In this blogpost, Nupur Trivedi, Advocate, Practising in Trial Courts & High Court and a student of the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about, who is a registrar, functions of ROC, Powers of ROC, who can file a complaint to ROC and the procedure to file a complaint.

Who is a registrar

The registrar is defined under Section 75 of Companies Act 2013, under which the term“Registrar” means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant Registrar, having the duty of registering companies and discharging various functions under this Act.

Functions of ROC

Registrars of Companies (RoC) appointed under Section 396 of the Companies Act, 2013 covering the various States and Union Territories are vested with the primary duty of registering companies incorporated in the respective states and the Union Territories. The Central Government exercises administrative control over these offices through the respective Regional Directors (RD). The Regional Directors (RD) are in-charge of the respective regions, each region comprising a number of States and Union Territories.[1]

RoC issues an incorporation certificate to the companies. The RoC offices function as registry of records, relating to the companies registered with them, which are available for inspection by members of public on payment of the prescribed fee. The registered documents are made available to the Shareholders, Investors and the General public at large through an online portal MCA21 at a payment of nominal fee.

But the role of RoC is more than that of a mere registry office; it is also entrusted with the responsibility to ensure compliance with all statutory requirements under the Companies Act by the incorporated companies, for instance, periodic filing of Annual Returns and Balance Sheets, Change of directorship of the company etc.

Powers of ROC

All incorporated companies functioning in India will have to abide by all statutory requirements of Companies Act and it is the duty cast on the office of the Registrar of Companies to ensure that all norms are followed and that any violations are brought to books. The RoC has the power to take action against companies that fail to submit requisite documents in time or for the production of incorrect/incomplete information.

The RoC also has suo-moto powers to order for inspection of companies and if deemed necessary, investigation can also be carried out and all violations can be brought to book and both civil and criminal prosecution would be initiated.

The powers of inspection, inquiry and investigation by the RoC are elaborated under Sections 206-209 of the Companies Act, 2013. The powers enjoyed by the RoC under the Act are stated hereunder in brief: –

• Powers under Section 206 to call for information, inspect books and conduct inquiries– This section corresponds to Section 234 of the Old Act. Under this section, the Registrar can call for information or explanation or any further documents from a Company on the basis of scrutiny of a document submitted by a company or on information received by the Registrar. The Registrar can send a written notice to the company demanding for an explanation or information in writing or production of documents by the company within the time prescribed in the notice.
• Power of inspection of books of account, books, papers and explanations by Additional written notice under Section 206 (3)- Under this sub-section the Registrar can send an additional written notice in three circumstances; firstly if the company fails to furnish the information or explanation required within the time specified in the notice; secondly if the Registrar is of the opinion that the information or explanation furnished is inadequate; and thirdly and most importantly if the Registrar is satisfied on scrutiny of documents furnished that the manner in which the company is run is fishy and the information or documents furnished do not disclose a full and fair statement of the information required. Hence, if any of the above said grounds exist, then the Registrar can exercise the power of inspection specified under the said sub-section 3 of Section 206 by sending an additional written notice to the company and recording his reasons for doing so, in writing.
• Power of Inquiry under Section 206 (4)- If the Registrar is satisfied on the basis of information available with or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of the Companies Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard.

It is important to note here that under this Section any person can make a representation to the Registrar and complaint against the state of affairs of the company.

• Powers as Civil Court under Section 207 (2) & (3)- The Registrar is vested with the powers of the Civil Court for conducting inspection and inquiry under Section 206. The registrar can call for discovery and production of books of account and other document, summon and enforce the attendance of persons and examine them on oath and inspect any books, registers and other documents of the company at any place. Hence, the Registrar has been given ample powers to inquire and inspect into the affairs of a company, about which he has grounds to believe, is not working in accordance with the provisions of the Companies Act.

• Report to Central Government under Section 208- After conducting an inquiry under Section 206 and inspecting documents under Section 207, if the Registrar is of the opinion that a further investigation is required into the affairs of the company then he can make a report and submit to the Central Government along with the requisite documents recommending for further investigation. The Central Government then appoints inspectors for carrying out an investigation against such company.

• The power of Search and Seizure under Section 209- Registrar has the power to search premises and seize any books and papers after obtaining an order from the Special Court for the same.

Who can file a complaint to RoC?

As already stated above that under sub-sec. (4) of Section 206 of Companies Act, 2013, a representation can be made by “any person” alleging that the business of the company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act or the grievances of investors are not being addressed.

Under sub-sec. (1) of Section 206 also, the RoC sends out a written notice to a company on the basis of “any information” received by him. Hence, the RoC has the power to carry out an inquiry into such allegations irrespective of the identity of the person complaining against the company. The only requisite is that of the satisfaction of the Registrar; he should be satisfied that such furnishing of information/ explanation or inquiry is necessary.

The provision in the Old Act corresponding to sub-sec. (4) of Section 206 of the New Companies Act is Section 234. Sub-section (7) of S. 234 stated that the representation to the Registrar was to be made by “any contributory or creditor or any other person interested”.  Earlier such “interested person” had to furnish information to the Registrar representing that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose.

However, the New Act does not impose any such restriction. Therefore, any person can furnish information regarding the misdealing, fraud or non-compliances by the company to the Registrar. That person can be absolutely anybody, from the employee, director, creditor, investor to the client of the company. It is not necessary that the complainant has to be an interested person or a person dealing with the company only.

Procedure to file a Complaint to the RoC ?

There is no specific format of a complaint to the RoC in the Companies Act. It has to be formal and stating all material facts in an elaborate manner. The complaint should be addressed to the RoC of the respective state where the company is incorporated.

The complaint should include the name of the company complained against and its full registered address. The complaint may contain the names of all the officials or agents of the company, such as CEO, Directors, Managing Directors or authorized signatories who may be responsible for the state of affairs of the company.

The relevant documents in photocopy may be enclosed along with the complaint. On receipt of such information if the RoC is satisfied that the business of the company is not carried on in accordance with the provisions of the Companies Act then it will take adequate steps under Sections 206-209 of the Companies Act, 2013 to initiate an inquiry against the defaulting company.

An example of the manner in which complaint can be filed is given below:-

By Regd post with A.D.

Date: ______

To,

The Registrar of Companies

10/499 B, Allenganj,

Khalasi line

Kanpur (U.P.) -208002

Subject: Complaint against XYZ Company Ltd.

Sir,

Under instructions from my client, ABC Pvt. Ltd, I file a complaint against XYZ Co. Ltd having its Registered Office at B-4, Georgetown, Allahabad, U.P., in the following manner:-

1. That, my client and XYZ Co. Ltd had business relations. My client supplied goods worth Rs. 5 crore to XYZ Co. Ltd in the month of September,
2. That, …………………..

Therefore, I request you to initiate an investigation into the affairs of XYZ Co. Ltd and protect the interest of my client who is likely to be defrauded due to acts of the agents and officials of XYZ Co. Ltd.

Kindly do the needful.

Thanking you,

Yours sincerely,

KLM

For ABC Pvt. Ltd

[1] Ministry of Corporate Affairs Website, http://www.mca.gov.in/MinistryV2/rd.html.

In this blogpost, Saurodeep Dutta, Student of University of Calcutta and the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about what is transfer pricing, it’s applicability and computation.

Introduction

Transfer Pricing is one of the grey areas of International Taxation, and in practise is applicable mostly to divisions between multinational companies, who have various units working in tandem in various jurisdictions around the world. Transfer pricing provides optimal results for these enterprises, allowing them to stretch their profits across various jurisdictions, aiming for better use of their own resources by the use of other arms of their own enterprise, ultimately being better for the overall finances of the enterprise.

Definition

A definition is required here.

Investopedia says ” A transfer price is a price at which divisions of a company transacts with each other. Transactions may include the trade of supplies or labour between departments. Transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities.”[1]

Looking at this definition, we can conclude a few distinctive points about transfer pricing :-

• Transfer pricing normally involves the divisions of a company or at least units that are somehow related to each other.
• These are in the form of transaction
• These transactions may involve anything from supplies or labour, between the departments of the group companies
• This entire scenario comes into being especially when the involved parties to the transaction are regarded as being two separately run and administered units, under the umbrella of a larger,multi-entity firm.

Prices for goods and/or services is generally slightly lower than the market price of the product or the good being transferred, and it is specifically because the transaction is basically a ‘transfer’ between two related companies, instead of a ‘sale’ or a ‘purchase’ between the two companies.

An important point to note here, is that a very important feature of Transfer Pricing is the relation between the companies. The relation between the companies must be that one of the companies is an Associated Enterprise(AE), in relation to the other company. The Income Tax Act specifies 13 different relations between companies that will be regarded as being Associated Enterprises.

Transfer Pricing was initially a concept applied only to International Transactions between the units of multinational companies. The concept was enshrined in Section 92 of the Income Tax Act in 2001, dealing with the requirements of International Transactions. However, this concept was applied to domestic transactions with effect from 01/04/2013, bringing into its purview domestic transactions as well. It is thus important to now specify the Arm’s length nature of the transaction in domestic cases. This also provides a method of standardization of expenditure or fair market value for transactions between group companies.

Domestic Transfer Pricing had come about as a result of the case of CIT vs. GlaxoSmithKline Asia (P) Ltd. The Finance Ministry had been recommended to bring about a deterrent for complications that brought complications in relation to Fair Pricing rules. Thus, the Finance Bill had also stated a method which defines the applicability of the Domestic Transfer Pricing Rules on certain transactions.

Applicability

According to the now codified Section 92BA of the Income Tax Act, the provisions would apply to the following, referred to as Domestic transactions (the value of which,originally, would have to exceed Rs. 5 crore): –

1. any expenditure incurred between related parties referred to in section 40A(2)(b);
2. any transaction referred to in section 80A;
3. any transfer of goods or services referred to in section 80-IA(8);
4. any business transacted between the assessee and other person as referred to in section 80-IA(10);
5. any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which section 80-IA(8) or section 80-IA(10) are applicable; or
6. any other transaction as may be prescribed,

Note that any transaction of International variety nullifies the provisions’ applicability.

For the 2016-17 year, the value of the transaction has been increased to 20 crore rupees. This effectively ensures that a huge number of transactions will no longer come under the umbrella of Domestic Transactions, and it would not be applicable to them anymore.

Computation of Arm’s Length Price

Here, an important consideration is what the Arm’s Length Price[2] of the product would normally be. This can be calculated in the following manner

1. a) Comparable uncontrolled price method: Method is done by comparing the price charged for good/services in a controlled environment, versus the price charged in an uncontrolled environment
2. b) Resale price method: Determined by comparing the gross margin that the reseller earns from the controlled transaction with the gross margin from comparable uncontrolled transactions.
3. c) Cost plus method: Determined by comparing the cost that the manufacturer earns in a closed environment, an open environment.
4. d) Profit split method: Determined by evaluating the allocation of the combined profit or loss attributable to one or more controlled transactions with reference to the relative value of each controlled taxpayer’s contribution to that combined profit or loss.
5. e) Transaction net margin method: Determined by comparing the net profit on costs or sale that the manufacturer or service provider earns from the controlled transaction with net profit on costs or sale from comparable uncontrolled transactions.

Compliance Requirements

Like any other form of corporate taxation, there are certain compliance requirements that must be met for Transfer Pricing. This also has been specified in Section 92D of the Income Tax Act

1. Every assessee has to obtain and produce a Chartered Accountant-prescribed report in Form 3CEB
2. Every person who has entered into Specified Domestic Transaction shall keep and maintain such information and documents in respect thereof, as prescribed in Rule 10D of the Income Tax Rules.
3. Filing has to be done electronically on or before the due date of Income Tax returns, i.e., on or before the 30^th of November of the financial year.

Penalty Provisions

• Adjustment being treated as concealment : Penalty will be 100% to 300% of the tax on adjustment
• Maintenance of required documents not done : 2% of value of transactions
• Transaction in form (3CEB) from Chartered Accountant is not reported: 2% of value of transaction
• Documentation not furnished: 2% of value of transactions
• Failure to furnish report (3CEB) by the due date: Rs. 1,00,000

[1]http://www.investopedia.com/terms/t/transferprice.asp

[2] Arm’s Length Price: – Price that would normally be on the table if the parties to a particular transaction were at ‘arm’s length’, that is acting independently of any relation to each other, and with concern only for each other’s self-interest. Normally is a good indicator of market price.

In this blogpost, Harsha Asnani, student, NIRMA University, Ahmedabad writes about cover available to professionals through Professional Indemnity Insurance. The author also writes about the reasons of why such insurance schemes are favourable to the professionals and entities, costs and type of professionals covered under this scheme.

In the ever increasing consumer-friendly nature of legal environment across different countries, the people working in different professions have to pay utmost attention in the manner in which they perform their jobs. The courts have become more consumer friendly in their approach. It has become a trend that the consumers especially in the medical industry have registered complaints against the doctors or hospital authorities for their negligence. In recent times it is not just the medical professionals or hospital authorities who face such issues but also various other professionals such as auditors who can be sued for filling a wrong statement of income or for that matter a lawyer and an architect etc. as well for negligence in the delivery of their services resulting into harm for others. Although the consumers are protected in every possible manner, the professionals also at the same time are given some sort of protection by way of indemnity insurances. Such insurances are known as the Professional Indemnity Insurance.

Professional Indemnity Insurance refers to insurance programs which protect the professionals from claims that may arise from negligent performance and lack of duty of care or due to errors or omissions while performing duties. It was designed to protect those professionals who provide advice and service to their customers. It covers those claims that may arise for financial losses that due to the advice and services that the professionals provide to their clients. Such financial cover may also include costs involved in defending legal recourses and the subsequent damages that may be payable. Professional indemnity aims to protect both the assets and reputation of the professional that are susceptible to be harmed by the legal actions initiated by the suffering victims.

What is covered under Professional Indemnity

The claim received under professional indemnity covers the following expenses:[1]

1. Compensatory damages awarded against the professionals;
2. Settlements;
3. Legal Costs and expenses associated with defending legal actions.

Which entities are covered under such claims[2]

1. A legal entity and its subsidiaries;
2. Past and existing principal or partner or director;
3. Past or present employees;
4. Contractors;
5. Any other person or entity related or acting within the scope of any of the former’s duties. For example staff like peons and sweepers in a professional establishment can also be covered for errors, omissions and negligence, provided that they are named in the policy. Such policies also neither cover any fines, penalties or punitive or exemplary damages nor any sort of third party public liability or losses arising out of war and nuclear perils nor any errors caused due to wilful neglect or deliberate act or financial losses due to loss of goodwill or loss of market share. Professional indemnity insurances also do not provide for protection in cases where the services are rendered under the influence of intoxicants or narcotics. In the case of dentists, any claims arising out of the discharge of duties under general anaesthesia are not covered unless they are performed in a hospital. Like all other insurance claims, professional indemnity insurance also does not provide any compensation in case of breach of clauses of confidentiality or suppression of anticipation of a claim. Any such condition shall lead to a rebuttal of the claim. Also, it should be kept in mind that in some cases there is a long time gap between the actual occurrence of the event and the time when the claim is actually made. In such cases, the companies or professionals must ensure that the continuity of coverage exists in order to avoid the reasons due to which the policy cannot be claimed

Indemnity insurances cover civil liabilities and not necessarily claims arising out of criminal liabilities or those acts which are committed in violation of any law or ordinances prevailing in the land

Why Professional Indemnity insurances

In a professional conduct claim, one has to spend a lot on money and time-based resources. They bring a lot of damages to the reputation irrespective of whether they are proved or not. In order to avoid all such claims from hampering the reputation of a professional, it is desirable that such indemnity insurances be opted for.

Types of Professions covered under the Professional indemnity insurances

Following are the broad category of professionals to whom the cover of Professional Indemnity insurance programs is available. Depending upon the policy of various insurance companies, there may be other professions as well that may be covered under this insurance scheme.

1. Management Consultants: The protection available to management consultants, among other things include Infringement of intellectual property rights, Fraud and dishonesty of employees, defamation, libel and slander, infringement of privacy, misuse of confidential information, a certain amount of PR and legal expenses and a certain amount of cyber liability.
2. Project Managers: The protection available to project managers, among other things, include unintentional breach of trust, professional negligence breach of intellectual property rights, fraud and dishonesty of employees and a certain amount of PR and legal expenses and a certain amount of cyber liability
3. Designers such as graphic designers, interior designers and web designers: The protection available to designers, among other things, includes unintentional breach of trust, professional negligence, and breach of intellectual property rights, certain amount of PR and legal expenses and certain amount of cyber liability and certain amount of PR and legal expenses and certain amount of cyber liability
4. Marketing consultants: The protection available to marketing consultants, among other things, includes breach of advertising regulation, infringement of intellectual property rights, defamation, libel or slander, infringement of privacy, misuse of confidential information, mitigation of loss, irrecoverable fees cover, cover the expense of withdrawal of content following a court order, certain amount of public relations or legal expenses and certain amount of cyber liability.
5. IT and Software Consultants: The protection available to IT and Software Consultants, among other things, includes unintentional breach of trust, professional negligence, and breach of intellectual property rights, a certain amount of PR and legal expenses and a certain amount of cyber liability.
6. Interior Designers: The protection available to interior designers, among other things, includes unintentional breach of trust, professional negligence, and breach of intellectual property rights, certain amount of PR and legal expenses and certain amount of cyber liability.
7. Life Coaches: The protection available to life coaches, among other things, includes unintentional breach of trust, professional negligence, and breach of intellectual property rights, certain amount of PR and legal expenses and certain amount of cyber liability.
8. Accountants and Bookkeepers: The protection available to accountants and book-keepers, among other things, includes infringement of intellectual property rights, defamation, libel or slander, infringement of privacy, misuse of confidential information, fraud and dishonesty of employees, certain amount of PR and legal expenses and certain amount of cyber liability.
9. Engineers- The protection available to engineers, among other things, includes unintentional breach of trust, professional negligence, and breach of intellectual property rights, certain amount of PR and legal expenses and certain amount of cyber liability.
10. Other professions include recruitment agencies and consultants, fitness professionals including personal trainers, dance teachers or yoga instructors, teachers including private tutors.

Professional indemnity insurance in case of medical professionals

In India, medical professionals and establishments have been made available with professional insurance indemnity cover in India after 1991. The insurance companies not only pay for the monetary claims but also arrange for the legal help from advocates. Benefits of the medical indemnity insurance are not only beneficial to the doctors or hospital authorities but also to the patients as their medical claims get easily fulfilled by the insurance companies. It provides for the retroactive benefit. It takes care of a number of damages against the third party. In cases of no-fault liability also, the scheme may give benefit to the patients who have suffered permanent disablement or death. The only limitation to this indemnity insurance is that the compensation is limited by the limit of indemnity that is decided for. Such insurances provide relief to the medical practitioners from the growing menace of claims from their patient. It must be kept in mind that although this security is available to the professionals but this may be limited to the monetary terms. Security of reputation is not something that such insurance claims can provide for.

[1] http://www.indiainsure.com/pdf/Inotes-Apr12.pdf

[2] ibid

In this blogpsot, Kartikey Johri, Student of VIPS, IP University and the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about who is a person, sectors where FDI are not allowed, What is downstream investment.

In order to answer this crucial question let us begin with defining a person who may be called a foreigner. And for that we need to understand the scope of the term, ‘person’ and the concepts of Resident, Non-resident, and PIO (Persons of Indian Origin).

Who is a person

A person, according to Section 2(u) of the Foreign Exchange Management Act, 1999 is inclusive of the following:

(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by such person. [1]

Thus, it means that whenever we talk about a foreigner or any other person, it is not restricted to an individual and may be any of the above things.

The same Act also defines Foreign Venture Capital Investor in Section 2(w) as an investor incorporated and established outside India which proposes to make investment in Venture Capital Funds or Venture Capital Undertakings in India and is registered with SEBI.

To answer the question, yes a foreigner can be a partner or even a designated partner in a Limited Liability Partnership, and this includes foreign companies as well. A person resident outside India or an entity incorporated outside India shall be an eligible investor for the purpose of foreign investment in Limited Liability Partnership. However the following persons shall not be eligible to invest in an Indian LLP:

1. A citizen/entity of Pakistan or Bangladesh
   2. A SEBI registered Foreign Institutional Investor (FII)
   3. A SEBI registered Foreign Venture Capital Investor (FVCI).
   4. A SEBI registered Qualified Foreign Investor (QFI)
   5. A Foreign Portfolio Investor registered in accordance with Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 (RFPI). [2]

For a foreigner to be a designated partner in an LLP, it is mandatory to have at least one of the designated partners to be a resident of India (S.7 of the Limited Liability Partnership Act, 2008). The consolidated FDI Policy of India governs foreign investment into Indian LLPs along with the foreign exchange laws and regulations.

The consolidated FDI Policy in its Circular no. 2 issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry imposes certain conditions and restrictions on foreign investment in Indian LLPs, with respect to funding, ownership, and management of such limited liability partnerships.[3]

Foreign Direct Investment is allowed via 2 routes, that are, Automatic Route and Government Approval Route. The automatic route is for all those sectors where FDI is allowed without any prior approval of the Government or the Reserve Bank of India. Government approval route, on the other hand, is where foreign investment in Indian market requires a prior approval of the Government and such approval is put forward for consideration before the Foreign Investment Promotion Board, Department of Economic Affairs, Ministry of Finance.

In the case of a Foreigner investing in Indian LLP, the consolidated FDI Policy states that such investment shall be allowed through the Government approval route only in limited liability partnerships operating in sectors or activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions (for example, minimum capitalisation norms applicable to ‘Non-Banking Finance Companies’ or development of townships, housing, built-up infrastructure and construction-related projects).  Also, LLPs with FDI will not be allowed to operate in agricultural or plantation activity, print media or real estate business.

Sectors where FDI is not allowed

There are certain sectors, apart from the aforesaid, where foreign direct investment is disallowed through either of the routes (Automatic or Government approval) such as Atomic energy, lottery or gambling, Nidhi company, business of chit fund, trading in transferable development rights, manufacture of cigars or tobacco substitutes, and agricultural and plantation activities (excluding certain activities such as horticulture, animal husbandry, etc.)).[4]

What is downstream investment

‘Downstream investment’ means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition. With regards to downstream investment, the consolidated FDI policy further states that an Indian company having foreign investment, direct or indirect (irrespective of percentage of such foreign investment) will be permitted to make downstream investment in an LLP, only if both, the company as well as the LLP are operating in sectors where 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. It is to be noted however, that the onus shall be on the Limited Liability Partnership accepting investment from the Indian company registered under the provisions of Companies Act to ensure the compliance required with downstream investment. LLPs with FDIs will not be eligible to make any downstream investments.

Any payment made by an eligible investor towards capital contribution/profit share of LLPs will be allowed only by way of cash consideration to be received by way of inward remittance through normal banking channels, or by debit to NRE/FCNR(B) account of the person concerned, maintained with an AD category- I bank.

RBI’s Circular no. 123 dated April 16, 2014, states in its Annex 1 the provisions for reporting such foreign investment in an LLP. It states that LLPs shall report to the regional office concerned of the Reserve Bank of India, the details of the receipt of the amount of consideration for capital contribution and profit shares in form FOREIGN DIRECT INVESTMENT-LLP(I) together with the copies of FIRC (Foreign Inward Remittance Certificate) and valuation certificate (from a Chartered Accountant/Practicing Cost Accountant or an approved valuer) along with a KYC report on the non-resident investor at the earliest but not later than 30 days from date of receipt of such amount. Disinvestment/transfer of capital contribution or profit share between a resident and a non-resident shall be required to be reported within 60 days from the date of receipt of funds.

Limited Liability Partnerships are also not permitted to avail External Commercial Borrowings (ECBs).

As stated earlier, in case, an LLP with FDI, has a body corporate as a designated partner or nominates an individual to act as a designated partner in accordance with the provisions of Section 7 of the Limited Liability Partnership Act, 2008, such a body corporate should only be a company registered in India under the provisions of Companies Act, as applicable and not any other body, such as an LLP or a Trust. For such LLPs, the designated partner “resident in India” as defined under the ‘Explanation’ to Section 7(1) of the Limited Liability Partnership Act, 2008, would also have to satisfy the definition of “person resident in India” as prescribed under Section 2(v)(i) of the Foreign Exchange Management Act, 1999. Further, the designated partners shall be responsible for compliance with regulations regarding foreign investment into limited liability partnership as well as liable for all the penalties imposed on the LLPs upon contravention of such regulations. Another crucial condition is regarding conversion. It states that conversion of a company with FDI, into an LLP, will be allowed only if the above stipulations are met and with the prior approval of FIPB (Foreign Investment and Promotion Board)/Government.

[1] http://finmin.nic.in/the_ministry/dept_eco_affairs/capital_market_div/FEMA_act_1999.pdf

[2] Scheme for Acquisition/ Transfer by a person resident outside India of capital contribution or

profit share of Limited Liability Partnerships (LLPs) (Annex 1 to Circular no. 123, RBI/2013-14/566)

[3] Para 3.2.5 of Circular no.2 of Consolidated FDI Policy, Department of Industrial Policy and Promotion

[4] Question 5 of FAQ regarding Foreign Investments in India updated up to 15 Feb, 2015; Reserve Bank of India (rbi.org.in)

In this blogpost, Mr.Sreeraj.K.V, Student of Government Law College, Ernakulam, Kerala writes an article on the topic Sexual harassment at workplace. This article includes various problems a woman faces during the time of her employment, its remedy and an analysis of various cases of the same nature.

Introduction

Now a day we hear a lot about atrocities against women and children. Many of us may have faced such problems too. The importance of this article is that even though we have many laws protecting the modesty of women in India, it could not be enforced properly in many parts of our country mainly in metropolitans[1]. While looking into the topic, we will be aware of the fact that it took nearly a decade to implement a law in favour of women mainly who are employed. Now we have Sexual harassment of women at the workplace (prevention, prohibition and redressal) Act, 2013 for protecting women in her workplace from any kind of sexual or other atrocities against her.

The term sexual harassment includes all those unwelcome actions, gestures, and request for sexual favours or pornography to the women at her workplace by other person or any other physical or verbal / non-verbal conduct of sexual nature[2].  The definition gains its importance as it includes any kind of ‘unwelcoming’ actions from other person irrespective of his designation in that office. So such harassment may not be sexual in nature, but when the victim feels that it questions her modesty, then such actions can be included in this definition.

The Act

As mentioned before, it took a very long time to enact a law in favour of women who are working at different places of the country. Before the enactment of this Act, there was no such independent law protecting the women at her workplace. In the case of Vishakha and others v. state of Rajasthan[3], Hon’ble Supreme Court of India looked into the matter as a pure case of Human Rights violation under Article 14, 15, 19 (1)(g) and 21 of the Constitution of India. The judgment of this case also provided certain guidelines which were then derived for the enactment of Sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013 which includes:

1. All those women harassed at her workplace including women as domestic workers, daily wagers, temporary or full-time workers as well as volunteers. The women may or may not be employees, and the law is applicable to women only.
2. Sexual harassment includes all those unwelcome actions, gestures, and request for sexual favours or pornography to the women at her workplace by other person or any other physical or verbal / non-verbal conduct of sexual nature.
3. The Act will be enforceable for the women at the workplace as well as outside arising out or during the course of employment.
4. The Act requires an internal complaints committee at every office and a local complaints committee at every district.
5. An aggrieved woman can file a complaint within 3 months from the date of the incident.
6. Even though money compensation is not a basis for settlement, the Act provides an option for a settlement between the aggrieved women and the respondent but only upon the request of the women.
7. The inquiry has to be completed within 90 days.
8. The complaints committee has the power to take action against the women in case of submission of malicious complaints or evidence.
9. The identity of any of the parties to the case must not be disclosed to anyone other than the court.
10. The Act also places a duty on the employer to conduct various awareness programmes to the employees, and it’s the responsibility of the employer to take proper care of the employees[4].

Section 2 of the Act defines about what is meant by a workplace and sexual harassment as well as the scenarios and impact of such behaviour.

Generally, sexual harassment at workplace includes two forms of inappropriate behaviour:

1. Quid pro quo (this for that) – explicit promise of preferential treatment in employment.
2. Hostile work environment: creating an offensive working environment which may affect her personal life and safety[5].

There is a general principle in our society i.e. prevention is better than cure. In the case of sexual atrocities also, this principle may work to an extent. The Act provides various preventive mechanisms for women after being a victim of sexual harassment at workplace. Whenever an act against women occurs, the first thing she has to do is to inform it to the co-workers and seek their help. She may file a complaint with the internal/local complaints committee for help. The complaint should contain full details regarding the incident including date, time, place, respondent’s details, etc.  Then it is up to the committee to make necessary steps for further legal procedures that must be fulfilled by the aggrieved women.

Another aspect regarding sexual atrocities against working women is that at times such acts may turn into the attempt of rape and even murder. In such situations, section 375, IPC will be applicable for the attempt of rape, and it extends the criminal liability of the respondent.  It is also advisable to the courts handling such matters that the court proceedings must be in – camera so that it does not affect the life and liberty of both parties. There are certain other provisions such as section 354 IPC which deals with provisions regarding such criminal acts which intend to outrage the modesty of women[6]

Constitutional validity

Article 14, 15, 19 and 21 of the constitution of India is regarded as one of the main provisions framed by the constitutional experts in favour of citizens of India as they are key elements of democracy. In the case of sexual harassment, as stated by the Supreme Court of India in Visakha case, even though the act is against a single person, it has to be regarded as an infringement towards the fundamental right of every citizen living in our country. In such a context, the act gains constitutional validity.

Another landmark judgment was made in Aruna Ramachandra Shanbhag v. Union of India[7]. The case mainly dealt with Euthanasia and its constitutional validity in the field of medical Law, but there is a hidden fact in this case that Aruna Shanbhag was also a victim of an attempt of rape at her workplace.

Conclusion  

Sexual harassment against women existed since time immemorial. In a written reply in Lok sabha, Maneka Gandhi, Women and child development Minister stated that around 57 cases were reported at office premises and around 469 cases outside office related to work during 2014[8].

This indicates a rapid increase in the cases of such nature. This is due to the fact that women face a negative environment in their workplaces. This can be cured only with the help of implementing various mandatory rules and regulations and code of conduct inside office premises, and also women must be treated as equal as men not only at their workplaces but also in every sector of life and this must be the first step towards women empowerment in the society.

Lack of knowledge and awareness are also few crucial factors which equally contribute to such increase. It can be however minimized through taking up such courses which give us a comprehensive idea about sexual harassment prevention laws or this course by National University of Juridical Sciences which talks about sexual harassment at workplace.

[1] Retrieved on: http://indianexpress.com/article/india/india-others/526-cases-of-sexual-harassment-at-workplace-in-2014-maneka-gandhi/

[2] Retrieved on : http://www.mondaq.com/india/x/348338/employment+litigation+tribunals/Overview+Of+The+Sexual+Harassment+Of+Women+At+Workplace

[3] Visakha and others v. state of Rajasthan AIR1997SC3011

[4] Retrieved on: http://www.indiatvnews.com/news/india/10-things-to-know-about-law-relating-to-sexual-harassment-at-wor-30985.html

[5] Retrieved on : http://www.hbcse.tifr.res.in/people/handbook-on-sexual-harassment-of-women-at-workshop

[6] Section 354 IPC – Outraging the modesty of a women

[7] Aruna ramachandra shanbhag v. union of India & ors (2011) 4 SCC 454

[8] Retrieved on: http://indianexpress.com/article/india/india-others/526-cases-of-sexual-harassment-at-workplace-in-2014-maneka-gandhi/

In this blogpost, Shivali Wal, Student of the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about, what is stamp duty, why do we need to pay stamp duty, principles regarding stamp duty and  what is the stamp duty for the transaction of loans (mortgage deed) in Karnataka.

What is stamp duty

Stamp Duty is a type of tax that is payable to the government by a person for the transaction of his property. It is payable under Section 3 of the Indian Stamp Act, 1899. As a general rule, the Government has the jurisdiction to collect such taxes, and it is the liability of the purchaser to submit any such dues following the appropriate procedure.The types of property includes leasehold from land (agricultural and non-agricultural), independent houses, flats to commercial units or a freehold.

Evolution of stamp duty

The first to introduce the concept of stamp duty in India were the British in the year of 1899. At the time, a duty was levied on all transactions related to property, which was to be deposited in the treasury of the government. The regulations with  regards to this were provided under the provisions of Indian stamp Act of 1899 and Bombay stamp Act of 1958. The collectible amount was collected by the stamp collectors who were appointed by the government. These collectors would go directly to the specific state under which the individual is taxed. Today, in several states, the provisions of the Indian stamp act of 1899 is still enforceable.

In India, most of the states have their own stamp laws. Hence,the stamp duty levied varies from state to state. Recently, the state of Tamil Nadu has introduced stamp laws concerning the state by distinguishing matters relating to immovable properties and securities.

The bill introduced by Tamil Nadu has brought some tremendous changes to the  Central law. For example, the family was redefined and the terms sister, brother, husband of predeceased daughter and wife of predeceased son was included within the ambit of the family. Thus, father, mother, husband, wife, son, daughter and grandchild are included within the scope of family in the eyes of the central law.

Need to pay stamp duty

Stamp duty is a kind of tax that is comparable with income tax or sales tax that is chargeable by the government. In order to avoid application of a penalty by the authorities, it is needed that one must pay their stamp duty of the full required amount and on time. The penalty for unpaid amount can attract penalty at the rate of two percent that is chargeable every month with the maximum penalty escalating up to 200 percent for the due amount

Principles regarding stamp duty

To register any document a person is required to pay fees, be it a document for  marriage, company, mortgage, property etc. There exists a lack of awareness amongst people when it comes to matters relating to the quantum of money that is required to be paid for such registration.

The amount of fees that is to be paid in this regard is fixed by the state government, which differs from state to state, as each state is empowered to legislate differently. For example, the stamp duty and registration provisions differ between the state of Maharashtra and Karnataka or for  that matter any other state. The basic guidelines as to the threshold and maximum amount of fees that can be charged is laid down in the guidelines given by the Reserve Bank of India (RBI).

Stamp duty in Karnataka

With reference to the provisions of stamp duty in Karnataka, the fees is fixed by the state government i.e. the government of Karnataka (GOK). The government decides the levy of stamp duty and registration fees for documents which are registered in the state of Karnataka. The fees so decided to be charged as stamp duty for the registration of documents can be either a fixed sum of money or it can be a percentage of the value of the transaction. In the state of Karnataka, The Karnataka Stamp Act deals with the provisions that relate to the amount of stamp duty to be levied for the registration of different types of documents. This act extends to the whole of the state of Karnataka i.e. it extends to the entire territorial boundary of the state of Karnataka. According to the act, ‘stamp duty’ is a kind of tax that is levied on the documents that are registered in the state of Karnataka. The act provides a list of 55 articles which are described in the schedule to the act for which stamp duty  is required to be paid at the rates prescribed. In Karnataka, the department of Stamps and Registration is the third highest revenue generating department . This department has a large interaction with the people

Procedural rules regarding payment of stamp duty in Karnataka

Stamp duty is generally paid either before the date of executing a document or at the date of executing a document. The burden of payment of such fees lies on the person executing such a document that is for example in the case of a sale deed the purchaser will pay stamp duty for the execution of such a sale deed as he is the one who desires to purchase the property in question. Similarly in the case of lease document the tenant would pay such fees. Therefore, when it comes to the  payment of fees in relation the loans  the fees will be paid by the person taking such a loan.

In case the stamp duty is not paid, the registration document, will not be received or considered as evidence in the court of law. Hence non- payment of stamp duty can hamper judicial remedies to some extent.

Stamp duty for the transaction of loans (mortgage deed) in Karnataka

The term mortgage is defined under Section 2(n) of the Karnataka Stamp Act, 1957 as under:

including every instrument whereby, for the purpose of securing money advanced, or to be advanced by way of loan, or existing or future debt, or the performance of or engagement, one person transfers or creates, to or in favor of, another, a right over or in respect of specified property;

Article 34 of the Karnataka Stamp Act, 1957, requires the payment of stamp duty towards any loan transaction as it makes a mortgage deed liable to stamp duty.

However, it is stated that an agreement relating to deposit of title-deeds, power or pledge, a bottomry bond, a deed of mortgage of a crop, a respondentia bond and a security bond are not contained within the ambit of a mortgage deed. Article 27 covers the provisions in regards to payment of a deed of further charge.

Article 34 states that:

1. If possession of the property has already been given, in such a case the amount chargeable is at the rate of 5% on the amount plus the surcharge and the registration fees chargeable in such a case is at the rate of 1% of the amount. (34 a)

Therefore,

– stamp duty = 5% on the amount+surcharge.

– registration fees = 1% of the amount.

2. If the possession of the property has not been given, in such a case the amount chargeable is at the rate of 0.5% for every Rs.100 or part thereof and the registration fees chargeable in such a case is at the rate of 0.5% subject to a max. amount of Rs.10,000.

Therefore,

– stamp duty = 0.5% for every Rs.100 or part there of + surcharge.

– registration fees = 0.5% subject to a max. of Rs.10,000.

Hence, it can be concluded that the rate of stamp duty differs on every mortgage deed. it varies in accordance with the possession of the mortgaged property or on any part of the said mortgaged property.

Stamp duty to be paid on instruments

A stamp duty is payable on instruments but not on the transaction. It is also essential to observe the stamp duty and see the intention of the document and the words used in it in order to ascertain the correctness of the stamp duty.

General design has been formatted for the better understanding of the public concerned with the same. The stamp duty and registration fee payable on the simple mortgage deed is as under:

– Stamp duty towards Government is 0.5% on the Loan Amount On the amount secured. (The Karnataka Stamp Act, 1957 Definitions Section 2(1) (n) )

– Surcharge of 2% on the Stamp Duty paid as per Sl. No. 1 (The Abstract of the Karnataka Municipal Corporation Act, 1976 Section 140 or)

– Surcharge of 3% on the Stamp Duty paid as per Sl. No. Surcharge payable if the loan amount exceeds Rs.2000 (The Abstract of the Karnataka Panchayath Raj Act, 1993 Section 205.)

-Registration fee 0.5% subject to maximum of Rs.10,000=00.On the amount secured.

Conclusion

The collection of stamp duty by the government is a form of tax levied upon the purchasers. The provisions regulating the procedure, amount, etc. varies from state to state in India.

There is a continuous scope of amending the provisions guiding the procedure of stamp duty with the changing economy and government observations. The compliance of such provisions is absolutely vital for the purchasers as it protects their subsequent judicial rights. The state provides an easily comprehensive machinery to the public to ensure not only their better understanding of this concept but also to ensure clarity with regards to the procedure concerning stamp duty.

In this blogpost, Harsha Asnani, student, NIRMA University, Ahmedabad writes about Corporate Criminal Responsibility in India. The author also writes about the problems associated with the fixing of Corporate Criminal Responsibility and the manner in which corporations can be held liable for criminal conduct.

After the adoption of globalisation regime, there has been a steep increase in the emergence of corporations as a form of business. A peculiar feature of such type of business entities is that their scale of operation is enormous, and so are its beneficiaries and stakeholders. Due to increase in the magnitude of the operational area of such corporations, it is necessary to keep a check on operations and the class of people it affects.

Unlike civil liability, in the Indian regime, it is difficult to set criminal liability on companies. In the recent past due to a multitude of activities of corporations, their actions are victimizing the society also. Therefore, it becomes important that such actions of theirs should be deterred.

What are the problems with fixing Corporate Criminal Liability

One of the key challenges that come up with fixing criminal liability is the fulfilment of the ingredients of a crime i.e. actus reus and mens rea. Firstly, in order to constitute a crime, it is important that the intentional element is identified. Corporations being fictional entities, it becomes difficult to ascertain, identify or proving the criminal intent. Therefore, juristic fiction proves to be a crucial hurdle. The second failure arises with the imposition of sanctions. Thirdly, for a very long period of time, it was considered that corporations cannot be held liable for moral blameworthiness. Fourthly, in the eighteenth and nineteenth century, it was considered that the corporations cannot be held liable for those acts which are not contained in their respective memorandums or charters. Fifthly, the application of criminal procedure mandates that the accused needs to be present in the trial procedure. Since this cannot be fulfilled in the case of corporations, therefore it is difficult to hold them criminally liable. Due to the above-mentioned reasons, it was held that since corporate are intangible, incorporeal, invisible and immortal, therefore they cannot be punished or imprisoned.

Corporate Criminal Liability as a concept

Corporate Criminal liability is based on the doctrine of respondeat superior which means that a corporation can be held liable only for the acts of its agents or employees who act under its authority either inferred or actual authority. In simple words, if there is a nexus between the criminal acts of the agent and his corresponding corporate duties, the corporation can be held liable for the agent’s conduct. The directors can be held liable under the ‘accomplice theory’ which states that it is they who either directed or encouraged to commit the criminal act or failed to exercise due care and caution during the supervision of the activities of their subordinates. According to this theory, a person is liable in light of his responsible relation irrespective of whether he is in possession of knowledge in relation to the criminal activity.

For imposing criminal liability, it is essential that the act of the employee is committed with the intention of incurring benefit to the corporation directly and indirectly. Also, if it is found that the act was committed with the intention of obtaining some personal benefit but has resulted into benefitting the corporation as well.

Requirements for establishing Corporate Criminal Liability

For fixing Corporate Criminal Liability, following prerequisites need to be followed:

1. Act within the scope of employment- The first and foremost criteria that need to be fulfilled is that the employee must act within his course of employment i.e. while the act was committed he or she must be performing duties assigned by the parent company. According to the common law system, a corporation is liable for the actions of its agents’ activities irrespective of his position in the bureaucratic setup.
2. Benefit to the Corporation- Another requirement that needs to be fulfilled is that the act of the agent or employee must result in some benefit to the company. It is not necessary that the benefit must be received or experienced by the company. The illegal act must be contrary to the interests of the corporate setup.

Manner in which corporations can be made liable

Following are the ways and methods through which corporations can also be made liable by imputing on them employees’ actions[1]–

1. Collective Blindness doctrine- According to this doctrine, it is not necessary that a single individual must be at fault. A group of persons also can be made liable by attributing the totality of knowledge.
2. Willful Blindness doctrine- According to the willful blindness doctrine, if it is found that the corporation was in possession of the knowledge of the illegal activities that were being carried on and had turned a blind eye towards it, then it can be held liable.
3. Conspiracy- A criminal conspiracy between two or more employees of a company or between one employee and non-employees can render the corporation liable as well.
4. Mergers, Dissolutions and liability– After a company has merged with or dissolved or has been acquired by some other company, any illegalities committed by the employees of the earlier company shall be imputed on the new or acquiring company. Thus, it is yet another way recognised by the courts to implicate criminal responsibility on corporations.
5. Misprision of felony– If in a court of law it is proved that a felony has been committed, and the corporation had the knowledge of its commission and further the corporation failed to notify about it to the concerned authorities and acted in such a manner or took steps for its concealment then the corporation can also be held criminally liable. In order to make a corporation criminally liable under this method, it is important that all the conditions are met. Fulfilment of all is necessary.

Corporate Criminal Liability in India

The Indian law recognises three types of offences in respect of creating corporate criminal liability. Firstly, to those persons who are or who were in charge of or were responsible for the affairs of the company unless proved that the commission of the offence was not within their knowledge. Secondly, if it is proved that the offence has been committed with the approval of any officer of the company or has occurred due to his or her neglect. Thirdly, the company can be held liable irrespective of the individual liability.

Prior to 2005, Corporate Criminal Responsibility was not recognised in the Indian legislative scheme. In the case of The Assistant Commissioner, Assessment-II, Bangalore & Ors. v. M/s. Velliappa Textiles Ltd. & Anr.,[2] it was held that a corporation can neither be held liable for criminal activities nor can be prosecuted.

Further, the case of State of Maharashtra v. Syndicate Transport[3] upheld the decision of Velliappa textiles and held that a corporation cannot be held criminally liable and prosecuted for the offences that may result in corporal punishment or imprisonment as they would result in no effective trial and enforcement of punishment.These decisions were upheld in various cases, for example, the Calcutta High Court in the case of Kusum Products Limited v. S.K. Sinha, ITO, Central Circle-X substantiated this legal stand by holding that the company being a juristic person cannot be sent to jail, and it is impossible for the court to impose a punishment that cannot be enforced. Taking a different stand from the present status quo would result in going against the legislative scheme.

In the year 2005, a very drastic change had come to this status quo, through the judgement of Apex Court in the case of Standard Chartered Bank and Ors. etc. v. Directorate of Enforcement and Ors. etc.[4] It was held that a company can be prosecuted and held liable for criminal offences even for the offences which are punishable with imprisonment and fine. In case if the company is found guilty, although the sentence of imprisonment cannot be passed but fine can be imposed. In case if along with the company an individual is also found liable then both sentence of imprisonment and fine can be imposed. There would be no bar to this rule. Although it is assumed that the corporations lack any personal malicious intent of their own but a corporation can be subject to indictment or any other criminal process irrespective of the fact that the actual crime has been committed by or with its agents.

Due to this judicial pronouncement, the blanket immunity from criminal prosecutions has been taken away from corporations. If any of the corporation is held liable, although it can be prosecuted but the judge cannot exercise their discretion in the choice of kind punishment. This discretion can be used only in cases of natural persons and not juristic persons.

Post Standard Chartered Bank case, it has become a trend that the corporations can be prosecuted for offences that are punishable with imprisonment and fine. In the case of Iridium India Telecom Ltd. v. Motorola Incorporated and Ors.,[5] the Hon’ble Supreme Court virtually placed a corporation on the same footing as that of any individual who can be prosecuted for both statutory and common law offences. Also, while holding the corporations liable, it is necessary that the intensity of degree and control be adjusted and liability should be inflicted only if the relationship is so intense that the corporation could be said to think or act through the offender. This is known as the doctrine of attribution and imputation.

[1] http://www.lawctopus.com/academike/corporate-criminal-liability/

[2] 2003 132 TAXMAN 165 SC

[3] AIR 1964 Bom 195

[4]  AIR 2005 SC 2622

[5] (2011) 1 SCC 74

In this blogpost, Rounak Biswas, Student of Symbiosis Law School, Pune and the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about, S.S.Lotus case – Facts and Judgment, post lotus scenario, Enrica Lexie – India’s Contention, ITLOS and the road beyond and the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation 1988

Introduction

Freedom of seas, rather High Seas from the time immemorial has been the bone of contention of all seafaring nations. From the time immemorial, the Vikings, the Portuguese, the Spanish, the British has taken the sea route to discover new lands. Consequently, the independence of the sea also came up. Earlier, the cardinal rule was that the control of the sea will be with the country which is militarily more advanced from the other. The same can be attributed to the fact of Spanish Armada or by the Battle of Jutland where one country tried to establish itself as a naval power replacing the other country. Thus, it’s quite easy to conclude that there was no freedom of high seas as such, and one or the other country has always tried to control freedom of navigation in the seas. The sea in the early fifteenth century was considered to be one of the means for expanding trade and country like Spain considered sea as mere clause and thereby refuses to allow non-Spanish ships to enter the areas administered by Spanish fleets[1].

The question of jurisdictional limit of the seas is a very important one and the same has been debated by jurists and countries alike. The difference in the opinion of jurisdictional limits of the seas has proved time and again that the problem is not easy to resolve and needs a uniform convention to resolve the issue. The Dutch jurist, Hugo Grotius was an advocate of open sea[2] and considered that the freedom of navigation should not be hindered by any state. However, the same appeared to be a far cry. Thus many countries adopted the three-mile limit. The three-mile limit is the area (three miles) covered by a canon shot when fired from the coast aiming towards the sea. However, the same failed to address the problem in the case of collision of two foreign ships or in the case of any conflict between two foreign ships.

S.S.Lotus case – Facts, Judgment & Hereafter

The case of S.S. Lotus (1927) can be considered to be the first case where the question of jurisdiction was raised for the first time. In S.S. Lotus case, a Turkish ship Boz Court collided with a French ship S.S.Lotus in the high seas on 2^nd August 1926[3]. As a result of the collision, the Turkish ship capsized along with the loss of lives of eight Turkish sailors and passengers. When the French ship Lotus reached Turkey, the authorities of Turkey ordered the officer of the watch on board Lotus (who was playing the same role during collision), Monsieur Demons to submit evidence to the Turkish authorities. While doing so, he was arrested by Turkish authorities and along with the Captain of the capsized Turkish ship was tried on the count of manslaughter. He was charged guilty and therefore was punished. The French authorities got concerned by the act of the Turkish authorities and lodged protest with the Turkish authorities. When M. Demons was ordered to be imprisoned for eight days and a fine was imposed the French authorities moved to the Permanent Court of Justice calling the Turkish trial and punishment illegal. The question, therefore, arose in the court whether the Turkish authorities have committed a crime by trying a foreign national in their court for a crime committed outside Turkey and the legality of the pecuniary compensation. The court held that the Turkish authorities have not committed any wrong by trying M. Demons, the French national in their court. The court enunciated two principles, namely – outside its territory and within its territory, collectively known as Lotus principles. The first principle says that a country cannot act beyond its jurisdiction unless the same is being allowed by a convention, custom or a treaty. The second principle says that a state may exercise jurisdiction within its territory even though there is no specific international law or treaty allowing to do so.

However, there is no international treaty or convention that prohibits a state to exercise its jurisdiction in case the act/incident is committed in a foreign country. A wide discretionary power lies in the hand of the country, in that case, which has to decide when to invoke jurisdiction and when not. In that pursuit, the country should keep in mind that they do not overstep the limitation laid down by the international law. In the case, the court held that there lies a concurrent jurisdiction i.e. both the Turkish and French authority has the right to try the offender and not just the flag state i.e. the French authorities. In this case, the court considered both the Turkish and French vessel as a territorial extension of their respective countries and thus came into the decision. The court further held that the Turkish authorities by initiating the criminal proceeding against M. Demons did not violate article 15 of the Lausanne Convention 1923 respecting conditions of residence and business and jurisdiction.

Post-Lotus Scenario

The Lotus decision, however, has been reversed post the 1958 Geneva Convention on the High Seas, reemphasized in UN Convention on the Law of the Sea (UNCLOS) 1982.

Article 11 of the 1958 Geneva Convention on the High Seas and Article 97 of UN Convention on the Law of the Sea (UNCLOS) 1982

 Penal jurisdiction in matters of collision or any other incident of navigation

1. In the event of a collision or any other incident of navigation concerning a ship on the high seas, involving the penal or disciplinary responsibility of the master or of any other person in the service of the ship, no penal or disciplinary proceedings may be instituted against such person except before the judicial or administrative authorities either of the flag State or of the State of which such person is a national.

2. In disciplinary matters, the State, which has issued a master’s certificate or a certificate of competence or licence, shall alone be competent, after due legal process, to pronounce the withdrawal of such certificates, even if the holder is not a national of the State which issued them.

3. No arrest or detention of the ship, even as a measure of investigation, shall be ordered by any authorities other than those of the flag State[4].

But these penal provisions does not have any mention of shooting incidents which clearly does not come under the purview of other incidents of navigation. Now the question lies what will be the course of action in that case as it has been raised in the Enrica Lexie Case.

Enrica Lexie – India’s Contention, ITLOS and the road beyond

Enrica Lexie incident happened in February 2012. Two Italian marines from Vessel Protection Detachment (VPD) mistook an Indian trawler St. Antony as a pirate boat and indiscriminately fired upon it. Consequently two fishermen aboard St. Antony died. The whole incident happened in the contiguous zone at 20.5 nautical miles, well beyond the territorial limit but within the Exclusive Economic Zone (EEZ). The ship was intercepted by Indian Coast Guard and was forced to anchor in Indian port of Kochi. Consequently, the two marines aboard Enrica Lexie were arrested on charges of manslaughter. When the Italy questioned the jurisdiction of India in the case, the Kerala High Court and Supreme Court both ordered the Italian Government and the marines to co-operate with Indian authorities. In response to this unfortunate incident, India claimed an exception to Article 97 of UN Convention on the Law of the Sea 1982 by invoking Article 1(a) and 1(g) and Article 6 of The Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (hereinafter referred as SUA) 1988.

The Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation 1988

Article 1. Any person commits an offence if that person unlawfully and intentionally:

(a) seizes or exercises control over a ship by force or threat thereof or any other form of intimidation; or

(b) performs an act of violence against a person on board a ship if that act is likely to endanger the safe navigation of that ship; or

(c) destroys a ship or causes damage to a ship or to its cargo which is likely to endanger the safe navigation of that ship; or

(d) places or causes to be placed on a ship, by any means whatsoever, a device or substance which is likely to destroy that ship, or cause damage to that ship or its cargo which endangers or is likely to endanger the safe navigation of that ship; or

(e) destroys or seriously damages maritime navigational facilities or seriously interferes with their operation, if any such act is likely to endanger the safe navigation of a ship; or

(f) communicates information which he knows to be false, thereby endangering the safe navigation of a ship; or

(g) injures or kills any person, in connection with the commission or the attempted commission of any of the offences set forth in subparagraphs (a) to (f)[5].

Article 6(1): Each State Party shall take such measures as may be necessary to establish its jurisdiction over the offences set forth in Article 3 when the offence is committed:

(a) Against or on board a ship flying the flag of the State at the time the offence is committed; or

(b) In the territory of that State, including its territorial sea: or

(c) By a national of that State.

Thus, India claimed jurisdiction in this matter as the Italian Marines Act is in violation of Article 1(a) and (g) and Article 6 (1)(a) of SUA Act 1988. All the more the immunity of SUA Act cannot be claimed by Italy since the vessel does not qualify as a warship or a naval auxiliary force or customs unit. Here the ship Enrica Lexie was registered as an oil tanker.

Following a diplomatic fallout between India and Italy, Italy moved to International Tribunal on The Law of Seas (ITLOS) claiming India did not have any jurisdiction over the case and asked to order India to refrain from any kind of administrative and judicial action against the marines. Italy also submitted before ITLOS to allow the two marines to remain in Italy until the completion of arbitration proceedings[6]. India refuted the submission made by Italy and requested the ITLOS to reject Italy’s submissions[7]. The tribunal, ITLOS ordered both the sides to suspend all the court proceedings of both India and Italy and requested them not to start any case or proceeding that may affect the judgment given by ITLOS in the course of time[8]. Accordingly India suspended all the court proceedings. As of now the case is under the purview of Permanent Court of Arbitration and the arbitration proceedings have started following the submission from the Italian and Indian side[9][10].

Conclusion

We have covered a long distance from Lotus to Lexie. However in my personal opinion, we still need to cover a long way as we see the law is incapable of explaining itself in many areas. The Enrica Lexie case pointed out the loophole of UNCLOS 1982, and thus, it is of utmost necessity to reformulate the Article 97 of UNCLOS 1982 providing what should be the correct step in case incident unrelated to collision happens. Instead of ‘any other incident of navigation’, proper conditions should be laid down to avoid standoffs as it happened in Enrica Lexie Case. Furthermore before firing upon some vessel, there should be an established mechanism of warning beforehand so as to warn the intruder of the possible preemptive strike. Otherwise often now and then people will be killed unnecessarily, and countries will get involved in legal entangles.

[1] http://www.jstor.org/stable/pdf/2506024.pdf?acceptTC=true

[2] The Law of the Sea, Robin Rolf Churchill, Alan Vaughan Lowe, Pg- 59 – 60

[3] http://www.icj-cij.org/pcij/serie_A/A_10/30_Lotus_Arret.pdf

[4] Part VII, UNCLOS 1982 can be accessed at: http://www.un.org/Depts/los/convention_agreements/texts/unclos/part7.htm

[5] SUA Act 1988, can be accessed at http://www.un.org/en/sc/ctc/docs/conventions/Conv8.pdf

[6] https://www.itlos.org/fileadmin/itlos/documents/cases/case_no.24_prov_meas/Final_submissions_Italy_orig_Eng.pdf

[7] https://www.itlos.org/fileadmin/itlos/documents/cases/case_no.24_prov_meas/Final_submissions_India_orig_Eng.pdf

[8] https://www.itlos.org/fileadmin/itlos/documents/cases/case_no.24_prov_meas/C24_Order_24.08.2015_orig_Eng.pdf, pg 25 – 26

[9] http://www.pcacases.com/web/sendAttach/1673

[10] http://www.pcacases.com/web/sendAttach/1674

In this blogpost, Komal Rastogi, Student, Nirma University, Ahmedabad, writes about the child sexual abuse in the domestic sphere as well as in Juvenile Justice home, legal provisions and the POSCO Act for the child sexual abuse.

India is the second most populous country in the world and is a home for 430 million children which means 42% of the total population in India. Out of the entire population of children, 50% of the population is under care and protection i.e. the protection from child sexual abuse. Child sexual abuse includes rape, sexual harassment, etc. is a problem which has become a growing concern in India. It is a fact that millions of boys and girls are sexually abused within and outside their homes by relatives or by known persons. In India, children are expected to obey and respect others without questioning their actions. The impact of child sexual abuse is worse in India than in any other country of the world.

Child sexual abuse in domestic sphere

Child Sexual Abuse (CSA) is a mental or physical violation of a child with sexual intent, generally by a person who is in the position of power and trust of a child. Apart from the definition, sexual abuse also includes:

Firstly, an adult revealing his/her genital organs to the child and influencing the child to do the same for them i.e. exhibitionism.

Secondly, an adult touches the child’s genital organ with hands or with other objects and persuading the child to touch their genitalia i.e. touching and fondling of a child.

Thirdly, an adult having anal, oral and vaginal intercourse with a child with or without penetration i.e. assault which includes rape and sodomy.

Fourthly, an adult is persuading or encouraging a child to hear, read or view any pornographic material.

Fifthly, an adult forcing a child to indulge in any sexual activity.

Sixthly, an adult marrying a minor, or minor marrying another minor is considered to be a forced relation.

Children are not only the victims of child sexual abuse but are also traumatized by the law because they are unaware of the act itself. Due to the trauma which children are suffering, their future gets jeopardized.

There are very few cases of child sexual abuse which are reported. Other victims do not even share their plight with their parents. The worst part is the feeling of silence and shame which characterizes the cases of sexual abuse amongst children. To overcome the detrimental effects of child sexual abuse, youth must be protected from this harm. It is imperative to capture the perpetrators of the sexual assault against Indian children. The increasing menace of child sexual abuse is not just limited to domestic spheres but extended to places which aim at protecting the interests of the child such as Juvenile Justice Homes.

Child Abuse in Juvenile Justice Homes

The main aim of the juvenile justice act is “to consolidate and amend the law relating to juveniles in conflict with law and children in need of care and protection, by providing for proper care, protection and treatment by catering to their development needs, and by providing a child-friendly approach in adjudication and disposition of the matters in the best interest of children and for their ultimate rehabilitation through various institutions established under this enactment.” [1] In spite of the aim and objective of the Juvenile Justice Act, its implementation has resulted in child sexual abuse in many states. Many of the rape cases have been taken place in juvenile justice homes i.e. with special families, observation homes, or shelter homes, etc. The girls remain at high risk of assault and abuse even in the protection home. There are many cases in which the perpetrator are staff members including caretakers, security guards, etc. In most of the cases, the sexual assault continues for a longer period as victims are not ready to dissent and endure quietly in the absence of inspection. The cases like two minor girls are assaulted by the manager of Baba Deep Jyoti Anath Ashram in Odisha[2], or boys sodomised by guards and senior inmates at govt. run Ashiana home for boys[3], Delhi or Arya Orphanage Case, Delhi, related to sexual abuse of a child in Juvenile Justice Homes.

To overcome the growing menace of sex crimes against children in India, there are legal frameworks of rights and guarantees enacted in the support of children. These include a vast array of legal enactments ranging from Constitution from one point view to the Indian Penal Code and other statutory provisions like Protection of Children from Sexual Offences Act (POSCO) on the other.[4]

Legal provisions related to child sexual abuse

Until 2012, there was no appropriate legal framework in India which deals with child sexual abuse. Earlier sex crimes against children were protected by section 354, 375, 377,509 of Indian Penal Code, 1860. Section 354 deals with “Assault or criminal force to woman with intent to outrage her modesty,”[5] Section 374 deals with rape, Section 509 states any person who intends to insult the modesty of a woman through word, gesture or act and Section 377 of the IPC deals with unnatural offence

The pornography was dealt with Young Persons (Harmful Publication) Act, 1956. In the year 2012, the Parliament of India has passed the Protection of Children against Sexual Offences Act (POSCO) for the victims of child sexual abuse below 18 years of age.

Salient features of POSCO Act

Firstly, POSCO Act is gender neutral. The consent of the child is immaterial under this act.

Secondly, this law mandates the reporting and recording of sexual abuse against a child. Section 19(1) of the POSCO Act makes it compulsory to report the offence.

Thirdly, this act lists the sexual crimes committed against a child. Section 3 of the POSCO Act states: “A person is said to commit “penetrative sexual assault” if (a) “he penetrates his penis, to any extent, into the vagina, mouth, urethra, or anus of a child or makes the child to do so with him or any other person”; Since the words “any other person” are used in Section 3(a), women may also be offenders or victims under the second part of Section 3(a)”.[6]

Fourthly, it also provides protection to minors during the judicial process.

Fifthly, “Section 5(j): “Whoever commits penetrative sexual assault on a child, which in the case of female child, makes the child pregnant as a consequence of sexual assault.” However, even in these offences, women can be joined as abettors under Section 16, POCSO Act”.[7]

Provisions of POSCO

1)  As soon as the matter is reported to the police officer, within 24 hours, the case should be presented before the Child Welfare Committee.

2)  The statement of the minor should be recorded in his or her home or his or her favorite place only by a female police officer.

3)   This act also provides a speedy trial and in camera proceedings to ensure confidentiality.

4)   The minor should not be called in the court repeatedly. He or she may be testified through video from home.

5)  The medical examination must be conducted by a female doctor, in the presence of a person whom minor trusted. Consent of the parents or guardians if present, otherwise the consent of medical professional on the behalf of a minor is required.

6)  The defense should route all the question through the judge and cannot ask any aggressive or character assassination questions to the juvenile.

7)  The minor should not be exposed to accused in any way during the recording of evidence.

Punishment enumerated under POSCO

1. For penetrative sexual assault, the sentence not less than seven years extended up to life imprisonment along with fine under section 4 of the POSCO Act.
2. Aggravated sexual assault committed by a person of trust or authority like police officer under section 6 would be punished with not less than ten years and extended up to rigorous life incarceration and fine.
3. For the non-penetrative sexual assault committed by a person with sexual intent must be punished with not less than three years and extended up to 5 years of imprisonment under section 10 of the POSCO Act.
4. Under section 10, if the aggravated sexual assault is done by the authority or by the person of trust, it would be punished with not less than five years and extended up to seven years of incarceration.
5. For sexual harassment under section 12 of the POSCO Act, prescribes a punishment of 3 years along with fine.

“As per section 42 of the POCSO Act, where an act or omission constitutes an offence punishable under this Act and also under sections 166A, 354A, 354B, 354C, 354D, 370, 370A, 375, 376, 376A, 376C, 376D, 376E or section 509 of the Indian Penal Code, then notwithstanding anything contained in any law for the time being in force, the offender found guilty of such offence shall be liable to punishment under this Act or under the Indian Penal Code as provides for punishment which is greater in degree.”[8]

Conclusion

Sexual abuse of a child is veiled in secrecy. It is essential for parents and guardians of the child to get sensitized and understand the degree of the problem. It is also crucial for the parents to create a protective environment for the child and to guide their children how to protect themselves from sexual abuse.

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[1]Retrieved on http://www.achrweb.org/reports/india/IndiasHellHoles2013.pdf

[2] Ibid

[3] Ibid

[4] Ibid

[5] Retrieved on https://indiankanoon.org/doc/203036/

[6] Retrieved on http://www.legalservicesindia.com/article/article/crusading-against-child-sexual-abuse-through-law-introspecting-the-posco-1908-1.html

[7] Ibid

[8] Ibid

In this blogpost, Aditi Sampat, Advocate, Nabco Enterprises Pvt Ltd and a student of the Diploma in Entrepreneurship Administration and Business Laws by NUJS, writes about the need for due diligence in acquisition,  important points to be kept in mind for due diligence of a software company which is being acquired.

The need for due diligence in acquisition.

The need for conducting adequate due diligence is necessary to the future success and longevity of the acquiring company. Sufficient time should be taken by the potential buyer to be as thorough as possible to ensure a competent investigation of the target company.

The purpose of due diligence with regards to acquisition is valuation and risk assessment. There are three primary areas that are assessed for the above –

1. Legal
2. Financial

The risks of inadequate due diligence involve

1. Unanticipated costly integration.
2. Inheriting unanticipated legal liabilities which were not covered.

According to Jim Hoffman, who is a pioneer in Information Technology Due Diligence, the due diligence related to Software and Information Technology is a mere afterthought when compared to the above areas that are assessed for valuation and risk assessment.

Nevertheless, there is an emerging trend wherein it is becoming increasingly difficult to ignore due diligence related to Information Technology and Software since the same has become integral to the functioning of every business.

Hoffman additionally also adds that Due Diligence for Software Company, which is being acquired is easier than legal or financial due diligence.

In his words “Software due diligence is more focused on spotting and anticipating future hurdles and costs. Unless the technology is not scalable with the business or not the presented technology, almost anything can be resolved.”

Due diligence of a software company which is being acquired:

1. Ownership of the product – Whilst conducting due diligence of a software company who claims to have a certain product, the acquirer must ensure that the software company does have a functional piece of technology and the corresponding customer base as claimed by them. An expert should be appointed to review the target company’s specific software program.

2. Determine the Technology’s Compatibility – Ensuring compatibility with the acquiring company’s technology. If the target company uses proprietary technology, the integration will not be easy. Instead, there will be serious repercussions on the maintainability of the software and retention of key employees at the target company.

3. Whether the Technology can be supported -Questions pertaining to the ownership of Intellectual property rights, patents and trademarks. Also, questions pertaining to whether there were any signed Non-Disclosure Agreements. In addition to the above, review of the third party software and open source licenses

What is a Non-Disclosure Agreement?

A non-disclosure agreement is a legal contract between two parties who agree on sharing confidential material, knowledge, or information for certain purposes, but also wish to restrict access to it by third parties.

What is Third Party software?

A third-party software component is a reusable software component, which has been developed to be either freely distributed or sold by an entity which is other than the original vendor of the development platform.

What are Open Source Licenses?

Open source licenses are licenses allow the software to be freely used, modified, and shared.

4. Uncover Licensing Risks – Typically a Startup or a Small Technology Company has not been properly licensed all its production and development software. In the wake of getting the product developed and sell it in the market, a number of licenses would not have been obtained. The same would be required to be obtained before the completion of the acquisition.

5. Review as to whether the technology of the target company is scalable – Where each acquisition plan is unique, it is extremely important to ensure that the technology of the acquired company is scalable and can integrate with new marketing and sales structures of the acquirer company. In the event that the technology requires a complete re-architecting to accommodate scaling, this would become an important aspect to include in the takeover contract.

What is Scalability of Software?

Scalability is the capability of a system or a network or a process to handle increased volume of work or enlarging its potential to accommodate the corresponding growth due to the increased volume.

6. Identify Key employees associated with Technology – Conducting interviews of the employees of the Target Company. Ensuring that key players remain employed post acquisition by offering retention bonuses. The same required to be incorporated in the acquisition agreement so that employees of the Target Company are motivated to stay and keep the technology sustained.

7. Appropriateness of Current Level of Resources – Reviewing whether the systems of the Target Company are outdated which could lead to large investments for the Acquiring Company. The Investment so to be incurred should be included in the agreement between the acquiring and target company.

8. Discover Hidden Projects – There may be several experimental projects which the Software team of the company could be working on which may not become a part of the target company’s product. The technical expert must make connections between these projects and the strategy and technology of the acquiring company. More often than not, these projects are discovered during employee interviews at the time of due diligence.

9. Review of the SDLC, that is, Systems Development Life Cycle–If the acquirer company is acquiring the team and are dependent on the target company for the software code, then the former would be interested in the continuance of the systems which are in existence and are functioning.

What is Systems Development Recycle?

It is a term to describe a process for planning, creating, testing, and deploying an information system.The systems development life-cycle concept applies to a range of hardware and software configurations, as a system can be composed of hardware only, software only, or a combination of both.

Conclusion

The need for Due Diligence for a software company to be acquired is of prime importance and should be started at the earliest time frame in the process of acquisition. However, it is very important to have a software expert as a part of the due diligence team to understand and point out the technical background involved in the process of acquisition of the target company.

Sources

1. http://stackoverflow.com/questions/814071/what-typically-takes-place-during-the-due-diligence-phase-of-an-acquisition-of-a
2. http://www.axial.net/forum/9-reasons-it-due-diligence/
3. http://www.axial.net/forum/it-due-diligence/
4. https://www.quora.com/What-is-a-good-list-to-go-through-during-the-due-diligence-process-of-an-acquisition
5. https://en.wikipedia.org/wiki/Non-disclosure_agreement
6. https://en.wikipedia.org/wiki/Systems_development_life_cycle
7. https://en.wikipedia.org/wiki/Third-party_software_component
8. https://en.wikipedia.org/wiki/Scalability