In this blog post, Deepak Sati, a student pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, compares and analyses Section 80 of CPC and ADR techniques.

Introduction

Generally, in suits between individuals and individuals notice to defendants by plaintiff before institution of suit is not required to be given. However, section 80 of the Civil Procedure Code (CPC) says that before institution of a suit against the government or against any public officer, in respect of any act purporting to be done by such public officer in his official capacity, until the expiration of two months next after the notice in writing has been delivered.

Nature of Section 80:

Section 80 contains a rule of procedure and makes it mandatory to serve a notice before institution of a suit against the Government or against a public officer.

Thus, this section describes two types of cases:

1. Suit against the Government and
2. Suit against public officers in respect of acts done or purporting to be done by such public officers in their official capacity.

In State of Maharashtra v. Chander Kant¹ it was observed that notice must be given in all cases regarding the first class of cases. However, regarding  second class cases, notice is necessary  only where the suit is in respect of any act purporting to be done by such public officer in the discharge of his duty, and not otherwise.

In State of Madras v. Chitturi   Venkata Durga Parasadrao ² it was observed that the expression act purporting to be done according to one interpretation which is strictly grammatical, takes in part acts as well as future acts. The other interpretation based upon an idiomatic interpretation of the language is that it would be restricted to part acts.

Object of the notice:

Underlying object of section 80 is to provide an opportunity to the Government or public officer to consider the legal position and to settle the claim forwarded by the prospective plaintiff if it appears to be just and proper. It is expected from the government unlike private parties to consider the matter objectively and make an appropriate decision in two months after obtaining proper legal advice. It saves public money and time and is in public interest.

The legislative intent behind this provision is that public money not be wasted for unnecessary litigation. The section guides the Government or a public officer to negotiate just claims and to settle them if well‐founded without adopting an unreasonable attitude by inflicting wasteful expenditure on public exchequer.

Opinion of the Law Commission:

In its 14^th report, Law Commission of India noted that section 80 has worked hardship in a large number of cases where immediate relief was needed. In large number of cases, the Government or the public officer made no use of opportunity afforded by the section; Government and public officers utilised the provision as a technical defence and notice remained unanswered.

In 27^th report the commission again considered the question and observed that there was no parallel provision in any other country governed by the Anglo‑Saxon system of law. It further said that in democratic country like ours there should ordinarily be no distinction as envisaged by section 80 between the citizen and the State.

                                 ADR (Alternative Dispute Resolution)

The term ADR has been used to represent various systems that attempt to resolve dispute through methods other than litigation in courts. It covers a broad spectrum of approaches, from party to party engagement in negotiations as the most direct way to reach a mutually accepted resolution, to arbitration and adjudication at the other end, where an external party imposes a solution.

The Arbitration and Conciliation Act, 1996 granted statutory recognition to ADR. The Act facilitate the parties to resolve disputes either through conciliation or the Award of the Arbitrator is a deemed decree. The Lok Adalats organized under the Legal Service Authorities Act, 1987, facilitate settlement between the parties.

Nature of ADR:

ADR is based on more direct participation by the disputants rather than being run by lawyers and judges, Most ADR processes are based on an integrative approach. They are more co‐operative and less competitive in comparison to adversarial court based litigation. ADR proceedings are private and confidential. ADR is perceived both as a preventive measure and as a method for channelizing disputes outside the formal justice system.

An ADR system combines various adjudicatory procedures such as arbitration and binding expert determination. The non‐adjudicatory procedure such as conciliation, negotiation, and judicial settlement include through Lok Adalat and mediation which contribute to resolution of disputes by agreement of the parties without adjudication.

Objective of ADR:

The ADR system seeks to provide cheap, simple, quick and accessible justice. There are four important goals of ADR:

1. To relieve court congestion as well as undue cost and delay;
2. To enhance community involvement in the dispute resolution process;
3. To facilitate access to justice; and
4. To provide more effective dispute resolution.

Application of ADR to disputes:

ADR mechanism is extra‐judicial in character. It can be used in almost all contentious matters which are capable of being resolved, under law, by agreement between the parties. In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co.Ltd. ,³ the Supreme Court held that the following categories of cases can be settled through ADR process‐

1. All cases relating to trade, commerce and contracts;
2. All cases arising from strained or soured relationships;
3. All cases where there is need for continuation of the pre‐existing relationship in spite of the disputes;
4. All case relating to tortuous liability;
5. All consumer disputes;
6. All offences which are compoundable.

  Citations:

1. (1977) 1 SCC 257
2. AIR 1957 AP 675
3. (2010) 8 SCC 24

In this blog post, Vinay Biradar provides a short yet meaningful excerpt from the book “Defying the Dictum”.

About the book “Defying the Dictum”

The book is a biography of Dr. Mallamma Yalawar, a woman of grit, based on oral interviews. In 1986 she started ‘Sabala’- an organisation for women empowerment in the hinterlands of Karnataka. Bijapur district in the northern part of Karnataka was oblivious to the growth story of the rest of Karnataka state. In such a scenario, Mallamma Yalawar defied all odds to start an NGO and has persisted with her goal for the last 30 years. The organization today is part of the World Fair Trade Organization and Mallamma is the Vice President of World Fair Trade Organization- Asia. Leaving her ancestral village with just Rs. 2 in hand and building a success story purely with hard work and dedication, Mallamma Yalawar’s story will be an inspiration to young women and men to set out to achieve their dreams. The writing style is not strictly biographical but of a free flowing novel of one’s life and its various twists and turns.

Book Excerpt:

It was the year 1999. Finally after a long gap of uncertainty, there was a stable government in New Delhi. Fresh elections had taken place in the state of Karnataka, which brought in the new government. The political flux in the country had permeated all the fields. The decade of the nineties where India saw rapid changes in its economy was about to end. The rural poor had access to better public facilities but were left far behind on the road to modernisation. Gender equality was still an unheard term for many in the country. Men would raise their eyebrows and stare if they were asked about women’s rights. Since there weren’t any “men’s rights” then why should there be “women’s rights”, was the “logical” rebuttal given. SABALA was striving to change that.

SABALA is an organisation for women empowerment, which was established in the town of Bijapur, a district headquarters in the northern part of Karnataka. The organisation had become the talk of the town for its work. After carving out a name for itself, a cooperative bank was started under its umbrella. This bank provided cheaper interest loans to women. 22

Bijapur is known for its dry and arid weather throughout the year but the town had experienced intense cold in the past few days. Mallamma was in her office going through stacks of files when the postman arrived with the letters. It had become a normal routine that every day a moustached young man would arrive with a bunch of letters addressed to her and Sabala. The organisation had started growing at a fast pace and its activities were being talked about in the local and state media quite frequently. The letters were sent by admirers about Sabala’s good work and her courage to take on the inert establishment to fight for justice for rural women. Some letters were correspondences about the various projects that Sabala was undertaking. While she went through them, one letter caught her eye. It was from the central secretariat in New Delhi. She opened the letter to find that the central government had initiated a CBI enquiry into the utilisation of funds of Sabala. Startling claims were made by the government against her and her organisation stating misappropriation of donor funds. The contents of the letter brought in utter dismay. Her temper rose as she struggled hard to find a reason behind the enquiry. It was an open secret that the government used the CBI as its political weapon. It was natural for any person whose life was in the public domain to have enemies around, often foes disguised as friends. 23

The situation demanded her to act and not ponder over her foes. “Sabala had misappropriated funds that were given by the donors and the government“, the letter alleged. It went on to add that Mallamma, being the CEO, had utilised these funds for her personal gain and the rural women gained nothing. Her thirteen years of struggle had been negated in a single letter and that pained her. The rich and the powerful often utilised their position to spoil the rise of those who they perceived as a threat. They did everything possible, made the wittiest of the plans; their crooked brains worked in tandem with the developments of their enemy and struck them using the state machinery. By now she had mustered enough courage to face every enemy within and around her. She was no stranger to difficulties. Mallamma was born with courage. It was hard for her to not use it.

She wrote back to the secretariat in New Delhi – “Sabala is open to any investigation whatsoever. We welcome the officers of the CBI to Bijapur for an enquiry into the record books and activities of Sabala”.

After a week, a Sikh officer and his assistant arrived in Bijapur. The officer, Mr. Arora, was an upright individual. He had orders from the ministry to be ruthless in his investigations and find the wrongdoings. When Mallamma courteously asked for arranging his stay and food, he flatly 24

refused. The next morning he was in Sabala’s office at 9 a.m. as promised. He went through all the record books and made notes until lunch time. He went to lunch all by himself and returned late afternoon. Mallamma’s courtesy was seen as her influencing the officer. So, she did not speak much and answers were given only to the questions asked. It was evening and the officer conveyed he would be back at 8 a.m. the next day for field visits. Mallamma nodded in agreement.

The next morning, when the officer turned up she showed him a chart of villages where

Sabala undertook its activities and trainings. There were 29 villages in and around Bijapur on that chart. The officer asked, “Which village are you willing to take us to, Mallamma madam?”

“Any village which you wish to go to Sir”, she answered.

The confidence flattered him. He was a tenured officer and knew confidence doesn’t come to everyone easily.

He went through the list of the villages and placed his finger on one village named Burnapur, which was about 25 kms from Bijapur. They boarded separate vehicles to reach Burnapur. The people in the village gathered on seeing two cars with people of Sabala and a strange looking man with a 25

turban. The villagers spoke Kannada and Lambani. The officer asked the crowd who knew Hindi among them. A middle-aged man came forward and replied, “Main Janta hu saheb” (I know the language sir). He had been to theneighbouring state of Maharashtra in search of work. That is where he learnt both Hindi and Marathi, he explained on interrogation by Mr. Arora. The officer wanted to get the information first hand by the beneficiaries of Sabala’s schemes. He walked along with the man, took him away from the crowd and spoke to him for about 10 minutes in isolation. It was a surprise visit and he did not intend to scare them off. The man spoke about Sabala and how it has empowered his wife and his sister. He said they also created self-employment opportunities for men by assisting them economically. “Mallamma Madam is a very good lady“, the villager said with a sense of pride.

The officer nodded and got into his car and indicated that he was willing to go back to Bijapur. That took Mallamma by surprise. On their way back, the officer said that he would meet her after lunch and that he had come to a conclusion in his investigation. She waited for him to arrive at her office. When he did, he spoke to her very gently and said, “There is no concrete evidence about the allegations made. You continue to do your good work. I’m sorry for the trouble.” 

She was relieved and was confident that truth would prevail. What bothered her was not the trouble but the trouble maker. She asked about the reason for the investigation. He was reluctant in saying, “It seems like you do not have a good rapport with your local politicians“.

He bid goodbye and wished her good luck.

The book is available online in the following places:

Amazon- http://www.amazon.in/dp/938612663X

Shopclues- http://www.shopclues.com/defying-the-dictum.html…

eBay- http://www.ebay.in/itm/-/112216962302

Publisher- http://bluerosepublishers.com/product/defying-the-dictum/

In this blog post, Bharat Rajvanshi, a student at Institute of Law, Nirma University and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, compares and contrasts the advantages of Arbitration over Litigation in IPR disputes.

IPR is an emerging field of law which has taken a major pedestal to be the most lucrative of budding lawyers as well as the most intelligent legal minds across the world. Since the recognition of the property on incorporeal property started, the courts were there to protect such rights and the executive also enforced its powers so as to protect others from hampering other people rights with the help of it. The courts required some laws to identify the limits of such rights and to what extent people would be able to seek remedy in such matters in the court of law. The main motive was also to fulfil the principles of natural law and to deliver all round justice to the aggrieved and to make the people keep continuing their faith in the Indian Judiciary.

As such, several laws were made and sanctioned by the legislature so as to perform its role in the process of such rights’ identification. On the basis of many international treaties and convention, various countries formed rules limiting the scope and extent of all such rights. Arbitration is a creature of contract, whereas the violation of contract itself leads to litigation.

The World Intellectual Property Organisation (WIPO) also favours the concept of arbitration above the classic format of litigation in the resolution of disputes over the Intellectual Property Rights. Arbitration as a confidential and private procedure is being used a lot in resolving the disputes involving IPR, usually when the parties involved are governed by different jurisdiction. IPR disputes have a variety of different characteristics which can only be addressed through by the arbitration mode rather than by litigation.

There are a plethora of advantages of arbitration over litigation, firstly being on the basis of a basic feature of the IP dispute being international. On one hand, where the Litigation involves multiple court proceedings under different laws of different countries, and the results are always conflicting. There is always an upper hand of the party litigating in its home country. On the other hand, the arbitration procedure involves the decision on merits of the case and only the law that is applied by the common consensus of both the parties. The arbitrating body is not bound to follow a specific procedure and they can formulate their own procedures. Also, the nationality of this body is not specified as they would be considered neutral towards law. The language, as well as the institutional culture of both the parties involved in the dispute, is also to be left at the option of the parties.

Another important factor classifying arbitration over litigation is the technical factor. Most of the honourable judges in majority of the countries of the world are not young and such positions are only given to the people having relevant expertise in their field. IPR being a fairly new development in the field of law requires in-depth knowledge of the said subject. Therefore the judges in litigation might not have the required expertise in the field of IPR. Whereas, in arbitration, the parties can choose their arbitrator and hence only such a person is chosen as arbitrator who satisfies both the parties equally.

Considering the factor of urgency, where on one hand the litigation procedure goes on with the classic procedure of the courts which they are bound to follow in case of any of the disputes are mostly lengthy and tedious and run into generations. The result of such a delay in justice would not yield proper justice to the aggrieved. Also, there are no interim or interlocutory relief available in certain jurisdictions. In the case of arbitration, the arbitrators as well as the parties are at the option to shorten the procedure or elongate it for proper discussion as how and when they like. Arbitration would also be available with the option of interim relief to the aggrieved parties, which might not be binding on the parties. They can at any time go to the court to seek any such remedy.

The litigation procedure is never final unless the apex court of the country passes such orders either in favour or against. There is always a possibility of appeal by the parties against whom the order is passed, or a lesser compensation is granted. There is no finality of such decisions by the lower court. Considering the procedures of each court, or the adjudicating body, the final judgement might come even after many generations, as discussed earlier. In the case of arbitration, there is a limited or no appeal option which can be waived off at the option of parties. Arbitration decision is more final and absolute than the traditional litigation.

Also, the litigation proceedings of any case, except otherwise stated by law, are to take place publically, which also involves the narration of facts as well as the property description over which the dispute is required to be settled. This would make the secrets public and would result in huge loss of Intellectual Property to the aggrieved. Therefore, to ensure the confidentiality and trade secrets of the parties, and also to secure the reputation of them, the arbitration can be done in closed curtains and the proceedings as well as the awards can be made confidentially. This would ensure the complete and all round protection of the intellectual property rights of all the involved parties.

Lastly, the parties always have the option to approach the court for seeking any remedy if they are not satisfied with the decision of the arbitrator. Although the shortcomings would never encourage the parties to approach the court for any of such kind of disputes. There are a lot of other technical factors which ensure justice to the parties to such disputes over Intellectual property.

Customarily, arbitrability, the topic of whether the topic of a debate might be settled through discretion, emerged in connection to mediation of certain IP question. As IP rights, for example, patents, are allowed by national authorities, it was contended that question in regards to such rights ought to be settled by an open body inside the national framework. In any case, it is presently extensively acknowledged that questions identifying with IP rights are arbitrable, similar to debate identifying with whatever other sort of secretly held rights. Any privilege of which a party can arrange by method for settlement ought to, on a fundamental level, additionally be equipped for being the subject of an assertion since, similar to a settlement, mediation depends on parties’ understanding. As an outcome of the consensual way of intervention, any remedy rendered will bind on the parties included and won’t in that capacity influence outsiders or other third parties.

Although it might not be a practice, the judicial body might be corrupt and would not follow any natural principals to bring about justice. Mostly international contracts include arbitration clause so as to escape any such condition of uncertainty.

In an IP infringement case, the parties end up paying loads of money to the court for the procedure as well as the advocates to come up with arguments to win the case and make it possible for the party to extract the damages from the other. The arbitration process is comparatively cheaper and would not make a hole in the parties’ pocket. Also, to appear before a court, you need to hire a lawyer so that your case is put up before the court and the proceedings can go on. Whereas in the process of arbitration, the parties are free to either hire lawyers or they can themselves appear in person and ask the adjudicating officer to resolve their matter in a timely and legal fashion.

Therefore, there is a minimal damage to the parties and their commercial relations involved in disputes. They also have a high flexibility in granting remedy. Hence the advantages of arbitration outnumber the advantages of litigation, though there are not much advantages of litigation in the field of Intellectual Property Rights. In perspective of these improvements, it is critical that every one of the partners, and especially the parties and their insight, should get to be mindful of the sufficiency of intervention for explaining global Intellectual Property debate and might set aside opportunity to survey ahead of time the ramifications of utilizing discretion successfully to solve such matters. This requires moving past the threshold issue of arbitrability of IP disputes with a specific end goal to address the issues which can fundamentally influence the accomplishment of arbitration as far as cost, speed and effectiveness, especially the extent of the arbitration clause and the meaning of the administering law.

In this blog post, Balaji AG, a qualified ACA, ICWA, ACS and CIMA (UK) Industry Consultant and a CFO of a Listed Company for over five years, and who is currently pursuing his Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, details the importance of Arbitration in Government Contracts.

Background

One of the key focus areas of governments is in infrastructure development and maintenance.  Railways and Defense are entirely run by Government.  Apart from this, governments also take active involvement in Education and Healthcare.  Further, governments are involved in administration and collection of taxes at various levels.  All of this requires plenty of work to be done either in an on and off basis or on regular basis.  Most of the them involves contracts of significant value and time.  There is a formal tendering process in most cases.  The bids are received based on detailed specs and requirements.  However, project development activities like detailed feasibility study, land acquisition, regulatory clearances like environment/forest are not given adequate importance.  This leads to inadequate definition of requirements or inadequate data at the time of bidding.  This results in bidding on basis of approximations.  When the work is executed the reality is far off from the initial data.  This leads to disputes.

The delay in payments by government organisations has been a long-standing issue.  This is seen   across all departments of both central and state governments.  Government resources are always stretched and this invariably results in delays in payment.  There are penal provisions in the contracts for delays in payment which are not fully or partly adhered to and this again leads to disputes.

The third area is in definition of requirements when government moves from a traditional manual system to technology driven systems.  There is lack of clarity or changes in requirements mid-way during project execution.  This typically happens when a government adopts new technologies.  Team defining the requirements may not have full clarity due to the red tape or inadequacies of the operations constituent of the team.  In such situations, it is not possible to easily determine the quantum of compensation required for the changed requirement.

Another area of challenge in government contracts is the actual contract document.  Standardization of contract documents without adapting it for individual activity results in unnecessary misunderstanding.  This leads to many issues relating to actual scope agreed upon and consequently disputes

Post liberalization, many contracts are awarded to enterprises with significant or total control of foreign parties.  These entities are accustomed to execution of contracts and resolution of disputes in a smooth manner in other developed countries.  They seek to protect their interests at the contracting stage through appropriate provision of dispute resolution mechanism.  They also do not hesitate to invoke those provisions in case of disputes to quickly resolve the issues.

Impact of Disputes

As of 31^st March 2013, there were 135 cases before arbitral tribunal with over Rs. 9000 crores being disputed with regard to National Highways Authority of India.  Furthermore, there were 79 cases pending in various courts with over Rs. 2000 crores of arbitral awards being contested.  This is only the tip of the iceberg.  Similarly, each department of Central Government like Central PWD, Railways, Military Engineering Services, State Government departments, Government Corporations have sizeable amounts in arbitration.  This results in significant amount being held up as dues from government agencies.  According to Mr. Deepak Parekh, Chairman of HDFC, all construction companies face arbitration in every project with Government agencies / corporations and it is further aggravated by the arbitral award being contested in courts.    Contracting companies have huge outstanding disputes and are over leveraged.  Banks are not keen on funding them as it takes many years for disputes to be resolved.  He welcomed the recent move of Cabinet that asked the Government agencies / Public bodies to pay 75% of the amount even in case of dispute.

In view of the significant challenges in completing the projects and realising the payments, the late industry’s participation in various e-governance projects has been declining.  There are several projects which fail to acquire bids.  Consequent impact is both on industry and the government.

Dispute Resolution Mechanisms

Contracts with Government agencies and corporations holds special attraction to private sector even though they are one sided and involves several challenges.  However, over a period the private players have come to realize that it is not just getting contracts from the government which is important.  It is equally important that they are able to execute the contracts completely and realize the amount due on time.  If in the process, they face disputes, it should be possible to resolve the same without delays.  As discussed above, there are quite a few areas in which disputes arise in contracts with government entities.  Impact of such disputes is also very significant as highlighted above.  Existence of an efficient and credible dispute resolution mechanism is very important for successful execution of government contracts.  High value contracts with inadequate dispute resolution mechanism and the costs of delay in dispute resolution are perceived as very high risks and are not acceptable.

Court process in India is very cumbersome.  Counsels for the parties keep stretching the litigation process resulting in costly and time consuming litigation.  The Legal System is not efficient.  All of these push the parties to seek alternative mechanisms of dispute resolution.  Alternative dispute resolution methods include amicable settlement, mediation, conciliation, arbitration, expert determination, etc.,

The first preferred method of resolution of disputes is normally to arrive at an amicable settlement through negotiation.  If that is achieved, the agreed terms are converted into an agreement which is binding on both parties.

Another method is mediation.  A mediator asks the parties to put forth their views and claims in a joint session.  The mediator then meets them separately to reach a settlement.  If settlement is arrived at, it is converted into an agreement.

The third method of dispute resolution is conciliation.  This is recognised under the Indian Law.  Conciliation is a non-binding procedure.  Conciliation can commence even in the absence of provision in the contract.  Settlement agreement signed by both parties and authenticated by a conciliator is binding like a decision of court of law

Another very important and most popular method of alternative dispute resolution mechanism is arbitration.

Importance of Arbitration

Arbitration has of late become one of the most viable means of dispute resolution in disputes between government entities and private parties.  Invariably the government contracts provide for arbitration evidently due to its relative advantages in terms of speedy disposal and technical knowledge of the adjudicators.  According to Section 28 of the Indian Contract Act, contracts are void if it places absolute restraint on legal proceedings.  However, if a contract has provision for arbitration mechanism it continues to be valid.  Arbitration in contracts involving Indian parties is mostly under the Arbitration and Conciliation Act, 1996, which is based on the UNCITRAL model law.  It provides the framework for legally binding arbitration awards with limited grounds for challenge in a time bound manner.

Arbitration clauses included in the contract is very important and needs to be worded appropriately.  This will determine the speed and the quality of arbitration apart from the cost associated with it.  It will also determine the extent of court intervention.  Ultimately, the very purpose of an alternate dispute resolution mechanism is to ensure speedy resolution of disputes.  If the clauses leave room for intervention of courts or referral of awards to courts of law the very purpose would be defeated.  As stated earlier, in many instances the government contract arbitral clauses have been worded in such a manner leaving adequate room for intervention of courts and referral of awards.  Consequently, many disputes are remaining unresolved and significant amounts are locked in court battles.  To avoid this situation, the contract arbitration clauses needs to be drafted with great care.

Following details in arbitral clauses needs to be defined properly to ensure that arbitration mechanism benefits are fully secured

1. Qualification of arbitrators. It would be appropriate to define the minimum qualifications of the arbitrators based on the nature of contract.  This would ensure that the technical aspects and industry practices are factored in the interpretation of contract terms.

2. Number and process of appointment of arbitrators including timelines and process to be followed if timeline is not adhered. This has been one of the real challenges in government contracts.  Arbitrator is typically an officer of the same government organisation.  He is the sole arbitrator.  This results in a possible bias which is against principles of natural justice.  At the time of contract negotiation, the private parties sign on the dotted line without understanding the implication of this clause.  It is important that the arbitrator is a neutral party.

3. Procedure for challenge of arbitrators

4. Specification of role of arbitral institution if any. NASSCOM President during the interaction between the Industry and DeitY (Department of Electronics and Information & Technology, Government of India) in 2015 requested for neutral panel to be constituted.  This would take the form of Institutional arbitration and would avoid the issue of bias in government contracts.  Further the arbitral clause should be clear about the procedure for arbitration to avoid intervention of courts.  Typically, the institutional arbitrator has their own rules which govern the procedure which would be followed.

5. Power to issue interim orders. This would facilitate faster partial relief to the affected party and also ensure prevent actions which are likely to frustrate the arbitral award

6. Cost of arbitral proceedings and sharing ratio

7. Time limits for passing interim orders and award. Time is the essence in dispute resolution.  Not only does it have an impact on cost of arbitration, but also at times impacts the survival of the private parties.  Stipulation of time limit for passing of interim orders and award improves the benefit of arbitral process.  Further, it brings in discipline to the arbitral process and the parties involved

Summary

Considering the high stakes involved in most of the government contracts and the past experience in the approach of the government organisations in raising disputes on almost all the contracts the importance of arbitration for dispute resolution is very apparent.  The loosely worded arbitration clauses in government contracts lend itself to significant court intervention which defeats the very purpose of resorting to alternative dispute resolution mechanism.  Intervention of court cannot be totally eliminated as those are statutorily enshrined under the Arbitration and Conciliation Act.  However, clarity on the details mentioned above will help in making tighter arbitration clauses which are less susceptible to court intervention and other procedural delays.  Further, the full benefit of resorting to arbitration mechanism can be ensured.

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In this blog post, Aranya Saha, a student of Jogesh Chanda Chaudri Law College, Calcutta University, who is currently pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the applicability of the law of limitation in Arbitration.

Starting from an International Company to a local company, everyone wants to save time and money. They choose the fastest and the cheapest way to resolve matters, which is why alternate methods of solving disputes gets is cognizance.

ADR processes basically helps the parties save both money and time but there are instances where ADR process has made the matter more complex and is not able to resolve the issue. The matter involves huge expenditures for hiring lawyers. Now the reality in the ADR process is that it also involves a lot of expenditure from both sides of the two parties as they have to pay a huge amount to the arbitrator or the mediator.

The thing which the ADR process does is that it does not involve the court or any governmental authority and gives the parties more independence and flexibility when it comes to choosing what laws and rules will apply. Everything happens mutually between the parties and it is upon the parties to choose a mediator or a third party to resolve their matter or sometimes an expert in some specific field when an ordinary person may not have the technical expertise or when the matter involves any technical issue.

These new methods of resolving disputes facilitate parties to take cost effective and efficient way to solve their matter. Alternate methods have the advantage of providing services that makes the parties less hostile and a sense of control. It also has the mutual consent to accept the outcome of the dispute resolving process. Alternative Dispute Resolution has mainly 5 types of methods: negotiation, mediation, arbitration, collaborative law and sometimes a process called conciliation which for the present purpose is considered same as mediation. Arbitration is a form of Alternative Dispute Resolution, where the parties to a dispute appoint a third party rather than approaching the court. The parties to a dispute submit their respective argument to the neutral third party and most of the time the decision given are binding because of the prior agreement between the parties.

Arbitration is one of the most efficient way to solve disputes by the help of a third neutral party but as popularly stated that “every coin has two faces” means that everything has its pros and cons, thus this is imply that the arbitration process of solving disputes also has its loopholes.

Merits:

• It saves a lot of time by allowing the parties to resolve their differences/ disputes/issues in a short period of time as compared to the excessive stint taken by the Hon’ble Courts in resolving the very same issues. The numerous numbers of cases pending in courts leads to docket explosion. Morepver, the population in India is so huge that the judiciary is not able to adjudicate at the rate cases are filed.
• It saves a lot of money that is disbursed on lawyers and other miscellaneous expenses that one has to undergo in the process of litigation. Some court proceeding can be very expensive when people look for good and renowned lawyers. Saving cost is one of the reasons arbitration is adopted everywhere.
• It puts the parties in control by giving them opportunities to discuss their case by giving them a forum to put forth their own views and thereby giving them a chance to put themselves on a clean slate.
• Access to justice is much easier and much faster in case of arbitration, because it allows people, who cannot afford fees or cannot afford to lose time, to acquire a remedy without getting into the sweat breaking system of the court.
• It focuses on the issues that are important to the people instead of just stressing upon the legal rights and obligations.
• It leads to more flexible remedies than in court, i.e. the people make agreements that the court cannot order or enforce upon.
• It produces good results by reducing stress upon the people and satisfying them by giving them the desired results and by preserving good relationships between them.

                                                            Demerits:

• Compatibility: arbitration method might not be suitable for certain types of cases. Some cases are to be dealt in the court of law; there is no other ‘informal’ means of solving the said cases.
• Waste of time and money: if the case is not solved because the parties have to approach the court anyway.
• The possibility of bias: though negligible, a conflict of interest or at least the appearance of impropriety may arise if a neutral in arbitration gets a good deal of repeat business from the same institution.
• The process is an informal procedure where there is opportunity to abuse power and also manipulate.
• Lack of power to establish legal precedent as decision of mediator is not final; it can only be final in rare cases in arbitration.
• Unfamiliar procedure and lack of awareness in people is another demerit of arbitration mechanism as it is new method and most people in developing countries are not having any know how about these processes.

The Indian Penal code has provisions for disputes to get it solved by an arbitrator. The arbitration and conciliation act has been made in this respect. It deals with the laws relating to the functioning of the arbitration process. The tribunals are not bound by any law to make its decision in that respect. The parties are free to choose the procedure to be followed by the arbitral tribunals but where the parties choose two different procedures and cannot come to a decision than the tribunal may fix the appropriate proceeding.

The section 21 of the said act says that a dispute is solved by arbitration only if the aggrieved parties approach the arbitrator in respect of the dispute in concern on the date on which it is referred. The awards made by the arbitrator have same binding effect on the parties but where the parties settle the dispute by self, the arbitral proceeding is terminated and an arbitral award on the agreed terms will be made.

The section 43 0f the Arbitration and Conciliation Act 1996 deals with limitations. The Limitation Act 1963 will apply in the very same way as it applies in court proceedings. The parties who enter in an arbitral agreement with another for some dispute which may arise in the future shall apply to the arbitral tribunals within the specified time period. Such time period may be extended by the court if it is of the opinion that the case is such that undue hardship would likely be caused if it is not extended. In cases that the court has jurisdiction to order that an arbitral award be set aside, the time between the arbitral award and the order of the court shall be excluded in computing the time prescribed by the Limitation Act 1963.

It may be useful to conclude that the arbitration system is developing a lifetime of its own, one shall not stand surprised once s/he sees the quantity of unresolved disputes being narrowed to zero within the close to future. Generally the total method could prove fateful nevertheless in many another manner it’s the foremost applicable manner of proving the terribly renowned locution, “justice delayed is justice denied”, to be true, one shall not sit up for justice being delivered if he or she is within the hands of the arbitration system.            Due to the increased quantity of workload within the numerous courts all round the world, individuals are turning towards a simple and low-cost (in some cases costly nevertheless feasible) system, which might resolve their dispute i.e. towards arbitration. Generally at the disposal of the judge and generally as a result of some contractual agreement, individuals do flip their backs onto the courts and move in direction of the arbitration system. The arbitration system is a gratifying system, which already enunciated its roots within the numerous legal systems of the globe, such that there’s a private international body governing the procedures of resolving disputes through different means.

REFERENCE

• The arbitration and conciliation Act, 1996 by O.P VERMA.

In this blog post, Angela D’souza,  a student pursuing her LL.B (4th year) from School of Law, Christ University, Bangalore and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the process of Arbitration in matrimonial and family matters.

WHAT IS ARBITRATION?

At its core, arbitration is a form of dispute resolution. It is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute,[1] which is enforceable by the court. Arbitration primarily entails parties opting for a private, out-of-court settlement. The characteristics of an arbitration process are as follows:

1. Arbitration is consensual.

Arbitration can only happen if both parties concede to it. In most cases, consensus is obtained by way of insertion of an arbitration clause in the relevant contract.

2. The parties choose the arbitrator.

Since parties can choose their own arbitrator through mutual consensus, it creates space for a fair hearing and impartiality.

3. Parties choose other details of the arbitration proceedings.

Parties can choose other details of the arbitration proceedings such as the date, time, venue etc. This helps in the efficacy of arbitration proceedings by providing for the efficacy of the parties.

As a consequence, arbitration proffers several benefits including:

• Choice of the arbitrator: An essential characteristic of an arbitration proceeding, the choice of an arbitrator by the parties, is a huge advantage. For example, parties can choose a technical person if the dispute is technical in nature, so as to ensure better understanding of evidence.
• Efficacy: Arbitration proceedings are dealt with faster than court proceedings. They are shorter in length and the preparatory work is less demanding, thus leading to more efficiency.
• Privacy: Arbitration proceedings are confidential. They are conducted in a private meeting setup where the media and public are not permitted. Likewise, final decisions are not published and neither are they directly accessible. This enables protect the parties’ privacy, thus encouraging them to opt for arbitration.

FAMILY DISPUTES AND FAMILY LAW ARBITRATION

Family Disputes

All families at certain times experience difficulties which can be termed as a family dispute. Such disputes range from matters such as disputes between husband and wife, relationship breakdowns, children’s welfare, financial support for children and property settlement.

The Family Courts Act explains family disputes as:

• A suit between parties to a marriage for decree of nullity, restitution of conjugal rights, judicial separation or dissolution of marriage.
• A declaratory suit with respect to the matrimonial status of a person.
• A suit between parties in a marriage with respect to the property of the parties or either of them.
• A suit seeking for an injunction in the event of certain circumstances arising in a marital relationship.
• A declaratory suit with respect to the legitimacy of any person.
• A suit for financial support or maintenance.
• A suit with respect to the guardianship or custody of a minor.

Family Law Arbitration

Family Law arbitration is a process in which a husband and wife, or ex-husband and ex-wife, agree to submit one or more issues arising out of their present or prior relations as spouses and/or their relations as parents of the same child or children, to a neutral third party or parties for a resolution that will be final and binding on them.[2]

However family law arbitration is not restricted to spousal matters alone. It also entails finding a resolution to issues such as custody of children and their welfare, maintenance and financial support and other ancillary issues.

FAMILY LAW ARBITRATION IN INDIA

A Brief Introduction of the Indian Family Law System 

The Indian Parliament in order to maintain a secular stance while also enabling religions to protect themselves has enacted the following family laws which are applicable to the religious communities defined in the respective enactments themselves:

• The main marriage law legislation in India which is applicable to a majority of the population is The Hindu Marriage Act, 1955, which is an act to amend and codify the law relating to marriage among Hindus. It applies to any person who is a Hindu, Jain, Sikh or Buddhist i.e., anyone who is not a Muslim, Christian, Parsi or Jew.

Further, with regard to personal matters, Hindus are governed by the Hindu Succession Act 1956 (an act to amend and codify the law relating to intestate succession among Hindus), The Hindu Minority and Guardianship Act 1956 (an act to amend and codify certain parts of the law relating to minority and guardianship among Hindus) and the Hindu Adoptions and Maintenance Act 1956 (an act to amend and codify the law relating to adoptions and maintenance among Hindus).

• The Special Marriage Act 1954 provides for a special form of marriage in certain cases, for the registration of such and certain other marriages and for divorces under this act.
• The Parsi Marriage and Divorce Act of 1936 seeks to govern and regulate the law relating to marriage and divorce among the Parsis in India.
• The Indian Christian Marriage Act 1872 is an act that consolidates and amends the law relating to the solemnization of the marriages of Christians in India and the Indian Divorce Act, 1869 states the law relating to divorce and matrimonial causes relating to Christians in India.
• The Muslim Personal Law (Shariat) Application Act 1937, The Dissolution of Muslim Marriages Act 1939, The Muslim Women (Protection of Rights on Divorce) Act 1986 and The Muslim Women (Protection of Rights on Divorce) Rules 1986, applies to Muslims living in India.

For the adjudication of all matrimonial and other ancillary disputes a person of any religion can approach the designated judicial forum as prescribed by the relevant legislation. There is an organized system of designated civil and criminal judicial courts within every state in India which works under the overall jurisdiction of the respective high court in the state.

Furthermore, the Family Courts Act 1984 seeks to provide for the establishment of family courts with a view to promote conciliation in and to secure speedy settlement of disputes relating to marriage and family affairs.

Why opt for Alternate Methods of Resolution?

Despite the existence of a well-organized and established hierarchy of judicial courts in India, suits in India including those of family matters suffer a setback owing to inordinate delay.

Judicial proceedings, due to tedious procedures, loopholes in the law and mounting costs take a long time to resolve. This not only causes inconvenience to the parties involved but also results in a backlog of cases and overburdening of the courts.

Further, litigation does not always lead to a satisfactory result.[3] While it is expensive, it often ends up in bitterness. Alternative dispute resolution systems are not only cost and time effective; they preserve the relationship between the parties by encouraging communication and collaboration.[4]

Does the Indian Law provide for Arbitration of Family Matters?

All matters which may form the subject-matter of civil litigation affecting the rights, or in other words all disputes between parties relating to private rights or obligations which civil Courts may take cognizance within the meaning of Section 9 of the Civil Procedure Code 1908 may be referred to as arbitration.[5] This, therefore, makes family disputes suitable for arbitration. However, this can be done within the limits set by the law. An arbitrator cannot grant a divorce or an annulment but can decide on certain other things such as how to divide property.[6]

At this juncture, it is essential to make a note of two important provisions of the Code of Civil Procedure:

1. Section 89 of the Code of Civil Procedure: Settlement of disputes outside the Court
2. ORDER XXXIIA 6 of the Code of Civil Procedure: Suits Relating to Matters Concerning the Family.

Section 89 of the Civil Procedure Code

In order to implement the 129th Report of the Law Commission of India, all courts were mandated that once the issues were framed, disputes should be referred either to as arbitration, conciliation, mediation or judicial settlement for resolution. It was felt that only in the event of failure of these alternate dispute resolution methods, should litigation proceed.

In accordance with this goal, Section 89 was worded so as to provide parties with an opportunity to opt for an amicable, out of court settlement.

ORDER XXXIIA 6 of the Code of Civil Procedure

It is essential to note that all proceedings under the Hindu Marriage Act and the Special Marriage Act are regulated by the provisions of the CPC. When matters regarding the family are concerned, an amendment can be made to the Code of Civil Procedure in 1976. This amendment provided for the mandatory settlement procedures in all matrimonial proceedings.

At this juncture, it is also indispensable to take a note of Section 9 (1) of the Family Courts Act which states that ‘In every suit or proceeding, endeavor shall be made by Family Court in the first instance, where it is possible to do so consistent with the nature and circumstances of the case, to assist and persuade the parties in arriving at a settlement in respect of the subject-matter of the suit or proceeding and for this purpose a Family Court may, subject to any rules made by the High Court, follow such procedure as it may deem fit.’

CONCLUSION

Therefore, although not compulsory, giving alternate modes of dispute resolution a chance in the resolution of family matters is the norm of Indian legal system. This practice should actually be given all the support that it can be given.

Opting for out of court settlements proves beneficial not only to the parties but also to the general public. The parties are benefitted through reduced costs and time lost, while the courts are a little less burdened. This allows for the speedy redress of other suits.

[1]http://www.wipo.int/amc/en/arbitration/what-is-arb.html (last visited Nov. 30, 2016).

[2] https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=14+J.+Am.+Acad.+Matrimonial+Law.+333&srctype=smi&srcid=3B15&key=30c87cbfd40c69ad2ce5b9f64d02e9e0 (last visited Nov. 30, 2016).

[3] Vini Singh & , Compulsory Mediation for Family Disputes?, 2 The Indian Arbitrator 3 (2010), http://www.arbitrationindia.org/pdf/tia_2_9.pdf (last visited Nov. 30, 2016).

[4] Id

[5] J.B. Mills v. Commrl Union Assurance AIR 1979 Cal 56 83 CWN 162.

[6] Id

Sports law in general

India being a unity in diversity is also a home to a diverse population which is fond of several sports. The work of administration and funding of sports is in the hands of the Ministry of Youth Affairs and Sports, which is headed by a cabinet minister and managed by the National Sports Federations. Sports law is one of those fields of law is law that is applied in the field of sports, physical education and its related areas. It is a pure law as opposed to theoretical law and is concerned with how law in general interacts with the activity known as Sports[1]

Sports have always been a form of recreation, but sports have evolved, and India is considered as one of the best places to hold international sports events. In this scenario, a need was felt to regulate the laws in the field of sports and to eradicate the grey areas. Even the United Nations, in its resolution 58/5 adopted by its General Assembly in 2003, has recognized sport as a means to promote education, health, development and peace[2] and therefore, a state should have an interest in sport-related matters.

1 present system of sports’ governance in India

Everything about sports legislations in India

Per se, there are no central or state legislations to regulate sports in India; the Ministry, which was set up by the government was responsible for achieving excellence in different sports events which were conducted in India and also to build a good infrastructure for sports. By and large, the administration of sports activities is in the hands of autonomous bodies, such as Sports Authority of India (SAI), Indian Olympic Association (IOA), Hockey India (HI) and Board of Control for Cricket in India (BCCI).

These governing bodies are recipients of government’s aid and are also registered under the Societies Registration’s Act of 1860.[3]

The following govern the whole of the Sports Law:

• National Sports Policy, 1984/2001

The main objective behind enacting this was to raise the standard of sports for the reason that it was degrading due to corruption, betting, etc. It was later realized that the Bill of the year 1984 was incomplete, and its implementation was not complete, and in a bid to revise the bill the same was reformulated in the year 2001.

The guidelines are three-fold:

• Firstly, to earmark the areas of responsibilities which different agencies have to undertake to develop and promote sports.
• To lay down the procedure to be followed by the autonomous bodies and federations to make the assistance and aid by the government available.
• And also identifying the sports federation that is eligible for coverage under these set guidelines.

It was only after this policy that the lawmakers realized the importance of sports and therefore ‘Sports’ was included in the Constitution in the State list of the Seventh Schedule (Entry 33).

The central government by the provisions of this policy aims to achieve excellence in sports on the national and global plane and collaborates with the state government and other agencies to achieve it.

• Sports Law and Welfare Association of India

It is a non-profit national organization that aims to understand, and work for the advancement of ethical sports law in India for promoting sports. The primary task of the organization is to provide consultancy services on different matters like Indian sports policy, sports injuries, health and safety in sports, IP issues in sports, etc. It also provides a forum for legal practitioners who represent different people, to set up rules for ethics for sports persons.

• Sports Authority of India

The Sports Authority of India (SAI) is an apex National Sports body set up in the year 1984 by the Ministry of Youth Affairs and Sports for broad-basing and bringing excellence in sports across India as a whole. It is located across 9 regions at Bangalore, Gandhinagar, Chandigarh, Kolkata, Imphal, Guwahati, Bhopal, Lucknow and Sonepat; and two Academic institutions like Netaji Subhash National Institute of Sports (NSNIS), Patiala and Laxmibai National College of Physical Education. It also accounts for academic programs like coaching and physical education awareness programs.[4]

• TheSports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Act

This Act was passed in the year 2007; its main objective was to provide access to listeners and viewers so as to encourage a larger audience. It shall cover the sporting events which are of national importance through mandatory sharing of sports broadcasting signals with Prasar Bharati and for matters related to it. The Act provides that no content right owner or holder or television or radio broadcasting service provider can carry out a live TV broadcast of important national sporting events. For doing this, it has to share its live broadcasting signal simultaneously (except advertisements) with the Prasar Bharati.

Role of different stakeholders

• Ministry of Youth Affairs and Sports:
• To lay down the conditions for eligibility of National Sports Federation to get recognition
• The conditions that have to be fulfilled by NSFs and other agencies if they wish to acquire government aid and support.
• To provide assistance to the NSFs if they carry out long-term development program.

• National Sports Federation

The responsibility for the complete management, direction, supervision and regulation of the discipline and promotion, development and sponsorship of the discipline is on National Sports Federation. They are expected to discharge these responsibilities in consonance with the principles laid down in the Olympic Charter or the Charter of the Indian Olympic Association in compliance with Government guidelines applicable to NSFs.

• SAI

For providing the necessary support to NSF for the identification, training, and coaching of sportspersons, also to improvise infrastructure, equipment, and such other facilities, the SAI plays a significant role. Further SAI will also be responsible for releasing funds to NSFs against proposals approved by the Government.  The release of funds to IOA shall, however, continue to be made by the concerned Ministry.[5]

National Anti-Doping Agency

The centre has set up a National Anti-Doping Agency (NADA) as an autonomous body. It consists of persons from government and non-government agencies, scientists as experts and also members from IOA. In the recent past, the controversy surrounding the intake of dope by sports persons is prevalent and in this light, NADA was set up. It shall carry out ‘in competition’ and ‘out of the competition’ testing on the sportsman. NADA helps in the regulation of sports activities so that it can be corruption-free and non-controversial.

Sports law of United States Of America

The U.S.A. has a very systematic law for sports. They have not provided with single legislation, but have divided it into 3 categories-:

• Amateur sports

It includes athletic activities from high school athletics to organize inter-collegiate or international competitions which are often organized and managed by groups that make rules for eligibility and competition, and courts do not interfere with the actions of these groups as long as they abide by the rules. The Amateur Sports Act of 1978 created the Athletic Congress, a national body for governance of amateur athletes, which administers a fund that allows amateur athletes an option to get funds and sponsorship payments and also not lose their amateur status.

• Professional sports

In the case of some professional sports activity, most sports leagues do have a standard player’s contract, and that shall be the guiding force behind a contract between players and owners.

• International sports

The two main international sports events include the Olympics, sponsored by the International Olympic Committee, and the World Cup, which is sponsored by FIFA. The United States has done the charting of the United States Olympic Committee (USOC) in the year 1950.

Grey areas in sports law in India

The realm of sports law is new in India and time and again, there has been an in-depth inquiry and research into this. Despite having several federations and independent bodies in India, our country lacks a good sports system, and it fails in every major event due to a precise and uniform law for sports. Firstly, there is no single body or legislation under the umbrella of which the ministry, and different sports federation, primarily the National Sports Federation would come.

In recent past, the dark sides of the competitive world has come to be known which depicts the maladministration of the sports law, such as the Olympic Games Scandal related to bidding, the recent IPL scam, FIFA scandal and allegations of sexual assault, etc. are few of those scandals.

The major loopholes which our sports law face include labour and employment issues, drug use, broadcasting rights, sports injury and the concurrent liability, harassment in sports, etc. The constant failure of India in different sports events is an indication of widespread corruption and poor infrastructure and therefore, the need of the hour should be to enact a proper legislation and forum to ease the activities of sports in India.

Conclusion

Given the close relation of sports with national pride and the kind of influence it has on the mind of the nation, the state has the most important role to play. It is very clear that the existing model has not succeeded in achieving its objective and it is time for a new model to be made. Also, it is quite clear that our culture and our attitude towards sports is the biggest hindrance in improving sporting standards.

[1] Available at http://www.asser.nl/sportslaw/about-the-centre/community/national-sports-law-associations/sports-law-welfare-association-of-india-india/

[2] Sport for Development and Peace, UN General Assembly Resolution, 3 November 2003

Available at http://www.un.org/wcm/content/site/sport/home/resourcecenter/resolutions/pid/19431

[3] Available at http://www.delhi.gov.in/wps/wcm/connect/98f8250046a2ddbd902e915d9d3d91ee/Registration+of+Societies.pdf?MOD=AJPERES&lmod=-299975412

[4] Available at https://en.wikipedia.org/wiki/Sports_Authority_of_India

[5] Available at http://yas.nic.in/sites/default/files/File918.compressed.pdf

In this blog post, Disha Mohanty,  a student pursuing her LL.B (5th year) from National Law University, Odisha and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, writes about the responsibilities of foreign directors in India.

With the onset of the Companies Act 2013, there has been a paradigm shift with regard to what will construe as the requisites for the appointment of a director in keeping with the responsibilities ascertained therein with a foreign company in concurrence with the RBI approval based requirements devised through FDI compliance. The requirements to be complied with in regard to foreign companies will be applicable only for the foreign companies which fulfill the terms stated[1] under Section 379[2] of the Companies Act, 2013 as per Chapter XXII. In case of absence of the foreign director, an alternate director (who must be a resident Indian) can take his/her place for not more than three months.

It must be stated at the very beginning that it is mandatory for every foreign company in India to have at least one Indian director on board[3] who must reside in the country for at least one hundred and eighty days in the previous year[4], so as to enable compliance with the statutory requirements due to the previous common practice of all the directors being stationed outside India and hence, resulting in compliance issues. The Section also includes the mandatory requirement for having a female director on board. It is also necessary for every foreign company to file Form FC-1 preferably within 30 days from the date of commencement of business in India, which must include a declaration stating that the director has not been debarred from running a business in India and abroad[5]. While the foreign director will require getting a Digital Signature and Director Identification Number in keeping with the Indian provisions, in addition to the approval acquired from the respective embassy consuls, however, it is not mandatory to acquire a PAN for the same. Additionally, unlike the Indian rule, foreigners won’t require a proof of their father’s name for the documents as mentioned above

Additionally, it may also be mentioned herein that the range of companies coming under the category of foreign companies has notably increased with the most specific relevant addition being that of including businesses being carried out in the electronic mode, also being included under the ambit of the Companies Act, even if the main server is not located in India. Considering the number of e-commerce portals which are plying in India within the past decade, Rule 2(c)[6] requires any business having a place of business in India to register therein and according comply with the financial requirements and reporting compliances[7] .

It must be noted that though directors can exercise the option to attend board meetings via video conferencing, it is necessary for every director to attend at least one meeting physically in person, for every 12 months.[8] Also, while the requirements for the requisite number of directors remain the same for foreign companies as in India, this privilege does not extend to foreigners opening a One Person Company which requires only one director.[9] It must be noted that foreign companies post the 2013 amendment can engage in mergers with Indian companies.

Directors in foreign companies also have to file accordingly a Director Responsibility Statement which states that the director has accordingly devised a system to ensure the compliance of the company concerning the applicable laws which should be operating efficiently and must be adequate reasonably.

It is also additionally the director’s responsibility to ensure that that in cases where in the net worth of the company is more than Rs 500 crores, or if the turnover is exceeding Rs 1000 crores, or has a net profit exceeding Rs 5 crores, the company must constitute a Corporate Social Responsibility Committee (two members, one of whom must be a resident director) which must accordingly devise CSR policies and implement them, utilizing at least 2% of the average net profit made by the company in question in the preceding three financial years in accordance with the terms of the CSR policy. This rule is applicable only to those foreign companies which have business operations in India. It is necessary to mention that the actions and utilization of monetary resources as per the policy must be mentioned in the annual report.

The directors are bound by the same responsibilities as their Indian counterparts regarding declarations about Related Party Transactions. It is also necessary for the directors to ensure that the activities undertaken by the company are strictly within the purview of those activities approved by RBI and are in compliance with the terms and conditions mentioned in the approval, which is to be issued by the appointed Chartered Accountant of the company by means of the Annual Activity Certificate. Foreign companies are on the whole permitted a limited list of activities in concurrence with the restriction that allows only those activities which are undertaken by the parent company.

With regard to raising capital of the company publicly, which would require issuing of a prospectus must be in keeping with Rule 11[10], with the directors treating the prospectus for all purposes to be an Indian prospectus. It is also the responsibility of the foreign director  to file the annual returns of the foreign company namely FC-4 as per Section 389 of the Act,[11] within sixty days from the last day of its financial year with the requisite fee to the Registrar of the Company (RoC)[12].  The director also has the responsibility to ensure compliance with the audit requirements applicable, especially if the company is about to undergo liquidation or to wind up and subsequently must notify the authorities pertaining to the ceasing of the existence of the company, in addition to approving the balance sheet and profit and loss account of the company.[13]

In accordance with the fact that the prospectus of a foreign company here will be treated as if issued by an Indian company, it is the director’s responsibility to ensure compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 with regard to declaration of material contracts disclosing details pertaining to the remuneration/appointment of the director two year prior to the issuing of the prospectus in addition to the other requirements pertaining to IDR. Disclosure of interest also extends to foreign directors as a responsibility owed towards their company. It is also the duty to partake the responsibility pertaining to the preparation of annual reports which must include the grounds mentioned under business responsibility reporting if the company in questions is within the top 100 companies by market capitalization[14]. It is also the responsibility of the director to register the charges on the property regardless of whether it is located in India or outside.[15]

Considering that foreign companies are also subject to the same norms for debentures, it is the director to ensure the compliance with Indian law. With regard to remittance of profits, it is the director’s responsibility to ensure the remittance only after the payment of the applicable taxes as per Indian law.

Further, with regard to mergers, foreign companies are permitted to merge with Indian companies; this would bring the company in questions within the ambit of the Competition Act, subject to MoU based on Central Government approval. And accordingly, make it the director’s liability subject to his/her involvement with the merger in question. If a company is incorporated in Singapore, then it is a necessity to ensure that at least one director of Singaporean nationality is on the board of the company in India. Languages however will at no point serve as a barrier from the appointment of the foreign director in the company.

It is also the director’s responsibility to ensure the compliance with the laws of the country where the company has been incorporated and according to whose laws the Articles of Association and Memorandum of Association have been drafted accordingly, and in general has a fiduciary duty to the company. Non-compliance with the responsibility as mentioned earlier will lead to the liability falling on the director as per Indian provisions.

In general, while foreign directors have a responsibility to ensure compliance with the laws of their parent company’s country and Indian laws, with regard to Indian laws the emphasis is primary in relation to tax compliance, and primary company bye-laws pertaining to the functioning of the country which in addition to company law includes the relevant labor, employment laws, and based on the activities of the company, intellectual property laws compliance. The emphasis lies on procedural compliance and especially with compliance and maintaining that the activities undertaken by the company are strictly those which are permitted and with prior approval. On the whole, while the laws in question place a considerable amount of increased liability on the director in question, such liability is necessary to ensure at least a particular degree of business responsibility and increased compliance with Indian procedural requirements is undertaken.

Footnotes:

[1] http://www.arkayandarkay.com/registration-of-foreign-companies/

[2] Section 379, Companies Act 2013

[3] Section 149(3), Companies Act 2013

[4]http://www.mondaq.com/india/x/284280/Corporate+Governance/Directors+under+Companies+Act+2013+is+it+old+wine+in+new+bottle

[5] http://taxguru.in/company-law/foreign-company-establishment-compliances-companies-act-2013.html

[6] http://taxguru.in/company-law/foreign-companies-companies-act-2013.html

Rule 2 (c), Companies (Registration of Foreign Companies) Rules, 2014

[8]http://www.mondaq.com/india/x/435008/Corporate+Commercial+Law/Key+Provisions+In+The+Companies+Act+2013+Affecting+The+Foreign+Residents+Doing+Business+In+India

[9] Supra n. 5

[10] Companies (Registration of Foreign Companies)  Rules, 2014

[11] http://www.mca.gov.in/MCA21/dca/help/instructionkit/NCA/Form_FC-4_help.pdf

[12] Annexure to Companies (Registration Offices and Fees) Rules, 2014

[13] http://www.samvadpartners.com/wp-content/uploads/2013/06/Roles-Responsibilities-and-Liabilities-of-Directors-in-India.pdf

[14] http://economictimes.indiatimes.com/markets/stocks/earnings/companies-act-from-now-on-annual-reports-wont-be-about-just-numbers/articleshow/49252759.cms

[15] http://www.charteredonline.in/2016/06/foreign-company-under-companies-act.html