In this blogpost, Sudhi Ranjan Bagri, Student, National Law Institute University, Bhopal writes about what is confession, rights to retract confession and the evidentiary value of retracted confession.

Introduction

Confessions

There is no definition of the word “confession” in the Indian Evidence Act[1] and it appears for the first time in Section 24. It is clear that confessions are merely a species of admission which is defined under Section 17 of the Act. It is correct to say that every confession necessarily is an admission but every admission does not necessarily amount to a confession. Sections 17 to 23 deal with admissions whereas Sections 24 to 30 deal with confessions.

Sir Stephen in his Digest of the law of Evidence defines confession as “an admission made at any time by a person charged with a crime stating or suggesting the inference that he committed that crime.”

Lord Atkin has observed[2] that, “A confession must either admit in terms the offence or at any rate substantially all the facts which constitute the offence. An admission of a gravely incriminating fact, even a conclusively incriminating fact is not in itself a confession.”

Of Probative value of confessions

A confession is substantive evidence against its maker, if it has been duly recorded and suffers from no legal infirmity, it would suffice to convict the accused who made the confession, though as a matter of prudence, the Court usually expects at least some corroboration before acting upon it. But before acting upon a confession, the Court must be satisfied that it is voluntary and true. Voluntariness depends upon whether there was any threat, inducement or promise. The truth is to be judged in the context of the entire prosecution case i.e. whether it fits into the proved facts and does not run counter to them. If these two conditions are satisfied, it becomes the most reliable piece of evidence against the maker.

Of Retracted Confessions

Retraction may be defined as the act of recanting.[3] To recant means to withdraw or renounce prior statements formally.[4] A retracted confession is one which is withdrawn or retracted later on by the person making it.

Retraction of statements is something that happens in most criminal cases. The reason behind the same may be the inadequate police protection or the ill-developed mechanism for witness protection or the inherent securities of the witnesses or the accused under the influence of the status of the opposing party as happens in almost all the high profile cases.

It should be noted here that the Act makes no distinction whatsoever between a retracted confession and an unretracted confession and both are equally admissible and may be taken into consideration against the accused though it may be that less weight would be attached to a retracted confession.[5]

Right to Retract Confessions

Retraction of a confession is very common since it is often procured through non-validating means An extraordinarily large number of confessions, in criminal cases, culminate in retractions, as a matter of course.^[6] In India, retractions are as plentiful as confessions.^[7] This goes to show that most confessions do no proceed from a feeling of penitence and remorse as they should, but that they have their source in the inducement, threat, torture, hope or any other non-validating cause.^[8] Thus, to retract from a confession is the right of the confessor and all the accused have invariably adopted that right.^[9]

Concept of Retraction flows from the Constitutional Right against Self-Incrimination

Article 20(3) of the Constitution of India, 1950 guarantees protection against the compulsion to be a witness against oneself. The application of this provision extends to statements made during police interrogations.^[10] This means that no person can be forced to make a confession, against his will. Thus, the test of relevancy of a confession is whether it is voluntary or not.^[11] Since there is a danger that the confessor may implicate himself against his will, the law regarding the same is so strict that a confession that is not voluntary is rejected even if it is true.^[12] Sections 24 to 30 of the Evidence Act have been legislated to take care of this constitutional right by excluding from evidence all self-incriminating statements that have not been made voluntarily.^[13] A right to retract is important because a retraction puts the court on enquiry as to the voluntary character of the confession.^[14] Moreover, to withdraw from what has been said previously is to be interpreted as an extension of civil liberty.^[15]

Retraction must be affected, especially when the Confession is Involuntary

When a confession has been retracted, the court has a duty to evaluate the evidence concerning the confession by looking at all aspects.^[16] The first test that the court is required to apply with regard the same is to ascertain whether the confession was voluntary or not.^[17] Satisfaction of this test is a sine qua non for admissibility of the confession in evidence.^[18] The word ‘voluntary’ used in respect of a confession refers to a confession that is not caused by inducement, threat or promise.^[19] If it appears to the court that a confession has been procured using any inducement, then it would be rendered irrelevant.^[20] A well-grounded suspicion based on the circumstances of the case may exclude a confession^[21] since the use of the word ‘appears’ in Section 24 suggests a lesser degree of probability than ‘proof’ defined in Section 3 of the Evidence Act.^[22] It is idle to expect the accused to ‘prove’ the inducement for in most cases such proof cannot be available.^[23] In light of the same, anything from the barest suspicion to positive evidence is considered sufficient for discarding a confession.^[24]   

Evidentiary value of Retracted Confessions

status of retracted confessions under the Act

The Act makes no distinction whatsoever between a retracted confession and an unretracted confession and both are equally admissible and may be taken into consideration against the accused though it may be that less weight would be attached to a retracted confession.[25]

Particulars of a retracted confession

As the confession is required to be clear, specific and unambiguous, its retraction should also not be ambiguous, vague or imaginary. The person alleging retraction of confession or his earlier inculpatory statement must satisfy the court that that he had withdrawn from his statement at the earliest possible time[26] and without any afterthought or advice and must give reasons for the same.[27]

Weight attached to a retracted confession

The weight to be attached to a retracted confession must depend on the circumstances under which the confession was given, and the circumstances under which it was retracted including the reasons given for retraction.[28]

Importance of corroboration

It is only as a matter of prudence and caution which has sanctioned itself into a rule of law that retracted confession cannot be made the sole basis of conviction unless it is corroborated. It is not necessary that each and every circumstance mentioned in the confession is separately and independently corroborated. It would be sufficient if the general trend of the confession is substantiated by some evidence which would tally with what is contained in the confession[29] i.e. corroborated in general particulars.

It is also a general rule that it is unsafe to base the conviction of the accused upon his retracted confession even when it is held to be true and voluntary unless it is corroborated in material particulars by independent evidence.[30]

Value of retracted confession against Co-accused and Accomplice

Where more persons than one are being tried jointly for the same offence, a confession made by any one of his co-accused can be taken into consideration by the court not only against the maker but also against his co-accused. The Act nowhere provides that if a confession is retracted, it cannot be taken into consideration against the co-accused or the confession accused.[31] A retracted confession can be considered against but it cannot be the basis for conviction of co-accused.[32]

However, the standard of corroboration is quite different in such cases. In the case where the resiled statement is being used against the confessing accused, general corroboration is sufficient whereas in cases of co-accused or an accomplice, corroboration in material particulars in necessary.[33]

It should be noted that it has been held that a retracted confession can be taken into consideration to indicate the prima facie involvement of others.[34]

Comparison with English Law

It is submitted that the Law in England differs from that in India to the extent that an accused person can be convicted on his own confession, even when it is retracted if the Court is satisfied with its truth. In India, there is a further requirement of corroborative evidence to support it.[35]

Conclusion

In conclusion, it is submitted that retraction is a very important principle of the Law of Evidence. It has a strong practical foundation. Furthermore, to give a gist of this article, the following principles constitute the law relating to retracted confessions:

1. It is not illegal to base a conviction upon the uncorroborated confession of an accused person, provided that the court is satisfied that the confession was voluntary and true in fact.
2. From the viewpoint of legality, the fact that a confession has been retracted is immaterial,
3. A confession is not regarded as involuntary merely because it has been retracted.
4. Before using the retracted confession, it must be proved to be true and voluntary.
5. In cases of co-accused, the confession must be corroborated by material particulars.
6. A person has a general right of retraction which flows from the principle against self-incrimination.

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[1] The Indian Evidence Act, 1872 [Hereinafter “the Act”]

[2] Pakala Narayan Swami v. Emperor, AIR 1939 PC 47

[3] P Ramanatha Aiyar, Advanced Law Lexicon, 4122 (3^rd Edition, Volume IV, Wadhwa and Co, Nagpur, 2005)

[4] P Ramanatha Aiyar, Advanced Law Lexicon, 3977 (3^rd Edition, Volume IV, Wadhwa and Co, Nagpur, 2005)

[5] Re: Kodur Thimma Reddi and Ors, AIR 1957 AP 758

[6] Queen Empress v. Babulal, (1884) ILR 6 All 509

[7] R v. Thompson, [1893] 2 QB 12

[8] R v. Thompson, [1893] 2 QB 12; The Deputy Legal Remembrancer v. Karuna Baistobi (1895) ILR 22 Cal 164; Dikson Mali v. Emperor, AIR 1942 Pat 90

[9] State of Tamil Nadu v. Kutty @ Lakshmi Narasimhan, AIR 2001 SC 2778; Rajen Boro v. State of Assam, 2003 (2) GLT 632

[10] Nandini Satpathy v. P L Dani, AIR 1978 SC 1025

[11] Kalawati v. The State of Himachal Pradesh, AIR 1953 SC 131

[12] Emperor v. Bhagi Vedu, (1906) 8 BomLR 697; Emperor v. Panchkari Dutt, (1925) ILR 52 Cal 67;  In Re: Tadipamula Satyanarayana, AIR 1959 AP 419

[13] Ram Lalwani v. The State, 1981 CriLJ 97 (Del)

[14] Emperor v. Krishna Babaji, (1933) 35 BomLR 728

[15] Aloke Nath Dutta v. State of West Bengal, (2007) 12 SCC 230

[16] State of Tamil Nadu v. Kutty @ Lakshmi Narasimhan, AIR 2001 SC 2778; Rajen Boro v. State of Assam, 2003 (2) GLT 632

[17] Shankaria v. State of Rajasthan, AIR 1978 SC 1248

[18] Id.

[19] Shanker Rao Chitnavis v. Ganpat Rao Pande, AIR 1925 All 606

[20] The Indian Evidence Act 1872, §24

[21] Emperor v. Panchkari Dutt, (1925) ILR 52 Cal 67

[22] Pyare Lal Bhargava v. State of Rajasthan, AIR 1963 SC 1094

[23] Vishnu v. Achut, AIR 1925 All 627; Bhukhin v. Emperor, AIR 1948 Nag 344

[24] Emperor v. Panchkari Dutt, (1925) ILR 52 Cal 67

[25] Re: Kodur Thimma Reddi and Ors, AIR 1957 AP 758

[26] Taj Mohammad Khan v. State of Karnataka, 1998 CrLJ 2312 (Kant)

[27] Subramania Goundan v. The State of Madras,  AIR 1958 SC 66

[28] Bhuboni Sahu v. The King, AIR 1949 PC 257

[29] State of Uttar Pradesh v. Boota Singh & Ors, AIR 1978 SC 1770

[30] Pyare Lal Bhargava v. State of Rajasthan, AIR 1963 SC 1094

[31] Ram Prakash v. The State of Punjab, AIR 1959 SC 1

[32] Shrishail Nageshi Pare v. State of Maharashtra, (1985) 2 SCC 341

[33] Subramania Goundan v. The State of Madras,  AIR 1958 SC 66

[34] Mohan Wahi v. State, 1982 CrLJ 2040 (Del)

[35] Yap Sow Keong & Anor v Public Prosecutor, [1947] MLJ 90

In this blogpost, Sonal Srivastava, Student, Amity Law School, Lucknow, writes about what is a one person company, who can incorporate a OPC, features of a OPC and the procedure for incorporation.

OPC or ‘one person company’ is defined in section 2(62) of the Companies Act, 2013 as a company which has only one person as a member. According to section 2(68) of the Act, it is the sub- domain of a private company.

Who Can Incorporate OPC?

According to Rule 3 of the Companies (Incorporation) Rules 2014, only a natural person who is the citizen and resident of India can-

Incorporate one person company and as well as shall be a nominee for the sole member of a one-person company.

Features of One Person Company

• Minimum paid-up share capital is 1 lakh.
• OPC can either be a company limited by share/company limited by guarantee or an unlimited company.
• The words ‘one person company’ need to be mentioned in brackets below the name of One Person Company, for example- Srivastava Company Ltd

                                                              (One Person Company)

• One Person Company should mention the name of the nominee/other person in the memorandum of association, with his prior written consent and the same should be filed with the registrar at the time of incorporation.
• Maximum Director- 15, minimum Director- 1.
• OPC need not hold AGM ( Annual General Meeting)
• Registrar should be informed about all the contracts entered by the OPC.

Procedure for Incorporation of OPC

1. DIN (Director Identification Number) and Digital Signature Certificate– First of all, the sole shareholder/director should get Director Identification Number from the Ministry of Corporate Affairs and also get Digital Signature Certificate.
2. Name of the Company– The second step involves the sole shareholder to apply for the name of the company.
3. Consent of the Nominee– The subscriber to the memorandum of ‘one person company’ shall nominate a person, after obtaining written consent of such person, who shall, in the event of subscriber’s death or his incapacity to contract, become the member of that one person company. [1]
4. Incorporation- Form INC- 2 is the form for incorporation of ‘one person company’ which has to be submitted to the registrar along with the following attachments-
   1. Memorandum of Association
   2. Articles of Association
   3. Proof of identity of the member and the nominee.
   4. Residential proof of the member and the nominee.
   5. A copy of PAN card of member and nominee.
   6. Consent of nominee in form INC- 3.
   7. An affidavit from the subscriber and first director to the memorandum in Form INC-9.
   8. List of all the companies (specifying their CIN) having the same registered office address, if any.
   9. Specimen signature in form INC- 10.
   10. Entrenched articles of association.
   11. Proof of registered office address.
   12. Copies of the utility bills. (not older than 2 months)
   13. Proof that the company is permitted to use the address as the registered office of the company if the same is owned by any other entity/person.
   14. Consent from the director.
   15. Optional attachments.
5. Final Incorporation Certificate– After doing all the formalities, the subscriber shall receive the final incorporation certificate from the registrar of the companies. The business can be commenced henceforth.
6. E– filing– the subscriber can also do e-filing for the incorporation of the company by filling e- form INC-2 and attaching other relevant documents.

Conversion of One Person Company to Private Limited or Public Company

According to Rule 3(7) of the Companies (Incorporation) Rules, 2014, a person company cannot voluntarily convert into any other kind of company unless two years have expired from the date of incorporation. After two years from the date of incorporation, one person company may convert into any other company even without threshold limit.

The threshold limit is an exception to the above rule that is if the paid-up share capital exceeds fifty lakh rupees or the annual turnover during the relevant period exceeds two crore rupees then it shall cease to be a one person company. (Rule 6(1) of the Companies (Incorporation) Rules 2014) and get converted into a private or public company.

After this, the one person company shall within sixty days from the date of applicability gives notice to the registrar that it has ceased to be “one person company” and that now it is required to convert itself into a private company by virtue of its exceeding paid up share capital.

Such one person company shall be required to convert itself, within six months of the date on which its paid up share capital has increased beyond fifty lakh rupees or the last date of relevant period during which its annual average turnover exceeds two crore rupees as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors in accordance with the provisions of section 18 of the Act.

The conversion shall be done after making necessary alterations in the memorandum and article of association and also by giving notice to the registrar in Form INC- 5.

Conversion of Private Company into One Person Company

A private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakh rupees or less or average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting. The company shall obtain NO objection certificate, and such resolution shall be filed with the registrar of companies within 30 days in Form no. MGT14.

The company shall file an application in form no. INC 6 for its conversion into ‘one person company’. On satisfaction and compliance with requirements, the registrar shall issue the certificate.

Conclusion

Thus, it can be concluded that the concept of ‘one person company’ was brought into action with the aim to encourage small scale industries and companies and, therefore, the process of incorporation of the same is kept simple so that the company can be incorporated by the subscriber without facing much difficulties.

[1] Advanced Company Law and Practice, the Institute of Company Secretaries of India

In this blogpost, Sudhi Ranjan Bagri, Student, National  Law Institute University, Bhopal, writes about what is the doctrine of public policy, the recognition and enforcement of the arbitral award it’s position in India, England and Russia.

Introduction

International economic cooperation has increased exponentially in the past decade and has resulted in a number of cross-border contractual disputes and complex questions of law such as choice of governing law, the jurisdiction of the chosen forum, consequences of the ambiguity of contractual provision et cetera. Litigation is not a viable alternative for dispute settlement on the international stage due to the costs involved.

Arbitration, sometimes preceded by some non-adjudicatory method of dispute resolution, has emerged as the popular method due to its well-known advantages. However, enforcement of arbitration is a contentious issue as the arbitral awards have to be enforced by the courts of the respective country which interpret with respect to their own laws. This project shall deal with the enforcement of foreign arbitral awards in accordance with the enforcing country’s public policy.

Doctrine of public policy

The doctrine of public policy, in the context of arbitration, entails that not all subject matter of dispute between two or more parties can be subjected to arbitration owing to the ‘public’ nature of the subject matter. In other words, if the subject matter is such that impacts society at large, then, it shall not be allowed to be settled by a tribunal constituted at the whim of the contracting parties and shall not be enforceable in rem. Matters affecting the general public shall be decided by the lawful public authorities of the country, i.e. the Courts and tribunal constituted under statutory authority, in pursuance of the interest of its citizens and furtherance of national law, which may or may not be in accordance with international law. e.g. disputes relating to fraud, corruption, crime, human rights, foreign policy, etc.

Article V (2) of the New York Convention of Recognition and Enforcement of Foreign Arbitral Awards, 1958, gives the signatory countries leeway to not enforce a foreign arbitral award if:

• It is found to deal with a subject matter which is not arbitrable under the laws of that country
• It is found to be contrary to public policy of that country

Sections 34 and 48 of the Arbitration and Conciliation Act, 1996, based on Article 34 of the UNCITRAL Model Law also provide for the same conditions. Section 23 of the Indian Contract Act, 1872, encapsulates the concept of public policy as follows:

“The consideration or object of an agreement is lawful, unless it is forbidden by law; or is such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent; or involves or implies injury to the person or property of another; or the court regards it as immoral or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement, of which the object or consideration is unlawful, is void”.

Section 68 of the English Arbitration Act, 1996, provides that an award can be set aside in whole or in part on the ground of serious irregularity. Section 68(2)(g) states that “Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant: (g)the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy.” Setting aside an award under Section 68(2) (g) of the English Arbitration Act, 1996, has a higher threshold than under Article 34(b) (ii) of the Model Law. RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS: EMERGING TREND

Recognition and enforcement of arbitral awards: Emerging trend

Arbitral awards obtained in one country sought to be enforced in another can be enforced by its Courts only if that country is party to the New York Convention.

Indian position

Public policy in India has been redefined from time to time. The question of public policy arose for the first time in the case of Renusagar Power Co. Limited v. General Electric Company[1] (“Renusagar case”), wherein the court held that mere violation of any provision of Indian laws would not suffice to attract the bar of public policy.

Subsequently, the SC in the case of ONGC v. Saw Pipes[2] (“ONGC case”) expanded the ambit of ‘public policy’ so as to include any awards which violate any statutory provision of Indian laws Such an award is considered as ‘patently illegal’ and therefore in violation of public policy. The point worth noting here is that in the Renusagar case, the enforcement of an award was being challenged, however in ONGC case the validity of arbitral award itself was being challenged under Section 34 of the Act.

Thereafter, with the impact of the decision in the case of Venture Global v. Satyam Computers[3] (“Venture Global case”), awards which were being passed in arbitrations seated outside India, became open to challenge under Section 34 of the Act. This resulted in foreign awards being subject to the broader test of “public policy” as enunciated in ONGC case.

In case of Bhatia International v. Bulk Trading S.A[4] (“Bhatia International case”), ONGC along with Venture Global caused an unfavourable situation opening the doors for many petitions challenging the arbitral awards on the ground of ‘patent illegality.’ These awards involving Indian parties were challenged before the courts in India which were again heard on merits thereby defeating the very objective of arbitration.

The Supreme Court gave a wider meaning to the term ‘public policy’ in the case of Phulchand Exports Limited v. O.O.O. Patriot [5](“Phulchand case”) under Section 48 of the Act, and laid down that the scope and purpose of the public policy is same under Section 34 and 48. Thus, in a case where the parties challenge the enforcement of the foreign award, Section 34 of the Indian Act can be invoked by virtue of the decision in Phulchand which gave a wide interpretation to the expression public policy and almost re-open the entire matter.

The decision given in Phulchand case has now been overruled by Shri Lal Mahal Ltd. v. Progetto Grano Spa[6]. In this matter, an award passed under the rules of the Grain and Feed Trade Association, London and upheld by courts in the UK was sought to be enforced in India. Objection to the enforcement of the award was raised under Section 48 of the Act on the ground that the award was contrary to the terms of the contract and thus patently illegal and in violation of ‘public policy’.

The Supreme Court is of the opinion that, the ground of ‘patent illegality’ is not included in the expression of ‘public policy’ under section 48 of the Act. Further, such ground is limited to section 34 of the Act where the question about the setting aside of the award arises.

In cases that involve the matters related to foreign arbitral seat and conflict of laws, the doctrine of public policy is limited. It was decided by the court that the ‘public policy of India’ under Section 34 would be interpreted in the relation of the jurisdiction of the seat where the authority of the award is challenged before such award becomes final and executable.

According to Section 48, the Supreme Court does not have any power to review the award at the stage of enforcement. The court is also restricted to review such an award on the merits. Therefore, the Supreme Court limited the meaning of ‘public policy’ to:

1. Fundamental policy of India;
2. Interests of India;
3. Justice and morality.

English position

In England, the pro-enforcement bias under the New York Convention has been faithfully and consistently observed. The national courts in England are reluctant to excuse an award from enforcement on grounds of public policy and interpret it restrictively.

In Soleimany v. Soleimany[7], the courts refused the enforcement of the award and held it to be contrary to public policy to give effect to an agreement to carry out an illegal act, as the case involved smuggling of carpets out of Iran.

In Westacre Investments Inc. v. Jugoimport[8], the Court of Appeal held that the enforcement of an award would not be denied, merely on the ground that there was an allegation of bribery to the Kuwaiti officials. The Court held that as the arbitral tribunal rejected the allegations and that the substantive law of the dispute was Swiss law it would respect the decision of the tribunal. The court further stated that there was a need to maintain equilibrium between public policy considerations of discouraging illegality and principles of comity in not enforcing awards made in violation of other States’ laws and against the policy of giving the effect of the finality of awards.RUSSIAN POSITION:

Russian position

The most illustrative case concerning violation of Russian public policy is United World v. Krasny Yakor[9]. Here, United World was awarded a sum of US$37,600 against Krasny Yakor and enforcement was granted by the Russian court of the first instance. However, the enforcement decision was set aside by the Federal Arbitrazh Court of the Volgo-Vyatsky Region. The cassation court held that enforcement of the arbitral award would lead to the bankruptcy of Krasny Yakor (a state-owned company), which would consequently have a negative influence on the social and economic stability of the city of Nizhi Novgorod, and consequently on the Russian Federation as a whole, as Krasny Yakor manufactured products of strategic value for the security and national safety of the state. Therefore, such damages were declared to be in contravention of public policy.

A different approach towards violation of public policy was taken in O&Y Investments Ltd. v. OAO Bummash[10]. In this case, arbitration proceedings were initiated against Bummash. While the arbitration proceeding was pending; Bummash sought a declaration from the Russian courts that the marketing and sale-purchase agreement, which contained the arbitration clause, was invalid. By decision of the Arbitrazh Courts of the Udmurtsk Republic, the agreement was deemed invalid because of a violation of Articles 81 and 83 of the Federal Law on Joint-Stock Companies. Despite this decision, the arbitral tribunal in the Netherlands decided in favor of O&Y Investments on March 4, 2004, after the Russian court’s decision on the invalidity of the agreement had entered into legal force. O&Y Investments then sought to enforce the arbitral award in Russia. However, the Arbitraz Court of the Udmurtsk Republic denied enforcement under Article V (2)(b) of the New York Convention because the enforcement would violate Russian public policy. This decision was affirmed by the Federal Arbitrazh Court of the Ural District.

The court held that the enforcement would lead to the existence of judicial acts of equal force, containing mutually exclusive holdings, within the territory of the Russian Federation. Enforcing an award based on an agreement that Russian courts previously deemed invalid would contradict the principle that judicial acts of the Russian Federation “are mandatory in nature.” As this principle is an inalienable part of Russian public policy, enforcement would lead to its violation and could therefore not be granted.

Two extreme positions on enforcement of foreign arbitral awards are seen in the case of European and Latin American countries along with Russia. The former, especially Switzerland and France, are willing to arbitrate white collar crimes and issues of competitions law, excluding only human rights issues and other crimes in the name of public policy. The latter, especially Brazil and Argentina, avoid enforcement at the slightest violation of national law or inconsistency with their Courts’ previous rulings.

Conclusion

European countries are more restrictive in using the public policy shield in the face of unfavourable foreign awards following the principle of international comity and uniformity in the international law. Latin American countries, on the other hand, seek to avoid enforcement in case of violation of national law. However, the general trend emerging among most countries is a favourable turn towards enforcement respecting the principles of party autonomy and the laws of other countries unless it leads to a violation of morality or causes gross injustice.

[1] 1994 Supp (1) SCC 644

[2] (2003) 5 SCC 705

[3] (2008) 4 SCC 190

[4] (2002) 4 SCC 105

[5] (2011) 10 SCC 300

[6] Civil Appeal No. 5085 of 2013 arising from SLP(c) No. 13721 of 2012

[7] [1999] QB 785

[8] [2000] QB 288

[9] ICC Paris, Judgment, Oct. 20, 2000

[10] Federal Arbitrazh Court of the Volgo-Vyatsky Region, decision of Feb. 17, 2003,

Case No. A43-10716/02-27-10

In this blogpost, Sudhi Ranjan Bagri, Student, National Law Institute University, Bhopal, writes about Section 28 of the Indian Partnership Act; whether a person can be held liable as a partner even if he is not a partner.

Introduction

The rule of the agency by estoppel is applicable in law related to partnership too. The concept of ‘holding out’ is in essence application of the principle of estoppel, which in itself is a rule of evidence according to which a person is prevented or ‘estopped’ from contradicting his previous statements made, which was believed to be true. Holding out refers to a course of action or omission which leads others to believe that the person possesses an authority which in fact he doesn’t. In simple terms, if a person represents that he is a partner of a particular firm, and some other person carried on some transaction believing him to be a partner of the firm, then is estopped from denying this representation later on.

This principle has been recognised in Section 28 of Indian Partnership Act, 1932. This section states that a person is held liable as a partner by holding out if such conditions are fulfilled:

1. He represented himself or knowingly allowed himself to be represented as a partner.
2. Such representation may be by spoken or written words, by conduct or by knowingly permitting others to make such representation by words or conduct.
3. The other party on the faith of such representation gave credit to the firm.

For example, X and Y are partners in a firm. Another person Z manages the firm on their behalf and performs various tasks like placing all orders, making payments, etc. If Z places an order on behalf of the company, then the payment has to be made by the partners, as they have implied authorised Z to function as a partner and did not inform the suppliers or the customers that Z was only a manager. However, if a person is aware that Z is merely a manager and not a partner, then he cannot sue the company to make good the losses incurred by dealing with Z as a partner.

A partner by holding out is liable to the person giving credit, to make good the loss which any third party may suffer. However, he does not acquire any claim over the firm, and doesn’t become a ‘real’ partner, but he does become liable for compensation to the third party whom he induced as a partner by holding out and caused him suffer loss or injury due to such representation.

Ingredients of Partnership by Holding Out

1. There must be representation

The voluntary representation by the person who is depicting himself as a partner of the firm should have been made, though it is not necessary that the representation must be express, it can be implied too.

In case of Bevan v. National Bank Ltd.,[1] where Mr. MW was the manager of one Mr. B’s business. The business was carried on in the name and style of MW and Co. The Plaintiff who had supplied the goods sued MW to recover his money as one of the partners of the firm, but B contended that he should not be held liable because the style of the firm carried the name only of MW. Court held that he was liable and laid down that where a person carries a business in the name of an individual with the addition of the words “and Co.” and employ that individual as manager of the business to whom the entire management of the business is left, that doesn’t amount to holding out that person as sole owner of the business, it may amount to holding out that he is partner in the business. MW was also liable because by permitting his name to be used in the title of the firm he made a representation that he was a partner and responsible to those who had given credit to the firm on the faith of that representation.

2. Knowledge of representation and acting on it in good faith

The second requirement of liability for holding out is that a person seeking to charge another with liability has to show that he had knowledge of the representation and did act under the belief that the facts represented were true. Where there is no representation to the plaintiff or, at any rate, there is no representation to his knowledge, his right to sue the person making such representation does not arise.

To charge the defendant with liability as a partner on the ground of representation of himself as a partner, it must be proved either that he has represented himself as a partner to the plaintiff or has made such a public representation of himself in a character as to lead the court to conclude that the plaintiff knowing of the representation and believing that the defendant to be a partner gave him credit under that belief.

If the plaintiff has acted on the faith of representation, liability is incurred by him, and it is immaterial that the defendant didn’t know that this representation had reached to the plaintiff.  But if the plaintiff has not heard of the representation or having heard didn’t believe it or knew the real truth, then in such cases no liability by holding out arises because he has not been twisted by the representation.

The person representing himself to be a partner is liable as a partner to anyone who has on the faith of any such representation gave credit to the firm.

Scarf vs. Jardine[2] is an important case for the principle of holding out wherein the importance of notice of retirement was highlighted. The court, in this case, stated that the retiring partner must give notice of his retirement from a firm in the same manner as a notice of appointment is given, so that the people can know about his status with regard to the company. Or else, he might be treated as a partner by holding out no matter how long back he retired from the firm without notice.

The court further stated that such notice can be given either by the retiring partner or the existing partners of the company. Unless such notice of retirement is given, the liability of a retired partner to old creditors or customers subsists, and the firm would also be liable for the acts of the retired partner.

There are exceptions to the rule established in the Scarf v. Jardine[3] case as given below:

1. The death of a partner constitutes sufficient notice by itself.
2. Insolvency of a partner is also sufficient notice and attracts Section 42 of the Indian Partnership Act.
3. If one has been a dormant or sleeping from beginning to end, notice can be dispensed with as neither the customers nor the clients know of his participation in the firm.

In English law, Partnership by holding out is referred to as apparent partnership instead, and the legal provisions in both countries are very similar.

In Smith vs. Bailey[4], it was decided that the liability on the principle of Estoppel extends only on account of credit given to the firm and not to torts or civil wrongs committed on behalf of the firm.

Conclusion

Partnership by holding out means when a person represents himself to be a partner of a firm and a third party believes in such representation, the person afterwards cannot deny his liability towards the third party.

Similarly, if a person is representing himself to be a partner, and the firm has knowledge about such representation but did not do anything to stop such representation. So, when a third party entered into a transaction with such person then firm would be liable for the act of such person, but the liability would only be limited to such representation and cannot be unlimited.

Moreover, when a person is admitted to a partnership by way of holding out, he cannot claim any rights in the property of the firm and his rights will be limited to such representation only. Furthermore, if a third party knew about the reality behind the representation even though he entered into transaction with such person then firm would not be liable for the transaction.

[1] Bevan v. National Bank Ltd., (1906) 23 T.L.R. 65.

[2]Scarf vs. Jardine, 1882 7 APP CAS 345.

[3] Id.

[4] Smith vs. Bailey, 2 QB 432.

In this blogpost, Shaunak Banerjee, Student, National Law University, Odisha, writes about the evolution of India’s patent legislation.

India’s pre-TRIPS era

The concept of issuing pharmaceutical patents was first initiated by the British, during the colonial era.[1] Over time, the system of issuing patents evolved, and over the next few decades, India witnessed a sharp fall in the production of -patents on medicines.[2] One of the more famous legislations that followed was the Patents Act, 1970. This came in the backdrop of the exorbitant prices charged by the firms on pharmaceutical products, something which the common people could not afford to buy.[3] This was the result of the continuing dominance of the foreign pharmaceutical firms who controlled almost 70% of the local market.[4]

This consequently allowed India[5] to transform and develop itself into one of the more functional pharmaceutical industries on the global scale. This created space for the local pharmaceutical companies to dive into the local market, and increase their overall share of the Indian Market. This resulted in the dwindling of shares by the foreign firms, who were now held in their steps. As a result, Indian firms became more technically sound and sophisticated knowing that they could ward off attention from the foreign firms, they started developing new processes for drug production, and also became skilled in reverse-engineering.[6]

INDIA’S AGE OF TRANSFORMATION (1995-2005)

TRIPS Agreement in India Hits A Roadblock

 India added a new dimension to its International IP Law, when it became a member of the WTO, and accepted The TRIPS Agreement. This agreement came into force in 1995.[7].The TRIPS Agreement revolved around the idea that the supremacy and the overall stability of the developed nations, vis-à-vis, the USA, Japan, Europe depended upon them ensuring ample protection of IP rights outside their dominions, especially in the developing countries.[8] The TRIPS Convention also ensured that for the countries to be part of the WTO, they had to be a part of the TRIPS agreement.[9]This, specifically, underlined the “single undertaking” nature of the WTO.

The TRIPS Agreement has stirred a lot of controversies, as it requires patents on pharmaceutical products, which was something that the developing nations did not adhere to at that time.[10] This didn’t go down well with the developing nations as it affected their shares in the local market.[11]Issuing of patents meant that the prices of the pharmaceutical products would go up, and which render them incompetent to function in such conditions.[12] The only upside that was presented to it was the fact[13] that it would lead to pharmaceutical innovation.[14]By allowing the innovators to block competition, and therefore, lead to a greater appreciation of their ideas, IPR’s can act as incentives for initiating further investment in research and development.

India, consequently, objected to the TRIPS Agreement, and all of its patent provisions,[15] as did all of the local pharmaceutical firms.[16] On being faced with the threat of having to leave the WTO if it didn’t adhere to the TRIPS Agreement, India finally acceded to it.
TRIPS Agreement required that the issuance of compulsory licensing should be “predominantly” within the local markets only.

 Article 31 of this Agreement was a slight deviation from this general rule, as it allowed the issuance of compulsory licenses by the government to third parties under four conditions: (a) Situations of National Emergency (b)Situations involving commercial non-public use (c) Where there is an inherent need to correct anti-competitive practices (d) Involving dependent patents. TRIPS inherently aims to bridge the fine gap between the interests of consumers and the manufacturers.[17]This article added many flexibilities as to the issuance of compulsory licenses though it still left terms like “National Emergency” undefined, which led to many ambiguities, thus leaving the provisions of the agreement in utter uncertainty. As a matter of fact, there were doubts as to whether India could avail these flexibilities under this article, and whether or not, it would have to declare a state of National Emergency to invoke this particular statute.

Effects Of The TRIPS Agreement On India: An Overview

Between the periods of 1995-2005,as a direct response to the imminent threat that was looming, that is the loss of the local market, due to the increase in prices of the pharmaceutical products, the local firms turned their attention outside India.They turned towards exports and R&D(Research and Development) in the developed nations. This was aptly pointed out by the Organisation of Pharmaceutical Producers of India (OPPI)[18].

Indian companies, however, could not manage to enter the American Market because of their stringent regulatory barriers. This, however, was temporary, as the Indian firms gained valuable expertise in navigating patents and soon they were to hold 20-50% of all the applications of drug approval in the US. [19] This massive turnover has resulted in India gaining a significant advantage in trade affairs. “It has become one of the largest suppliers of pharmaceuticals formulations in the world”.[20]

This is in stark contrast to what the condition was prior to the TRIPS Agreement. Foreign exports now formed a bulk of the revenue of the local firms, then the local sales. This, in turn, will lead to greater foreign investment. As per the WHO, “Developing countries bear the brunt of the problem” and “poverty, and the lack of an official supply chain, are major factors in creating markets for counterfeit products”[21]. By using India’s third world patent system in line with that of the Western countries, India gained legitimacy and positive attention. The R&D Sector also improved drastically under the TRIPS Agreement.

 One of the ramifications that have followed is that “Indian firms involved in Research and Development have focused on the diseases prevalent in the developed countries other than those specific to India.”[22]
This economic development brought the complete and utter disregard for public health to the forefront, as public health activists raised the issue of the conflict between the two sections.[23]Many NGO’s, the WHO, and other organizations began to study and analyze the relationship between economic development, and the overall public health. The HIV crisis acted as the epicenter for the medicine campaigners, who propagated the idea that TRIPS acted as a barrier to the access of generic[24] AIDS medicines in the developing countries.[25]

The efforts of the health activists reaped awards as the Doha Convention ensured that the issuance of compulsory licenses extended to that of the developing countries as well, also known as the countries who did not have the resources to manufacture medicines or pharmaceutical products, could now get access to such products, by means of a compulsory license.[26]

The Doha Declaration was held in Doha, on November 14, 2001. It shifted the focus from that of the developed countries to that of the developing countries, as it moved a step further towards promoting and looking out for the overall benefit and welfare of the entire global population at large. It aimed to promote increased access to medicines and, consequently support and aid the overall public health.

 It allowed the issuance of compulsory licenses to those countries which lacked the resources to manufacture their own pharmaceutical products. The Doha Convention went a long way in alleviating the distressing conditions in the third-world countries. [27] It, however, failed in its objective to clarify the term “national emergency,” which being a vague term, could be construed so as to benefit the developed nations. .[28]

To put things into perspective, in the light of all the ambiguities mentioned in the TRIPS Agreement, India put forward its Revised Act in 2005. India was attributed with the assertion that developing countries required a “Transition Period.” India had to file their patent applications, in accordance with the “Mailbox Provision”, when the 2005 changes came into effect.[29]
In order to meet with the TRIPS deadline, India passed an ordinance that temporarily brought such laws into force.[30]“The Indian Pharmaceutical Association(Hereinafter referred to as IPA),which represented the largest local generic firms, insisted that the Revised Act include a new provision which would prevent the patenting of already known substances, as well as the patenting of new forms of known substances.”[31] Local HIV organizations rallied against such laws and helped protests against the passing of the bill.[32]Humanitarian bodies like MSF [33]and representatives from WHO also pleaded to the government “To make laws that would facilitate access to the medicines and not go beyond the minimum level which was required by TRIPS.”[34]

The ultimate objective of adding the provision of compulsory licensing in the 2005 Revised Act was to provide such a license[35] if (a)”a patent is not worked in India [for] three years after its grant”[36](b)”reasonable requirements of the public’ are not satisfied”(c)”the patented invention is not available to the public at a ‘reasonably affordable price’[37].

The Revised Act has further added some provisions to shape the future of India’s pharmaceutical industry. These provisions are (a)the recognition of product patents, not just process patents (b) A twenty-year term from the filing date of applications(c)the availability of patents for industrial application.”[38]

On close examination of the Indian context, we can find many anomalies in the Revised Act. Many undefined and vague terms, such as the requirement to involve in “reasonable” efforts to negotiate with the patent-holders is lost completely in relation to the Indian perspective.[39] Such ambiguities have given rise to many flexibilities, which are of relevance with respect to the developing countries, and their access to pharmaceuticals.

Such a wide analysis of the flexibilities is beyond the scope of this paper. Despite these ambiguities, India has gone on to implement the TRIPS Agreements, as this allows a vast scope of expansive development and flexibility in the area of pharmaceuticals that no other legislation had ever provided before in the international dominions, remains one of the more go-to topics to research on.

[1]P. Narayanan, Patent Law 5 (4th ed. 2006)

[2]P. Narayanan, Patent Law 546 (3d ed. 1998)

[3]STAFF OF S. COMM ON THE JUDICIARY, SUBCOMM. ON ANTITRUST AND MONOPOLY, 87TH CONG. IST SESS., REP. No. 448 (June 27, 1961) 41 tbl.19

[4]SudipChaudhuri, The WTO and India’s Pharmaceuticals Industry: Patent Protection, Trips, and Developing Countries 1, 29 (2005)

[5] Jean 0. Lanjouw, The Introduction of Pharmaceutical Product Patents in India: “Heartless Exploitation of the Poor and Suffering”3 Nat’l Bureau of Econ. Research, Working Paper No. 6366, 1998

[6]Dilip G. Shah, Generic to Innovative: Transition of Indian Pharmaceutical Companies, 5 Pharma Focus Asia 13, 14 (2007).

[7] The Patents (Amendment) Act, 2005, No. 15, Acts of Parliament, 2005

[8]Susan K Sell, Private Power, Public Law: The Globalization Of Intellectual Property Rights, Berne Convention for the Protection of Literary and Artistic Works art. 33, Sept. 9, 1886

[10][10]Carlos M. Correa, Patent Rights In Intellectual Property and International Trade: The TRIPS Agreement 227

[11] F. M. Scherer, A Note on Global Welfare in Pharmaceutical Patenting, 27 World Econ. 1127, 1128 (2004)

[12]World Health Org., The World Medicines Situation 31, 68-69 (2004)

[13] Keith E. Maskus, Implications of Regional and Multilateral Agreements for Intellectual Property Rights, 20 World Econ. 681, 689 (1997)

[14] Alan V. Deardorff, Should Patent Protection Be Extended to All Developing Countries

[15] George K. Foster, Opposing Forces in a Revolution in International Patent Protection: The U.S. and India in the Uruguay Round and its Aftermath, 3 UCLA J. Int’l L. & Foreign Aff.283, 311 (1998).

[16] Id.

[17] James ThuoGathii, Rights, Patents, Markets and the Global AIDS Pandemic, 14 FLA. J. Int’l L. 261, 300 (2002)

[18] OPPI’s Position on Trade Related Aspects of Intellectual Property Rights (TRIPS)

[19] Hitesh Gajaria, India to Be Amongst Top Three Generic Makers in the World, Express Pharma, Jan. 16-31, 2008

[20]Shubham Chaudhuri, Pinelopi K. Goldberg &Panle Jia, Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India, 96 Am. Econ. Rev. 1477, 1481-82 (2006)

[21] WHO Fact Sheet No. 275, Counterfeit Medicines, Feb. 2006,

[22] See Comm’n On Intellectual Prop. Rights, Innovation and Pub. Health, World Health Org., Public Health, Innovation And Intellectual Property Rights 15 (2006)

[23]Ellen’Thoen, The Revised Drug Strategy: Access to Essential Medicines, Intellectual Property and the World Health Organization, In Access To Knowledge In The Age Of Intellectual Property(2010)

[24]James Love, Panel Discussion, AIDS Drugs And The Developing World: The Role Of Patents In The Access Of Medicines,12

[25]Fordham Intell. Prop. Media &Ent. L.J.683, 705 (2002)

[26]Radhika Bhattacharya, Are developingcountries going too far on TRIPS? A closer look at the new laws in India, AmericanJournal of Law & Medicine, Summer-Fall2008 Issue

[27] WTO, Ministerial Declaration of 14 November 2001, WT/MIN(01)/DEC/1, 41 I.L.M. 746 (2002)

[28]Frederick M. Abott Et Al, International Intellectual Property in an Integrated World Economy 330 (2007)

[29] Appellate Body Report, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (Dec. 19, 1997)

[30]Patents (Amendment) Ordinance, No. 7 of 2004.

[31] See AmitSen Gupta, Mashelkan Committee Trips Again, People’s Democracy, Sept. 20, 2009

[32] Interview with Loon Gangte, President, Delhi Network of Positive People, in New Delhi, India (June 20, 2007)

[33]Medicins Sans Frontilres, Will The Lifeline Of Affordable Medicines For Poor Countries Be Cut 5-6 (2005)

[34] Letter from Jim Yong Kim, HIV/AIDS Dir., World Health Org., to Dr. A. Ramadoss, Minister of Health and Fain. Welfare, Gov’t of India (Dec. 17, 2004), available at http://www.cptech.org/ip/health/c/india/whol2172004.html

[35] Sands, Katharine W,Prescription drugs:India values their compulsory licensingprovision–should the United States foll,Houston Journal of International Law, Winter 2007 Issue

[36] Peter Nunn, India Introduces Product Patents, Charles Russell, Apr. 1, 2005

[37] Id.

[38] See Jeffrey D. Hsi, Patent Law in India Focuses Strongly on R & D, 25 Genetic Eng’g News 9, 9-10 (2005)

[39] Art. 31(b), TRIPS

In this blogpost, Sonal Srivastava, Student, Amity Law School, Lucknow, writes about what is a  co-operative society how is it incorporated,  number of members their term and the procedure of election in India. 

Part IXB inserted by the Constitution 97^th Amendment Act, 2011 talks about the “co-operative societies”. According to Article 243ZH(c) of the Indian Constitution “co-operative society” means a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any state.

Incorporation of co-operative societies

According to Article 243ZI, the legislature of a state may in accordance with the provisions of this part, by law, make provisions with regard to formation, regulation and winding up of cooperative societies based on the principles of voluntary formation, democratic member- control, member economic participation and autonomous functioning.

Number, term of members of board, its office bearers and the manner of election

As per the provisions of Article 243Z that the board shall consist of as many members as the legislature of a state may define but it shall not exceed 21 members. Further, the Legislature of a state shall provide for the reservation of one seat for scheduled castes or tribes and two seats for women on the board of every co-operative society consisting of individual as members and having members from such class or category of persons. The term of office of a member shall be five years from the date of the election and the term of office bears shall be coterminous with the term of the board.

As per the provisions of Article 243ZK the election of the board shall be conducted before the expiry of the term of board so as to ensure that the newly elected members of the board assume office immediately on the expiry of the term of office of the members of the outgoing board and the supervision of the same shall be conducted by the body appointed by the state legislature.

Audit of accounts of co-operative societies-

According to Article 243ZM, the legislature of a state may, by law, make provisions with respect to the maintenance of accounts by the co-operative societies and the auditing of such accounts at least once in a year; the legislature shall also lay down the minimum qualification of the auditors and the auditing firms;

Such auditors or auditing firms shall be appointed from a panel approved by a State Government or authority authorised by the State government in this behalf

The accounts of the co-operative society shall be audited within six months from the close of the financial year and the audit report of the accounts shall be laid before the state legislature in accordance with the provisions of the law.

According to Article 243ZN, the general body meeting shall be convened within the period of six months from the close of the financial year

Right of a member to get information

According to Article 243ZO, the legislature may by law provide for access to every member the information, book of accounts, etc. of a co-operative society; it shall also make provisions for the members to attend meetings and for co-operative education and training for its members.

Returns

According to Article 243ZP, every cooperative society shall file returns, within six months of the close of every financial year, to the authority designated by the state government including the following matters such as annual reports of its activities; its audited statement of accounts; plan for surplus disposal as approved by the general body of the co-operative society, list of amendments to the bye-laws of the co-operative society, declaration regarding holding of its general annual body meeting and any other information required by the registrar.

Offences and Penalties

According to Article 243ZQ, the legislature of a state shall make provisions for the offences and imposition of penalties for the same. Clause 2 of the said article lays down various offences covered under this part.

Conclusion

The amendment has brought the co-operative societies into the realm of the constitution which means that any changes to be made in the part shall require amendment through special majority thereby securing the position of co-operative societies. The exhaustive provisions cover varied aspects of the incorporation, returns, offences, etc. of the co-operative societies making the job easier for its officers to carry out their work.