set the compensation amount lower as compared to its market price. Hakeem then moved to the Supreme Court.
The Supreme Court ruled that the court cannot increase the compensation under the Act, it can only remit the compensation or set aside the award.
Kameshwar Singh v. State of Bihar (1952)
In the above-mentioned case, the Bihar Land Reforms Act, 1950 was challenged as being violative of Article 19(1)(f) and Article 14. In furtherance of the same, the Hon’ble Apex Court held that the right to property cannot be an absolute right and can be taken away on the ground of public interest to achieve the constitutional goals, and the Court thereafter, also laid emphasis on striking a balance between an individual’s right to acquire and hold property or land and the interest of the public, i.e., public welfare.
The State of West Bengal v. Subodh Gopal Bose and Others (1954)
In this case, Supreme Court ruled, even if the land was already being used for public utility, the State still had the power of eminent domain to acquire it for public use. Furthermore, it emphasised the importance of giving fair compensation to the landowners. The Court further held that the Constitution’s purpose is to create a welfare State by giving more social interest to communal rights than private properties and liberties.
Maneka Gandhi v. Union of India (1978)
The Hon’ble Supreme Court in this case explained the contours and limbs of Article 21 of the Constitution (Right to Life and Personal Liberty), stating that the expression life and personal liberty is of the widest amplitude, covering a bundle of rights, and the right to property is being one of them as it is an important component in an individual’s quality life, therefore, it cannot be abridged or taken away without following the due process of law.
Sudharsan Charitable Trust v. Government of Tamilnadu (2018)
Herein, the Apex Court elaborated on the term “eminent domain” in regard to the land acquisition. The court stated that the concept of eminent domain is deeply interlinked with the State’s sovereignty and its powers. The State can take away an individual’s property by providing adequate compensation for the same in the public interest, as the goal of the welfare state will always be to secure social justice, and in exercising the same, the State is not infringing upon the right to livelihood or dignity of a person. Thus, the petitioner’s contention that they cannot be deprived of their land under the powers of eminent domain was wholly rejected.
Conclusion
The principle of Eminent Domain provides the right for the government to acquire private property or lands in the interest of the public, provided that the landowners are given fair compensation. In regard to the same, the government can acquire land for the development of infrastructure like roads, railways, schools, hospitals, and highways; however, it is the duty of the government to ensure a transparent and just approach while dealing with affected families and communities. At the end of the day, the goal is to have a balance between rights and objectives that the welfare state needs to achieve, and if the owners of the respective land are not sufficiently compensated, the situation can be termed as inverse condemnation.
Eminent domain has certain restrictions and drawbacks, even if it can be advantageous for growth. These include breaches of property rights, unjust compensation, and the possibility of misuse. The doctrine tends to strike a balance between the collective needs of society and safeguarding the property rights of individual communities.
The doctrine of eminent domain can have a significant impact on people’s lives and livelihoods. Therefore, it is of utmost importance for governments to uphold transparency and impartiality in their dealings with affected families and communities. They must also undertake measures to lessen the negative effects of eminent domain. Eminent domain can be productive and useful because it can open up opportunities for people and benefit many people. However, there are disagreements about whether it is a positive thing or not.
The power of eminent domain is understood as the power that the State may exercise over all land within its territory. Eminent domain can be supported by the fact that governments have more legal control over lands within their dominion than do private owners. However, the definition of public purpose is extremely flexible. The legality of the right of eminent domain has come under extreme pressure due to development claims and the mass relocation that accompanies large infrastructure. The law of eminent domain finds its place among the doctrines that have not been attempted to be tamed by constitutionalism. Moreover, it has not been moderated by new perspectives on the relationship between citizens and the State. The principle of reasonableness can be a ground for challenge, and the government’s policy has yet to receive a conclusive answer from the Supreme Court. To comprehend the doctrine of eminent domain, it is important to ask questions, including about the valid law in India, i.e., the Land Acquisition Act 1894 (repealed now) or The Right to Fair Compensation and Transparency in Land.
Frequently Asked Questions (FAQs)
How is just compensation determined in eminent domain cases?
Just compensation is calculated based on the fair market value of the property at the time of acquisition or the amount of compensation paid to property owners, when their property is taken through eminent domain. To calculate the suitable compensation amount, various other factors are also taken into account, including:
Location
Current Use
Possibility of Future Development
Other Relevant factors, may be considered include the size of the property, any improvements or structures on the property, etc.
Can the government use eminent domain for private development projects?
Eminent domain is an instrument of law used by the government to involve private developers in public projects, depending on the jurisdiction. However, in some countries where the “public purpose” requirement is strictly interpreted, has given rise to arguments and legal challenges.
Can property owners challenge actions under the exercise of eminent domain?
Yes, owners of the estate do have the right to challenge eminent domain actions to ensure the government’s exercise of eminent domain is in compliance with the law and that the proposed project serves the public interest. They can approach the High Court and subsequently the Hon’ble Supreme Court to seek the necessary remedy.
Can eminent domain be used to acquire land for commercial purposes?
Nowadays, the use of eminent domain is the most debatable topic. Its use is restricted by several jurisdictions that can clearly serve a public purpose, and using it for solely private commercial endeavours may not be allowed.
Can individuals or communities appeal against the exercise of eminent domain in court?
Yes, impacted parties or communities may file a petition for the exercise of eminent domain to seek better compensation. The court’s decision will be based on the merits of the case and whether the government has followed the legal requirements. However, in the recent case of Project Director, NHAI v. M. Hakeem (2021), the SC held that “court cannot increase the compensation under the Act, it can only remit the compensation or set aside the award’.
Human civilization is interdependent. In the 21st century, we have several work sectors: the primary sector (agriculture), the secondary sector (industry), and the tertiary sector (services). Each field involves an employee-employer relationship, necessitating defined working hours. However, there are instances where employees work more than legally prescribed hours, leading to labour law violations. As a result of excessive working hours, employees face personal issues such as illness, depression, reduced happiness, and decreased participation in social activities.
Who is an employee
The Industrial Relations Code of 2020 defines who is an employee in general. An employee is defined as any person employed by an industrial organization, any company, cottage industry, or any similar sector, regardless of their skill level (skilled, semi-skilled, unskilled), or position, for any period. The term ’employer’ refers to the owner of the companies or industries, as declared by the government.
Who is an employer
Any individual, whether acting as an employer directly or indirectly, or on behalf of another individual, who employs in an establishment that is overseen by a department, either central or state, falls under the jurisdiction or authority designated by the department head. The authority also covers establishments operated by the local authority, including contractors, local authorities, or legal representatives.
The workers are not allowed to work more than eight hours a day.
That is, the working hour times include spent work during the running time of transport vehicles, subsidiary works, and attendance at terminals of less/more than fifteen minutes.
Working journalist
The working journalist’s hours of work are subject to a maximum of one hundred and forty-four hours of work during any period of four consecutive weeks and not less than twenty-four consecutive hours of rest during any period of seven consecutive days.
In addition to such holidays, casual leave or another kind of leave as may be prescribed, earned leave on full wages for not less than one-eleventh of the period spent on duty, and leave on medical certificates on one-half of the wages for not less than one-eighteenth of the period of service.
Weekly compensatory holidays
No worker shall be allowed to work for more than six days in any week. Provided that in any motor transport undertaking, an employer may, in the event of any dislocation of a motor transport service, require the worker to work on any day of the weekly holiday, which is not to arrange that the worker does not work for the whole day.
Any worker deprived of any weekly holidays, or due within the two months immediately following that month, a compensatory holiday of an equal number of holidays
Prohibition of overlapping shifts
The worker shall not be allowed to carry out the same kind of work arranged at the same time, i.e. – a worker works in that mine, so any other mine can do the same kind of work.
So a worker has worked in any mine for 12 hours already, so that worker cannot work in any other mine doing the same work.
Annual leave with wages
Every worker employed shall be entitled to leave in a calendar year with wages subject to the condition:
He has to work one hundred and eighty days or more in such calendar year
The worker is entitled to one day leave for every twenty days of his work in case the worker works in mine, rather than every fifteen days of his work in such calendar year
Any period of layoff, maternity leave, or annual leave availed by such worker in such calendar year shall be counted for calculating for a period of one hundred eighty days, but he shall not earn leave.
Any holiday fall between the leave availed by such worker is excluded from that period of leave so availed.
Such a worker whose service commences on one of the first days of January shall be entitled to be left with wages if he has worked for one-fourth of the total days as a reminder of the calendar year. If such worker dies, is discharged, or is dismissed, the legal heir or nominee can get such a facility
If such a worker does not take any leave in a calendar year, take the whole of the leave allowed to him at the end of the year, or any leave not taken to him shall be added in the next succeeding calendar year, but it does not exceed thirty days.
Any worker who applied for leave with wages and refused gets the encashment to leave at the end of the calendar year as per the demand
Over time
Over time when shall be paid wages at the rate of twice of wages in respect of overtime work, where a worker works in an establishment for more than such duties in any say any week all the period of overtime work shall be calculated daily. Overtime must be with the consent of the employer.
Workers over and heavy works
In every state, worker safety and facilities depend on the government and policies. Generally, developed states have good labour laws and are primarily focused on the safety and welfare of the worker, but in developing and underdeveloped economies, there is always a lot of responsibility and a stressful situation with hard work. Basically, for that reason, the worker’s hours and overworking duration are high, which causes accidents and injuries. As per the data from DGFASLI reports, more than 11,000 deaths and 4000 injury cases are registered each year, and all the responsibility of the worker is transferred to the supervisor and contractor. There are thousands of workers who regularly lose their hands, fingers, and other injuries, according to CRUSHED 2022.
A worker in this stage of fatigue has approximately a 62% chance of a high risk of causing accidents. Fatigue increases the chances of human error as well as a decline in the performance of the worker.
What happens to repeated long hours of work
The employer and employee are both working hard to be productive and finish the work on time, but the overwork causes various problems, like:
Cardiovascular and Cerebrovascular Disease- Worker heart-related disease due to industrial work, pollution, and working more than 7 or 11 hours per day increases the risk of myocardial infarction. Those who work more than 50 hours per week have a decreased risk of developing ischemic heart disease.
Hypertension- working more than 60 hours per week has a very high chance of suffering from systolic blood pressure and high blood pressure, but hypertension is caused by duty hours or workload but is not directly related.
Diabetes Mellitus- It is one of the diseases caused by long working hours. The disease is related to the daily diet, food, lifestyle, and food timing, causing diabetes mellitus.
Work stress- People who work more than 10 hours per week or 60 hours per day have a chance to suffer from work stress, which increases the chance of work stress and psychological problems or something like that.
Health behaviour- The workers are taking care of their health and fitness, but those who smoke, consume alcohol, and lead a sedentary lifestyle are likely to face various health-related problems.
Sleep fatigue- In general, the public takes 7 to 8 hours of sleep per day, but less than that hour is problematic for every lack of sleep or the root of every disease.
Occupational injury- When any person works 12 hours a day and 60 hours per week, they may cause occupational injury.
Note that all diseases or health-related problems depend on the person and how much that person is conscious of their health care His/her excessive hours of work do not directly cause any such disease but indirectly affect the health of the person.
Does less work boost productivity?
In a survey in 2018, British workers worked 42 hours per week, while the average full time German worked 1.8 hours less each week, but the workers were 14.6% more productive. And in Denmark, the average work week was 37.7, but the workers in that country were 23.5% more productive.
Various studies say that fewer working hours with proper sleep boosts the productivity of the worker, but that does not mean that they have no workload; they have knowledge but work more productively in a shorter time frame.
The short-term working hour is not for all. There are individuals who are workaholics and love to spend time in the workplace. The long working hours improve the friendly environment among employees and increase positive stress (work pressure), which boosts productivity.
Way forward
A few steps for achieving better labour standards are:
There must be strict execution of the labour laws, time duration for duties, proper rest time, safety, salary, and mental and physical health. Each thing should be properly taken care of with strict execution of the laws.
The government must, from time to time, check all the companies- the concerned department should check—and examine all the things, like the cleanliness of the working space, and fulfil all the guidelines, like drinking water, lights, safety measures, and health care for the labour.
Research different approaches and strategies to improve productivity, reduce risk, and provide a better work environment.
Medical facility restroom, washroom, and canteen facilities should be in the workplace.
Conclusion
The working hours of workers are always important for industries. Flexible working hours as per law and facilities with health care must be needed. The world’s happiest country, Norway, has one of the best labour laws, maternity benefits, medical care, and short working hours productivity, which proves that every democracy that primarily focuses on the people of the respective country boosts the economy to a happy country as well.
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