This article is written by Yash Lahoti, a student of GNLU, during his internship with iPleaders

The New Companies Act, i.e. Companies Act 2013 requires a minimum net profit of Rs. 5 crore to be spent on CSR activities. This brings many Small and Medium Enterprises (SMEs) into the picture of spending on CSR. This brings another set of challenges as the company is expected by its B2B customers to comply with environmental and social standards.

Small and Medium Enterprises contribute largely to the country’s economic growth by employing nearly 40% of the nation’s workforce and by contributing about 45% to the manufacturing output pool. That is because these enterprises not only serve independently but are also ancillary to those larger units and hence generate employment and help industrialize the rural and backward regions of India.

The activities done by these enterprises are done with the awareness of community needs and expectations. Hence, doing such business activities in proximity of locals will help them develop appropriate CSR programmes.

The standard of companies having a net profit of INR five crore and above set by the CSR clause in the Companies Act, 2013 makes the SMEs qualify for the same excluding the micro- enterprises.

The CSR activities of these enterprises are largely affected by the personal interests of the promoters engaged in similar business activities. The quantum of revenue available to these enterprises is expected to be small and so for the benefit of the community, the pooling of resources by all eligible companies in a geographical area is the apt thing to do to create a sizeable CSR fund.

The collaborative CSR activities taken up by these SMEs create an impact on the community. They not only help in fulfil community needs and expectations but are also beneficial to the companies themselves as collaboration reduces  operational costs for fund management. The collaboration of CSR activities is a necessity because the efforts taken by the SMEs are not optimally delivered to the community due to the following reasons:

• The CSR activities largely depend on the profits of SMEs and any fluctuations in the profits can adversely affect their contribution towards CSR.
• There is lack of professional approach due to lack of human resource in SMEs.
• SMEs focus on short-term activities rather than long-term programmes for local communities to reduce operational costs involved.

Pooling of resources with other SMEs and creating joint CSR programmes managed by a single entity is the modified approach of SMEs towards CSR with the introduction of new companies Act, 2013 so as to reduce operational costs. A survey conducted by UNIDO in 2008 found that 31% to 79% of the SME clusters preferred charity over long term programmes for local communities. These collaborations can be formed within the units in a cluster as they interact with the same communities and have established associations that cater to the business needs of the units. These collaborations have the following advantages:

• Reduces operational cost:

The CSR efforts of a company consist of the following:

1. Establishing a CSR department;
2. Assessing the needs of local communities;

• Taking up programmes directly or through an NGO;

1. Conducting regular impact assessment studies.

  These activities require huge investment and a common organization catering to a number of companies will carry out these activities effectively with reduced operational costs.

• Undertake long-term projects:

The uncertainty in the CSR budget is a major hindrance in taking up long-term projects. The financial performance of the company is a great factor; any fluctuation in the financial performance of the company directly affects the contribution to CSR. The CSR budget allocation is highly unreliable and can jeopardize the projects that have been taken up. Here comes the importance of pooling. Even though the share of one partner reduces, the others can contribute to an extent more than their allocated share in case there is a variation in contribution from a segment of the cluster. Long-term programmes have a larger impact than short-term impact due to the following reasons:

1. Communities have realized these long-term programmes genuinely help in making their lives better;
2. The long-term programmes lead to better community relations;

• Long-term programmes help in reducing situations of community unrest that hamper business activities.

1. The workforce affected by these programmes also remains happy and hence, the business activities of the companies aren’t affected.

• Learning from experiences:

A large number of participants in a common entity discuss and assess past experiences and cater to the communities’ needs and issues.They undertake those programmes that will address greater number of community issues and will be beneficial for the communities.

Collaboration among these SMEs in a cluster also provides an opportunity to address social and environmental issues and gives a better response to the pressure from buyers, who are trying to establish ethical supply chains and gain appreciation from the international community.

• Process to be undertaken for collaboration:

Firstly, an alliance of the interested SMEs has to be created which can be done through cluster association, in case of large-scale participation. In other situations where there are only few SMEs interested in undertaking activities in collaboration, it can be initiated by an individual SME. When cluster association undertakes CSR activities, they make sure that local areas are given due consideration while developing CSR programmes.

A steering committee is required to be formed by the alliance which will constitute representatives from each SME so that they can mutually  resolve any issue that arises. The Steering committee will, then, decide the method of implementation of the activities, i.e. whether through a registered society, trust, a Section 8 Company or through a new entity or directly.

The alliance also need to decide the beneficiary group and the geographical area that they will target based on the inputs from the members of the alliance. Individual SMEs should develop their CSR Strategy in a way that it is flexible to incorporate collaborative effort to undertake CSR activities. Flexibility should be given in case of choosing the themes given under Schedule VII.

In case where the funds allocated for CSR activities are insufficient to cover the cost of collaboration, SMEs have an option of contributing to the Prime Minister National Relief Fund or any other fund set up by the Central Government or the State Government as given under Schedule VII of the Companies Act, 2013.

Volunteering Programmes by Companies

Companies, as part of their corporate social responsibility efforts, encourage their employees to volunteer for a cause during their work hours under formalized EVPs (employee volunteering programmes) which is usually pre-selected by corporate human resource. These EVPs must be carefully planned and executed as it involves substantial opportunity cost for employers.

A Corporate Volunteer’ is an employee who actively takes on the tasks or a project on his own without being assigned or told to do so as part of his daily duty. Corporate volunteering is intended to promote larger social and environmental good and is considered as an altruistic activity. It is intended to improve the quality of life of a target community. Mostly, there isn’t any financial gain while providing such services by the volunteers. At times, these services involve incentives such as profile or personality development, socialization, skill and fun.  There are a few areas like health services, emergency rescue or education where the volunteers themselves need training before they could contribute. While considering EVP, several design parameters and related activities need to be considered which are as follows:

• Setting an objective of a Company from its EVP,
• To develop a framework under which employee volunteers can derive its maximum benefit,
• Recruiting qualified and talented individuals for a specific volunteer role,
• Training new volunteers for their roles and responsibilities. This provides an introduction to the volunteers to the environment they will be working in.
• ‘Adhoc’ assistance is given by a senior and more experienced person to facilitate a new trainee to reach his or her individual goals and objectives in the volunteering programme.
• Reward and Recognition should be given as it motivates volunteers in achieving a goal or organizational objective. This is important in cases where volunteers do not get financial incentives.
• Employees with unique experience and background should be encouraged to work together to increase productivity, effectiveness and responsiveness to changing conditions to enhance their contribution and benefit from the volunteering exercise.

Community Engagement

A community can be defined as a homogeneous group which is bound together politically, culturally, geographically or when they share certain principles, values or at times characteristics. Regarding the discussion here, the community is basically defined as the collection of stakeholders who are resident in the vicinity of the operations of the company and also who rely or are impacted by the shared resources.

Community engagement can be defined as a process in which priorities, needs and values of different individuals and also of external organizations in a community are included into the corporate decision making and management decisions of the company.

Procedure for robust community engagement is as follows:

• Firstly, the complexities and characteristics of the local landscape is to be understood and the same information, then, can be used for strategic planning of community engagement.
• Facilitation and support is to be given to the process of community driven It enables communities to identify their own opportunities, set their own goals and also assets their plan to utilize or share.
• A list is to be created of the individuals, institutions and groups that could be affected by any community engagement project. This step is very important as it generates knowledge about institutions, individuals and local organizations so as to understand their behaviour, interests and inter-relations.
• Target and scope of such an engagement should be set up which is to be in line with the activities that the company is planning to support.
• The best possible way to implement the project is to be identified keeping in mind several variables like project timeframe, budget objectives of community engagement, etc.
• Proper monitoring and evaluation should be done so that the information collected can be used in future planning and finally the information gathered should be communicated to all the stakeholders, the company, and also to the community.

This article is written by Vernita Jain from, NLIU ,Bhopal as part of internship application at iPleaders.

INTRODUCTION

Any advertisement or promotion through Television, Radio, or any other electronic media, Newspapers, Banners, Posters, Handbills, wall-writing etc. to misrepresent the nature, characteristics, qualities or geographic origin of goods, services or commercial activities so as to mislead the consumer could be broadly defined as a misleading advertisement.

Advertising is the most important and legitimate means by a seller to awaken the interest of the buyer in his product. Advertising industry has become a big business, growing at considerable rate and is on the expansion spree for the last few years and. However, the growth of this industry has given rise to prevalent malpractices carried out by advertisers to have an edge over their competitors in the same industry.

As far as its constitutionality is concerned, an advertisement is often described as commercial speech protected under Article 19(1) (a) of the Indian Constitution[1]. As a facet of the right to information, it facilitates the dissemination of information about the sellers and their products.

 A consumer is considered to be a king/queen and that s/he is considered to be intelligent and the ultimate decision maker with respect to the fortunes of many a company. He has to be protected from the prevalent malpractices of the industry and should be encouraged to give a wider choice of good quality products. This can be achieved by imposing strict regulations to curb malpractices of advertisers.

WHAT IS A FALSE OR MISLEADING ADVERTISEMENT?

India is one of the major contributors in the world trade and business. This in turn results in increased competitions among various producers and businessman. One can go to any extent to win in the battle that he is fighting with  its competitors..One of the ways to increase sales and luring costumers towards them is through advertisements and one can go to any extent to mislead customers.

The consumers are protected under The Competition Act[2] which provides criminal and civil regimes to address false or misleading representations. Under both regimes, the Act prohibits the making, or the permitting of the making, of a representation to the public, in any form whatever, that is false or misleading in a material respect.

‘Consumer trust in advertising relies in no small part on the ability of the industry to effectively and transparently police itself,’

         -Stephen Loerke, Managing Director, World Federation of Advertisers.

 In India, the role of self-regulation is provided by Advertising Standards Council of India with the support of the Advertising Industry. Advertisers (80%) usually comply with the decision of ASCI’s Consumer Complaints Council even if they do not agree with it. A complaint when made to the ASCI regarding any misleading advertisement, if an advertiser does not voluntarily withdraw the offending advertisement, ASCI writes to the media and they stop or refuse it.

According to the act[3], such practises of misleading advertisements are called as one among Unfair Trade Practises. Unfair Trade Practises means that, trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provisions of any services, adopts any unfair method or unfair or deceptive practice.[4]

POSITION IN INDIA

Rule 7(9)[5] prescribes that “No advertisement which violates the standards of practice for advertising agencies as approved by the Advertising Agencies Association of India, Bombay, from time to time, shall be carried in the cable service.”

 The Advertising Standards Council of India (ASCI) is a non statutory Tribunal set up in 1985 and incorporated under section 25 of the Companies Act[6]. It entertains and disposes of complaints based on its Code of Advertising Practice (CAP). The Code is based on fundamental principle, “To ensure the truthfulness and honesty of representations and claims made by advertisements and to safeguard against misleading advertisements”.

 ADVERTISEMENT STANDARDS COUNCIL OF INDIA (ASCI)

For long, advertisements were regulated by the courts, government, tribunals, or police that depended upon the nature of each case. Additionally, absence of a single comprehensive legislation created a lot of confusion in terms of a proper code to follow by the industry and the authority to regulate or guide the pattern of advertising.The duty of the ASCI was to entertain and dispose off complaints based on its Code of Advertising Practice[7].

Gradually, the ASCI Code received huge recognition from the advertising industry, the importance of the ASCI increased with the growing malpractices and the warnings issued by it to the advertisers against the misleading advertisements.Nonetheless, the ever increasing role of ASCI and its importance in regulating advertising practices in India was felt by the government too and the ASCI Code was made compulsory[8] for TV advertisements in August 2006. The Rules regarding the advertisement were also amended as, “No advertisement which violates the Code for Self-Regulation in Advertising, as adopted by the ASCI, Mumbai for public exhibition in India, from time to time, shall be carried in the cable service.”[9] This move has provided a binding effect on the ASCI Code.

One of the overarching goal of ASCI is, to maintain and enhance the public’s confidence in advertising. It is the duty of ASCI to ensure that advertisements conform to its code for self-regulation which requires advertisements to be truthful and fair to consumers and competitors. The advertisements make truthful and honest representations and claims which is essential to prohibit misleading advertisements[10], not be offensive to public decency or morality;  Not promote products which are hazardous or harmful to society or to individuals, particularly minors; and  Observe fairness in competition keeping in mind consumer’s interests. Also, they should be within the bounds of generally accepted standards of public decency and propriety; and not used indiscriminately for the promotion of products, hazardous or harmful to society or to individuals, particularly minors, to a degree unacceptable to society at large, and fair in competition[11].

The main aim of the code[12] is to protect the legitimate interests of the consumers by regulating patently false, misleading, and objectionable advertisements broadcast on television, radio, and internet by advertisers, media, and advertising agencies. Both the advertising agencies and advertisers are required to produce such substantiation as and when called upon by ASCI. Before advertising, marketers must hold documentary evidence to prove all claims, whether direct or implied are capable of objective substantiation; advertisements should comply with the law and should not incite anyone to break it; and consumers should not be encouraged to use products to excess. Products should be safe and without side effects[13].

PROCESS OF COMPLAINT

There are three types of complaints handled by ASCI:

 (a) Complaints from the general public including government officials, consumer groups,    etc.,

 (b) Suo Moto complaints from the member of the ASCI Board, CCC, or the Secretariat and,

 (c) Intra industry i.e. complaints from one advertiser against another.

 The methods of registering a complaint are:

(i) Letter addressed to The Secretary General, the Advertising Standards Council of India, 219 Bombay Market, Tardeo, Mumbai 400 034;

(ii)  Throughemail (asci@vsnl. com; [email protected]);

(iii) Online Procedure: visit ASCI’s website www.ascionline.org and register a complaint. The form is simple and you will get a tracking number which will help you track the progress of the redress of your complaint. You can even download the offending advertisement, which will help speed up the process;

(iv) Phone: you can ring ASCI on 022 23513982 or 022 23521066 or 1-800-22 –2724 (toll free). If the complaint is complete, the decision will be taken by ASCI’s Consumer Complaints Council (CCC) within an approximate period of a month.

All complaints are finally redressed by ASCI’s CCC. This body consists of 21 members – 12 members from civil society and nine from industry. The civil society members consist of consumer activists (women/children/consumers), eminent academicians, journalists, doctors, lawyers and scientists.

On receipt of a complaint, the Secretariat acknowledges the complaint and requests the advertiser or agency to provide comments in respect of the complaint. The CCC decides upon the complaints within a period of 4 to 6 weeks, once the party concerned is afforded an opportunity of presenting its case. If the complaint is upheld, then the advertiser and its agency are informed of the CCC decision within 5 working days. The advertiser is given 2 weeks to comply with the CCC decision. Non-compliant advertisements are published in ASCI’s Media quarterly release on an all India basis[14].

ASCI ON TELECOME SECTORS

In many cases ASCI has cracked the whip on telecom operators, pertaining to false claims and over-the-board promises. Some of the cases against telecom operators are:

The Idea Cellular’s advertisements for IIN (Idea Internet Network) were taken to be misleading. The ads shown basically showcased how Internet can transform lives in rural areas. In one particular video ad, they have shown bias visuals, which give an impression that all women in Haryana are backward. A complaint against this advertisement was launched and ASCI considered it to be misleading.

Vodafone created advertisements with text: “Share photos 43% faster” and “The fastest 3G network”; ASCI rapped them, and asked them to withdraw such misleading ads.

In case of, Colgate-Palmolive (India)  vs Anchor Health & Beauty Care[15],If the advertisement in question sends a message to a man of average intelligence and a weak brain amenable to an advertisement wash, as though the defendant’s product is either the only product containing all 3 ingredients or the first in the market, such a message is misleading. This is exactly why, the first lesson taught to a consumer, in movements to create awareness, is that “every rupee spent on advertisement is a nail on the coffin of consumer’s sovereignty“.

In Eureka Forbes Ltd.,-vs- Pentair Water India (P) Ltd[16], the Karnataka High Court also followed the ratio laid down in all the aforesaid rulings and granted an injunction restraining the defendant from disparaging either UV water purifiers in general or the plaintiffs product Aquaguardin particular.

Hindustan Lever Ltd vs. Colgate Palmolive India Ltd . In the said case, the subject matter of dispute was an advertisement issued by Hindustan Lever Ltd., claiming that its “New Pepsodent” toothpaste was “102% better than the leading toothpaste”. Colgate Palmolive Ltd., filed a complaint on the file of the MRTP Commission under Section 36A {(viii) & (x)} of the MRTP Act. They also moved an application for injunction. In the injunction application, the MRTP Commission recorded a prima facie finding that the reference made in the advertisement to the “leading toothpaste” was that of Colgate. Therefore an interim order of injunction was granted apart from certain directions. The said order was under challenge before the Supreme Court. The Supreme Court refused to interfere with the order on the ground that the interlocutory order passed by the Commission was purely a discretionary order.

Calcutta HC in case of Reckitt Colman vs. M.P.Ramachandran laid down following principles-

 (1) That a person is entitled to claim that his product is the best in the world, even if it is untrue and,

(2) That while doing so he would also be entitled to claim that his product is better than his competitor’s, even if it is untrue.

But with so many regulatory measures and legacy regulators introduced in the recent past, it may not now be possible for manufacturers and marketers of goods and services, even in developing countries, to make “false, misleading and harmful” claims in advertisements.

HAPPENINGS IN U.S.A

 In U.S., the Federal Trade Commission takes care of false and misleading advertisements.

There is a paradigm shift from “competitor’s interest” to “consumer’s interest” in such cases. Section 5(a)(1) of the Federal Trade Commission Act[17], declares as unlawful “unfair methods of competition in Commerce and unfair or deceptive acts or practices in Commerce”. It empowers the Commission to prevent such acts or practices.

DEVELOPMENTS IN U.K

The Advertising Industry in U.K., has been successful in self-regulation. In 1961 with the establishment of Advertising Association established the Committee of Advertising Practice (CAP) began self regulation. The Advertising Standards Authority (ASA) was established in 1962 to ensure compliance with the CAP Code.

 There are 2 Committees known as Committees of Advertising Practice CAP (Broadcast) and CAP (Non Broadcast) which are independently administered by the Advertising Standards Authority (ASA)[18].

The job of ASA is to regulate the content of advertisements, sales promotion and direct marketing in the U.K and make sure that the standards are kept.. The Advertising Standards Codes are separated into Codes for TV, Radio and all other types of advertisements. The fundamental principles underlying the Advertising Standards Codes are that the advertisements should not mislead, cause harm or offence. There are specific rules for certain products and marketing techniques, which include rules for alcoholic drinks, health and beauty, children, motoring, environmental claims, gambling, direct marketing and prize promotions. The majority of U.K., advertising is within the Codes and when the ASA upholds complaints, most advertisers agree to change or remove the advertisement. If they do not, ASA relies on the backing of the Office of the Fair Trading (OFT)[19]

. In essence there are 3 different authorities in U.K., viz.,(1) The Director General of Fair Trade, to consider complaints against regular advertisements, (2) the IBA to consider complaints about commercial radio and television advertisements and (3) the Cable Authority to consider complaints about misleading cable advertisement[20]s.

RECENT DEVELOPMENTS

The ASCI pulled up Hindustan Unilever (HUL) for advertisement of its water purifier product ‘Pureit Ultima’ “The TVC of Pureit Ultima claims, ‘Pureit Ultima RO+UV. Sirf is mein hai Purity Indicator jo saaf saaf dikhata hai ki paani kitna pure hai’, which was false and misleading.

Similarly, complaint against LG Electronics was upheld as its advertisement “claims India’s only true water purifier which was not adequately substantiated.”

Complaint against Bharti Airtel was upheld for its Airtel Broadband advertisement claiming “offer of Airtel Broadband — 60 GB @ Rs 1099 with unlimited calls, was not substantiated with evidence of the customers who have availed this scheme.” Regarding an advertisement of VLCC, ASCI said the claims were considered to be misleading.

[1] Article 19(1) (a) talks about: to freedom of speech and expression;

[2] The Competition Act, 2002

[3] Ibid.

[4] M/S.Philips Medi. … vs M/S.Indian Mri Dia. & Res. Ltd. & …

[5] Rule 7(9) the Cable Television Network Rules, 1994

[6] Companies Act, 1956.

[7] Called the “ASCI Code”

[8] Gazette of India, Extraordinary (Part II- section 3(i)) dated August 2, 2006 issued by the Government of India.

[9] “Advertising and Promotion: an IMC Perspective” by  Shah Kruti, and D’Souza Alan,(2009),Tata McGraw-Hill Education

[10] Jain ANiruddha in her article “ Misleading Advertisements: Concepts, Concerns and remedies”

[11] Ibid.

[12] Supra N. 5

[13] See , http://www.india-seminar.com/2013/647/647_alan_collaco.htms

[14] “Regulation by advertisement by advertising regulating council of India: A Critical Appraisal” by Nirmala.K and M.D Krishna.

[15]  Colgate-Palmolive (India) … vs Anchor Health & Beauty Care 2009 (40) PTC 653 (Mad.)

[16] In Eureka Forbes Ltd.,-vs- Pentair Water India (P) Ltd[16] 2007 (4) Kar.L.J. 122

[17] Ibid.

[18] “Media & Entertainment Law” by   Smartt  Ursula .

[19] Supra N. 16

[20] Ibid.

Discounts for lawyers

Quite a few retailers realize that lawyers are great customers – affluent and often unhappy people who turn to materialism with a vengeance. Offering a discount on law day is a smart way to capture their attention. So it’s going to happen this year more than ever as there are more services providers as well as exclusive online stores for lawyers. I am definitely going to check out http://lawsuitsandmore.com/. For litigators, I would strongly recommend getting a set of stylish collars. The judge is definitely going to look at you and wonder what is up your collar while you persuasively present your arguments and floor everyone in the courtroom! Also, demand discounts on law say to people who sell data room services and billing software, database and research services etc to lawyers. Book publishers are likely to offer deals as well.

SuperLawyer is supporting a Law Day delegation to Canada

SuperLawyer.in, a sister website to this blog, is supporting an initiative by a company called E4 to bring the legal industries of India and the wonderful country Canada a little closer on the Canadian Law Day. This tour coincides with the Canada Law Day on April 17 with a weeklong celebration all across Canada.

The delegation is being organized with support from the Canadian Ambassador to India, Ontario Bar Association, Canadian Law Society, Schulick Business School, Queen University, York University, University of Toronto  and Indo Canada Chamber of Commerce and it is to be consisted of only successful lawyers and selected law students. While selection is a bit exclusive, I would suggest that you must give it a shot if you can make 14 days of time in the month of April. Just send your request and updated profile to  [email protected].

Note that bilateral trade between Canada and India is about to touch 15 billion USD and there is a new momentum in cross border investments as well as trade. Also, Canada has a huge NRI population that repatriate money to India, buy property, set up charities and generally like to be involved in growth of the country of origin. Naturally, demand for lawyers with Indian expertise is increasing and it is a great idea to create relationship with Canadian legal fraternity as well as businessmen for Indian lawyers.

Apart from the hectic networking, the organizers have arranged for great deals and travel opportunities as well and I am tempted myself to make a visit to that part of the world. While the delegates need to cover their own costs, opportunities like visiting the Canadian Parliament, attending live courtroom sessions and attending a grand Law Day conference seems to be priceless opportunities.

Beware, you may be forced to give an interview to SuperLawyer if you join the delegation.

Fun events I am looking forward to

Over time, the idea of celebrating law day is seriously catching up. I know quite a few schools are inviting lawyers to visit classrooms and interact with students so that they are better aware of opportunities in legal industry. I am quite sure that there would be a few cricket and football matches organized by a few bar associations around the country. I am however looking forward to some good skill development workshops for lawyers we might organize. How would you like that?

This article is written by Shourya Bari, a student of JGLS.

“The question now raised by the introduction of the phrase ‘due process’ is whether the judiciary should be given the additional power to question the laws made by the State on the ground that they violate certain fundamental principles…There are dangers on both sides. For myself I cannot altogether omit the possibility of a Legislature packed by party men making laws which may abrogate or violate what we regard as certain fundamental principles affecting the life and liberty of an individual. At the same time, I do not see how five or six gentlemen sitting in the Federal or Supreme Court examining laws made by the Legislature and by dint of their own individual conscience or their bias or their prejudices be trusted to determine which law is good and which law is bad…I would leave it to the House to decide in any way it likes.”- B.R. Ambedkar

The passage is perhaps one of the most historic speeches ever made by Dr. Ambedkar. The content of the speech truly captures the dilemma and dichotomy associated with the ‘due process’ clause. The phrase ‘due process’ was borrowed from the Magna Carta and means according to the law of the land. The phrase acquired procedural and substantial meaning owing the judicial craftsmanship of the Supreme Court of the United States of America. The crux of the debate revolving around the use of the phrase in India emphasizes on one crucial aspect. The presence of the ‘due process’ clause in the constitution will provide great power to the judiciary to declare laws made by the Parliament invalid. This implies a curtailment of the power of legislature to legislate on vital issues without any hindrance. The choice was simple before the members of the constituent assembly. They had to choose any one between the legislature and the judiciary to have greater power. The discourse of the constituent assembly on the issue of ‘due process’ shows that the clause was initially present in the Fundamental Rights provision associated with preventive detention and individual liberty in the initial draft version adopted by the constituent assembly in 1947. However, eventually the ‘due process’ clause was eliminated from the draft constitution. This post seeks to provide an explanation as to why the constituent assembly finally excluded the ‘due process’ clause from the constitution by referring to the proceedings of the fundamental rights sub – committee and the debates in the assembly.   

Kazi Syed Karimuddin moved the amendment that the draft Article 15 should contain ‘No person shall be deprived of his life or personal liberty without due process of law’ in place of ‘No person shall be deprived of his life or personal liberty except according to procedure established by law’. Mr. Karimuddin justified his move arguing that the clause ‘according to procedure established by law’ will do great injustice to the court as the duties of the court will be completed with ensuring compliance with the established procedure. Such a clause prevents a judge to interfere with any law that might be capricious or unjust. He argued in favor of providing individuals with inalienable rights in such a way, that political parties coming into power cannot snatch them away.

Shri Chimanlal Chakkubhai Shah argued in favor of retaining the due process clause in the constitution. He explains the connotation present in the ‘due process’ clause. He says that in reviewing a legislation the court will have the power to see not only that the procedure is followed but will also have the power to see that the substantive provisions of law are fair and just and not unreasonable or arbitrary. Mr. Shah counters the argument that the judiciary may not be able to fully appreciate the necessities which have required a specific legislation. He vouches in favor of the judiciary’s capacity to appreciate the necessity behind the passing of an apparent unjust or arbitrary law. Mr. K. M. Munshi staunchly supported the contentions of Mr. Shah.

Mr. Mehboob Ali Baig had pointed out that the clause ‘except according to procedure established by law’ has been borrowed from the Japanese constitution, but the drafting committee has omitted other provisions of the Japanese constitution which give meaning to the clause ‘except according to procedure established by law’. He suggests if the clause ‘except according to procedure established by law’ is read with those other provisions of the Japanese constitution it would make more sense to adapt the ‘due process’ clause.

Shri Alladi Krishnaswami Ayyar put forward arguments to counter the points submitted by all the above members. Shri Ayyar first explains that the ‘due process’ clause as interpreted by the English judges connoted merely the due course of legal proceedings according to the rules and forms established for the protection of rights, and a fair trial in a court of justice according to the modes of proceeding applicable to the case. Shri Ayyar goes on to critique American judicial decisions for an inconsistent interpretation of the ‘due process’ clause on a case by case basis. Shri Ayyar explicitly expresses his skepticism towards the idea that three to four judges will enjoy the freedom to determine what constitutes ‘due process.’ He was extremely critical of the conflicting decisions rendered by the United States Supreme Court while interpreting the ‘due process’ clause.

Mr. Z. H. Lari countered the submissions of Shri Ayyar by bringing in a new point. Mr. Lari clarifies that in the United States of America no such words as ‘personal’ existed. The word liberty alone existed and possibly in that state of things, it was possible to interpret in such a way as to extend the scope of ‘due process’ of law to other spheres of life. Therefore he presents that when the word ‘personal’ has been inserted no court of law which is conscious of the requirement of the requirements of a state as well as conscious of the necessities of individual liberty will be so uncharitable to the interest of the state as to interpret it in a way to thwart the proper working of the state.

Mr. Govind Ballabh Pant was staunchly against the inclusion of the ‘due process’ clause. His vociferous opinion was that the retention of the ‘due process’ clause might mean that the future of the country was to be determined not by the collective wisdom of the representatives of the people but by the whims and vagaries of lawyers elevated to the judiciary.

Shri Ayyar was one of the members of the fundamental rights sub – committee who was initially in favor of a ‘due process’ clause. The point to note would be the reason as to why Shri Ayyar changed his stand. The change of stand by Shri Ayyar turned out to be crucial because he then became a part of the group who were against the ‘due process’ clause and formed the majority with Shri Ayyar in their group. In this context it would be wise to note the activities of constitutional adviser Shri B.N. Rau. Granville Austin in his book the Indian constitution notes that the elimination of due process was a result of B.N. Rau’s influence. In his comments on the report of the fundamental right sub – committee, he pointed out how a substantive interpretation of ‘due process’ might interfere with legislation for social purposes. Soon after that, Shri B.N. Rau began his trip to the United States, Canada, Eire and England to talk with justices, constitutionalists and statesmen about the framing of the constitution. In the United States he met Supreme Court Justice Felix Frankfurter, who told him that he considered the power of judicial review implied in the due process clause both undemocratic – because a few judges could veto legislation enacted by the representatives – and burdensome to the judiciary.

Shri B.N. Rau was influenced by Harvard Law School’s great constitutional lawyer James Bradley Thayer, who also feared that a great reliance on due process as a protection against legislative oversight or misbehavior might weaken the democratic process. In his speech Rau had pointed out that Thayer and others had drawn attention to the dangers of attempting to find in the Supreme Court – instead of in the lessons of experience – a safeguard against the mistakes of the representatives of the people. After Shri B.N. Rau returned from his trip he met Shri Ayyar a number of times and convinced him of the dangers inherent in substantive interpretation of due process. This is evident from the fact that, Shri Ayyar later became one of the most outspoken opponents of the ‘due process’ clause.

There were strong views in the assembly for and against the inclusion of the ‘due process’ clause. Dr. Ambedkar was himself in favor of the ‘due process’ clause and he was torn apart between his choice and his official duty to uphold the decision of the fundamental rights sub – committee where Shri Ayyar’s change of side turned out to be the decisive factor. It was at this point Dr. Ambedkar delivered the historic speech present in the passage. It was open to the house to decide whether ‘due process’ clause should be included in the constitution’s fundamental rights provisions.

The house decided in favor of the clause ‘except in according to procedure established by law’. Thus, in spite of passionate efforts by several members of the house the ‘due process’ clause did not become a part of the Indian constitution. This post has explained through the debates in the constituent assembly and proceedings of the fundamental rights sub – committee the decision of the house to exclude ‘due process’ clause from the Indian constitution and reasons they provided for doing so.

This article is written by Yash Lahoti, a student of GNLU, during his internship with iPleaders

INTRODUCTION

Technological development is significantly overhauling the traditional methods of dispute settlement and electronic  media to sort out disputes  are rising and will become the future of dispute settlement-if it is channelized in a proper manner. Technological advancements have enabled us to tackle many disputes in the past and cyberspace with its   endless possibilities has brought in a new dimension to the regime of international commercial arbitration.[1] Online arbitration is a method, which is being accepted by people at large and has an effective working setup under the current legal framework.

Use of Internet is at its zenith in the current generation and the number of disputes arising in the same forum is also on a rise. Litigation as well as traditional methods of dispute settlement has its share of shortcomings such as they are time consuming, expensive and  have problems regarding the seat/venue of the arbitration.

Accessibility of data via Internet allowed for an immense growth of international commerce. Hundreds of transactions are concluded through electronic medium and entities rely on modern techniques to settle any dispute, which arises during such transaction. In the modern civilization, the dispute settlement mechanism has diversified and arbitration is one of the most preferred methods to resolve disputes. Carrington[2] put forth his experience when dealing with witnesses who hailed from various jurisdictions and the constant trips that they had to make so that they could be present on the day of the proceedings were costly, uneconomical and inefficient. The same problem could have been sorted out with the help of telecommunications and conferencing, if the technological mediums were put to use.

The reality of civil litigation system in the nation is appalling as many people do not have access to the justice system and many lawyers cannot afford to represent clients. Attorney fees and litigation expenses prevent disputants from filing claims and seeking relief from wrongdoers. Many cannot afford to hire lawyers as they are in no position to pay them. There are many reasons, which make the present litigation system unattractive and one such being the monopoly of the lawyers who are earning handsome money from the current litigation system and do not want any change in the same. Second, being the monopolistic nature of the legal system. It takes time for law to evolve and keep pace with the dynamic society and monopolists do not always reform monopolies. There is a historical inertia and the supposed nature of law is slow to change. There is a perception that whatever legal changes are necessary will evolve over a sufficiently lengthy period of time.[3]

However, it’s believed by many that times are changing and modern transaction needs are required wherein the speed of communication has jumped to warp speed. Many e-commerce disputes are emerging today and it requires settlement within few weeks or months so that it doesn’t hamper ease of conducting business and problems stemming from these fast transactions need similarly to be resolved quickly, within weeks or months instead of years.[4]

Many business transactions are conducted through electronic mediums, technological advancement has reached a new height and disputants presume that the ways they use to create relationships and transactions ought to be available to resolve problems. Facets that underlie litigation system are no longer used or relied upon in many serious transactions. Significant financial and business decisions occur nowadays without the expectations or needs that litigations proceedings require. Financial events those are as legally significant as service of process occur by computer transmissions. Judicial hearings require presence of parties and witnesses personally; however transactions rely upon telephone communications and video conferencing.[5]

Today, documents are mostly stored in or have their source in electronic form. [6] The growth in electronically stored information and the variety of systems or devices for creating and storing such information has been dramatic. This creates new issues for discovery as electronically stored information may exist in dynamic databases and other forms very different from static paper.

There is no denying that online arbitration is risky as there can be peculiar problems encountered by only cyberspace and there can be problems to implement the same. Online arbitration has garnered more recognition in the international arbitration sector rather than Indian as the level of technological advancement in foreign countries is undoubtedly more than the Indian scenario. Basically, the problem lies with the fact that the inception of the dispute is of less concern than the fact that the problem requires treatment of being shifted from the conventional methods to the virtual world.

Possibility that the whole proceeding cannot be conducted through online arbitration and during the final settlement of the award, it would be inevitable for the parties to meet up and enforce the award accordingly.

ADVANTAGES OF ONLINE ARBITRATION

Throughout the paper, it has been seen that a new branch of arbitration is creating a lot of stir in the international as well as in the Indian scenario. The system, even though is a new one but still it functions on some of the archaic rules followed by the conventional arbitration. The new branch is thought to have an edge upon the arbitration, which is in practice in today’s world. The advantages that online arbitration provides are:

• As the traditional methods employ a neutral person to settle the dispute between both the parties, in online arbitration also, a similar pattern is followed wherein a mediator/arbitrator will address the particular needs of the disputants.[7]However, the online arbitration allows a lot more flexibility, saves upon time and money and enables quicker decisions.[8]
• No expert would be able to deny that online arbitration any day is a faster method than the current methods available at hand. Online arbitration was brought forth with the prime objective that it will cut down on the cost, which is usually incurred during arbitration. Many prefer arbitration as it ensures a quicker decision but the method is costly. One session of arbitration can be easily billed for thousands and mostly the elite class prefers it[9], thus online arbitration is an attempt to make this efficient system reach as many as people. In Online Arbitration, physical presence of parties, witnesses are not required, at least at the initial stages and thus, a lot of cost is saved when the parties don’t have to travel for long distances.[10]
• The cost of traditional methods such as litigation and mediation etc., involves a lot of cost and sometimes hiring an attorney that can be unnecessary. The legal profession for some has become a medium to earn as much money as possible and certain attorney’s would bind their clients for long in the maze of legal arena and would keep churning money as much as possible. The aggrieved party would be bound to pay the money but no positive result would come out of it. Thus, online arbitration is a sure shot solution to the problem of increased costs in litigation and conventional arbitration process. In online arbitration, use of cyber space is very high and both the parties and the witnesses presenting themselves would have to have an efficient connection to the modems and computer systems.

Substantial cost savings may also result because online arbitration does not require parties to pay for long distance phone calls or tele-conferencing.[11]

• Another advantage that can be attributed to online arbitration is that all the documents and evidences can be stored in the digital platform and if used the correct methods to secure it, then the cost of safeguarding such documents will also lower down. Thus, storage of documents and evidences in online arbitration is also considerably safe.
• The changing times call for advancement in technology and parallel development in the working of people in each field. Law is considered to be the most dynamic of all fields, everyday a new proposition crops up, every time a new law is made and implemented and thus, any day a new technology can come in and take the place of already existing ones.

Internet has brought in revolution in itself and the mode of virtual arbitration is doing the same in the field of dispute redressal mechanism. The conventional method of posting each and every document and through post or speed most has been substituted with e-mails. Communications through e-mails have made life easier and in a spur of moment, people can express themselves to each other and the other party does not have to be present physically but the disputes get resolved easily.[12]

• Fixing of convenient time and place becomes easier as online arbitration is undertaken. The claimants and respondents don’t have to bother about taking long flights and meeting at a neutral point. Cyberspace is a neutral forum and no party’s rights are harmed if such medium is chosen. Both the parties can come together at any convenient time, place being the place, which they are commonly residing at or the place of their business and can conduct the arbitration sessions. The only requirement wherein the physical presence or signature by mere physical presence is called for is during rendering and enforcement of award.
• There would not be any wastage of time as the amount of idle time that disputants experience is similarly reduced because, in contrast to traditional mediation, the mediator can devote time to one party without wasting the time of the other party, who would traditionally sit around waiting for the next mediation stage.
• The issue regarding the jurisdiction also gets solved to some extent wherein the place of conducting the session of arbitration becomes the jurisdictional point of the said matter. The Tribunals don’t have to deal with an extra issue of jurisdiction, which sometimes leads to disposal of matters and the parties have to keep knocking different doors of judiciary to obtain a favorable award/decree.
• One of the major reasons why online arbitration is preferred is because that confidentiality of the matters are kept as it is which is one of the biggest advantages of traditional arbitration as well. Online arbitration, when conducted should be immune to unauthorized access, identity verification, service denial, crash of the system and viruses and it would be a success with every aspect.[13] However, in any system a full proof confidentiality criteria is not possible and the best way to deal with that situation is to maintain as much transparency as possible while conducting the sessions which will enable trust building among parties, though it should be kept in mind that private information of the parties should be masked when publishing the awards.[14]

Thus, the advantages of online arbitration are numerous and if it’s directed in the correct direction, it can prove to be fruitful for the future generations to come. It comes with very few hassles but proves beneficial for majority. It is speedily gaining recognition in the international sector, even though it might be doused with certain disadvantages and arbitrators more often root for the method. The litigation system is burdened in any country and arbitration acts as a boon for those who have been stuck in the system for long. Even the civil laws allow for attributing any matter to arbitration, if it feels that it can be handled better in that field. In the Indian scenario also, the same trend follows wherein, if the civil courts grant permission to the parties to go for arbitration, then it can do so and the award shall be binding upon the party.

Online arbitration has managed to make a mark in every dispute redressal mechanism around the world and it shall continue to do so, if as many parties undertake the practice as possible.

DISADVANTAGES OF ONLINE ARBITRATION

Every system has its pros and cons and even this system has its share of them. The old school followers still stuck by the traditional rules of either litigating a matter or going for the traditional arbitration methods wherein both the parties will sit face to face with each other and try to sort out their dispute. It is felt that cyberspace at all times may not be the best platform where a tribunal should be sorted out. As has been pointed out by Joel Eisen in the article,[15] the practice of arbitration cannot be reproduced in an online environment because ‘cyberspace is not a mirror image of the physical world.

• Both the parties sitting together with a neutral person acting as their arbitrator sometimes proves beneficial as the parties will be able to understand each other in a much clearer manner which may not be possible in cyberspace, even though both the parties are sitting opposite each other.[16] The power of compelling a party who is face to face with you is easier rather than online arbitration. The process of understanding the dispute by both the parties and the arbitrator is much clearer and surer.
• One of the biggest disadvantages of the system is that there is no provision for appeal; the decision rendered becomes binding upon both the parties. Thus, if by any chance the decision is not what is expected by any of the parties, and then he may be left remediless and will have no avenue to avail. The award shall be enforced as it is and in many conditions, depending upon the authenticity of witnesses and evidences, the victim might not be remedied at all. The genuineness of any witness can be understood in a better manner if they are face to face, rather than being through the medium of cyber space.
• Till date, limited range of disputes is attributed to traditional arbitration methods only, then it can be gauged that even lesser number comes for online arbitration. Matters wherein the parties have already determined liability and the dispute solely pertains to determination of appropriate compensation are apt disputes for online arbitration. However, our system is crammed with complex and complicated matters, which can be left to arbitration such as family matters, matters related to women and children etc., and only niche commercial matters are for arbitration. Thus, the range of disputes brought forth in online arbitration is very limited and thus, there is a high possibility that this system will not be put to much use.
• Another disadvantage is accessibility of online arbitration when in many countries; use of Internet is banned or is highly restricted.[17] Under such circumstances, it is very difficult to conduct such sessions because either government or its agent’s interference can cause disruption in the whole system.
• One more glaring disadvantage is that even though online arbitration can reduce the overall cost of the process, but the up-front and continuing fees or the initiation fees is very high. The cost to start an online proceeding can be high and sometimes when a lot of disturbance occurs in cyberspace, then highly intricate and complex machines have to be purchased which in no way can reduce the cost of the arbitration.[18]

Thus, even though a new stem of arbitration is welcomed, it comes with a cost, which may not be advantageous for public at large. It is a very new field, which is unexplored and many people are shying away from even  delving into the field as it comes with its negatives. It can be quite conveniently said that people are too comfortable with the present legal system and does not want to try their hands at new things. Tailing the same argument, most arbitrators are aged and experienced, but experienced only in the field of law and rather not at the new technologies that are coming up. They are still comfortable writing down their judgments with pen and on a paper rather than type it out. Thus, it can serve as a big hindrance in the success of online arbitration. Its beginning has been welcomed by many but the question looms that what will be the future of online arbitration as its acceptability can pose hindrance to many.

FUTURE OF ONLINE ARBITRATION

Society has been changing forever and with them the people have learnt to adapt with the same, they have been imbibing the new laws, regulations of the society and even the legal system. From the archaic times to the contemporary times, legal field has been such that went through a lot of changes, some favorable and some were not.

The advent of the society was parallel to the development of the legal system in the world. India was one of the places where civilization knocked before than many other nations and people were peace loving and considerate who would mingle with each other and live in a peaceful manner. The earliest disputes were, as can be traced, related to property matters. When people were given the opportunity to acquire land or any other immovable property, people thought of their gain and would use any techniques to acquire the same, as it would symbolize wealth and a higher status in the society. Fraud, cheating, misrepresentation were part and parcel of acquiring land and this eventually lead to the inception of the legal system in India.

In the earlier times, there were no formal court system and the elders of the society would take up the matter. They are adjudged to be the best people to resolve the dispute as they were well connected with the happenings of the society or the village they resided in. Their decision was held to be final and binding upon the parties who came before that. The administrative system of the princely states portrays a systematic judicial system for the first time where people with special knowledge were elected to fill up the posts. Certain priests or soldiers were exclusively appointed to deal with the justice system of the kingdom.

Trial by ordeal[19] was a famous method to determine the guilt of a person. The ancient Indian society[20] was largely dominated by faith and religious people and considered the method as a valid proof. It was very common to swear by the truth or to call upon the Gods to witness the truth of a statement, as is clear from various illustrations of the ordeal given in the Smritis.[21]. There were other kinds of trial that were also prevalent but this was considered to be the most potent among all.

If noticed during the times of Asoka, the great philosopher of all times i.e. Chanakya[22] had full-fledged responsibility to look after the judicial system. Emperor Bindusara always relied on the words of Chanakya before deciding upon any matter. The priest would also be consulted before any punishment was meted out to the culprit. Thus, such posts were considered to be holy and of high stature and they were expected to have high code of conduct. This system was successfully carried on for several years and even the Mughal dynasties complied with the same.

However, with the advent of the British things reached its structured form wherein it was realized that a regulatory framework should be in place to govern the entire system or a very chaotic and haphazard situation was in place. No one was held responsible for any act or omission, which would wrong the other party. Thus, the litigation of Court system was developed in India. The Charter of 1833[23] provided the foundation for consolidating reforms and codifying laws and accordingly, a law commission was appointed in 1834 and this step lead to the modernization of Indian laws.

Later, High Courts in the three presidency towns i.e. Calcutta, Bombay and Madras were set up, which gave a boost to the entire judicial system. However, it was not a rosy picture as one after the other cases started piling and the judiciary could not handle the same. Victims were not given justice and the accuseds were languishing in the prison without being correctly convicted. Thus, the need was felt that an alternate system should be devised that can take off certain burden of the shoulders of the judiciary.

Looking towards the apathetic situation, the judicial system borrowed the concept of arbitration from the western world. Arbitration was a welcome change wherein the courts could divert the matter to a neutral body in appropriate cases. The idea of not going for litigation and waiting for a long period of time before justice could be delivered. Arbitration gave the parties the opportunity to settle the matter outside the purview of court and still obtain a binding and final decision. Arbitration has been held high among all the dispute resolution mechanisms and various facets are adding onto the said mechanism with change in the society.

One such addition has been the foundation of online arbitration, which was a dream even in the past few years. For ease of business and to keep pace with the society, even Internet has been made a medium to solve such disputes. Online dispute mechanism started to resolve matters related to domain names of websites and allied disputes. Then the same method has been extended to some other commercial disputes, which did not arise out of the online medium but still the online arbitration platform was being utilized. This showed the willingness of the society to try their hands at this new method as they thought it could be in their favor.

The online dispute resolving mechanism ensures that the objective of conventional arbitration is upheld i.e. speedy delivery of justice without causing inconvenience to the parties and not draining them financially. The use of cyberspace and technology ensured that the system could become a success. Video conferring and Internet has been used for commercial purposes and the same tools are utilized for solving disputes that arise out of such commercial transactions. Even though the thought is novel, it has certain practical difficulties, which till not settled will not make the system as useful as it has been envisaged. However, it’s a pleasant welcome to see that courts in India and around the world has started using internet applications and judges have started receiving training in computers and are encouraged to use such technologies in the court scenario.[24]

Online arbitration calls for the parties to be present during the rendering of award so that they can sign the award before it is enforced and decision is delivered as soon as possible, however the decisions are not held to be binding and have to approach the court at the last stage wherein the enforcement can be only done by the court. It is one feature where it falls short of the conventional arbitration.

As the method is just starting out, it would require some amount of capital, which initially can make the whole system a costly affair but then as time progresses and the system is accepted by many, the economic costs will also come down making the online arbitration scenario conducive for many. Thus, all opportunities should be given to the system to develop so that it can reach maximum number of people and pull them out of their plight and sorry situation.

[1] K. Lynch, “The Forces of Economic Globalization: Challenges to the Regime of International Commercial Arbitration”, Kluwer law International, pg. 345 (2003)

[2] Carrington, P.D., “Virtual Arbitration”, Ohio State Journal on Dispute Resolution, Vol. 15, no. 3, pp. 669-690 (1995)

[3] Id.

[4]Supra (n 1)

[5] Id.

[6]ReOperadora DB Mexico, S.A. de C.V., 2009 WL 2423138 (M. D. Fla. 2009)

[7]E. Casey Lide, “ADR and Cyberspace: The Role of Alternative Dispute Resolution in Online Commerce, Intellectual Property and Defamation”, 12 OHIO ST. J. ON DISP. RESOL. 193, at 208

[8] Id., at 719 (1996)

[9]Lan Q. Hang, “Online Dispute Resolution Systems: The Future of Cyberspace Law”, 41 SANTA CLARA L. REV. 837, 855 (2001)

[10]Llewellyn Joseph Gibbons, Robin M. Kennedy, and Jon Michael Gibbs, “Frontiers of Law: The Internet and Cyberspace: Cyber-mediation communications Medium Massaging the Message”, 32 N.M.L. REV. 27, 42 (2002)

[11]George H. Friedman, “Alternative Dispute Resolution and Emerging Online Technologies: Challenges and Opportunities”, 19 HASTINGS COMM. & ENT. L.J. 695, 712 (1997)

[12]Jim Melamed, The Internet and Divorce Mediation, available at http://www.mediate.com/articles/melamed9.cfm, last visited September 25, 2002

[13]Nicolas De Witt, “Online International Arbitration: Nine Issues Crucial To Its Success”, 12 The American Review Of International Arbitration 462 (2001)

[14]Isabelle Manevy, “Online Dispute Resolution: What Future?” 42, June 2001, http://www.juriscom.net/uni/mem/17/odr01.pdf, last accessed on September 27, 2015

[15]Joel B. Eisen, “Are We Ready for Mediation in Cyberspace?” 1998 BYU L. Rev. 1310 (1998)

[16]Ponte, Lucille M. &Cavenagh, Thomas D., “Cyberjustice: Online Dispute Resolution (ODR) for E-commerce”, 31 (2005)

[17] Id.

[18] Public citizen, protecting health, safety and democracy, www.citizen.org, last accessed on September 27, 2015

[19]V. D.Kulshreshtha, ‘Landmarks in Indian Legal and Constitutional History’ (published 2010 Eastern Book Company) 10^th Edition 5

[20]L. D. Barnett, ‘Antiquities of Indian’ (published 1964 Cornell University Library) 18

[21]Raj Kumar, ‘Essays on Legal System in India’ (first published 2003, 2012 Discovery Publishing House) 8

[22]Kautilya’sArthasastra, Vol. IV, p. 10

[24]Maria Mercedes Albornoz and Nuria Gonzalez Martin, ‘Feasibility analysis of Online Dispute Resolution in Developing Countries’, Inter-American Law Review, Vol. 44, No. 1

This articles is written by Shivesh Kumar Tripathi  a student of National Law Institute University, Bhopal

Introduction

A company can only act through human beings and a human being who commits an offence on account of or for the benefit of a company will be responsible for that offence himself. The importance of incorporation is that it makes the company itself liable in certain circumstances, as well as the human beings- Glanville Williams

Section 11 of Indian Penal Code, 1860 (the Code) define person. It reads “the word person includes any Company or Association or a body of persons, whether incorporated or not.” Further section 2 of the Code provides that “Every person shall be liable to punishment under this Code.” Thus, section 2 of the Code without any exception to body corporate, provides for punishment of every person which obviously includes a Company. Therefore, by reading of these two provision concept of corporate criminal liability can be derived, though it is not the sole legislation which provides for the punishment of corporate body, Companies Act, 2013, Income Tax Act, etc.

Corporations have now became an integral part of our society, and with development of corporations they have become significant actor in our economy, our society runs in the risk of getting victimized by these corporation, and therefore they should be deterred too. Imposition of punishment, upon offenders of any kind, can be understood by various rationale of criminal law jurisprudence, but deterrence is the rationale that is applicable to such economic entities as corporations.[1]  Corporations have their own identity, they have separate legal personality and they are different from their members[2], and this is sufficient to makes it possible to held them liable and censure them.[3]

Criminal Liability is the quality or state of being legally obligated or accountable; legally responsible to another or to society which is enforceable by criminal punishment.[4] And therefore, Corporate Criminal Liability means the extent to which a Corporation as a legal person can be held criminally liable for its acts and omissions and for those of the natural persons employed by it. This paper is intended to examine various nuances related to corporate criminal liability, and at the end to provide various recommendation which should be incorporated in in legislations.

 Twin Model of Corporate Criminal Liability

A.  Derivative Model

This model is individual centred model. It derives to attach the liability to the corporation only because an individual connected to the corporation incurred some liability for which the individual is to be punished, but since it is connected to the corporation the liability is put on the corporation to having that individual with it and letting it incurred some liability.[5] Derivative model can be understood in two sub-categorises: a) Vicarious Liability; b) Identification Doctrine.

1. Vicarious Liability

The concept of vicarious liability is based on two latin maxims- first, qui facit per alium facit per se, it means that he who acts through another shall deemed to have acted on his own, and second, respondeat superior which means let the master answer. In Bartonshill Coal Co. v. McGuire[6], Lord Chelmsford LC said: ‘every act which is done by an employee in the course of his duty is regarded as done by his employer’s orders, and consequently is the same as if it were his employer’s own act.’

Vicarious liability generally applies to civil liability but Massachusetts court in Commonwealth v. Beneficial Finance CO.[7], held three corporations criminally liable for a conspiracy to bribe, the first company, for the acts of its employee, the second, for the act of its Director, and the third, for the acts of the Vice-President of a wholly owned subsidiary. The Court seemed to believe that corporate criminal liability was necessary since, a corporation is a legal fiction comprising only of individuals. US courts are not the only courts which have incorporated the concept of vicarious liability in the cases of criminal liability, but now this model has been rejected considering it to be unjust to condemn one person for the wrongful conduct of another.[8]

1. Identification Doctrine

This doctrine is an English law doctrine which tries to identify certain key persons of a corporation who acts in its behalf, and whose conduct and state of mind can be attributed to that of the corporation. In case of Salomon v. Salomon & Co.[9] House of Lords held that corporate entity is separate from the persons who acts on its behalf. The Courts in England had in various judgments like DPP v. Kent & Sussex Contractors Ltd.,[10] R v. ICR Haulage Ltd.,[11] ruled that the corporate entities could be subjected to criminal liability and the companies were held liable for crimes requiring intent. Judgment like these led to the promulgation of ‘identification doctrine’.

As to the liability of these key persons who act on behalf of company, it was held in Moore v. Brisler[12] that the persons who are identified with the corporations must be acting within the scope of their employment or authority. The conduct must occur within an assigned area of operation even though particulars may be unauthorised. It will be wise to infer that identification doctrine is narrower in scope than the vicarious liability doctrine, instead of holding corporation liable for act of any employee, identification doctrine narrows it down to certain persons.[13]

B.  Organizational Model

Unlike derivative model which focuses on individual, organizational model takes corporation into consideration. Offences require mental state (mens rea) to commit a crime along with physical act (actus reus), but the problem that arises while holding corporations criminally liable is how a corporation which is juristic person could possess requisite mental state to commit a crime.

Derivative model was one way to attribute mental state to corporation. Other way could be by proving that there existed an environment in the corporation which directed, tolerated, led-on, and even encouraged the non-compliance of specific law which made it offence.[14] Moreover, physical act that too is required to complete the requirement of commission of an offence can be derived rather be proved from the act of its employees, officers, directors, etc. Thus, culture of a corporation is to be seen while determining its criminal liability.

Corporate culture may help for commission of an offence requiring mental state by- firstly, providing the environment or necessary encouragement that it was believed by the offender working in the corporation that it was perfectly alright to commit that offence, or corporation has psychologically supported the commission of offence; secondly, it is quite possible that the corporation created an environment which led to commission of crime. Both ways it was the corporation and its working culture that let the offence committed.

III.          Deadlocks of Corporate Criminal Liability

A.  Imprisonment

As has been discussed above that a company is recognized as a juristic person, and being a person it has to face the punishment that has been provided by the various acts. There are various provisions in Companies Act, 2013 itself which hold a company liable for its wrongdoing. However, there are provisions which provides mandatory imprisonment for a person including company, such as Section 447 of Companies Act, 2013 Act, Section 420 of The IPC, 276B of The Income Tax Act etc.

The Courts found themselves in dead end in these kind of situations where a company is charged under sections which provides for necessary imprisonment, as the company being a legal person cannot be imprisoned for its criminal acts, it can only be punished with fine and not otherwise. The Supreme Court has to face similar difficulty in case of M.V. Javali vs. Mahajan Borewell & Co. and Others[15], The Company was found guilty under Section 276B read with 278B of The Income Tax Act, which gives mandatory punishment of at least 3 months, but the Court found itself in a fix about how to imprison a company.  J. Mukhrjee said that, “Even though in view of the above provisions of Section 278B, a company can be prosecuted and punished for an offence committed under Section 276B the sentence of imprisonment which has got to be imposed there under cannot be imposed, it being a juristic person and we are of the opinion that the only harmonious construction that can be given to Section 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed namely on persons coming under categories (ii) and (iii) above, but where it cannot be imposed, namely on a company, fine will be the only punishment.”

Therefore, the solution as of now is that a person is juristic person then punishment relating to imprisonment would not apply to it instead he will be liable for fine. The court can do one thing though, if it cannot imprison a corporate body but it can charge greater amount of fine in such cases in comparison to what it charges to the person who are capable of being imprisoned for the same offence.

B.  Mens rea

Another problem faced by the Judges was how to try a company for the offences where mens rea was an essential. How can a juristic person have a mental element to commit a crime? The trend was such that the company was only tried for cases where mens rea was not an essential and it was accepted that it cannot be tried for offences where mens rea is required.

In the case of Motorola Inc. vs. Union of India[16] the Bombay High Court quashed a proceeding against a corporation for alleged cheating, as it came to the conclusion that it was impossible for a corporation to form the requisite mens rea, which was the essential ingredient of the offense. Thus, the corporation could not be prosecuted under section 420 of the IPC, but this idea of company not possessing mens rea came to an end Lord Denning’s view in the case of H.R. Bolton (engg.) Co. Ltd. vs. T.J. Graham[17] was accepted that “A company may in many ways be likened to a human body. They have a brain and a nerve centre, which controls what they do. They also have hands, which hold the tools and act in accordance with directions from the centre. Some of the people in the company are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what they do. The state of mind of these managers is state of mind of company and it treated by law as such. So you will find that in case where the law requires personal fault as a condition of liability in tort, the fault of the manager will be the personal fault of company.”

The concept of alter ego was evolved subsequently in India to tackle with the problem. The alter ego doctrine revolves around the concept of personification of the legal body. The Corporation is considered to be the alter ego of the individual. Therefore, the corporation can be rendered liable for the criminal act of the individual done in his scope of work. Mens rea of the individual is considered to be the mens rea of the corporation itself. In the case of The Assistant Commissioner, Assessment-II, Bangalore & Ors. vs. M/s. Velliappa Textiles Ltd. & Anr[18], the Supreme Court has held that, “Though, initially, it was supposed that Corporation could not be held liable criminally for offences where mens rea was requisite, the current judicial thinking appears to be that the mens rea of the person in-charge of the affairs of the Corporation, the alter ego, is liable to be extrapolated to the Corporation, enabling even an artificial person to be prosecuted for such an offence.”

Thus, this doctrine of alter ego allowed the courts to frame corporate houses for the offences which had mens rea as an essential ingredient, and it is now less tiresome for the court to hold a corporation criminally liable.

IV.          Recommendation and Conclusion

The 47^th law commission report has recommended various solutions to deal with such problem:

1. Some discretion is to be given to judges to impose penalties as they deem fit for the case.
2. Para 8(3) of the47^th law commission report recommended that, “in every case in which the offence is punishable with imprisonment only or with imprisonment and fine, and the offender is the corporation, it shall be competent to the court to sentence such offender to fine only.”

• In every case in which the offence is punishable with imprisonment and any other punishment not being fine and the offender is a corporation, it shall be competent to the court to sentence such offender to fine.

Unfortunately, the legislatures have ignored these recommendation by law commission and failed to incorporate these provision, and thus the problem is where it was earlier. It is still very difficult for court to punish the offenders. Therefore, it can be said that even though Corporate Crimes are much in vogue today, but the methods to tackle them are still in their pre-mature stage.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:  

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

[1] John T. Byam, The Economic Inefficiency of Corporate Criminal Liability (Vol. 2), 1982, pp. 582-585.

[2] Salomon v. Salomon & Co., 1897 AC 22: (1895-99) All ER Rep 9 (HL).

[3] Supra note 1.

[4] Black’s Law Dictionary (9^th edition), p. 997.

[5] Sumit Baudh, Corporate Criminal Liability, The Student Advocate (Vol. 10), 1988, pp. 45-46.

[6] Bartonshill Coal Co. v. McGuire, (1853) 3 Macq 300.

[7] Scoff Massachusetts, 1971 360 Mass 188,cfWR Lafare, Modem Criminal Law (West Publishing

Co., 775.

[8] State of Maharashtra vs. M/s Syndicate Transport Co. (P) Ltd. AIR 1964 Bom 195.

[9] Salomon v. Salomon & Co., 1897 AC 22: (1895-99) All ER Rep 9 (HL).

[10] DPP v. Kent & Sussex Contractors Ltd., (1944) 1 All E.R.119.

[11] DPP v. Kent & Sussex Contractors Ltd., (1944) 1 All E.R. 691.

^[12] Moore v. Brisler, [1944] 2 All ER 515.

[13] Smith and Hogan, Criminal Law 178 (1992).

[14] Criminal Law Officers Comm. [Code Committee] of the Standing Comm. of Attorneys-General, Austl., Model Criminal Code: Chapter 2, General Principles of Criminal Responsibility Section 501 (1992).

[15] M.V. Javali vs. Mahajan Borewell & Co. and Others, (1997) 8 SCC 72.

[16] Motorola Inc. vs. Union of India, 2004 Cri LJ 1576.

[17] H.R. Bolton (engg.) Co. Ltd. vs. T.J. Graham, [1957] 1 QB 159.

[18] The Assistant Commissioner, Assessment-II, Bangalore & Ors. vs. M/s. Velliappa Textiles Ltd. & Anr, (2003)11 SCC 405

This article is written by Priyanka Kansara,  a student of NLU, Jodhpur, during her internship with iPleaders.

 The E-commerce platform is not a privilege, but rather a necessity for the liberalization in the Economic Market in India. The only reason behind Government’s denial to ease the FDI Policy in E-commerce is that the Government wants to promote the Indian Manufacturing Policy such as Make in India before opening up B2C e-commerce to foreign retailers. India has a unique place in the race of World economies and as per the Confederation of India Industry (CII), India should ease the FDI Policy for the E-commerce Industries. In the Month of November, the CII had entered into an Agreement with the Global provider of cloud-based e-commerce marketplaces CloudBuy.[1] The portal can support the range of payment methods now needed by Indian businesses. As per CloudBuy CEO Lyn Duncan, It is an e-commerce platform for the future, which will enable secure business over the web and a transition to online payments. Similarly as per CII the platform will enable secure e-commerce for organisations of all sizes and will speed the growth in online business-to-business transactions; it has the potential to substantially increase trade between our members and around the globe.

The Indian e-commerce industry is in dire need of Capital. India has the potential to become one of the largest markets for e-commerce. By restricting entry of foreign capital, technology and expertise, government is scuttling the growth of the industry. FDI in India is regulated under Foreign Exchange and Management Act 1999, which is related to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.[2] Currently, FDI Policy in India restricts e-commerce companies from offering services directly to retail consumers and 100 per cent is allowed only in Business- to- Business (B2B), which means India does not allow FDI in B2C e-commerce but allows 100 per cent FDI B2B segment. As per the FDI Policy Circular 2015, E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to ecommerce as well.[3]  As per the words of the Hon’ble Minister of Commerce and Industry Ms. Nirmala Sitharaman, e-commerce strictly means you just create the portal, where a buyer and a seller come together but you (the companies) are not finishing off with that, you are also holding stocks of one seller or many sellers.

Judicial Scrutiny for the violation of FDI Policy in E-commerce Market 

“Prima facie, the Union of India/ State Government cannot, on the one hand, for the purpose of tax, treat such sales as retail and on the other hand, for the purpose of investment, not treat the same as retail sale”, the statement by the Hon’ble Justice Rajiv Sahai Endlaw, while dealing with the petition by the All India Footwear Manufacturers and Retailers Association (AIFMRA) for seeking the clarity on FDI norms for Online Market, created a confusion around the e-commerce market and FDI Policy in India.[4] The AIFMRA had contended that alleging violation of foreign direct investment (FDI) norms by online marketplaces such as Flipkart and Amazon, which have attracted billions of dollars in overseas funding. The argument on behalf of the Association is that E-commerce Market places are retailers, because they accept payment, make deliveries, take returns, and make refunds. Merely there being a physical retailers behind the transaction does not convert the transaction into B2C model having no ecommerce element.

Recently in the Month of November, the Confederation of All India Traders (CAIT) had also raised similar questions in a complaint sent to the Ministry of Commerce and Industry. The CAIT has opposed entry of FDI in any segment of retail and has urged the Government to frame a ‘National Trade Policy’ for retail to provide better business opportunities to the Indian retail sector; as the Domestic traders are fearful as to allowing the FDI in E-commerce without any Policy will enhance the risk of India’s being a dumping yard for the Global Online Market giants. It’s also in favour of a clear policy and guidelines on e-commerce on the lines of the USA, the UK, the European Union and China, among others. The letter singled out Flipkart, Amazon, and Snapdeal for violating FDI regulations while offering huge discounts during the festive seasons also. E-commerce players such as Snapdeal, Flipkart, and Amazon have adopted a market place whereby they provide a platform for retailers and distributors to sell products to customers.

Some specific issues arises while analysing the alleging violation of foreign direct investment (FDI) norms by online marketplaces such as taxation, value added taxes, and bringing them under the ambit of local body taxes. On the same footing, the Kerala High Court had admitted a petition from the Mobile Retailers’ Association that accused of e-commerce firms including Amazon, Flipkart, and Snapdeal of FDI violations, alleging that e-commerce firms enter into exclusive bulk deals with manufacturers to sell their Mobile phones and such strategies would wipe out traditional sellers.[5]

Retail Trading, in any form, by means of e-commerce, would not be permissible for Companies with FDI, engaged in the activity of multi brand retail trading, as well as Single brand retail trading, the Foreign Investment of which is aimed at attracting investment in production and marketing, improving the availability of such goods for the consumers. The efforts of many of the Foreign as well as Indian E-commerce firms like yebhi.com or fashioforyou.com to make the case for allowing FDI in this sector did not bear fruit. But it would be helpful in the creation of a more transparent funding structure for domestic players and offer easier access to capital.

Conclusion: we need a proper and Regularized National Trade Policy

 The debate over whether India would open up B2C e-commerce to FDI has been long and often bitter. The Commerce Ministry’s discussion paper last year listed objections it received from a national body of traders to open up B2C e-commerce to FDI i.e. allowing FDI in e-commerce will provide such players enormous geographical reach and this will be against the spirit of FDI in multi-brand retail which is restricted to cities with more than a million people etc.

E-Commerce in India, unlike in Foreign Jurisdiction, has a different scenario; it has all the advantages of profit-making and commercial viability but is neither regulated by any dedicated e-commerce law nor is it contributing towards the economic and social growth in India. The Government should ensure with the solid FDI Policy to enable a fair Market environment, which can create a healthy competitive environment and can ultimately benefit to the consumers and Government revenues.  For that, we’ll have to wait for some time, but ultimately systema of FDI Policy is a most important phenomenon to be development for the up-liftment of e-commerce in India.

Non-regularization can cause discrepancies in certain other Legal provisions such as Taxation Policies; along with the FDI, taxation is a key consideration impacting e-retailers’ business model, operational strategies and future growth. Lack of physical boundaries and the intangible nature of operations create several taxation issues at each stage of e-commercialization.

Another negative factor as to increment in the unemployment; in India, where small time businesses and kirana store are the largest source of the employment; lack of regularization in the opening of Business to Consumer (B2C) e-commerce can cause negatively impact on the SMEs etc.

[1] CloudBuy ties up with CII for online e-commerce gateway, Business Standard, November 16, 2015, http://www.business-standard.com/article/pti-stories/cloudbuy-ties-up-with-cii-for-online-e-commerce-gateway-115111600636_1.html (accessed on December 2, 20115).

[2] Foreign Exchange Management Act, (1999 no. 42 of 1999; enforced on 29th December, 1999), http://finmin.nic.in/the_ministry/dept_eco_affairs/capital_market_div/fema_act_1999.pdf  (accessed on December 2, 2015).

[3] Consolidated FDI Policy 2015 (effective from May 12, 2015), Department of Industrial Policy and Promotion Ministry of Commerce and Industry Government of India, http://dipp.nic.in/English/policies/FDI_Circular_2015.pdf (accessed on December 12, 2015).

[4] Delhi HC says e-tailers seem to breach FDI rules, Business Standard, September 24, 2015, http://www.business-standard.com/article/companies/delhi-hc-says-e-tailers-seem-to-breach-fdi-rules-115092301392_1.html (accessed on December 2, 2015).

This article is written by Harsha Jeswani, a student of National Law Institute University, Bhopal.

Need for a new consumer protection law

Recently, the Consumer Affairs Minister, Mr. Ram Vilas Paswan, introduced the Consumer Protection Bill, 2015, which is likely to replace the old Consumer Protection Law of 1986. The 1986 Act was introduced to protect the consumers from the unfair trade practices and to redress their disputes by establishing various consumer councils. However there were certain lacunas present in the said Act. The Act did not provide for any remedy to the web consumers. A consumer can bring an action against the seller only in the place where the transaction took place. The new bill on the other hand, aims to fill the gaps by widening the scope and ambit of the old law and bringing about radical changes in order to ensure speedy and inexpensive justice to aggrieved consumers.

One of the significant features of the new bill is to bring the online consumers under the gamut of the Act as there is no dedicated Act for e-commerce.  The decision came after the Maggi Controversy which resulted in growing concern over the safety of consumers. Further, due to expansion of e-commerce and online shopping in India, consumers these days have also become exposed to new forms of unfair trade and unethical business practices. There has been an increased use of internet these days for purchasing purposes. Transactions taking place over the internet are bereft of interaction between the buyer and the seller, as a result of which the former is unable to inspect the quality of the goods offered to him. Fraudulence in online payments is also common.  Therefore the need was felt for protecting the consumers against these technological challenges and to allow for a ‘territory free’ legal action against any goods or service provider.

India is experiencing a robust growth in its e-commerce sector which is expected to be worth more than $16 billion by the end of this year. This new bill therefore recognises the growing complexity of the business landscape with the expansion of e-business across India.

Salient features of the new bill

The salient features of the new bill include establishment of an independent executive agency, the Central Consumer Protection Authority (CCPA), which will serve as a regulatory body to take care of the rights of the consumers. The authority will have a right to recall the products and cancel the advertisements in case of misleading advisements. It will also be empowered to commence class action lawsuits against companies that are evading the statutes of the law and it will now, also, cover Indian e-commerce portals. The new bill confers power on the authority to initiate action against the manufacturers on its own unlike the old Act where the consumer is required to file a case before the court to initiate proceedings.

The new bill is proposed on the lines of institutions in USA and European countries which provide that a consumer protection law should derive its basis from the contract law and the law of sale of goods without which the law of consumer protection tends to be confusing and conflicting. Describing standard form contracts to be ‘of comparative modern origin’, Lord Diplock, in the 1974 judgment in Schroeder Music Publishing Co Ltd. v. Macaulay,[1]  complained that the corporations being stronger effectively confronted the customer with a condition to accept the goods with all the terms, or reject them altogether. Lord Denning, another reformer, corrected that the customer was not even given the freedom of ‘take it or leave it.’ Instead, he was simply given a form and told: ‘sign here’. And if things went wrong, the corporation would shift the burden on the consumers for having accepted the goods with full knowledge of the terms imposed.[2]

Therefore, in order to protect the interests of the disadvantaged party, the British courts recognised the principle of contract law by virtue of which the weaker party could avoid the contract if a party to the contract committed a fundamental breach. UK incorporated this principle in case of consumer contracts also by enacting the Unfair Terms in Consumer Contracts Regulations, 1999 wherein an unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.

However, the earlier consumer protection law of India did not recognise this aspect in case of consumer contracts. The 2015 bill has incorporated the above principle by introducing a ‘product liability’ clause which mandates that if product/services causes personal injury, death or property damage, the authority will take action against defaulting manufacturers or service providers.[3]  Thus by introducing this clause the new bill protects the interests of the online consumers as well who enter into a contract with sellers of online stores to purchase the products without having any means to sample and test the products and services that they are purchasing.

The Bill also fixes product liability upon the manufacturer for any defect in the product if such a product inflicts any damage, personal injury or results in a death of the consumer. In certain cases, the seller could also be held liable for the same. The Bill limits the ability to claim damages on account of mental agony only to cases where personal injury is actually caused. Furthermore, the Act envisages consumer complaints to be resolved expeditiously within three to five months.

The concerned forum is also authorised to cancel unfair terms and conditions in a contract to protect the exploitation of the consumers by traders/service providers. The bill therefore recognises that there is no place for unfair contract terms in consumer contracts.[4] This necessarily means that a contract is binding but not the unfair terms in it. If, however, the cancellation of such unfair terms goes to the root of the contract, the contract would be held void.

It is often contended that Indian consumers face a variety of threats when shopping online due to the shortcomings in the Consumer Protection Act, 1986. The use of internet for purchasing products, the online mode of payment, and such other digital activities raise a number of issues with regard to consumer protection. The new bill proposes to cover all such shortcomings by acknowledging the new consumer trends emerging through the e-commerce platform. Various aspects of e-commerce which are often considered as unethical such as misleading advertisements to consumers, online multi-level marketing, direct selling practices and many other potentially unethical business practices which might mislead or exploit consumers are specifically targeted by the new legislation. Direct interventions and class actions by the regulatory authority for consumers with grievances will therefore now increase the cost of doing business for some companies. E-commerce businesses must particularly take note of the “product liability” section of the bill. If the amendments are passed, action will be taken against manufacturers that sell products and services which cause death, damage or injury to the consumers. The bill provides for a mediation option that can be used by both parties as an alternative dispute resolution mechanism to ensure speedy and inexpensive justice.

For the said purpose, the National, State or district forum will be entitled to mediate a dispute between the parties. The State Government is empowered to establish District Consumer Mediation Cell attached to the District Commission in each district of the State and a Consumer Mediation Cell attached to the State Commission.[5] The new law provides for punishment up to life imprisonment in certain cases of food poisoning. Thus the 2015 bill incorporates stringent punishment against the incidents of fraud and cheating.

Another noteworthy feature of the 2015 bill is the provision of cooling off. The new bill gives the right of cooling off in consumer contracts. Ordinarily the rule is that once a contract is made, it is final and binding on all the parties. But the cooling-off clause gives right to a consumer to return the goods purchased by him within the specified time period and get the payment back if the goods are not in conformity. Many countries recognise this rule. In UK, the Consumer Credit Act, 1974 allows a 14 days cooling-off period in consumer credit.[6] Canada also recognises the law on cooling off which varies from state to state depending on the type the contracts.[7]

India on the other hand did not specifically provide for any provision for cooling- off period except in insurance contracts. The rule was once a contract is entered into between the parties it is final and its sanctity must be preserved. However, the government of India made efforts to introduce exceptions to this general rule particularly in e-commerce transactions where the consumer is very often at disadvantaged situation since he does not get a chance to see the goods or ascertain services. Also consumers in India are often misled by the unfair and false advertising. The consumer buys product by placing his reliance on the advertisements. It is only after he makes purchase, the consumer realises that he has been misled by the false advertisement. Even in case of electronic contracts, it is only after the consumers receives the delivery of the products, he realises that the said products are not in conformity with the goods which were displayed in the online stores and were ordered by him. Many a times, the consumer however was able to set aside the contract but the retailer will refuse to entertain his complaint by shifting the blame on the manufacturer who issues the advertisements. Therefore in this background, there was a need in India for introducing the concept of cooling-off in every consumer sales contract.

The 1986 Act did not have any clear provision for cooling-off. It only talked about ‘reasonable length of time’ but did not define what constitutes reasonable. This gave wide discretion to retailers to set their own ‘reasonable length of time’, which could be as little as nine days in extreme cases. Therefore, in order to obtain a balance between the rights of the consumer and the inconvenience caused to the trader, the Consumer Protection Bill, 2015 provides for a cooling-off period of 30 days. This period enables the consumer to cancel the contract within the prescribed limit in case of any hardship caused to him due to any misrepresentation on the part of the seller. Similarly the interests of the seller is also taken into account as the trader is not required to provide service till the cooling off period is over. Similarly, it also protects the interests of those persons who buy digital content such as e-books, or online films and music by giving them the option of replacement in case the downloads does not work, but not a refund.  Thus, it can be said that the 2015 bill provides for a comprehensive framework to look after the interests of the consumers.

Concerns

Despite all these amendments the Consumer Protection Bill, 2015 is facing criticism on many aspects. Some argue for a separate Act that should regulate e-commerce transactions as present in UK and Europe. These people believe that since e-commerce transactions differ in certain respects from an ordinary contract, therefore there is need for separate law in order to effectively deal with the issues of e-commerce. The activists of consumer protection bill believe that the new bill is likely to make process of consumer grievance redressal more complex and burdensome. Moreover, the equivalent powers which are granted to the proposed authority will overlap with that of the judiciary which is not only undesirable but may also lead to greater complexities. The draft bill also provides for mediation as a mechanism to resolve the disputes. Introduction of such a provision is likely to frustrate the ends of the justice on account of further delaying the process of settlement. Also, provisions pertaining to appointment of mediators could act as a breeding ground for corruption leaving the weaker party helpless. The complexity and regulations are further increased due to setting up of a Consumer Authority and no clear provisions to simplify the conduct of cases in the courts. Further the bill should clearly lay down the products and services which qualify for commercial purpose as it still remains a grey area.

Conclusion

Addressing these issues is therefore incumbent upon the government if it really wishes to make the new bill successful. The cabinet has already approved the Consumer Protection Act for e-commerce as a clean bill of health and will soon become a matter of discussion in the parliamentary sessions. Time is ripe for the bill to be become the new consumer protection law which is specially designed for the digital India.

[1] [1974] 1 WLR 1308.

[2] Levison v. Patent Steam Carpet Cleaning Co. Ltd., (1977) 3 All ER 498.

[3] See Section 72(1) of the Consumer Protection Bill, 2015.

[4] See Section 2(42), the Consumer Protection Bill, 2015.

[5] See Section 63(1), the Consumer Protection Bill, 2015.

[6] The Consumer Credit Act, 1974.

[7] Akhileshwar Pathak, E-Retailing and the Consumer Protection Bill, 2015: Drawing from the European Union Consumer Directives, Indian Institute of Management Ahmedabad-380 015, India.