In this blog post, Pramit Bhattacharya, a student of Damodaram Sanjivayya National Law University writes about how a minor can become a part of a partnership. The post also highlights the rights and liabilities of a minor after being admitted into a partnership, and also discusses the position of a minor after he attains majority.

A minor is a person who hasn’t yet attained the age of majority according to the Indian Majority Act of 1875.[1] Section 3[2] of the Indian Majority Act states that a person who is domiciled in India will attain majority at the age of eighteen.

Section 30 of the Indian Partnership Act[3] governs the admittance of a minor into a partnership. This section deals with the rights and liabilities of a minor who is admitted into a partnership and is entitled to the benefits of a partnership. A deeper reading of the provision, specifically sub-section (1)[4] Of the provision makes it very clear that a minor can’t be a full-fledged partner in a partnership. But with the consent of all the partners, a minor can be admitted to the benefits of a partnership.

Minors – Admitted only to benefits

The general principle which has been laid down in Section 11[5] of the Indian Contract Act, 1872, states that a person has to attain the age of majority and should be of sound mind and not disqualified to enter into a contract to be a competent party. The Indian Partnership Act, 1932 was drafted by a Special Committee. Before the enactment of this statute, the provisions relating to partnerships was enshrined in the Indian Contract Act itself. While drafting the Act, the Special Committee felt that no major changes were required in the Partnership Act, and they believed that there was no reason to deviate from the principle of incapability of a minor to enter into a contract as provided by Section 11 of the Contract Act. Following this, the Committee did not allow minors to become a partner in a partnership, although they allowed a minor to be admitted to the benefits of a partnership.[6] In the judicial pronouncement of S.C. Mandal v. Krishnadhan,[7] It was observed that under Section 4 of the Indian Partnership Act, a firm means a group of person who has entered into a contract of partnership among themselves and reading it with Section 11 of the Indian Contract Act, it can be interpreted that a minor cannot be a part of the contract of partnership. A minor can only be admitted to the benefits of a partnership, and that partnership has to exist independently. Also, there cannot be a contract between two minors.  In simple words, there should be a partnership between two major partners before a minor can be admitted to its benefits.

In the case of H.R.G Ram v. Commissioner of Income Tax,[8] It was held by the High Court of Allahabad that any partnership deed which divides the obligations and rights between the major and minor partners equally will be invalid as it will be in contravention of Section 30 of the Partnership Act because in such a case not only the benefits are given to the minor, but liabilities are also being imposed upon the minor. There was some confusion regarding this proposition of law as in some cases, different high Courts of the country opined that even if a minor is made a full-fledged partner in a partnership firm, the partnership deed is to be interpreted in a liberal manner, and the obligations of the minor will be limited to the extent provided in Section 30 of the Partnership Act.

But in the landmark case of Commissioner of Income Tax v. D Khetan and Co.[9]The Apex Court made the legal stand clear on this issue by stating that where a minor is made a full-fledged partner in the firm, the firm could not be registered by the Income Tax Department. In case the Income Tax Department do register such a partnership firm, a new contract is to be made where the minor is admitted only to the benefits of the firm, and the original contract will be rendered invalid by registration of the new contract. Therefore, the proposition of the law is very clear. The partnership deed has to make it specifically clear that the minor is admitted only to the benefits of the firm and is not personally liable for the losses. In the judicial pronounce of Banka Mal Lajja Ram & Co. v. Commissioner of Income Tax, Delhi,[10] It was held by the Court that even if the other partners consent, a minor still can’t become a full-fledged partner in a firm through his or her guardian. In the case of CIT v. Kedarmall v Keshardeo,[11] it was held by the Court that a contract deed is valid when a guardian enters into a partnership on behalf of the minor, provided the minor is not made liable for the losses of the partnership, and the Guardian still had the right of being the guardian of the minor when the contract was entered into. Also, the income of a minor from a partnership will not be considered for the purpose of income tax.

Rights and liabilities of a minor

Sub-section (2)[12] of section 30 of the Partnership Act states that a minor is entitled to share of profits and the property of the firm which may have decided at the time the minor was admitted to the benefits of the partnership.  Under this provision, a minor also has the right to access and inspects the accounts of the firm. But this right is limited to the access and inspection only of the accounts of the firm and not any other document of the firm. Under sub-section (3) of the provision, it is stated that the minor is liable to the extent of his share in the partnership and cannot be made personally liable for the losses of the firm. In the case of S.C Mandal v. Asutosh Ghose,[13] It was held by the Court that the creditors of the firm can only recover the amount from a minor to the extent of his share in the firm, but they can’t sue the minor personally. The full-fledged partners do not enjoy this benefit as they can be made personally liable. In the case of S.R Patil v. C.N. Sedalge,[14] It was opined by the Court that a minor who has been admitted to the benefits of a partnership can’t be declared insolvent even if the other partners are declared as insolvent.

Sub-section (4) of the provision states that the minor can sue other partners to get the benefits of the partnership, but this right to sue is limited by the provision. The minor gets the right to sue other partners to recover the benefits only if the minor sever all ties with partnership firm. This provision further states that in the case the minor sever all ties with the firm, valuation of his share is to be done by section 48[15] of the Act, as far as possible.

Position of minor on attaining majority

Under sub-section (5) of the provision, the minor has two options on attaining majority. Either he can sever the connection with the firm or become a full-fledged member. The minor has to make the decision within six months of attaining majority. If he chooses to become a full-fledged partner of the firm or sever the ties with the firm, he will have to give a public notice specified under section 72[16] of the Act. In the case that no public notice is given by the partner, he will be considered as a member of the partnership. The minor also continues to enjoy the rights which he enjoyed as a minor till he reaches a decision. Sub-section (6) of the provision states that burden of proving that the minor had no knowledge about the fact that he was entitled to enjoy the benefits of the firm lies on the party who alleges such facts. Clause (a) of sub-section (7) states that when a minor becomes a full-fledged partner, such minor will now be held liable not only for the future liabilities of the firm, but will be liable for those obligations also which were incurred by the firm from the date the minor was admitted to the benefits of the partnership. Clause (b) states that the share of the minor after he attains majority will be the same which was given to him when he was a minor. This is because, when the minor chooses to become a full-fledged member of the partnership, there is no break in the partnership and it continues as it is.

Sub-section (8) of the provision states that when the minor decides that he’ll not become a full-fledged member of the partnership, he will be liable for the obligations and liabilities of the firm until the time he gave a public notice stating that he wouldn’t continue as a partner in the partnership. After severing the ties with the firm, the minor may file a suit to recover the benefits he was entitled to. Sub-section (9) of the provision states that nothing is given in sub-section (7) and (8) will affect Section 28 of the Act which states that if a party has misrepresented some fact, he’ll be liable for holding out. Therefore, if a minor even after leaving the partnership represents himself as a partner, he’ll be estopped from denying it later.

Footnotes:

[1]http://admis.hp.nic.in/himpol/Citizen/LawLib/C0141.htm

[2]Age of majority of persons domiciled in India 

[3]https://indiankanoon.org/doc/1921150/

[4] Ibid.

[5]http://comtax.up.nic.in/Miscellaneous%20Act/the-indian-contract-act-1872.pdf

[6]http://www.legalindia.com/minority-and-partnership/

[7](1922) 49 Cal 560,570

[8] [1950] 18 ITR 106 (All)

[9]AIR 1961 SC 680.

[10]AIR 1953 Punj 270 (DB).

[11]AIR 1968 Assam 68

[12]http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf

[13]AIR 1915 Cal 482.

[14]AIR 1965 SC 212.

[15] MODE OF SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS

[16] MODE OF GIVING PUBLIC NOTICE.

In this blog post, Pramit Bhattacharya, a student of Damodaram Sanjivayya National Law University, writes about the concept of indemnity and agency. The post talks about the essentials of the contract of indemnity, the rights of the indemnity holder, and the indemnifier. The post also discusses the relation between agency and indemnity.

Indemnity can be considered as a sub-species of compensation. And therefore, a contract of indemnity deals with compensation in cases of contracts. The responsibility to indemnify is taken voluntarily by the indemnifier, and even the mere possibility of occurrence of a loss will make him liable. The loss should arise due the conduct of the indemnifier or any third party. A contract of indemnity should also have the essential elements of a contract like free consent, legality, etc. So in the case of indemnity, the promisor is under the obligation to save the promisee from any kind of loss due to the promisor’s own conduct or conduct of any other party.

In the case of an agency, the principle that one person cannot carry out all transactions all alone, so he should have an opportunity to facilitate his business wherein he is represented by another person when dealing with a third person.

Concept of Indemnity

In general, indemnity can be defined as “protection against losses.” Indemnity is a protection or security against a loss. Contract of Indemnity is governed by Section 124 of the Indian Contract Act, 1872,[1] which falls under Chapter VIII of the Act. Under this Section, the definition of a contract of indemnity is given as a contract “by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity.”

Essentials

There must be two parties and, there should be an agreement between them wherein the promisor promises to save the promisee from any kind of loss. This is the most vital element in the contract of indemnity. The loss occurring may be due to the conduct of the promisor or any other third party. The provisions of the Act restrict the loss to an extent because it is restricted to a human agency only and an act of God is not covered under the contract of indemnity. Marine Insurance, fire insurance, etc. also fall into the category of the contract of indemnity.[2]

Rights of Indemnity Holder

Section 125 of the Act governs the rights of the indemnity holder.

• The indemnity holder will have the right to recover any amount he was compelled to pay in a matter or a suit to which the promise of the indemnifier applies. For instance, A and B enter into a contract that A will indemnify B if C sues B in a particular matter. Now, C sues B and B had to make some payment. According to the contract, A will have to make good all the payment which B made to C in relation to that matter.
• The indemnity holder is also entitled to recover any cost which he might have to pay to any third party. But the indemnity holder should have acted prudently and under the directions which were given by the indemnifier. In the judicial pronouncement of Adamson v Jarvis,[3] Adamson was an auctioneer and under the instruction from Jarvis he auctioned some cattle. It was later known that Jarvis wasn’t the real owner of the cattle. The real owner of the cattle filed a suit against Adamson. The Court held that Adamson could recover the cost he incurred from Jarvis because he acted as per the instructions given by Jarvis.
• The indemnity holder also has the right to recover nay sum that he may have paid under any suit or compromise provided it was not contrary to the instructions of the indemnifier.

Rights of the Indemnifier

Although the rights of the indemnity-holder have been mentioned under the Act, the rights of the indemnifier haven’t been mentioned expressly under the Act. In the judicial pronouncement of Jaswant Singh v. Section of State,[4] it was opined by the Court that the rights of the indemnifier are similar to the rights of a surety. Rights of a surety have been stated under Section 141 of the Act. The indemnifier, upon indemnification, will be entitled to all the protection which the indemnified person was entitled to. The principle of subrogation comes into play here. The principle of subrogation follows the principle of substitution. Once the promisor pays the amount of compensation, he replaces the indemnified person.

Enforceability of Contract of Indemnity

In India, no provision expressly states that when a contract of indemnity will become enforceable. The judicial decisions are also conflicting with respect to the issue of enforceability. The case of O.J. and Sons Ltd. v. Gopal Purushottam[5] is one of the earliest cases in India where the right to be indemnified before paying was recognized. But the trend and the Courts have changed a bit. In the cases of Gajanand Moreshwar,[6]Shiam Lal v. Abdul Salal,[7] and K. Bhattacharya v. Namo Kumar,[8] the Court was of the opinion that the indemnified party can compel the indemnifier to pay so that he can meet a liability without waiting to actually discharge the liability. The principle followed is that the indemnified party shall never be called to pay. The obligation of the indemnifier starts as soon the loss becomes absolute.

Contract of Agency

In the case of a contract of agency, one person represents some other person when dealing with third prties and transacting with them. The person who authorizes someone else to work on his behalf or represent him is known as the principal. The party who has been authorized is known as the agent. The relationship that subsists between them is known as an agency. In the case of an agency, the principle has to give his express or implied authority to represent him and carry on the activities on his behalf. But an agency can be created through estoppel or ratification also. In a case of an agency by estoppel, the third party may be lead to believe that one person is acting on the behalf of the other, because of the conduct of the parties. In the case of an agency by ratification, one party does not have the authority to represent the other when entering into a contract with a third party or carrying on any activity. But the transaction is adopted by the principal later. This is known as ratification. In the case of an agency, no consideration is needed to be paid. It is not necessary to pay some remuneration or commission, and the principal will be held responsible for the acts of the agent even when no remuneration is paid to the agent. The agent must work according to the instructions of the principal. A fiduciary relationship exists between the agent and the principal, i.e. of trust and confidence. The principal has the duty to reimburse the agent for his expenses, and he must also indemnify the agent against any kind of loss which has been incurred while carrying out the agency business.

Indemnity and Agency

Under Section 222 of the Indian Contracts Act, it is stated that the agent must be indemnified for the activities which have been carried out lawfully on the behalf of the principal. For instance, X, an agent, who is in Spain gets the instruction from Y, the principal, who is in India to enter into a contract with Z and deliver certain goods to Z. Subsequently, Y does not send any goods to X, and the contract is breached because X couldn’t deliver them to Z. Z sues X for the breach. X informs the principal about the suit and the principal authorizes the agent to defend the suit. The agent incurred certain expenses to defend the suit. Y, as the principal will have to indemnify the agent. Another example can be given to define the principle. A, the principal asks B, the agent, to enter into a contract with C and buy 100 sacks of rice. Later A refuses to take the delivery of the sacks. C sues B for the damages and B had to compensate C. A is under an obligation to indemnify B for the damages he suffered.

The case of Adamson v. Jarvis[9] mentioned earlier can also be a classic example of indemnity in case of an agency. The auctioneer sold the cattle under the instruction of Jarvis. But Jarvis was not the true owner of the cattle. Adamson had to pay the damages to the real owner. But as an agent who was working lawfully on the instructions of the principal, he was entitled to be indemnified.

Concluding Remarks

Simply put, in the contract of indemnity one party needs to make good any damage or loss suffered by the other party due to the conduct of the promisor or any third party. Having a simple indemnity clause in a contract would not always answer liability issues because the law does not encourage those who try to shift their own liability onto other or seek to avoid liability. The main reason behind this is that the negligent party shouldn’t be allowed to shift all the liability on another party.

Footnotes:

[1]http://comtax.up.nic.in/Miscellaneous%20Act/the-indian-contract-act-1872.pdf

[2]http://informationbible.com/article-essentials-and-legal-rules-for-a-valid-contract-of-indemnity-181150.html

[3](1827) 4 Bing 66: 5 LJ (os) (CP) 68: 29 RR 503.

[4]14 BOM 299

[5] [1728] ILR 56 CAL 262.

[6]A.I.R. 1942 Bom, 302, at 304.

[7]1931 ALL 754

[8]1899 26 CAL 241.

[9] Supra 3

In this blog post, Pramit Bhattacharya, a student of Damodaram Sanjivayya National Law University, gives a comprehensive analysis of the Goods and Service Tax Bill (GST), 2014  and its impact on the economic system of India.

With the proposal of the Goods and Service Tax (GST) Bill or officially the Constitution (122^nd) Bill, 2014 in the Parliament, the government of India is seeking to remove all indirect service tax which is levied on the consumers by the Centre and the State and implement a national Value-Added Tax through the length and breadth of the country. The Government is looking forward to the GST by the end of 2016. The introduction of the GST will create a comprehensive and all-embracing tax base where, not taking in account some minimum exemption, almost all the goods and services will be taxable.

The introduction of GST will herald a new era in the Indian economic system. The introduction of the GST will give way to a common Indian market. It also seeks to reduce the cascading effect of indirect taxes which is at present prevalent in the current economic structure. In a nutshell, the introduction of GST will completely overhaul the current indirect tax system. Not only will it have a bearing upon the Tax structure, but it’ll also modify the Tax Computation, Compliance, tax incidences, and Reporting. GST will have a pervasive effect on the business operations, impacting almost all aspects including pricing of services and products, accounting and modification of the supply chain.

Understanding GST

GST is a consumption tax which is based on the value added concept. In simple terms, the consumer will have to pay the tax only once, with the price of the goods remaining the same. GST will eliminate the cascading effect of taxation which the consumers face under the current sales tax and service tax. Keeping the federal structure of governance in India, it has been proposed that both the Centre and the State will concurrently levy the GST (CGST and SGST). The basic principles would be the same for the CGST and the SGST and across SGSTs for separate states. It is also proposed that the GST will follow the destination principle, wherein the exports would be zero-rated, but the imports would be subject to tax payment. When the trade and commerce are within India, i.e., interstate, an integrated GST (IGST) will be applied (cumulative of SGST and CGST of the destination)

 It has also been proposed that an additional tax of 1 % will be levied with respect to the supply of goods; in addition to the IGST. The revenue generated from this tax will be assigned to the origin state. This additional tax is proposed for the period of 2 years initially.[1]

Significant Features of the GST

• One of the most important characteristic of the GST is that the authority to make any laws or levy any taxes in the course of “interstate” commerce and trade will be vested only with the Central Government. The State will have authority only over “intra-sate” trade and commerce.
• An IGST will be levied on inter-state trade and commerce. In the case of import of goods, they’ll be subjected to both IGST and customs duty.
• GST will incorporate in itself-

At the Central Level-

1. Central Excise Duty
2. Additional Excise Duty
3. Additional Custom Duty
4. Service Tax
5. Special Additional Duty
6. Central Surcharge and Cess’

At the State Level-

1. VAT
2. Entertainment Tax (Entertainment Tax on Municipality, Panchayat and District level will be continued)
3. Entry Tax
4. Purchase Tax
5. Luxury Tax
6. Octroi

•  Exemption from GST

1. Alcoholic liquor supplied for human consumption
2. Petroleum products like high-speed diesel, crude, aviation fuel, motor spirit, natural gas (Although they shall also be subject to GST if and when the GST Council notifies).

• GST may be levied to advertisements and newspapers.
• Stamp duties, typically imposed on legal agreements by the state, will continue to be levied by the States.
• The GST Council will be responsible for the administration of GST. The Council will act as an apex policy making body for GST, and the council will comprise of State and Central Ministers who hold the portfolios of the finance department.
• It has also been proposed to remove Octroi/Entry tax across India

Advantages of GST

1. GST will provide a wider tax base. GST will also eliminate classification disputes.
2. As mentioned earlier also, one of the major advantages of having GST will be to remove the multiplicity of taxes and the cascading effect.
3. With the introduction of GST, compliance procedures will be simplified, and tax structure will make allowance for better regulations.
4. The duality of administration of Centre and State taxes will be harmonized, and it’ll lead to the reduction of compliance and duplication cost.
5. It is also proposed that the compliance procedure will be automated. This will lead to efficient working and also reduce errors.
6. Exports will become more competitive as exports will be zero rated. More the exports, better the GDP.

Impact of GST

GST if introduced will stand out as one of the most significant fiscal reform in the economic structure of India. GST is expected to harmonize the administration of taxes at the Central and the State level and thus simplifying the structure of consumption taxes. A significant redistribution of tax across goods and services will also take place depending upon the final rate and base of GST. The services which under the current regime falls under both the Central and the State list will see a reduction in taxes levied on them, which in turn will increase demand. The supply chain of operations will also be fundamentally changed with the introduction of GST. Under the current regime, the supply chain is designed in such a way that the burden of Central Sales Tax is minimized. These designs are subprime from the economic and strategic point of view. The elimination of the Central Sales Tax will provide business houses to optimize their supply chain and reduce the costs.

Impact on manufacturing and retail sector

1. Increased flexibility in obtaining credit on goods and services.
2. Reduction in production and procurement cost due to the full credit of taxes on interstate sale.
3. Imports will become cheaper due to credit on import taxes.
4. Elimination of Entry tax along with additional compliances will reduce a huge burden.

Hospitality and Entertainment sector

1. The multiplicity of taxes will be reduced as VAT, Service Tax, Luxury Tax and Entertainment Tax will be eliminated.
2. Simplifies levy and valuation on composite transactions. Thus, will reduce litigation challenges and related costs faced by companies in this sector.

IT and telecom sector

1. Classification disputes on software, SIM Cards, AMCs, and Franchise Fees will cease to exist.
2. Levy and valuation on composition transaction will be made easier.

Service sector

1. Better credits can be availed across various goods and services.
2. No segregation will be done between manufacturing, trading and services for availing credit.

Banking and finance sector

1. Interest on loans will be taxed under the GST.
2. Credit pool will increase due to the availability of GST credits.
3. The rise in tax rate from around 12% will increase to more than 20% which may increase the cost of banking and operations (negative impact).

Infrastructure and real estate

1. Supplies o SEZs to be zero rated and hence SEZs will benefit a lot from GST.
2. Under the GST regime, composite contracts may fall under the head of “services.”
3. Total tax incidences will increase on certain product under the GST such as steel and cement.

GST is not a new tax, but a replacement tax. The major step forward which can be achieved by introduction of GST is the mechanism to mediate inter-state credit. The GST regimes focuses on a central compensation system. The integrated GST will replace the CST, with the originating state charging IGST on sale. Now, this IGST can be taken as a credit at the destination place, and can be used to pay IGST, CGST or SGST (in such order of preference). In simpler words, the loss which is caused to the destination state under the current regime by tax paid in another state which is being adjusted against tax payable to the destination state will be made good by the Centre. This will help in the growth of market across the individual state. The rationale behind such mechanism is to act as a catalyst for increased revenue and production. This system of input tax credit in inter-state sales is a major salutary feature of the proposed GST model.

All said and done; GST has still not seen the light of the day. The idea may seem innovative, but such innovation is not of present times. The idea for GST was conceived in the year 2000 and 16 years have passed, but no implementation of the idea has yet been done. If at all GST is implemented a study done by the National Council of Applied Economic Research (NCAER) also suggests that India will indeed make progress on implementation of GST and could expand India’s growth of gross domestic product by 0.9-1.7 %[2]. The removal of Central and State taxes will help in reducing taxes and will also aid in filing costs and expanding business in a profitable manner. This would attract more investors and as a result, the gross domestic production will increase. Simplification in tax norms through the implementation of GST can also help in improving tax compliance and increasing tax revenues.

Footnotes:

[1]http://www.ey.com/IN/en/Services/Tax/EY-goods-and-services-tax-gst

[2]http://www.referencer.in/GST/Files/GST_NCAER_Report.pdf

In this blog post, Pramit Bhattacharya, a student of Damodaram Sanjivayya National Law University writes about the new Geospatial Information Regulation Bill, 2016 which seeks to regulate and govern all kind of geospatial data. The post highlights the different aspects of the bill and discusses their impact on India’s integrity and sovereignty.

The Geospatial Information Regulation Bill, 2016 has been drafted by the Government of India, which seeks to regulate and control the procurement, distribution, and broadcasting of any kind of geospatial information which can affect the integrity, sovereignty and security of India in any manner. The bill is applicable not only to citizens of the country but also to citizens outside the country, on aircrafts and ships which are registered in India, also persons who are engaged in government service. According to the draft, it will be compulsory to take permission from the government before any geospatial information can be published, broadcast or acquired.

Geospatial Information

The definition and the ambit of “geospatial information” are very wide according to the draft. The definition of geospatial information has been given in such a way that it includes any images or data received through space or any aerial platform. The aerial platforms include satellites, balloons, aircrafts, airships, any unmanned aerial vehicle, etc. The definition also has under its ambit any kind of data which shows any physical feature, boundaries, phenomenon, etc. of the earth. Maps, charts, surveys, terrestrial pictures, etc. also falls under the definition of geospatial information according to the bill. The definition given provided in the bill is so vast that it’ll cover almost everything like GPS enabled devices like cell phones, car navigation systems, drones, balloons, satellite imagery, etc. Not only this, print media like newspapers, magazines and books will also fall under the purview of the definition. Such a wide definition will make the situation very complicated if the bill becomes a law. Almost everyone will have to seek a license from the government to even retain and use the geospatial information. The impact of such a regulation will be widespread. For instance, if a geospatial journal or magazine, say National Geography or Discovery want to publish anything which is even remotely related to some geospatial information, they’ll have to take the prior permission of the government. The editors, publishers and subscribers will also have to take the permission of the government since they will either acquire or broadcast the geospatial information. Any person doing any research related to any geographical issue will also have to take the consent of the government.

Jurisdiction

The jurisdiction which is being given under the bill is also wide. The bill gives an extra-territorial jurisdiction, and if made into a law, it’ll be applicable not only to people residing in India but also to people who are residing abroad. This kind of jurisdiction may not be feasible at all. The main question which arises here is that why would a foreign entity want to submit to a jurisdiction of such an Act which seeks an extensive regulation in distribution and publication of data and information. This may have a negative impact and trade and commerce. This kind of severe regulation will discourage those business houses to set up business in India, which has anything to do with the use of geospatial information (for example foreign cell phone companies whose devices are GPS enabled or car manufacturers who provide a navigation system). The bill talks about licensing all the entities who use any kind of geospatial data. The bill also states that this licensing would be done by a bureaucratic committee, and the data or information would be scrutinized after the data is collected and before it is distributed.

The Authorities

The bill states that an Apex Committee will be set up which will look into the implementation, regulation, and governance of the Bill, which will be in accordance with the policies. A Security Vetting Authority will also be set up and the main aim of this Security Vetting Authority will be to carry out scrutinization and vetting of any kind of geospatial data from the security point of view and provide license and permission to the users to procure, publish, distribute, and broadcast the information, as per the regulations which have been framed. An Enforcement Authority will also be constituted which will look into the enforcement of terms and conditions of the license which has been provided to the user. The Enforcement Authority will have the power to confiscate all the data or resources which have been used for publication or distribution in violation of the Act. The Enforcement Authority will also have the power to impose penalties and revoke or suspend the license of the violators. To hear the appeals against the decisions of the Security Vetting Authority and the Enforcement Authority, an Appellate Authority will be set up, and any person who wishes to appeal against the order or decision of the Appellate Authority can further appeal to the High Court. Thus, to summarize, there will be four authorities to regulate and govern the Act-

• The Apex Committee
• The Security Vetting Authority
• The Enforcement Authority
• The Appellate Authority

The Apex Committee will have the power to delegate its responsibilities but not delegate the regulatory powers. It is the sole authority which can make regulations with regards to the Act. The Apex Committee will comprise of three members. Given the wide ambit of the Act, the authorities may find it very difficult to implement the Act properly. Also having these many authorities for the implementation and monitoring of a single Act can lead to conflict within themselves also.

Licensing

Any person who wants to use geospatial data in any manner, whether to acquire such data, broadcast, publish or distribute such data will have to make an application to the Apex Committee and also to the Security Vetting Authority to obtain the license required to acquire, distribute, publish, or broadcast any geospatial data. A license will also be required if the data is to be used outside India. The license can be suspended or revoked any time by the authorities if the use of any information is in contravention of the Act. The licensee will be supplied with security vetted information, and only that information can be used by the licensee. The licensee shall also display the insignia of clearance by the Authority while using the information. If any loss or damage occurs due to the use of the security vetted information, the licensee will be held liable for such loss. Any person who has acquired any geospatial data before the commencement of the Act will also have to take the permission of the authorities. Such person should make an application to the governing bodies within one year of commencement of the Act for the grant of a license and the permission to retain such data. The governing body has to grant a license or reject the application within three months of receipt of an application.

The issue here is that there are no rules and regulations which state the criteria or requirement for granting or rejecting of license. There is arbitrariness in the granting and revocation of license. There is also no system of check and balance to monitor the activities of the Authorities. This may lead to a lot of arbitrariness on the part of the Authorities. The Bill also states that if the application for the license has been rejected by the Authorities, then the person who applied for a license cannot use or retain any geospatial data with him. This clause also has an ambiguity about it. The Bill does not provide for the way in which such data or information would be disposed of.

Penalties

The draft provides for penalties and fines in case of illegal use of geospatial data. If a person fails to pay the penalty, then such amount would be recovered from the defaulter in the form of land revenues and the defaulter’s license will also be suspended until the penalty is paid. The penalties specified under the draft are exorbitant. The penalties range from Rupees 1 crore to Rupees 100 crore in case of illegal use or distribution or publication of geospatial data. There is also a provision for a penalty which ranges from Rupees 10 lacs to Rupees 100 crore in case India’s map I wrongfully depicted or the license is misused.

It can be said that the proposed bill and the Information Technology Act may be at conflicts because the IT Act deals with any kind of digital data. The IT Act also states that in a case there is a conflict between it and any other Act, the IT Act will prevail. But the bill of the proposed Act also said that in a case of conflict it’ll propose over any other law. This kind of loopholes can be a serious drawback and can make implementation and regulation of the Act very ineffective.

Concluding Remarks

As mentioned earlier, the scope of the bill is very wide. Rather, to wide. Too much law and regulations can also be harmful. The bill needs to be amended to reduce the scope of the definition and make it more streamlined. In order to cover every aspect, it has been given such a broad ambit that instead of regulation it may lead to obstacles and hindrance for the field where geospatial information and data is a necessity. A developing country like ours needs policies to spread information and not laws and policies which are punitive and regressive.

In this blog post, Abhiraj Thakur, a 1st-year student of NALSAR University of Law, Hyderabad, writes about the DNA fingerprinting technology which is widely used to secure convictions. This technique being reliable and accurate should be adopted at full scale in India. However, our country still suffers from some issues which thwart the use of DNA fingerprinting in Indian Criminal Law.

What is DNA?

DNA (Deoxyribonucleic Acid) is the primary hereditary material in a human body. The Human DNA has a double helix structure. Most of the DNA is found in Nucleus of the cell called the nuclear DNA, and some are found in mitochondria called the mitochondrial DNA (mtDNA). It complexes with proteins to form chromosomes which contain our genes and all genetic information.[1]

The DNA Fingerprinting technology is one of the foremost and most reliable technologies used in USA and UK in identifying individual culprits through their respective unique DNA patterns. In 1984, Sir Alec Jeffreys, of UK discovered that no two people could have the same DNA sequence.[2] Although more than 99% of the DNA is the same in all humans, there are some particular strands that are unique between two individuals having the same sequence. Sir Jeffreys was the first person to discover this. This led to the birth of DNA Fingerprinting. The potential of DNA Fingerprinting in the investigation of crimes was quickly realized. In 1986, this method to solve the rape and murder mystery of a teenage girl Dawn Ashworth near Leicester. The suspect Richard Buckland was exonerated, and the real criminal Colin Pitchfork was found guilty. It was the first case in which DNA technology was used.[3]

Benefits

Accuracy

In a crime scene, there is always a possibility of finding the DNA of people other than the criminal. In such a scenario the, a majority of investigative agencies today rely on DNA fingerprinting to find out which DNA is that of the criminal. Also in cases where a mixture of a blood sample or other samples is found at the crime scene. DNA technology today has sufficiently evolved so that it can identify each of the blood of each from a mixed sample. This has greatly helped in securing convictions in rape cases. 

For example, if a girl is raped by, let say, six persons, DNA fingerprinting can identify the DNA sequence of every individual and comparing it with the suspects, we can catch the criminals. In such cases, each of the people whose DNA pattern matches with the sample gets convicted and of those whose DNA sample does not match is proved not guilty and acquitted.

Reliability

Today, There is greater acceptance of DNA evidence over Narco Analysis because DNA evidence does not lie. The narcotic analysis is a subjective method. A lot of subjectivity is there in it. It is possible for people to fool it. People can lie but DNA cannot. Earlier there were statistical doubts that two persons may have the same DNA sequence. But as the technology is advanced, it has now been proved that no two persons can have the same DNA sequence. Narco analysis is not always reliable and is not accepted as evidence by the courts.[4]

Apart from crimes, it is also extensively used for on- criminal purposes like paternity tests, seed stock identification, the authenticity of consumer products, and medical diagnosis.

Limitations

Identical or Monozygotic twins have the same DNA sequence. Therefore in such cases, the law enforcement agencies remain skeptical of relying on DNA fingerprinting to deal and identify the real criminal. Also, a question arises in regard to such twins, can they be convicted only by the DNA Evidence? This is the biggest limitation of DNA evidence. Two identical twins do have the same DNA. So in such case where one of them has committed a crime, they cannot be convicted by DNA evidence. But in such cases, the simple fingerprint will help to convict the real criminal. It is because there is a slight difference between the finger prints of the identical twins. But in the courts of law, full fingerprints only are acceptable because clever counsels raise questions on partial fingerprints as they can match with others.

Usage in India

DNA testing as evidence is not covered under Indian Evidence Act 1872 and Criminal Procedure Code 1973. The method of DNA profiling used today in India is based on polymerase chain reaction (PCR) and uses short tandem repeats (STR). These techniques have revolutionized the speed and efficiency of the DNA test. These techniques are very reliable and are in vogue in various countries. Dr. Lalji Singh is considered to be the “Father of DNA fingerprinting” in India, He developed and used the technology in India for the first time in 1988.

Problems with Usage in India

Handling of Samples

The admissibility of DNA evidence depends on upon accurate and proper collection, preservation and documentation which can satisfy the court. As was seen in the infamous OJ Simpson case, improper handling of DNA evidence can lead to the acquittal of the accused. The procedure of collection and preservation is very important. The sterile gloves and forceps must be used. If we use our hand in the collection process, our DNA will get mixed up with it.

Today in India the police constables are untrained in how to collect DNA samples. In foreign countries, when a crime occurs, first the forensic investigators and scientists go to the crime scene to collect forensic data. But here in India, first an untrained constable goes there. Acting on intuition, he washes up the body and removes it. He in this process destroys vital DNA evidence. So they must be trained to handle forensic evidence and to properly collect it and seal it. But even when there is some contamination, it can be found out in the test result; we can see a faint band of DNA of the person whose DNA has been mixed up and a strong band of DNA of the real criminal. But such contaminated evidence is not accepted as evidence in the courts.

Storage of Samples

In UK and US, the samples of DNA are stored in National DNA Database. The police have very limited powers to retain the DNA recovered from crime site; their job is confined to just collection and deposition. Unlike in India where the police have unchecked powers to collect and retain the DNA of suspects even after acquittal. This raises concerns about many over fears that it may lead to misuse of DNA database and may divulge the privacy of the individuals. Of suspects even after acquittal. 

DNA of all convicts should be stored in the database so that the multiple offenders can be apprehended easily. Moreover, in countries like the UK, the government is trying to create a database of all people, not just convicts and acquitted but also of other innocent people. The purpose of such databases is not just for crime investigation rather it will be helpful for research in medicine.

Lack of Test Centers

In foreign countries, there are enough facilities for the DNA testing. People can get DNA fingerprinting done anywhere as there are a lot of institutions. Even for something like $10000-$12000 they can do the full genome sequencing[5]. But in India, there are not many facilities. For doing a DNA, test people have to go all the way to Centre for Cellular and Molecular Biology or CCMB in Hyderabad. This may not be feasible for everyone. With due regard to the efficiency of this technology, there should be sub-branches of this institution in every district of the country. If not possible, it must be made sure that people from all parts of the country can readily have DNA testing.

Violation of Constitutional Rights

There have been quite many ethical concerns regarding DNA tests. Some people allege that it violates the right to privacy, right to life and right against self-incrimination according to Article 20 of Indian Constitution.

The most famous case involving the use of DNA fingerprinting in India is of ND Tiwari. ND Tiwari a famous politician was alleged by Rohit Shekhar to be his biological father. In the subsequent paternity case, many legal issues surrounding the DNA Testing emerged- such as if paternity is conclusively proved (100%) by DNA Testing, whether the persons have the right to keep the result of such tests private etc.

Indian law says that one cannot be forced against his/her will to give DNA evidence. But today in certain cases, courts are forcing suspects to undergo DNA tests. As in the ND Tiwari case, all these arguments were raised. But the court forced ND Tiwari to give his blood sample in the larger interest of the public. Courts can force people to give their blood samples to meet the demands of justice.

These are the few burning issues with the use of DNA printing technology in India. The future of DNA Technology is no doubt very bright. There has been a revolution with regards to the technology. In the time to come, it will prove very helpful in convictions of the offenders. There has already been rigorous research going on in the technology around the world; India shall by no means lack behind in it.

Footnotes

[1] http://www.cdfd.org.in/servicespages/dnafingerprinting.html

[2] Ibid

[3] http://news.bbc.co.uk/2/hi/programmes/newsnight/8245312.stm

[4] Selvi & Ors. Vs. State of Karnataka & Anr. On 5 May 2010

[5] Full genome sequencing is a laboratory process that determines the complete DNA sequence of an organism’s (in this case human’s) genome at a single time.

In this Blog post, Abhiraj Thakur, Student NALSAR University of Law tries to answer the question “Are Surrogacy Contracts in consonance with the Indian Contract Act, 1872?” And further examines the different elements of a surrogacy agreement in light of the 1872 Act.

Surrogacy, with advancements in medical technology and increasing need-based demand, has become increasingly popular,[1] Thereby, necessitating the regulation of conduct between parties through the formation of agreements, who by the very nature of it, are likely to grow increasingly attached to the fetus or abdicate responsibility upon birth. Hence, the surrogate and intended parents seek to determine aspects like compulsory prenatal visits, coverage of medical expenses, assured guardianship upon birth,[2] inter alia, through contractual clauses, for both Commercial[3] and[4] Surrogacy.

In the Indian context, owing to lack of legislative clarity on the state’s position on Surrogacy Contracts, it becomes essential to understand the scope of enforceability of both, altruistic and commercial surrogacy contracts concerning the Indian Contract Act, 1872.

Element Of Consent – Section 14

The essentiality of consent[5] being free and unvitiated for any contract as defined and laid down in Sections 13 and 14 of the Indian Contract Act 1872, becomes highly relevant in the Indian context wherein Commercial Surrogacy has not been deemed illegal.

Testing Consent against Section 16(2)

In India, often poor women in vulnerable situations ‘consent’ to such agreements to escape poor economic conditions or are pressurized by their relatives to carry the child of a couple incapable of reproducing.[6]  In the former case, unless a presumption of inequality of bargaining power[7] or other forms of undue influence[8] is raised which goes unrebutted, the consent is held free. Mental distress caused by the need for money is held not to be sufficient to negate consent by the courts.[9]

Whereas in the latter, if the facts indicate that the blood or marital relationship was such that possibility of dominance existed, a presumption of undue influence is raised. This implies that it will be presumed that the ones seeking the contract to be enforced in fact used their position to dominate the surrogates’ will[10] and by Section 19-A, the surrogate will have the right to recede the contract.

Inability to Gauge Consequences- A Voluntary Risk

Further, it is argued that surrogacy, due to its very nature, leads to changes in the will to part with the child. Consent is necessarily predicated upon the ability of a party to comprehend the nature and consequences of the act that they wish to undertake. Consent which is also indicated by intention needs to be present continuously in a long term contract.[11] The implications of giving up a baby are incomprehensible by the surrogate at the time of concluding the contract. In the landmark Re Baby M case[12], the court noted,

“Under the contract, the natural mother is irrevocably committed before she knows the strength of her bond with her child. She never makes a totally voluntary, informed decision, for quite clearly any decision before the baby’s birth is, in the most important sense, uninformed, and any decision after that, compelled by a pre-existing contractual commitment”.[13]

Hence, the surrogate may during the gestation period, develop deep attachment and undergo a ‘change of heart’.[14] This line of argumentation presumes that all surrogates lack the ability to give consent as they are deciding to engage in an activity, the future consequences of which are unassessed, but known.

However, the doctrine of freedom of contract[15]– a touchstone of classical and modern contract law theories and the basis for state enforcement of private contracts necessarily presumes that parties, by deciding the law for themselves, undertake the risk of sticking to it despite a ‘change of the heart.’ To entail oneself personal autonomy, parties face the trade-off of potential regret.[16] This doesn’t create any rational differentiation for surrogacy contracts from other long-term contracts.

Unconscionability Principle- Section 16(3)

The recognition of this freedom principle merely invalidates a change in the decision as an excuse for non-performance; it, however, does not prevent the court from the protection of weaker parties especially in light of unequal bargaining power.

Section 16(3) applies to instances that the courts determine to be ‘unconscionable’ by the facts.[17] In the particular case of surrogacy contracts, this can be adjudged by procedural matters such as inability on the part of the surrogate to read the terms or harsh exemption clauses preventing liability of the fertility clinic, etc. It can also be derived by substantive elements like exceptionally low payment or some explicitly harsh terms. These terms can be indicative of exploitation of the vulnerable, cases that often arise in India being a popular destination especially for foreign parties due to the availability of cheap surrogates, and can be grounds for deeming undue influence being present.[18]

However, it is important to not characterize the very nature of surrogacy as an unconscionable bargain, an argument often advanced by feminist scholars opposing such contracts.[19] Since such an argument stands against the fundamental premise of a contract and disregards truly altruistic forms of surrogacy and cases when women choose to opt into it to experience the joys of childbearing or gratuitously.

Legality of Object – Section 23

The question whether surrogacy contracts are forbidden by any law or opposed to public policy needs to be answered separately.

Commercial Traditional Surrogacy – Forbidden by Law?

The law does not expressly recognize surrogacy, but views traditional surrogacy[20] As the adoption of the surrogate’s child by the intended parents, so, it needs to be examined in light of the Hindu Adoptions and Maintenance Act, 1956. Section 17 of the said Act expressly forbids the payment of any sum or any rewards in consideration for adoption. In Baby Manji Yamada v. The Union of India[21], a landmark Indian surrogacy case, the position taken by the courts was that such an arrangement was viewed as adoption under the law. In Jan Balaz v. Anand Municipality[22] As well, the German couple- intended parents, in this case, were only allowed to take their twins to Germany, who were born out of surrogacy in India, upon completion of adoption formalities. Hence, in commercial traditional surrogacy contracts, the effect is one of committing an act forbidden by law, thereby making the object illegal.

However, courts in decisions above, adopted a pro-contract and pro-commercial approach, indicating that the legislature brings surrogacy contracts in the realm of Indian Contracts Act while issuing further guidelines, so as to not affect their enforceability, but merely regulate them. More recently, in P Geetha Nagar v, Kerala Livestock Development Board[23], the court clarified that surrogacy is not illegal in India and noted India’s significance as a ‘surrogacy destination.’ The courts have recognized the immense economic gain accruing.

Thereby, while a strict reading of the law prohibits such contracts, the precedent has upheld them even in light of Section 23.

Public Policy Considerations

A concern raised by many objectors is that altruistic surrogacy in itself is an immoral bargain as it fails to serve the best interests of the child since the baby is separated from the birth mother, and commercial surrogacy, specifically amounts to ‘baby-selling’ by commodifying and devaluing women and children.[24] The Supreme Court gave these public policy considerations significant weight in the Baby M case[25], and the court felt that there was inherent something harmful about the practice of surrogacy.[26]

Under the Indian Contracts Acts, Section 23 lays down that an agreement is unlawful if it is opposed to public policy. The Supreme Court has interpreted this to apply to agreements injuring public interest or public welfare.[27]

However, there is far less tangible evidence of a material link between permitting surrogacy and public interest, especially considering that the essence of the surrogacy contract lies in a dealing involving two parties affecting their rights on the child. While it is much desired that the courts weigh the best interests of the child, the contract in itself falls short of becoming a public policy concern. Further, it ‘s hard to fit such contracts in any of the recognized ‘pigeon-holes’[28] Of circumstances opposing the public policy.[29]

Indian courts have as well upheld all forms of surrogacy contracts, and in fact recognized reproductive rights as part of the right to privacy.[30] The Universal Declaration of Human Rights in Article 16(1) recognizes the right to marry and found a family. However, in Jan Balaz v. Anand Municipality[31], Justices K.S. Radhakrishnan and A.S. Dave stressed on the necessity of special legislation to govern several issues of public welfare and policy importance that arise in such disputes, like rights of a surrogate mother, guardianship, responsibilities of the fertility clinic, etc. Need for regulation is pressing, but the position of the law is that that, in itself, does not affect the enforceability of surrogacy contracts.

Thus, we see there is a cause for respecting surrogacy contracts as they pass the tests for the existence of essentials of a contract. While ubiquitous claims of disproportionality and inability to gauge consequences exist, these fall short of being specific to surrogacy contracts and fail to create cause for disrupting the system of contractual obligations. These contracts stand to deserve full enforceability since the law needs to respond to new social patterns, rather than abandoning them, and eventually stagnate.

 [divider]

Footnotes

[1] DasGupta, S. (n.d.). Globalization and Transnational Surrogacy in India. Lexington Books 2014, United Kingdom.

[2] Surrogacyindia.com. (2016). Documentations, Contracts at SurrogacyIndia. [online] Available at: http://www.surrogacyindia.com/Contracts.html [Accessed 9 Apr. 2016].

[3] Surrogacy refers to an agreement between the parties wherein the surrogate is given money for merely carrying the baby. See: Fertilityconnections.com.au. (2016). Surrogacy – Fertility Connections. [online] Available at: http://www.fertilityconnections.com.au/surrogacy/ [Accessed 9 Apr. 2016].

[4] Altruistic Surrogacy refers to surrogacy without any financial gain to the surrogate for carrying a child, only ‘out of pocket’ expenses like medical expenses, travel and time out of work are covered. See: Fertilityconnections.com.au. (2016). Surrogacy – Fertility Connections. [online] Available at: http://www.fertilityconnections.com.au/surrogacy/ [Accessed 9 Apr. 2016].

[5] Section 10, Indian Contract Act 1872.

[6] Braho, H. 2015. Motherhood Surrogacy: Progress or Exploitation?. European Journal of Sustainable Development, 4(2).

[7] Lloyds Bank v. Bundy, 1975 1 QB 326.

[8] Section 16, Indian Contract Act 1872

[9] Raghunath Prasad v. Sarju Prasad, AIR 1924 PC 60.

[10] Lancashire Loans Ltd. v. Black, 1934 1 KB 380.

[11] Margalit, Y. Redefining Parenthood – From Genetic Essentialism to Intentional Parenthood. SSRN Electronic Journal.

[12] 537 A.2d 1227, 109 N.J 396.

[13] Id at para 100, p.434.

[14] Margalit, Y. (n.d.). In Defense of Surrogacy Agreements: A Modern Contract Law Perspective. SSRN Electronic Journal.

[15] Pound, R. 1909. Liberty of Contract, 18 YALE L. J. 454.

[16] Schuck, P. 1988. Some Reflections on the Baby M Case, 76 GEO. L.J. p.1793.

[17] Wajid Khan v. Raja Ewaz Ali Khan, 1891 18 IA 144.

[18] A. Schroeder Music Publishing Co. v. Macaulay, 1974 1 WLR 1308.

[19] Andrews, L. 1988. Surrogate Motherhood: The Challenge for Feminists. The Journal of Law, Medicine & Ethics, 16(2), p.72.

[20] Traditional Surrogacy, differing from Gestational Surrogacy, involves the use of the surrogate mother’s egg to procreate.

[21] 2008 13 SCC 518.

[22] Civil Appeal No. 8714 of 2010.

[23] WP(C).No. 20680 of 2014.

[24] Wolf, S. 1992. Surrogate Motherhood: Politics and Privacy. Larry Gostin. Ethics, 102(3), p.671.

[25] Re Baby M, 537 A.2d at 1247.

[26] Id at 1248, 1250.

[27] Ratanchand Hirachand v. Askar Nawaz Jung, 1991 3 SCC 67.

[28] These include contracts of marriage brokerage, the creation of perpetuity, interference with the administration of justice, wagering contracts, against friendly foreign states, trade with the foreign enemy, restraint of trade, price escalation, and interest clauses, among others.

[29] Fender v. John Mildmay, 1938 AC 1.

[30] B. K. Parthasarthi v. Government of Andhra Pradesh, AIR 2000 AP 126.

[31] AIR 2010 Guj 21.