In this blogpost, Haridya Iyengar, Student, Jindal Global Law School, Haryana writes about the importance of will, how to make a will and how is a will executed.

People usually postpone the writing of a will because it is a tangible reminder of our mortality. However, it is one of the most important documents since it allows you to choose the recipient of your property. Without a will, the state will have to decide how your property is divided and among whom.

What is a Will?

A will is a legal document which states how you want the assets you own to be distributed after your death. It is a fluid document which, can be changed whenever you want and will take effect only when you die. However, a will had to comply with several laws before becoming valid.

A will can be made by anyone who is over the age of 21. In India, a will can be written on plain paper, and it is not legally necessary to make it on a stamp paper. While a will can be printed, it is preferable for it to be hand written to make it more authentic and easily verifiable.

Importance of a Will

Virtually every person requires a will because without one you cannot determine who receives your property. If you die without preparation of a will, your property is divided by the inheritance and succession laws which will depend on your religion. A common misconception people have about inheritance is that they believe the estate is automatically transferred to the spouse. However, children and sometimes even relatives can stake claims on the property.

Another important thing to keep in mind is the inconvenience caused to your family. Without a will, your family will have to prove their relationship with you, and this will cost them a lot of time and money.

How to make a Will in India

While there is no particular legal or mandatory format of making a will, traditionally these are the steps followed:-

1)  Declaration

A will should be started with a declaration stating your name, address, age and other basic information. It should also specify the time at which you are writing the will and a declaration stating that you are writing it in your full sense.

2)  Details of Assets and Documents

The next step would be to list down your important assets such as land, fixed deposits, postal investments, mutual funds, etc. It should also contain an indication as to where all these documents are stored. The best place to keep this is a bank deposit safety box along with your will.

3) Ownership Details

At the end of the will, you should mention the division of the assets and the name of the recipients. If a minor is mentioned in your will make sure to also mention a custodian who takes care of the asset until the minor reaches adulthood. This custodian has to be a trustworthy person. The inherited property will be divided as per law but, other wealth or property purchased by you may be divided the way you want. You may also set conditions for certain divisions.

4) Signature

Once you are done writing the will, you must sign it in the presence of two witnesses. The witnesses will have to sign it after your signature to prove that you have signed the will in their presence. The witness should not be a direct beneficiary but, a close friend or neighbour.  The envelope has to be sealed after completing all the formalities, and the seal must bear your signature and the date of sealing. The seal does not need to be signed by the witnesses.

Execution of Will in Court

You can choose to get the will executed in court or in the presence of a magistrate. This is to make the process division easier and smoother.

Importance of a Probate

A probate is a copy of the will, certified under the seal of the court. The executor has to file a probate petition in the court of law which usually takes six months to a year. The rights of an executor or legatee will not be established until the court grants a probate of the will. Probate can be granted only to the executor of the will.

In this blogpost, Harsha Jeswani, Student, National Law Institute University, Bhopal analysis the concept of Limited Liability Partnership, its features and how it originated

INTRODUCTION

These days the concept of limited liability partnership has become one of the most recognised ways of doing business in all countries of the world.  India is also among those countries where the business is carried on in the form of limited liability partnership. India introduced its Limited Liability Partnership Act in 2008. A Limited Liability Partnership also called as an LLP combines features of both the Partnership and the Company into one single organisation. In other words, LLP is a way of doing business that provides the advantages of limited liability of a company and at the same time gives flexibility to its members as in the case of partnership firm.

Thus, a Limited Liability Partnership (LLP) is a type of partnership in which the liability of the partners is limited unlike the partnership governed by the Indian Partnership Act, 1932. In an LLP, a partner cannot be held liable for the wrongful conduct or negligence of his co-partner. This is an important point which distinguishes it from the unlimited partnership. In an LLP, the partner’s liability is therefore limited like that of shareholders in a company. Thus, an LLP is a combination of both partnership and company and because of this very feature, it is appropriate for small and medium-sized enterprises.

ORIGIN OF LLP

The concept of Limited Liability Partnership emerged in the early 1990s in the United States in response to the sudden fall in real estate and early prices in Texas in the 1980s and the subsequent effect it had on the banks and other financial institutions. This collapse led to a large wave of bank and savings and loan failures. Because the amounts recoverable from the banks were small, efforts were made to recover assets from the lawyers and accountants who had advised the banks in the early 1980s. The reason was that partners in law and accounting firms were subject to the possibility of huge claims which would bankrupt them personally, and the first LLP laws were passed to shield innocent members of these partnerships from liability. Thus, the first ever law on LLP was enacted in Texas on 26^th August 1991, which was then followed by other countries of the worlds. Many countries that have recognised the concept of LLPs include Canada, Germany, Japan, China, Greece, Singapore, etc., India being one of them.

LIMITED LIABILITY PARTNERSHIP IN INDIA

The recommendations of the J.J. Irani Committee and the Naresh Chandra Committee-II led the making of the draft bill for introducing LLP in India. The Cabinet approved the Bill on December 7, 2006, which was then tabled in the Rajya Sabha on December 15, 2006.  Subsequently, the Department Related Parliamentary Standing Committee on Finance recommended certain changes in the draft Bill, 2006.  The committee submitted its final report to the Ministry for Corporate Affairs.

Finally the Limited Liability Partnership (LLP) Bill, 2008 received the approval of the Cabinet on 1^st May 2008. Both Houses of Parliament passed the bill without any changes. The Bill then received the assent of President on 7th January 2009. In India, The Limited Liability Partnership Act, 2008 was published in the official Gazette of India on January 9, 2009, and has been notified with effect from 31 March 2009. The LLP Act, 2008 thereby makes provision for the formation and regulation of limited liability partnerships and matters connected with it.

SALIENT FEATURES OF AN LLP

• The LLP is a body corporate having separate entity from its partners and perpetual succession.
• An LLP in India is governed by the LLP of 2008 and, therefore, the provisions of Indian Partnership Act, 1932 are not applicable to it.
• Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.
• An LLP is a result of an agreement between the partners, and the mutual rights and duties of partners of an LLP are determined by the said agreement subject to the provisions of LLP Act, 2008.
• The LLP being a separate legal entity is liable for all its assets, with the liability of the partners limited only to the amount of contributed by them just like a company. No partner will be individually liable for any wrongful acts of other partners. However if the LLP was formed for the purpose of defrauding creditors or for any fraudulent purpose, then the liability of the partners who had the knowledge will be unlimited.
• There must be at least two designated partners in every LLP of whom one shall be resident in India.
• Every LLP shall maintain annual accounts to show its true state of affairs. It must prepare a statement of accounts and solvency every year and filed with the Registrar.
• The Central Government may, whenever it thinks fit, investigate into the affairs of an LLP by appointing a competent Inspector.
• A firm, private company or an unlisted public company have the option to convert itself into LLP as per the provisions of the Act. Upon such conversion, the Registrar will issue a certificate to that effect. After issuance of a certificate of registration, all the property of the firm or the company, all assets, rights, obligations relating to the company shall be vested in the LLP so formed, and the firm or the company stands dissolved. The name of the firm or the company is then removed from the Registrar of Firms or Registrar of Companies, as the case may be.
• Like the company, an LLP can be wound up either voluntary or by the Tribunal to be established under The Companies Act, 1956.
• The LLP Act 2008 also enables the Central Government to apply the provisions of the Companies Act whenever it thinks appropriate and must issue notification to that effect provided such notification must be laid before each house of the Parliament for a total period of 30 days and shall be subject to any modification as may be approved by both Houses.

CONCLUSION

Though India recognised the concept of LLP very late, LLP in India has finally found its space. LLP, which is a combination of both company and partnership, is beneficial to small and medium business enterprises. The concept of LLP is also encouraged by the Government as it provides various tax benefits and enables the entrepreneurs to focus on the core activities of the business. It is the type of organisation that is easy to maintain while at the same time providing limited liability to the owners. LLP is one of the simplest forms of business which is easy to incorporate and manage. Because of its nature, LLP has become very popular these days, and a number of firms and companies are now getting converted into LLPs.

In this blogpost, Harsha Jeswani, Student, National Law Institute University, Bhopal writes about the global depository receipts, its procedure and use.

INTRODUCTION

Depositary receipts (DRs) are negotiable financial instruments that are traded on domestic stock exchange. The individuals holding depository receipt are considered to have an ownership interest in the shares of the company like ordinary shareholders. The difference is that these are the receipts which are traded outside the home country of the company to increase the visibility of the company in the global world and to expand the capital investment in other countries.

The holders of GDRs are entitled to all the rights of a shareholder with respect to dividend and capital gains and can be purchased and sold like other securities. This enables the investors in any country to purchase the securities of any other country without any currency or language barriers.

GLOBAL DEPOSITORY RECEIPTS

Global Depository Receipts or GDRs are certificates that are nowadays becoming popular among the investors to access the global stock market. The companies have also accepted it as one of the ways to list its securities in foreign markets. The concept of GDRs is based on American Depository Receipts (ADRs) which were the first depository receipts issued in 1927. It allowed the companies outside the USA to have access to capital markets of the USA.

A global depositary receipt (GDR) is similar to an ADR, but is a depositary receipt sold outside the United States and outside the home country of the issuing company. These are widely used nowadays by almost all the companies in the world to gain accessibility to the capital markets of the world. India is no exception. Many companies in India have expanded their market to foreign platforms with the help of GDRs and gained access to investment capital overseas.

PROCEDURE INVOLVED

A GDR is issued in the same manner as a financial instrument. It is administered by a depository bank to the corporate issuer. The bank is generally located in the countries in which the GDR is traded. A GDR is often considered as a Deposit Agreement between the bank issuing it and the holder of GDR. The agreement specifies the rights and duties of each party. There is a separate Custodian bank which holds the shares of the company that underlie the GDR. The depository bank then buys the shares and deposits the shares in the custodian bank. These shares are then issued in the form of GDRs representing ownership in these shares.

The custodian bank which is situated in the country of the issuer has a duty for safe keeping the shares of the GDR. It is generally the depository bank which selects the custodian bank which then collects the dividend and forwards any notice of the issuer to the depositary bank, which then sends them to the GDR holder.

Global depository receipts (GDRs) as tradable instruments are becoming increasingly popular in the hands of institutional investors worldwide and an accepted option for companies to access global equity markets. India is no exception, and a number of Indian companies have spread their presence to foreign bourses through GDRs and gained access to investment capital overseas.

POPULARITY OF GDR

So the question that arises for consideration is why these GDRs are becoming so popular these days. This is because GDRs are the type of financial instruments which derive its value from the equity shares of the issuer company. Further, the holder of GDR has an option to convert his GDRs to a proportionate number of shares. The underlying feature of GDRs is that it has many features of shares such as the right of the holder to receive dividends and also voting rights in a company if provided in GDRs Agreements. Apart from this, another advantage of GDR is that is capable of being traded as a security in a more investor-friendly currency thus leading to more liquidity. Thus, any outsider investor who wishes to invest in the stock of any Indian company would prefer GDRs as their natural choice since GDRs are exempted from tax in India unless they are converted into shares.

The procedure of issuing GDRs by an Indian company involves issuing of its equity shares (in Rupees) to the depository bank situated in a foreign country and then the issue of GDRs by the depository bank against the said equity shares to the foreign investors in foreign currency. The physical possession of the equity shares is entrusted to a domestic custodian bank, which is an agent of the depository bank.

The depository bank is recognised as the registered owner of the equity shares of the company in its books since these shares are issued to the depository bank. The holders of GDRs have an option to exchange their GDRs for the equity shares of the company and such holders then become the owner of the equity shares of the company.  Since at the beginning it is the depository bank holding the equity shares, hence it has all the voting rights given to any equity shareholder.

Before 2005, all companies were permitted to issue GDRs, however, post 2005, certain amendments were made as a result of which now only listed companies can make issuance of GDRs in foreign markets. It depends on the company whether they want to offer GDR as a public issue or as a private placement to selected group of individuals. Similarly, GDR holders have certain benefits over preferential shareholders. Also certain types of GDRs issuances enjoy an exemption from the open offer requirements under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as long as they are not converted into equity shares.

Looking to the benefits associated with the issuance of GDRs, there are many companies in India such as Tata Steel Ltd, Reliance Industries, Sterlite Industries India Ltd., that have realised the importance of GDRs as a means for raising foreign direct investment and this number is likely to increase in future.

CONCLUSION

It can be said that the use of GDRs enables individuals to have access to the capital markets of the foreign company without any concerns regarding currency, language, or tax laws. The issuance of GDRs increases the liquidity of the firms. Further, the holder of GDRs has same rights as that of equity shareholders. Companies that issue GDRs benefit as well, by gaining access to more potential investors. The companies have an opportunity to raise additional capital GDRs offer the opportunity to broaden the company’s base of shareholders and to raise additional capital. This helps the company in emerging markets thereby increasing the prospects of such company to grow.

In this blogpost, Saumya Agarwal, Student, Amity Law School, Delhi writes about the censor board, need to revamp the Cinematograph Act, 1952 and the recommendation made by the mudgal committee.

Introduction

The latest controversy that started the censorship debate again in the country was the long kissing scene that was reduced to 50% in the recent bond movie. The internet domain was filled with mockery over the trends started as #SanskariJamesBond. When asked by Pahlaj Nihalani, the Chairman of CBFC, he said he didn’t see the movie. It was the CBFC panel’s decision. Although he defended the decision by saying that it was done to safeguard the culture and values of the nation and to mould the youth of the country in the right direction and they cannot set the wrong examples through their movies. The sensibility of the Censor Board is being questioned.

Mr. Shyam Benegal has been recently roped in to revamp the Censor Board. This article has been written to give the recommendations that have already been given for the betterment of the Censor Board and other recommendations that can be given.

Censor Board

The Central Board of Film Certification (often referred to as the Censor Board) is a statutory censorship and classification body under the Ministry of Information and Broadcasting, Government of India. It works according to the regulations of the Cinematograph Act, 1952. It main task is to assign certificates to films, televisions shows, television ads, and publications for exhibition, sale or hire in India. Films can be viewed by the public only after the certification by the Board.

The censor board publishes many types of certificates- U, U/A, A and S.

• U-(Unrestricted Public Exhibition)

These films are fit for public exhibition and are often family friendly. These films can contain universal themes like education, family, drama, romance, sci-fi, action, etc. These films may contain mild violence, but it should not be prolonged.

• U/A (Unrestricted Public Exhibition- But With Parental Guidance)

These films can contain universal to adult content, but the adult content should not be very strong but can be watched under parental guidance like brief kissing scenes, fighting scenes and mild language, etc.

• A (Adults Only)

These films will be released in the public domain, but they will be restricted to adults only. These films generally contain strong violence, kissing scenes, implied sex, tribal nudity, some coarse language and even some controversial and adult themes considered unsuitable for young viewers.

The Board consists of 25 members and a Chairperson (those is appointed by Central Government). Shyam Benegal is the current chairman of the Board.

Need to revamp the Cinematograph Act, 1952

It is an outdated Act. It is a colonial time act which needs to be changed with the changing times. As said by Rakeysh Omprakesh Mehra, “we are now living in a different world, and so we would like to take things to a next level. There is so much connectivity and information that change is the need of the hour.”[1] Times have changed; we live in a different world now as compared to the time when the act was passed. So, tremendous changes are needed in the act.

In a list of words that were considered to be controversial by the Censor Board, ‘Bombay’ which was the name of Mumbai earlier was also included. It was contained in the list which was banning the words that were “abusive” and “objectionable”.

A great need is being felt to bring the changes in the Act. Some of the changes were recommended by the Mudgal Committee.

Mudgal Committee                                

The Mudgal Committee was constituted which was headed by Justice Mukul Mudgal, retired Chief Justice of the High Court of Punjab and Haryana, who proposed the changes in  the Cinematograph Act, 1952 as Cinematograph Bill, a report which was submitted to the Ministry of Information and Broadcasting.

The Committee was constituted during a sensitive time in India. The socio-cultural conditions have changed tremendously in the last ten to fifteen years. So Mudgal Committee was constituted in which the members of the committee were FCAT chairperson Lalit Bhasin, Central Board of Film Certification (CBFC) chairperson Leela Samson and other film personalities like Sharmila Tagore and Javed Akhtar.

The first recommendation that they gave was the change in the name of the ‘advisory panel’ to ‘screening panel’. It also recommended that there should be a committee of 9 members on such manner as to ensure language diverse representation with at least two lady members. Right now the appointment of the advisory panel is more political, often with people who have little knowledge of the intricacies of cinema which is detrimental to the process of appointment.

Another suggestion to is the increase the jurisdiction of the Film Certificate Appellate Tribunal to hear the cases regarding any objection in any film. So rather than going to the court for any objection in the film, the plaintiff can come to the Tribunal.

The Committee also suggested that there should be more categories for classification of films and to bring age-specific divisions. The Committee recommended a five category for film certification as the existing three categories are insufficient.

Another suggestion given by the Committee was to suspend the powers conferred on the State Governments and the High Courts to ban a film in their state. The Committee gave the reasoning that filmmakers put a lot of hard work and time in making a movie and the state governments ban the movie in their respective states. So the Committee recommended that the Central Government can suo moto or at the behest of a State Government or the administration of a Union Territory is of the opinion that a particular film that is publicly exhibited that causes or is likely to cause an imminent breach of public order.

The Committee drafted a Cinematograph Bill incorporating its recommendations.

Conclusion

Much hue and cry is being made over the new Benegal Committee about the fact that Mr. Benegal is himself from the film fraternity so he will make the recommendations that is actually needed in the Act. But the government should remember that the job of the CBFC is to certify films and not to censor them. What happened to the recommendations of the Mudgal Committee? Does the government choose to ignore the previous government’s constituted committee’s recommendations? Were the recommendations unacceptable to this government?

The five categories of film certification make sense as is being followed in other countries. It would be simpler to accept the suggestions given by the Mudgal Committee than to make a new committee. We all know that the recommendations given by the committees generally pile up on shelves; I hope the Benegal Committee does not meet the same fate as the earlier one.

[1] http://indianexpress.com/article/entertainment/bollywood/cbfc-revamp-need-of-the-hour-rakeysh-omprakash-mehra/

In this blogpost, Haridya Iyengar, Student, Jindal Global Law School, Haryana writes about the laws regulating the food industry in india.

The Indian food processing industry is governed by various laws. This covers aspects such as – sanitation, licensing and other permits necessary to start up and run a food business. This paper will give a brief overview of these laws.

History

The legislation which first dealt with food safety in India was the Prevention of Food Adulteration Act, 1954. It regulated the laws of the food industry along with six other laws – The Fruit Product Order of 1955, The Meat Food Products Order of 1973, The Vegetable Oil Products (Control) Order of 1947, The Edible Oils Packaging (Regulation) Order of 1998, The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order of 1967 and The Milk and Milk Products Order of 1992. However due to the changing requirement of the food industry, The Food Safety and Standards Act was introduced in 2006. This law overrides and repealed all prior laws.

The act was established to bring uniformity and a single reference point for all matters relating food safety and standards. It helped move from a multi-departmental and multi-level control to a single line of command. This act is enforced by two statutory authorities – Food Safety and Standard Authority of India and State Food Safety Authority. It should also be noted that this was possible because “Adulteration of foodstuff and other goods” was included in the concurrent list in the constitution of India.

Key Features of the Food Safety and Standards Act

1) Packaging and Labelling

An analysis of the packaging and labelling regulations shows that there are various kinds of products – pre-packaged products, proprietary products and specific products as mentioned in the regulation. The following are the general requirements for the packaging and labelling of food products:-

• The declaration required under the regulation on the package should be either in Hindi or English.
• Pre-packaged food on the label shall not be presented or described on any label or in any manner that is misleading, false or deceptive. This is to stop erroneous impression regarding it character.
• Label should be applied in a manner which will prevent separation from the container.
• Contents on the label shall be prominent, clear, indelible and readily legible by consumers under normal circumstances of purchase and use.
• If the container is covered by a wrapper, the necessary information or the label on the container should not be obscured by the wrapper.

2) Signage and Customer Notice

While the provisions of Food Safety and Standards Act does not specifically provide for regulatory requirements for signage and customer notice, it has provisions for with regard to advertisement of products by food business operators.

Section 24 provides that, no person shall engage himself in any unfair trade practice for the purpose of sale, supply, use and consumption of articles of consumption or adopt any deceptive practice of making any statement whether orally or in writing which:

• Falsely represent that food is of a quality, quantity, standard or grade consumption
• Make false or deceptive representation of the usefulness or need for the product
• Gives public any guarantee of the efficacy that is not based on an adequate or scientific justification.

3) Licensing Registration and Health and Sanitary Permits

Under the license and registration regulation, the food business operators in the country are required to be compulsorily registered or licensed as per the regulations under Food Safety and Standards Act. So no person shall commence any food business unless a valid license is possessed by the food business operator. The conditions with regard to sanity, safety and hygienic requirements have to be met at all times. These regulations recognize and help ensure that the food business operators maintain sanitary and hygienic conditions required in each food category.

Conclusion

 The new objectives under the Food Safety and Standards Act go far beyond the objectives of Prevention of Food Alteration Act. The preamble of Prevention of Food Alteration Act laid emphasis only on provisions which helped prevent adulteration while the Food Safety and Standards Act lays emphasis on all laws related to food. This includes manufactory, storage, registration, sale and import. It helps make the availability of food safe and wholesome for human consumption.

In this blogpsot, Harsha Jeswani, Student, National Law Institute University, Bhopal writes about the salient features and impact of the Goods And Service Tax Bill, 2015

INTRODUCTION

The Constitutional 122^nd Amendment Bill, 2014 proposes to introduce one of the most controversial bills of all the times officially called as The Goods and Services Tax Bill or GST Bill.  GST is a value added tax that is likely to substitute all indirect taxes imposed on goods and services both by the Central and the State Government once it is implemented. It is considered as the biggest tax reforms in India that is set to consolidate the economies of the state and increase the economic growth.

BACKGROUND

The discussion on GST was started by Vajpayee Government in 2000 by setting an empowered committee. However, it was only in 2009, the GST (Goods and service Tax) Bill was introduced for the first time by the UPA Government. The bill seeks to roll out the nation’s biggest indirect tax reforms since 1947. However, the bill was repeatedly being opposed. It became a topic of discussion in every session of Parliament. Finally after seven years of continuous discussion between the Centre and the States, a consensus has been developed on sharing tax revenue.  The GST system is adopted by over 130 countries around the world. It is targeted to be a simple, transparent and efficient system of indirect taxation. The newly formed NDA government introduced the GST Bill in Lok Sabha on 6^th May 2015. Before the beginning of the voting session, the Finance Minister Arun Jaitley promised states to compensate for any loss of revenue due to proposed bill and also assured that the new uniform indirect tax rate will be much less than 27% recommended by an expert panel. The Congress walked out in protest. Finally, the Bill was passed by the lower house with 352 votes against 37 paving way for a new tax regime in India. It is proposed to be implemented from April 2016.

What is GST?

GST is a comprehensive tax levy on the manufacture, sale and consumption of goods and services at a national level. Presently, different taxes are levied on goods and services. With the coming of GST, the difference between goods and services will narrow down.  The central idea is thus to create a single, accommodating and integrated Indian market to strengthen the economy and making it powerful. The GST is aimed to increase the GDP of India by one or two percent.

GST is a uniform tax which is levied on both goods and services payable at the final point of consumption. It is likely to replace the indirect taxes imposed by the Central and State Governments like central excise duty, service tax, central surcharges and cesses, state sales tax, VAT, entertainment tax not levied by local bodies, luxury tax, taxes on lottery, betting and gambling, tax on advertisements and state cesses and surcharges related to supply of goods and services. These taxes have always suffered as these taxes have been ineffective and have suffered from infirmities and, therefore, GST will introduce an effective way of tax imposition process.

SALIENT FEATURES OF THE BILL

The Bill makes legislation on the taxation of goods and services a subject of concurrent list thus empowering both Centre and the State to makes laws on GST.

The Bill provides for a GST Council which will have the discretion to decide the taxes which will be included in GST; the goods and services subjected to GST, the rate at which GST will be applicable.

The GST Council has a duty to ensure optimum tax collection for goods and services by the state and the Centre.  The Council will consist of the Union Finance Minister (as Chairman), the Union Minister of State in charge of revenue or Finance, and the Minister in charge of Finance or Taxation or any other, nominated by each State government

The Bill exempts alcohol for human consumption from GST. Also, it empowers GST Council to decide when GST would be levied on various categories of fuel, including crude oil and petrol.

The Centre can levy an additional tax of up to 1%, on the on the supply of goods  during trade between states which will go to the States for two years or till when the GST Council decides.

Parliament may, by law, decide to compensate states for a period of five years for any revenue loss due to GST.

IMPACT OF THE BILL

The introduction of GST provides for a single comprehensive taxation system for all goods and services making tax regime more simple and easy. The major advantages of GSṬ are-

It is assumed that the implementation of GST will boost the Indian economy by increasing employment opportunities, promoting exports with a gain of $15 billion every year.

In the GST system; taxes will be collected at the time of sale at the manufacturing cost. This means that the individuals will now consume the goods at a reduced price. Thus, it will certainly reduce the tax burden for consumers.

GST will lead to easy, transparent and simple tax structure by integrating all indirect taxes on goods and services into single GST. This will result in uniformity in tax rates thereby making the administration of tax structure more efficient.

CONCLUSION

Thus, GST was introduced with an aim to harmonise a system of taxation by including all indirect taxes into one tax. It seeks to settle the issues of the present indirect tax structure by enlarging the tax base, increasing compliance, and preventing economic disturbances caused by different interstate taxes. However, the new bill fails to comply fully with an ideal GST. The imposition of additional one percent tax on goods traded between the states is likely to impede the objective of creating a harmonized system of levying a tax on goods and services. The burden on retail consumers will also increase, the interstate trade will become more expensive than intrastate trade. Thus, even though GST is seen as a positive move to simplify the tax regime in India still, some amendments are needed to make it more flexible, transparent and comprehensive.

In this blogpost, Sudhi Ranjan Bagri, Student, National Law Institute University, Bhopal, writes about position, role, responsibility, remuneration and responsibilities of independent directors in India.

Introduction

The concept of independent directors is not new. However it has turned out to be a huge matter of debate after corporate frauds like Satyam Scam, Enron scandal etc came to light. One of the factors that have been identified to be common in all these major corporate failures around the world has been the failure of the board of directors of a corporation to detect internal crisis early on & act in a timely manner to put the organization back on track before difficulties become irreversible. After witnessing various corporate failures, scandals & the ensuing crisis, attempts at every level have been made to make corporations strong & effective to counter various problems which crop up in routine dealings. It is at this point that the office of independent director draws attention as it is increasingly being felt that through them, objectivity & rational perspective can be brought on board & they can to a large extent ensure transparency & accountability of a board. They are expected to enhance the standards of corporate governance.

“Corporate governance is a key element in improving economic efficiency & growth as well as enhancing investor confidence…The corporate governance should promote transparent & efficient markets, be consistent with the rule of law & clearly articulate the division of responsibilities among different supervisory, regulatory & enforcement authorities..”[1]

Concept Of Independent Directors

The Board of Directors plays a key role in balancing the interests of managers & shareholders. The board also undertakes various other roles like keeping a check on the work of the executive team, analyzing their own performance, etc. However if we compare the workings of widely held corporations & those corporations which are owned by a small number of people (usually family owned) we realize that the roles and functions of the board change drastically between the two. In widely held corporations (eg.US & UK) the board’s role is one of “vertical governance” that entails working on behalf of the shareholders to maximize managerial opportunism & maximize shareholder wealth. Whereas in family-owned corporations the board’s role is that of “horizontal governance”, of balancing between major stockholders who are also part of the management & the minority shareholders & also protecting the latter by the former. It is while pondering on these issues that need is felt to have “independent” people on board who are free from any kind of influence or bias & can work independently harmonizing the interests of various parties involved in a corporation. The role they play in a company broadly includes improving corporate credibility, governance standards & the risk management of the company. They are also expected to contribute from their vast amount of experience & expertise to improve the overall functioning of the company. They bring a fresh perspective to the boardroom & since they have no other vested interests, their judgment isn’t clouded & they can work exclusively for the benefit of the company. In Indian scenario, this institution assumes another important role i.e. protection of minority shareholder’s rights as the majority of companies are family owned businesses, and thus they exercise strong control over the management.

Position of Independent Directors under Companies Act, 2013

In Indian corporate history, there is more than an even chance that 2013 will go down as a watershed year in terms of corporate governance reforms as it was the year a path-breaking new Companies Act, 2013 found its way into the statute book. The new Act, 2013 has brought in a lot of revolutionary changes addressing a wide variety of issues but in this project focus is on provisions relating to independent directors. The 2013 Act, for the first time, has defined the term “Independent director”. The old Act,1956 did not contain any provisions regarding this, so only listed companies had to follow this requirement as per Clause 49 of the Listing Agreement but now independent directors have been made mandatory for unlisted large public companies. The Act, 2013 differs from Clause 49 at various points, but its requirements are far more stringent than Clause 49.

Who can be Independent Director

By listing out detailed criteria regarding the appointment, the Act has brought in a significant change. Any promoter of the company or its holding, subsidiary or associate company or anyone related to them or anyone who has or had a pecuniary relationship with the company during the two immediately preceding financial years or current financial year has been excluded from being appointed as independent director[2]. All this has been done to maintain complete independence.The Act also lays down a term-based appointment for a period of five years, renewable, by special resolution for a second term, & not subject to retirement by rotation[3]. This kind of stability enables them to work fearlessly & efficiently.

Number of Independent Director

There is a specific obligation on every listed public company that at least one-third of the board of directors should comprise of independent directors & also empowers Central govt. to include other class/classes of companies within the scope of this requirement[4]. To make the process even simpler, an independent director may be selected from a data bank containing details of persons willing to be appointed maintained by some body as may be notified by the Central government[5]. But the hard fact remains that it is really difficult to find adequate amount of persons sufficiently qualified & also willing to take up this job.

Remuneration

Another significant step taken is that the Act also places a limit on the amount of shares that can be held in the company by a relative of such a director[6]. The Act also expressly disallows them from obtaining stock options[7]. Profit related commission may be paid to them, but subject to the approval of the shareholders[8]. The concern which arises here is a wide disparity between the remunerations & the responsibilities given to perform.

Responsibilities

The Act has imposed manifold responsibilities on independent directors. The Act requires the individuals to submit a self-declaration confirming that they have satisfied the criteria prescribed for the position[9]. It is also stated that any board meeting held at shorter notice (to transact urgent business) requires the presence of at least one independent director & if such is not present, the matter discussed at the board will be considered approved only once an independent director ratifies it[10]. Further, they can be removed if they fail to attend any board meeting for 12 months period with or without permission from the Board[11].

Separate meetings

The Act makes it mandatory for all the independent directors to hold at least one meeting annually, without the presence of non-independent directors & members of management[12]. Here they are expected to review the performance of the Chairperson, non-independent directors & the Board as a whole.

Committees

The Act has made it mandatory for independent directors to be a part of certain committees.

• Corporate Social Responsibility Committee– The Act provides that every company having net worth of rupees five hundred crore or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during any financial year shall constitute a CSR Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. This provision has been included so that independent directors can keep a check on the workings of the CSR committee.
• Audit Committee- The Act requires that the Board of every listed company & such other companies as may be prescribed shall constitute an Audit committee which shall consist of a minimum of three directors with independent ones forming a majority[13].
• Nomination & Remuneration Committee (NRC) – The Act requires that the Board of every listed company & such other companies as may be prescribed shall constitute an NRC consisting of three or more non-executive directors out of which not less than one-half shall be independent directors.

The role of NRC is to:

(a) identify persons qualified to become directors

(b) recommend to the Board their appointment & removal

(c) evaluate directors performance

(d) recommend to the Board a policy relating to the remunerations for the directors etc.

Independent Director’s Liability

To provide an atmosphere where independent directors feel free to function to their full capabilities the Companies Act 2013 protects them from liability to a certain extent. It is provided that they are liable only if any fraudulent act has been committed with the consent of such a director or where such director has not acted diligently & if such act is attributable to the board process.

Conclusion

The institution of independent directors has come a long way & has evolved over the years. In the Indian context, Companies Act, 2013 has become a turning point for independent directors. They have been assigned wide powers & responsibilities. The major reason behind this is that it is sincerely hoped that independent directors would be successful in implementing high standards of corporate governance & ensure that the companies are run in a transparent & efficient manner. They also carry with them the expectation that they would act as the protector of minority shareholder’s interests which is very important at least in the Indian context. However the kind of roles & responsibilities that have been assigned to them under Act, 2013 appear to be numerous & at certain times, overwhelming. It remains to be seen as to how many people would be willing to take so many responsibilities especially when remunerations are not at all attractive. It also remains to be seen whether independent directors, in reality, are able to carry out so many functions as been assigned to them in an efficient manner. But at the same time, it is too early to analyze whether these provisions would be successful in implementation or not.

To conclude, the researcher feels that all the desired regulations, provisions, etc have been put in place to ensure the office of independent directors is able to contribute in corporate governance. All that remains to be seen is whether independent directors are able to break away from their old mould of merely acting as a rubber stamp & actually contribute to the growth of the company rather than simply playing an ornamental role.

[1] Preamble,OECD Principles of Corporate Governance,2004

[2]  S. 149(6) Companies Act 2013

[3] S. 149(10) and (11) Companies Act, 2013

[4] S. 149(4) Companies Act, 2013

[5] S. 150(1) Companies Act, 2013

[6]  S.149 (6) (e)( iii) Companies Act 2013

[7] S. 149(9) Companies Act 2013

[8] S. 197(7) Companies Act 2013

[9] S. 149(7) Companies Act 2013

[10]  S.173(3) Companies Act 2013

[11] S. 167Companies Act 2013

[12] Companies Act 2013, Schedule IV

[13]  S. 135(1) Companies Act 2013

In this blogpost, Haridya Iyengar, Student, Jindal Global Law School, Haryana, writes about the difference between trial by jury and trial by a judge stating the advantages and disadvantages of both.

This paper will seek to explain the difference between the jury system and judge system. It will do this by looking at the structure and the pros and cons of each system.

 Difference between Jury and Judge System

When deciding a legal issue between two parties, the state has to implicitly or explicitly choose individuals to give judgement. There are two systems which can be used to pick these individuals – the jury system and judge system.

The Jury System

A jury composed of the members of the community is present at the trial to act as fact finders.  Either 5, 10 or 15 members are picked randomly from the voter list of all adult citizens in that district or state. In this system, the jury listens to arguments and looks at the evidence given by each side. After both sides are done presenting, the jury bases its decision on how persuasive each side’s evidence is. While the final decision is taken by the jury, the judge still handles the questions of law and procedure during the trial.

The Judge System

Trial by judge or bench trial take place only in front of the judge, there is no jury. The judges are appointed by the state to resolve issues. The judge plays the role of fact finder and the ruler of procedure and matters of law. So, the judge decides the credibility of evidence as well as what happens at the trial according to the rule of law and procedure.

Advantages and Disadvantages

Both the jury system and the bench system have their pros and cons. It is important to look at the benefits and drawbacks of each of these systems. Since trial by judges might be beneficial in one case while, trial by jury might beneficial in another.

The Jury System

While the jury system was abolished after KM Nanawati Vs. The State of Maharashtra, it does have many advantages. Firstly, the evidence presented needs to convince 12 different jurors for each case. This helps introduce 12 new perspectives to the case making it more decisive. Secondly, it reduces the effect of criminal creating judge nexus. It is hard for criminals to create a nexus with the jury members since members are picked at random from the district. Thirdly, it ensures societal participation in the judicial system. Fourthly, the jury system is democratic. The verdict given by the jury is made through a democratic vote. Finally, this prevents lawyer-judge nexus. The random selection of jurors helps prevent lawyers from creating an advantageous nexus which influences his arguments.

While the jury system has advantages, it has also been heavily criticised. The biggest disadvantage came to light after KM Nanawati Vs. The State of Maharashtra. It was seen that the jury was often biased because it based its decision on popular media notion which, could completely deter the notion of a fair trial. This was because the jury consists mostly of people who are not related to the legal system. In the Nanawati case, the jury wrongfully acquitted the plaintiff because of media and public support in favour of Nanawati.
Another disadvantage of the jury system is that they are influenced more by sentiments and prejudices rather than law. While the judges ask the jury members to act impartially and impersonally, this is rarely the case. It rarely tends to apply the law and is emotionally swayed. The jury system is also a very slow process. The selection of jurors tends to take a long time.

The Judge System

The judge system or bench system is currently being followed in India. The judge system has various merits which help the Indian courts decide cases effectively. Firstly, the judge system is supposed to be speedier than a jury trial. Unlike jury trial, there does not have to be a selection procedure for each case. Judges are appointed by the state to decide the cases. Secondly, judges have years of training and experience. A judge is an expert both in law and in working out the truth. Thirdly, judges because of years spent gathering legal knowledge can solve complex issues more effectively. Finally, the bench system is cost effective. Since the bench system does not require the lengthy process of a witness interview, impartial jury selection and cross-examination the cost borne by the parties are less.

However, the bench system is not without its disadvantages. Firstly, there are chances of lawyer-judge nexus being established. If a lawyer makes a nexus with a judge during the trial of a case that nexus will certainly be useful to that lawyer in future cases that comes up before the judge. Secondly, judges can be very objective while deciding a case which, leads to a harsh decisions. Finally, a judge only trial is disadvantageous from the defendant’s perspective in a criminal case. In a jury trial for a criminal case to be proved beyond a reasonable doubt, there needs to be a unanimous vote. Even if the defendant convinces one of the jurors to vote against the conviction, he is not held guilty. In the bench system, however, if the majority votes for a conviction then the defendant is held guilty.

Conclusion

Both the jury system and the bench system have their own advantages and disadvantages. However, reviving the jury system in India might be a mistake since the court already has approximately 3 crore cases pending. The jury system will only further delay the process of deciding these cases.

In this blogpost,  Saumya Agarwal, Student, Amity Law School, Delhi, writes about bribery and related offences Act that are enacted in the USA and the UK and the differences in these acts, their applicability in various situations and on whom it is applicable.

Difference between corruption and bribery

There is some difference between corruption and bribery. Corruption is the abuse of the position of trust to gain an undue advantage and bribery is a single offence which contains the practice of offering something, usually money to gain an illicit advantage.

Anti-Corruption Law in the USA                                                 

The anti-corruption law in the US is Foreign Corrupt Practices Act (FCPA)  which was enacted in 1977 for the purpose of making it unlawful for a certain class of people and entities to make payments to foreign governmental officials to assist in obtaining or retaining business. It applies to any person who has a certain degree of connection to the United States and engages in foreign corrupt practices. The act also applies to any act by US businesses, foreign corporations trading in the US, American nationals, citizens and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the US.

It is the most widely enforced law in the US. The Securities and Exchange Commission (SEC) and the Department of Justice are both responsible for enforcing the Act. The act was first to introduce corporate liability, responsibility for third parties and extraterritoriality for corruption offences means- all the persons and the companies who have committed the offences of corruption abroad. In the case of any violation of the act, there are consequences including high financial penalties of USD 250,000 per violation for an individual act and USD 2,000,000 per violation for the company. The people face prison time as well.

 The policy applies broadly to three categories of persons or entities: ‘issuers’, ‘domestic concerns’ and certain persons and entities under ‘territorial jurisdiction’. These provisions prohibit

(1) US persons and companies,

(2) companies organized under US laws,

(3) companies that have their principal place of business in the US,

(4) companies listed on stock exchanges in the US or

 (5) companies required to file periodic reports with the SEC (issuers) and

 (6) certain foreign persons and business acting while in the territory of the US (territorial jurisdiction) from making corrupt payments to foreign officials to obtain or retain business.

On the analysis of the law, the conclusion reached is positive. The MNCs have confirmed that briberies are not basic facts of the businesses in many countries, but that doesn’t mean that it doesn’t exist. The governments have taken important steps; much more is needed to be done because bribery continues to be a problem in many countries.

Many companies have adopted anti-bribery/anti-corruption (ABAC) solutions. As the business is increasing, the companies are focusing more on their core competencies. As a result, they are engaging in more third party contracts to provide critical business functions. The businesses do not have direct control over the third party and as such exposed to the regulatory and reputational risk of third-party FCPA violations. The companies that operate internationally engage more in third party contracts sometimes even with the parties in countries which are high on Corruption Perceptions Index; these companies have adopted the solutions to protect themselves from fines and reputational damages.

Anti-Bribery Law in the UK

The Bribery Act, 2010 is an Act enacted by the British Parliament to prevent bribery acts and all the criminal activities related to it in Britain. The act covers the crime of bribery, being bribery, the bribery of foreign public officials and the failure of a commercial organization to prevent bribery on its behalf.

The penalties for committing a crime under the Act are a maximum of 10 years’ imprisonment, along with an unlimited fine and the potential for the confiscation of property as well as the disqualification of directors. The directors and officers will be guilty of the offences if they are actively and passively involved.

It has a universal jurisdiction allowing anyone to be prosecuted-be it an individual or a company with the links to the UK, regardless of even the place where the crime occurred.To get caught, all that is required is that your company is carrying on the business or part of their business in the UK. The new law can catch any business that has a potential connection in the UK. However, the UK government has mooted that this condition will be applicable if there is a demonstrable business presence in the UK. It is advisable for the companies to take a close look at the legal and operational set up of their group operations to (or “intending to”) ensuring that risk is minimal if possible, as the meaning of carrying on business is likely to be interpreted broadly by the UK courts.

The companies will potentially be caught by the new law if they have branches, subsidiaries and the group relationships that go with them, sales representatives, agents, distributorships or even bank accounts and costumers in the UK.

Difference between FCPA and the UK Bribery Act

The Bribery Act has a broader applicability than FCPA. So the companies and the organizations that are operating on a global basis to be aware of the differences between the FCPA and the Bribery Act and to be prepared for the implications of the Bribery Act coming into force.

The main points of difference between the Bribery Act and the FPCA are:

• Both the acts make it an offence to bribe a foreign (public) official. Although under the Bribery Act, a ‘foreign public official’ is defined as more narrowly than the FCPA. But it includes (i) anyone who hold a foreign legislative or judicial position; (ii) individuals who exercise a public function for a foreign country, territory, public agency or public enterprise; or (iii) any official or agent of a public organization.

• The FCPA does not cover bribery on a private level, but such an act can be covered under other US legislations. The Bribery Act covers both the public and private acts.

• Under the FCPA both the criminal and the civil proceedings can be brought but under the Bribery Act only the criminal proceedings can only be brought which will be enforced by the Serious Fraud Office (SFO).

• The FCPA covers only the active bribery, e., Only the act of giving a bribe in contrast to that the Bribery Act covers both the active and passive acts of bribery ( the taking of a bribe).

• The Bribery Act creates a strict liability for the corporate offences subject only to establish that a company has ‘adequate procedures’ as opposed to vicarious liabilities. Under the FCPA, a company can be vicariously liable for the acts of its employees and agents which are subject to the US jurisdiction.

• Under the FCPA, it must be proved that the person offering the bribe did so with a ‘corrupt’ intent. The Bribery Act makes no requirement for a corrupt or improper intent about the bribery of a foreign official.

• The defence of promotional expenses can be demonstrated that have a reasonable and bona fide expenditure under the FCPA, but there is no defence concerning the promotional expenses under the Bribery Act about foreign public officials. However, the Ministry of Justice has provided some comfort on this aspect in its guidance.

• The penalties also differ under both the acts. Under the FCPA, an individual can be fined up to USD $250,000 per violation and may be given a five years imprisonment. A company under the FCPA is liable for a fine up to USD $2,000,000 per violation.Under the Bribery Act, an individual found to have committed an offence under the Bribery Act is liable to imprisonment of up to ten years and an unlimited fine. A company found guilty is subject to an unlimited fine.

After reading and analyzing these acts, there are certain changes that are a must in the Prevention of Corruption Act, 1988. The recommendations of the changes in the act will be taken care of in the next article.