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How to file a RTI against a private school?

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RTI against private school

This article is written by Rimjhim Vaishnavi, a student of NUSRL, Ranchi, on how to file a RTI against a private school.

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Does a husband have to pay alimony if the wife’s adultery is proved in Court?

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alimony

This article is written by Monika Bhakta, a 4th year student of Lloyd Law College. 

Introduction

As per the social concept of Hindu society the Joint Hindu family system looms large, the law of maintenance has a special significance in the Hindu Law. All members of a joint family, whatever be their social status and whatever be their age limit, are entitled to maintenance. Hindu law also recognizes that a Hindu has also a personal obligation to maintain certain near relations, such as wife children and aged parents.

In Hindu law, the term “Maintenance” has been used in a wide sense. Hindu Adoptions and Maintenance Act, 1956, define maintenance as ‘provision for food, clothing, residence, education, and medical attendance and treatment.’

Maintenance as a Personal Obligation:

Hindu sages, in the most unequivocal and clear terms, lay down that maintenance of certain persons is personal obligation.

Manu declared: “The aged parents, virtuous wife, and an infant child must be maintained even by doing hundred misdeeds.”

Brihaspati said, “A man may give what remains after the food and clothing of family: the giver or more (who leaves his family naked and unfed) may taste honey at first but afterwards find its poison.

According to Mitakshara : “Where there may be no property but what has been self acquired, the only persons whose maintenance out of such property is imperative, are aged parents wife and minor children.”

The maintenance of the aged parents, infant children, and wife is considered to be the greatest duty of a person. It is the belief of Hindus that if one faithfully fulfills this duty, the gates of the heaven are wide open for one. One may also attain salvation. On the other hand, a person who indulges in charity or Dan at the cost of the maintenance of his aged parents infant child and wife is condemned by the sages; it is like tasting honey which turns out to be poison later. During the British period, it was a well established rule that the maintenance of the aforesaid three sects of a person was a personal obligation of every male Hindu. Under the Modern Hindu law, in respect of aged parents and minor children, this is an obligation of every Hindu, male or female, thus, a Hindu has a personal obligation to maintain

 (a) His wife,

(b) Children and

(c) aged parents.

Maintenance as a Right of Wife

In most system of law the wife’s special position in her husband’s household is recognized. The obligation of the husband to maintain his wife does not arise out of any contract, express or implied, but out of the status of the jural relationship of the husband and wife created by the performance of the marriage. The obligation of the husband to maintain is wife begins with the marriage. It is irrespective of the fact that whether he has or has no property. Hindu law- givers did not deny maintenance even to an unchaste wife, provided she is continued to live with her husband though in such cases she was entitled to starving maintenance. Under the ancient Hindu law, a wife who did not live with her husband, whatever be the cause was not entitled to maintenance. But gradually law developed and it came to be established that a wife living separate from her husband for some justifiable cause can claim maintenance. In the modern Hindu law a wife is also entitled to maintenance after dissolution of marriage.

Under Hindu law a wife has exclusive right to claim for the maintenance from her husband. But she loses her right if she deviates from the path of chastity. Her right to maintenance is codified in the Hindu Adoption and Maintenance Act, 1956(78 of 1956). In assessing the amount of maintenance, the court take into Account various factors like position and liabilities of the husband. It also judges whether the wife is justified in living apart from the husband.

Grounds on which the Order of Maintenance can be refused

  • That a wife living in Adultery, or
  • That without any sufficient cause or reason she refused to live with the husband, or
  • That she and her husband are living apart by mutual consent.

Adultery

Before coming into the force of the Marriage Laws (Amendment) Act, 1976 “Living in adultery” was a ground of divorce. On the other hand, a petitioner could obtain a decree of judicial separation, if he could show that his spouse after solemnization of the marriage had sexual intercourse with any person other than his spouse.

Adultery in Matrimonial and Criminal law: The following is the accepted meaning of the adultery in the matrimonial law:  “Adultery may be defined as consensual sexual intercourse between a married and a person of opposite sex, not the other spouse, during the subsistence of the marriage”.

Under the Indian Law, adultery is also a criminal offence. But the definition is different. Section 497 of the Indian Penal Code defines it thus: “Whoever has sexual intercourse with a person who is and whom he knows or has reason to believe to be the wife of another man without the consent or connivance of that man, such intercourse not amounting to the offence of rape, is guilty of adultery”.  Under both the criminal law and matrimonial law, adultery is an offence against marriage and therefore in both the cases it is essential that at the time of the offence a valid marriage was subsisting to constitute the offence of adultery it is also necessary that the respondent (in case of the criminal offence, the wife) was a consenting party. In short, the sexual intercourse must be consensual.

Proof of Adultery and Burden of Proof: The burden of proof is on the petitioner. At the time he was required to prove it beyond all the reasonable doubts, but today it can be proved by ‘preponderance of probability’. “Proofs beyond all reasonable doubts”, means such proofs as precludes every reasonable hypothesis except that which tends to support it. It need not certainty, but must carry a high degree of probability.

There is always the presumption of innocence and it is for the petitioner to prove the allegations relied upon. The respondent, on the other hand bears the burden of establishing the affirmative defences set up in reply.

It was sometimes said that since the adultery is a serious charge, it must be examined on the same footing as a criminal charge. It was also said at times that is was a quasi-criminal offence and must be proved as such. Section 23 of the Hindu Marriage Act requires that the court should decree the relief if it is satisfied that the ground for granting relief exists. It is often said that adultery is a serious matrimonial offence and the court must be satisfied beyond all reasonable doubt that it is established. However, Section 23 itself lays down a standard and puts adultery on the same footing as cruelty, desertion, or unsoundness of mind. What is required is that the court must be satisfied on a preponderance of probability that the charge is established. A logical conclusion from all points cannot be expected nor can a degree of uncertainty be demanded of which the matter under investigation is not reasonably capable. The word ‘strict’ is regarded sufficiently apt to describe the measure and standard of proof. The proceeding is civil and not criminal and analogy of a criminal case can at times be misleading.

In White v. White, AIR 1958 SC 441, the SC had to consider the words ‘satisfied on evidence’ used in Section 14 of Divorce Act, 1869. After referring to the case, Preston Jones (1951)1 AII ER 124, decided by the house of lords in England, the Supreme Court expressed the view that the words ‘satisfied on evidence’ means that the court should be satisfied beyond reasonable doubt as to the commission of the matrimonial offence. The view was also expressed that the evidence must be clear and satisfactory beyond mere balance of probabilities. It was also pointed out that it was not necessary and really possible to prove adultery by any direct evidence.

 

Maintenance on Adulterous Woman:

In order to constitute a claim of maintenance by the wife can be taken into consideration by the virtue of Section 18 of Hindu Adoption and Maintenance Act, 1956 which states that a wife can ask for maintenance: 1) subject to the provisions of this section, a Hindu wife whether married before or after the commencement of the Act, shall be entitled to be maintained by her husband during her life time.

2) A Hindu wife shall be entitled to live separately from her husband without forfeiting her claim to maintenance-

(a) If he is guilty of desertion, that is to say, of abandoning her without reasonable cause and without her consent or against her wish , or of willfully neglecting her;

(b)If he has treated her with such cruelty as to cause a reasonable apprehension in her mind that it will be harmful or injunctions to live with her husband;

(c)If he is suffering from a virulent form of leprosy;

(d)If he has any other wife living;

(e) If he keeps a concubine in the same house in which his wife is living or habitually resides with a concubine elsewhere;

(f) If he has ceased to be Hindu by conversion to another religion;

(g) If there is any other cause justifying living separately.

3) A Hindu wife shall not be entitled to separate residence and maintenance from her husband if she is unchaste or ceases to be a Hindu by conversion to another religion.

 Therefore wife in Order to be entitled for the claim of maintenance must be capable of, by virtue of section 18 clause 1 and 2. Only a wife, who as mentioned above can ask for the maintenance, But the wife who is charged under the allegation of being indulged in the adulterous activity cannot be made liable to enjoy the ripen fruits of the Maintenance. Section 18(3) of the Hindu Adoption and Maintenance Act 1956 clearly states that a wife indulged in the relationships of adultery could not be entitled to ask for maintenance. The word ‘unchaste’ refers to relating to or engaging in sexual intercourse activity or especially of an illicit or extramarital affair. A wife indulged in unchaste activity is denied for the claim of maintenance.

But while considering the concept of the Hindu Marriage Act, 1955

Section 23A ‘Relief for respondent in divorce and other proceeding’–  In any proceeding for divorce or judicial separation or restitution of conjugal rights, the respondent may not only oppose the relief sought on the ground of petitioner’s adultery, cruelty, or desertion, but also make a counter-claim for any relief under this Act on that ground; and if the petitioner’s adultery, cruelty, or desertion is proved the court may give to the respondent any relief under the Act to which he or she would have been entitled if he or she had presented a petition seeking such relief on that ground.

Section 24 ‘Maintenance pendent lite and expenses of proceedings’ – where in any proceeding under this act it appears to the court that either the wife or the husband, as the case may be, has no independent income sufficient for her or his support and the necessary expenses of the proceedings, it may on the application of the wife or husband, order the respondent, to pay to the petitioner the expenses of the proceeding, and monthly during the proceeding such sums as having regard to the petitioner’s own income and the income of the respondent, it may seem to the court to be reasonable.

None of the above the 2 sections have provisions where a respondent wife as in this case would have been denied maintenance.

But if we look at Code of Criminal Procedure, 1973 under Section 125 (4) No wife shall be entitled to receive an allowance from her husband under this section if she is living in adultery, or if, without any sufficient cause or reason, she refuses to live with her husband or if they are living separately by mutual consent.

This section would disallow maintenance on the ground of adultery of wife.

Case laws Referred:

Under Vinod Kumar V/s. Kaushalya, I (1996) DMc 603 Raj. – It is true that is suit for the divorced is decreed after the trial on the ground of adultery then the wife will not be entitled to get permanent alimony and maintenance U/sec 25 of the Hindu Marriage Act 1955 because adultery  alleged against her is proved.

On 15th Nov 2013 a local Mumbai court on Friday rejected a 38yr old south Mumbai woman’s plea for maintenance from her estranged husband after it found out that she was involved in the adulterous relationship.“The wife who engaged herself in (an) adulterous activity cannot be allowed to take advantage of her own wrongdoings,” the court said while accepting the 40yr old husband’s plea seeking divorce on the grounds of cruelty and adultery.

Conclusion

As per the above mentioned sections and the facts and the circumstances referred it states that a husband cannot be made liable to pay alimony if the wife’s adultery is proved under the court of law. Therefore in Order to constitute a claim for the right of maintenance wife must be cleaned handed, she must be pure enough to claim for the maintenance as per the rules and regulations stated in the previously mentioned sections.

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How And When To File A Complaint With A State Human Rights Commission

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human rights commission

This article is written by Priyanka Kansara, a student of NLU, Jodhpur.

Introduction

“The amount of violations of human rights in a country is always an inverse function of the amount of complaints about human rights violations heard from there. The greater the number of complaints being aired, the better protected are human rights in that country.” 

Daniel Patrick Moynihan

Human rights” means the rights relating to life, liberty, equality and dignity of the individual guaranteed under the Constitution or embodied in the International Covenants and enforced by courts in India.[1]” All human beings are born with some unalienable rights like life, liberty and pursuit of happiness. The importance of these natural rights can be found in the fact that these are fundamental for their proper existence and no other rights can be enjoyed without the presence of rights to life and liberty.[2]

For having the knowledge of the procedure of State Human Rights Commission, firstly we need to get familiar with the strength, the evolution, the functions and the limitations of the Commission. State Human Rights Commission is a Quasi- Judicial Body, which works for the protection of the Human Rights as prescribed under the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Right adopted by the General Assembly of the United Nations on December 16, 1966.

Evolution of State Human Rights Commission

State Human Right Commissions are constituted to enquire into Complaints, which is one of the major activities of State Human Right Commissions. As the nomenclature is indicating, Human Right Commissions are meant to prevent violations of Human Rights[3], which are prescribed under Universal Declaration of Human Rights[4].

The State Human Rights Commission is a Legislative body works for the purpose of redressal of the grievances arising out of violations of human rights. The Human Rights Protection Act, 1993 facilitates that State Government may constitute State Human Rights Commission to exercise the power conferred upon, and perform functions assigned to it under the Act.

State Human Rights Commissions work under the supervision of National Human Rights Commission on different themes i.e. Human Rights, Custodial deaths[5], Police excesses[6], fake encounters[7], Women and Children’s rights[8], Dalit’s right & Minority Communities’ Rights[9], Disability, Bonded Labour and Labourer’s Rights[10] , Armed Forces[11] or any of the entries enumerated in List I or List III in the Seventh Schedule of the Constitution applicable to that State.etc.   

How to Complaint with a State Human Right Commission

Article 14 of the Constitution guarantees to all people equality before the law and equal protection of the laws’ within the territory of India. The procedure to file an application with State Human Rights Commission is not a complicated task; any person or the victim himself can present the petition[12], even in the form of an application, to the authorized person of the Commission.

Non-registration of First Information Reports (FIR) is one of the most serious, frequent and common grievances against the police. This problem is compounded when the person against whom a complaint is made is rich and powerful. Police officers must register an FIR immediately on receiving information about a cognizable offence. Persons aggrieved by non-registration of FIR can approach the District Superintendent of Police[13] or the concerned Magistrate[14] to get their complaints registered. Alternatively complaints in this regard can also be filed before the National or concerned State Human Rights Commission.

https://lawsikho.com/course/certificate-criminal-litigation-trial-advocacy

Functions of the State Human Rights Commission

Section 12 of the Human Rights Act, 1993 states that;

The Commission shall perform all or any of the following functions, namely:-

(a) inquire, suo motu or on a petition presented to it by a victim or any person on his behalf, into complaint of –

(i) violation of Human Rights or abetment thereof; or

(ii) negligence in the prevention of such violation, by a public servant;

(b) intervene in any proceeding involving any allegation of violation of Human Rights pending before a Court with the approval of such court;

(c) visit, under intimation to the State Government, any jail or any other institution under the control of the State Government, where persons are detained or lodged for purposes of treatment, reformation or protection to study the living conditions of the inmates and make recommendations thereon;

(d) review the safeguards provided by or under the Constitution or any law for the time being in force for the protection of Human Rights and recommend measures for their effective implementation;

(e) review the factors, including acts of terrorism, that inhibit the enjoyment of Human Rights and recommend appropriate remedial measures;

(f) study treaties and other international instruments on Human Rights and make recommendations for their effective implementation;

(g) undertake and promote research in the field of Human Rights;

(h) spread Human Rights literacy among various sections of society and promote awareness of the safeguards available for the protection of these rights through publications, the media, seminars and other available means;

(i) encourage the efforts of non-governmental organizations and institutions working in the field of Human Rights;

(j) such other functions as it may consider necessary for the promotion of Human Rights.

Section 12 also ensures that whenever, the Commission on receipt of a complaint or suo-motu finds that there is a violation of the Human Rights or abetment by anybody, irrespective of the fact as to whether the violation is by a public servant or any other person, the Commission can initiate proceedings for enquiry. It also, necessarily, follows that when a court of competent jurisdiction, either Civil or Criminal, is already seized of the matter, the Commission has no jurisdiction in the matter to initiate parallel proceedings or order a parallel investigation. In the Case of N.C. Dhourrdial vs. Union of India[15], it was stated that the Commission, which is the creature of statute is bound by its provisions. Its duties and functions are defined and circumscribed by the Act. Of course, as any other statutory functionary, it undoubtedly has incidental or ancillary power to effectively exercise its jurisdiction in respect of the powers conferred to it but the Commission, should necessarily act within the parameters prescribed by the Act creating it and the confines of jurisdiction vested in it by the Act.

The Government is duty bound to consider the recommendations of the Commission and to act upon the same.[16]

“It may also be relevant to notice here that the Commission is a creature of a Statute i.e. Protection of Human Rights Act, 1993. It, therefore, cannot obviously clothe itself with such powers which have not been conferred upon it by the aforesaid Statute. Apparently powers of judicial review have not been conferred upon the Commission. Powers of holding parallel proceedings where the matter is already pending before a competent court (civil or criminal), have also not been envisaged by the Act. Under the provisions of the Act, the Commission has been merely constituted with a function to make recommendations to the appropriate Government, when any violation of Human Right  by a public servant, is brought to its notice, after due investigation of the matter. As the language of Section 18 itself suggest that the Commission has only power to make recommendations to the concerned Government or authority, for initiation of proceedings, or for initiation of such action as may be deemed fit. The word “recommendation” necessarily mean “to Suggest.” Such a suggestion cannot be treated to be a decision capable of execution or enforcement.”[17]

 Limitations for the Jurisdiction of Human Rights Commission

  • The Commission or the State Commission shall not inquire into any matter after the expiry of one year from the date on which the act constituting violation of human rights is alleged to have been committed.[18] It is, thus, clear that a specific period of limitation has been provided for initiating of proceedings even in connection with violation of human rights by a public servant. The acts which are found to be beyond the aforesaid period of one year from the date, when the complaint in question is filed before the Commission, shall not be inquired into by theCommission or the State Commission. The Commission is enjoined with powers only with a view to inquire into the violation of the Human Rights.
  • While inquiring into any complaint of human rights violation, the Commission shall exercise the power of a civil court to the limited extent of securing the presence of witnesses, examination of witnesses, etc. After completing the inquiry, as envisaged in Section18 of the Act, the Commission shall make only a recommendation to the Government such as to make payment of compensation or damages to the complainant or to the victim or member of his family as the Commission may consider necessary, in the event the inquiry discloses violation of Human Rights or negligence in the prevention of such violation.[19] On receipt of the Commission’s report, the Central Government may or may not take any action, depending upon the nature of the findings recorded by the Commission.[20]
  • The Commission is not a judicial body. It has only been vested with certain powers of the Civil Court under Section13 for the purpose of inquiry into complaints regarding summoning and enforcing attendance of witnesses, examining them on oath, discovery and production of documents, evidence on affidavit, requisitioning of any public record or copy, issuing Commission for examination of witnesses/documents etc.[21]

But on the other side, it has been stated in U.P. Power Corporation. Ltd. v. National Human Rights Commission[22] that according to S. 18 (a) where inquiry discloses the Commission of violation of Human Rights or negligence in the prevention of violation of Human Rights or abetment thereof by a public servant, it may recommend to the concerned Government or authority to make payment of compensation or damages as the Commission may consider necessary. Thus, the Commission has jurisdiction to recommend compensation as the Commission may consider necessary. The power of the Commission under S. 18 is not initiated by any other provisions or any State Legislature or subordinate legislation. The power of the Commission under S. 18 is in addition to any other provisions covering the subject matter and not in derogation of any other provisions of law.

For a Prudent person- How to File a Complaint with State Human Rights Commission

Any person i.e. person with the spirit of public interest or the Victim himself can file an application by person or by post. There is no particular procedure to file a Complaint. Whenever and wherever, there is violation of Human Rights or exploitation of Human Being; they can inform the State Human Rights Commission within the prescribed time period.

The matter cannot be pending before any Court in the territory of India, which has a requisite Jurisdiction over the matter. Though, where there is some delay in the execution of the matter, any person can complaint the Commission with regard to such undue delay.

The power of the State Human Rights Commission is to give Order to respective Government to have a policy for requisite execution of the matter or the investigation of the matter by itself only; in this situation, the Commission will submit its report to the State Government for the quick elimination of the restitution.

Conclusion

State Human Rights Commission works as an additional tool for the protection of the Human Rights. As per the theme “how and when to Complaint with State Human Right Commission”, though the jurisdiction of the Commission is vast enough to entertain the Complaints in the field of protection of gross violation of Human Rights and Human indeed; in all cases, the Commission cannot take the action suo-moto. All the Human Beings are supposed to be aware of their Rights, which are the proof of their mere existence. The awareness of the same matters prior to the procedure or the functioning of the Commission.

 

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[1] Protection of Human Rights Act, 1993 (henceforth the Act 1993) s. 2 (January 8, 1994).

[2] Siddharam Satlingappa Mhetre vs. State of Maharashtra (2011)1 SCC 694.

[3] s. 12 (a) (i) the Act 1993.

http://nhrc.nic.in/Documents/Publications/TheProtectionofHumanRightsAct1993_Eng.pdf, (accessed on July 20, 2015).

[4] The Universal Declaration of Human Rights, 1948 (December 10, 1948), http://www.un.org/en/documents/udhr/ (accessed on July 20, 2015).

[5] State Human Rights Commission investigates custodial deaths, The Times of India (October 11, 20114), http://timesofindia.indiatimes.com/city/coimbatore/State-Human-Rights-Commission-investigates-custodial-deaths/articleshow/44778865.cms (accessed on July 20, 2015).

[6] ARUL, P.,  Fake action against police: State Human Rights Commission, , Deccan Chronicle, (July 18, 2015) http://www.deccanchronicle.com/150718/nation-current-affairs/article/take-action-against-police-state-human-rights-commission (accessed on July 20, 2015).

[7] Muzaffar, Imran, ‘Cops threaten us of staging fake encounter in our house’, Greater Kashmir (April 29, 2014), http://www.greaterkashmir.com/news/kashmir/-cops-threaten-us-of-staging-fake-encounter-in-our-house/168939.html (accessed on July 20, 2015).

[8] Hema Malini Crash: Rajasthan State Human Rights Commission Issues Notice to Authorities, NDTV (July 8, 2015), http://www.ndtv.com/india-news/hema-malini-crash-rajasthan-state-human-rights-commission-issues-notice-to-authorities-779388 (accessed on July 20, 2015).

[9] Sharma, Somendra, Maharashtra State Human Rights Commission approaches police against senior member, dna (Ma 29, 2014), http://www.dnaindia.com/mumbai/report-maharashtra-state-human-rights-commission-approaches-police-against-senior-member-1992006 (accessed on July 21, 2015).

[10] Dhar, Aarti, Amend Mines Act to contain silicosis: Rajasthan HRC (April 5, 2015) http://www.thehindu.com/news/national/other-states/amend-mines-act-to-contain-silicosis-says-rajasthan-state-human-rights-commission/article7070876.ece (July 21, 2015).

[11] Madhukalya, Amrita, 25 years of AFSPA: 43,000 dead in 21 years, dna (July 1, 2015), http://www.dnaindia.com/india/report-43000-dead-in-25-years-of-afspa-2100707 (July 21, 2015).

[12] s. 12 (a) the Act, 1993.

[13]Code of Criminal Procedure 1973 (henceforth the CrPC 1973) s.  154 (3) (April 1st, 1974).

[14] s. 156 (3) the CrPC 1973.

[15] AIR 2004 SC 1272.

[16] T.T. Antony vs. State of Kerala 2001 (6) SCC 181.

[17] Jai Singh v. Punjab State Human Rights Commission and Anr. C.W.P. No. 20075 of 2003 (decided on April 2, 2005).

[18] s. 36 (2) the Act 1993.

[19] Rajesh Das vs. Tamil Nadu State Human Rights Commission 2010(5) CTC 589.

[20] State of Karnataka v. Union of India (1977) 4 SCC 608.

[21] State of Bihar vs.  Bihar Human Rights Commission AIR 2014 Pat 30.

[22] AIR 2010 All. 139.

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Legal Rights Of LGBT Community In India

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This article is written by Tanya D’souza, a student of Ambedkar University.

Abstract: In the past few years the LGBT community has been making the headlines quite often, be it because of the Supreme Court judgement on section 377 of the IPC or because of the most recent NALSA judgement about the legal recognition of the third gender in India.

The LGBT communities all around the world have been in a constant battle against the discrimination they face on a daily basis. In the west the LGBT movement, had emerged “with and out of the women’s movements, foregrounded the idea of pleasure, the LGBT movement here really came into existence piggybacking on the AIDS crisis and articulated itself necessarily in the languages of crisis, violence and remedial action , not pleasure.”(Tellis: 2011) Even though in the academic filed sexuality was shown to be embedded in various discourses it wasn’t accepted or understood by the state. Also no debate about sexual desire has ever come up with sexual agency as the base.

In this article I will try to trace answers to a few questions that may come to our mind when we are made familiar with these laws. Questions like-Was it a valid decision? Is being homosexuality unnatural? What role does religion play in the perception of homosexuality? While criminalizing the act of homosexuality and calling it unnatural, are we not indirectly going against the very law of human rights and equality?  While we keep talking about India’s continuous growth and development as a county, we must also sit back and think to ourselves, is it just enough to be developed in terms of science, economy and infrastructure? What about bringing about change in the mindset of the society towards issues like that of section 377?

Background

Not many people were familiar with the section 377 of the Indian Penal code till the recent movement that took place on a large scale in order to repeal it. This struggle has been a long one, Section 377 dates all the way back to 1861, during the British rule in India when any sexual activities that went “against the order of nature” was criminalized including homosexual acts. The concept of what is natural and what is unnatural in itself can be looked at as a problem. Just because some people have different preferences, does it make them or their choices unnatural?

Section 377, IPC reads as:

“377. Unnatural offences.— Whoever voluntarily has carnal intercourse against the order of nature with any man, woman or animal, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Explanation.—Penetration is sufficient to constitute the carnal intercourse necessary to the offence described in this section.”

On 2nd July 2009 the High Court of Delhi declared gay sex legal, with respect to sex between consenting adults, but on 11th December, 2013 the Supreme Court went back to the old constitution and reinforced section 377. Despite all the government petitions to review and drop the ban on gay sex the apex court refused to do so and stuck to their verdict. One wrong judgment put to test all the hard work invested by the LGBT activists in order to spread awareness regarding the topic and also to liberate hundreds of individuals who identified themselves as a part of the LGBT society.

 Ever since the Supreme Court came out with such an unfair verdict there has been a lot of discussion and debate regarding this topic across the globe. In many parts of the country the LGBT society protested against this verdict by organizing various peace walks and pride parades in order to create awareness regarding this subject. These pride parades included not just homosexual people but also many heterosexual people who felt that this was a wrong step taken by the Supreme Court.

Effects of section 377

Poulomi Banerjee in her article shows us how this verdict has become a menace for many people who belong to the LGBT society and gives us accounts of many such instances. She tells us about a transgendered individual from Kolkata who was ill-treated and insulted by people from his neighborhood. While he “was returning home… some people on the street threw eggs at him. A day or two earlier, a group of approximately seven men from the neighborhood had blocked his way, demanding to know how much they would have to pay him in return for sexual favors” (Banerjee, 2014). This is something many homosexual people face on a daily basis. And what are they supposed to do about it? Go to the police? Well they can’t, because the police themselves harass them and misuse the law. “There have been cases where two boys were seen holding hands or kissing and been harassed by the police. They either beat them up or threaten them with arrest and demand money to let them off. Demands for sexual favors in return of non-prosecution are also common,” says Kolkata-based activist Pawan Dhall, as accounted by Banerjee in her article.

It’s sad to see that while on one hand we have people coming forward and taking part in the awareness campaigns and resent the Supreme Court’s judgment, on the other hand there are still many people who believe that having any other sexual orientation except that of a heterosexual is unnatural and not just against nature, but against the will of God. There are a number of people who believe that the Supreme Court has made the perfect decision and it that their decision couldn’t get any better. An article published by the Hindustan Times quotes the general secretary of the All Indian Muslim Personal Law Board, Mr. Abdul Raheem Quraishi as saying, “We know that homosexuality is against nature…it goes against all its laws and it is what led to the spread of HIV/AIDS” (HTC & AFP, 2013).

While the justification for this judgment given by many is similar to that of Mr. Quraishi regarding HIV/AIDS one must also remember that HIV/AIDS is not only a problem among homosexuals. Putting an end to oral and anal sex is not going to stop HIV/AIDS from spreading. Anyone who has unprotected sexual intercourse (not just oral and anal but also peno-vaginal) with an infected individual is susceptible to HIV infection. In fact “The United Nations Development Programme on HIV/AIDS had argued in 2008 that decriminalizing homosexuality would help India to combat the spread of HIV/AIDS which affects an estimated 2.5 million people here.”(HTC & AFP, 2013)

More than being a way to keep AIDS away section 377 is more to do with the prevalence of How does one call this judgment fair if a section of people are treated so badly just because of difference in choice? What happens to the right to equality and freedom of choice? The 377 verdict seems to have simply ignored even the basic human rights of Article 14 and 15 of the constitution that guarantees every individual the right to equality and prohibits discrimination of any kind based on caste, sex, religion, race or even place of birth. If two individuals mutually consent to indulge in gay sex, why should anyone have a problem with it? This is another contradiction as Article 21 of the constitution guarantees an individual the right to freedom, privacy and personal liberty, hence guarantying protection of intimate sexual relationships, between consenting adults, from any intrusion of the state legislation. The Supreme Court seems to have kept a blind eye to these rights. Yes, it would be a horse of a different color if one individual was forcing another into the act, and that in all senses could be considered rape as well.

Does Section 377 only effect the LGBT Community?

Section 377 states that anything but heterosexual sex is “against the law of nature” hence against the law. Terming sexual acts like anal sex and oral sex as “gay sex” or “homosexual acts” is another problem. Banerjee in her article quotes Ashok Row Kavi, (activist and chair of the Humsafar trust-a homosexual community based organization) saying “A study conducted by the Family Planning Association of India has found that a good number of heterosexual couples in India engage in anal sex. So, under provisions of section 377, they too can face criminal proceedings” (Banerjee, 2014). So how can we term such sexual practices as being “gay” or “homosexual” when there are large numbers of heterosexual couples who indulge in such sexual practices? In other words it’s not just the LGBT society being targeted by this law it seem like the Supreme Court is out to change the whole idea or practice of sex among the citizens of India no matter what their sexual orientation is. India is known as the country of Kamasutra, in which oral sex and various other styles of sex are described in detail but now according to 377 any sexual act that is not peno-vaginal is a crime.

While some may say, “Section 377 does not criminalize homosexuality. You cannot be arrested for being gay. But you can be arrested for engaging in non-peno-vaginal sex,” (Banerjee, 2014) for some people this may be satisfactory unless they realize that the whole point of this fight against 377 is that, it is not just about sex, “There is a close link between the act and the identity” (Banerjee, 2014). If any two people are in a relationship and wish to have an intimate relationship under mutual consent, shouldn’t they have the free will to have the sort of relationship they want? For those who say that this judgment is valid on the basis on religion and culture, should realize that even God is said to have given humans the free will to choose their own lifestyle.

For many years homosexuality had been considered to occur in an individual due to being a part of wrong environmental influences. There also was a point in time when homosexuality was considered to be a mental illness/disease even by the American Psychiatric Association, but sometime in 1973 they removed homosexuality from the diagnostic and statistical manual of mental illnesses. But many people till date live with the impression that homosexuality is an illness. In the recent past we have witnessed many ministers and government officials who wish to open rehabs for homosexuals, so as to “fix” their “problem” for the “betterment” of society.

It has been scientifically proven that an individual’s sexual orientation does not take shape due to environmental influences. While environmental influences may help reveal the true sexual orientation of a person, the fact remains that an individual’s sexual orientation is determined during gestation and is fixed by the time of birth. Hence environmental factors cant simple change an individual’s sexual orientation unless that individual already had an inkling of having a different sexuality at birth itself. We should educate ourselves and others with such knowledge and facts, so that all these old concepts are abolished and awareness is created among people to be able to step out of this antediluvian mindset. For such old, unrealistic and unscientific perceptions and taboos only cause hate and violence.

In Banerjee’s article it has very rightly pointed out how anyone can take advantage of this law and misuse it. “Section 377 gives anybody, be it family members or neighbors who disapprove of a homosexual relationship, the opportunity to call the cops and claim to have witnessed anal or oral sex and the police will have to file an FIR,” says lawyer Anand Grover, who had represented the Naz Foundation (the NGO whose petition had led to the landmark Delhi HC verdict in 2009) at the Delhi HC and SC” (Banerjee, 2014). Even though there will be a proper proceeding that will follow up later and medical examination is needed as poof, to prove an individual guilty, but isn’t being dragged to the police station humiliating enough? And enough of embarrassment for a person to be made to hang their head down in society, that too just because of difference in choice.

Ashley Tellis very rightly points out that, “The next step is to rebuild the earlier movement against section 377 and every other form of violence, legal and non-legal, against LGBT communities. The Delhi high court order did not call for the repeal of 377 nor did it address any of the issues that actually affect poor and marginalized LGBT communities across the country” (HTC & AFP, 2013).

The NALSA Judgment- a ray of hope?

The National Legal Services Authority (NALSA) filed a petition in 2012 to the Supreme Court, asking for equal rights and legal recognition of transgendered individuals as the third gender. They believed that the non-recognition of gender identity of the transgender community violates the fundamental rights guaranteed to the transgendered individuals, who are citizens of this country.

Due to non-recognition the transgender community lacked access to the most common rights that every other so called “normal” citizen possesses. They were denied the right to vote, the right to own property and the right to claim formal identity through any official documents such as a passport or driving license. Further they also faced discrimination to contest elections, employment and were treated as untouchables. All this merely because most of the legal documents needed to avail any of the above ask to specify the gender of the applicant. And the form only consists of two options in the gender category i.e. male and female.

Now with the NALSA judgment in place, it has been declared that, “transgender persons have to be declared as a socially and educationally backward classes of citizens and must be accorded all benefits available to that class of persons, which are being extended to male and female genders. Learned counsel also submitted that the right to choose one’s gender identity is integral to the right to lead a life with dignity, which is undoubtedly guaranteed by Article 21 of the Constitution of India. Learned counsel, therefore, submitted that, subject to such rules/regulations/protocols, transgender persons may be afforded the right of choice to determine whether to opt for male, female or transgender classification.”[1] The Judgement also broadened the meaning of the term ‘sex’ which always meant male or female biological sex in Articles 15 and 16, and have now included ‘psychological sex’ and/or ‘gender identity’ to it.

This judgement comes across as a ray of hope to many individuals who have been struggling over the years with being able to identify themselves by the gender they relate to, be it female, male or third gender. The selection of gender is now based upon the individual’s choice, irrespective of medical and surgical intervention. Not just this, the Supreme Court under article 19(1) (a) of the constitution declared the protection of an individual’s gender expression allowing no restrictions on an individual’s personal appearance and choice of dressing.

Contradictions

The NALSA judgement enfolded both gender identity and sexual orientation within its transgender definition. Significantly, kothis were included in the transgender category, with the Court also acknowledging that they exhibit “bisexual behavior.” The Supreme Court recognized that gender identity might also be expressed through mannerisms, not merely dress and speech.

Even if Section 377 were interpreted to criminalize an act rather than an identity, the NALSA judgment’s definition of “transgender” raises the question of how transgender persons, particularly kothis, may be accorded a gamut of rights under the NALSA judgment when 377 infringes on their “mannerisms” and other elements of their “bisexual behavior.” Sexual orientation cannot be separated from Section 377; preventing individuals with non-hetero-normative sexual orientations from engaging in sexual activities is no different than preventing transgender persons from engaging in sexual activities of their choice.

Conclusion

The Supreme Court’s verdict on section 377 is not just biased, there is nothing substantial enough to prove section 377 to be correct neither morally nor scientifically. This judgment seems to have been passed on the basis of homophobia, rather than the betterment of the society as a whole. While we talk about adopting modern methods and working towards a united, well-developed country, here we stand fighting for rights of a section of society that has been refused basic human rights just because they are a minority and have different views and lifestyle preferences. We must realize that the NALSA judgement’s legal declaration of a gender identity is not the end of the battle towards equality among the LGBT community, but is just the beginning. Hopefully this judgement will stop the atrocious practices of ill-treating transgender persons and subjecting them to offensive and intrusive procedures, and will also be a reason to rethink and rework section 377.While this may be a step forward towards the betterment of the transgender community, let’s not forget that the lesbian, gay and bisexual communities are yet to granted their share of rights.

Our country has a large number of minorities and just like they have the right to live the way they want, the LGBT society should be granted the same freedom. It’s high time we as a country adopt methods of inclusiveness instead of segregating minorities due to such differences and individual preferences.

References and work cited

  • Banerjee, Poulomi: “Decoding section 377: How the verdict erased basic human rights”, Hindustan Times, New Delhi: Thursday, February 20, 2014.

Linkhttp://www.hindustantimes.com/StoryPage/Print/1165215.aspx?s=p

[1] As sited in the Judgement http://supremecourtofindia.nic.in/outtoday/wc40012.pdf

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Project Management And Its Legal Aspects

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This article is written by Divya Kathuria, a student of Raffles University.

What is project management?

When one reads this term, the first question that generally comes into everyone’s mind is why we are talking specifically about the management of project. The answer is even simpler than the question. Project can be defined as a venture being carried on by any enterprise which has a particular aim and it starts with keeping the aim in mind and ends as soon as the goal is accomplished. So, as the project is specific and special, its management needs to be done by skilled professionals and experts of the particular field.

Project management is the process through which a particular activity under the project is initiated, planned, organized and achieved in order to finally reach the goal or aim for which the project was ventured. It includes initiation, execution, monitoring & controlling (how it is being executed) and in turn, also executing the monitoring and controlling of all activities and finally, closing the project after the goal has been reached. Project management is actually very necessary to let the project reach its end, it would not be wrong if I say, it is necessary to turn the dream into reality. It is needed for both temporary as well as unique kind of projects.

Management is simply the technique of understanding the shortcomings of a thing; needs and controlling the use of resources, saving time and costs, scope and quality. The same is for project management. Application of the skills and knowledge of a project manager in project activities in order to meet the needs of stakeholders and expectations from project is nothing but the duty of a project manager. It is also necessary for the completion of project within the decided time limit without compromising on the quality of output.

Need of project management and role of project manager

  1. To define the project and agree with the customer: – it is the responsibility of a project manager to define the project and its benefits to the interested parties that is, clients or customers. It is his duty to ensure whatever the customer wants or needs or expects through project gets it at the end of the deadline for closing of project.
  2. Control scope creep and manage change: – in every kind of project, there are always possibilities involved that some of the other terms of the project are changed or need to be changed may be sometimes, due to unavoidable situations and sometimes, on the insistence of parties. To manage such changes and to ensure if they need to be done and how much, project managers play their part. He needs to deeply access that such changes do not prove fatal to the enterprise anyway.
  3. Deliver project results on time and on budget: – Project manager has to ensure that the team works properly for the project and the project is not just finished within time but also, it is completed within the given budget. Otherwise, the company may have to suffer losses.
  4. Provide a process for estimating project resources, costs and time: – this is one of the most important tasks handled by project managers and requires skill and expertise. Before deciding whether to undertake a particular project or not as to if it’ll be beneficial or not, it is always upon project managers to estimate the cost and time project will take and decide if it will help the organization or not. Also, after estimating if the enterprise has particular resources to attain the goal only, the institution can go for the project.
  5. Communicate project accomplishments, risks and changes: – as the project goes further, the stakeholders must be informed about each and everything regarding it like progress, any losses, any changes, requirements, resources used, etc.
  6. Prepare for unexpected issues: – everything will never run as smooth as it is estimated by the project manager. So, it is his responsibility to consider some extra space for such situations that can arise anytime and can’t be estimated beforehand such as changes in business cycle, sudden changes in market forces, even natural calamities, etc. need to be taken into account by an efficient manager of projects.
  7. Reviewing: – after the last stage of project is accomplished, an efficient project manager would access how well they had done on each stage of project and what were the drawbacks and would generally record them and try to avoid them in his further projects that he undertakes.

The negative side of project management

  1. Micromanagement: – it usually happens that with all the focus of product managers on completing the work before deadline given and within particular resources, the quality is overlooked. The whole project manager team and manager himself focus themselves only on a preset outcome with quite strict parameters.
  2. Miscommunication costs: – even a little miscommunication can lead to great losses. For example, if one phase of workflow development is misconstrued and sends a portion of the team down the wrong path, not only does the team have to reverse direction, but they halt progress in subsequent phases of the project as well. Clear communication guidelines should be issued to ensure timely and accurate transmission of new, information and project updates to protect against missteps.[1]
  3. Lacks creativity: – sometimes, strict project management with strict policies and guidelines can lack an innovative thinking which can even be better for completing the project may be with lesser efforts and costs. It is often observed that because of being struck to particular norms of accomplishing the project, people involved stop thinking out of the box that can even be faster too. However, this is not the case every time.

Legal issues with Project management:

 

  1. Risk Insurance: – When a project is initiated, there are obviously certain risks involved. Not only accessing these risks is important, but creating ways to overcome these risks while incorporating them in contract is equally important.
  2. Project contract: – A project will always include numerous contracts. The drafting of the project contract includes the most of lawyer’s contribution. While contracting, he would have to go through the nature of obligations that would arise from the contract and also, the evolution of agreements whilst making business-related decisions. After he is done with the contractual phase, the lawyer needs to deal with the post-contractual phase as well. The post contractual phase will include his’ and party’s hidden obligations which he needs to analyze and perform.
  3. Change control: – A contract for project when proposed must also include a procedure for change in the contract including the conditions of change and sometimes, listing of the situations only in which the changes can be made. However, any kind of change in the contract terms is highly discouraged. After the changes are made, they must be documented concretely and also numbered for future needs that may arise.
  4. Imposing restrictions: – In a project contract between two parties, it is common that the restrictions would be imposed on party by another. It is the duty of the lawyer to check that the restrictions are in consonance with Section 27 of the Indian Contract Act, 1872 which states that “Every agreement by which anyone is restrained from exercising lawful profession, trade or business of any kind, is to that extent void”. However, exception to this can be like not revealing secrets of the company to prevent exercise of insider trading, etc. and to preserve the goodwill of the Company.
  5. Interpretation of Contract:Any law would include the interpretation part as it is the only way to understand it. The very first part of interpreting any contract is its recitals. The introductory part of a contract is usually referred to as ‘recitals’. Further, in a contract, there are certain things which are explicitly provided while certain are implied. Certain terms of contract are clear while certain are tacit and it requires legal expertise to understand the tacit terms and work as per those. Thus, the interpretation of contract is as important as making the contract itself.

 

  1. Reprisal of issues by Arbitration or mediation: – It is quite important to include arbitration or mediation clause in the project contract. In case of small disputes between contracting parties, one cannot always approach the Court for that, then the cases would last till eternity and it would become impossible to accomplish the project. Also, it must be added that which law would govern either parties in cases like, if both the contracting parties are foreign entities or either of them is and such other cases. It is also vital to decide the jurisdiction beforehand in case anyone approaches the Court.

Conclusion

Project management is an excellent method to deal with the different tasks in an organization. We don’t realize but, even in our everyday tasks, we use the skills of project manager depending upon what we are dealing with. It is nothing, but a framework to reach a particular aim which may include, studying for your exams or managing the project of an MNC. All the projects are different in entirety but, all will start with an idea. Starting, analyzing, executing, controlling and concluding any type of project includes the knowledge and expertise in that particular field. However, in case of companies, one man that is must in project management is a legal expert.

[1] http://www.ehow.com/info_8774906_describe-advantages-disadvantages-project-management.html last visited on 22nd July, 2015

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Can We File A Writ Against Private Internet Service Providers in India?

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This article is written by Shourya Bari, a student of Jindal Global Law School.

The Indian Constitution provides for enforcement of Fundamental Rights in the Supreme Court of India under Article 32.[1] Fundamental Rights can be enforced only against a state, as defined in Article 12[2] of the Constitution. Article 12 concludes the list of authorities falling within the definition of state referring to the phrase ‘other authorities’ within the territory of India or under the control of the government of India. The Indian judiciary for the last five decades has strived towards laying down the ambit of the phrase ‘other authorities’ through extensive interpretation.

Until Rajasthan State Electricity Board, Jaipur v. Mohan Lal[3] was decided, several High Courts were of the opinion that since in Article 12 ‘other authorities’ is mentioned after specifying all other authorities which would be a state, namely the Government and Parliament of India, the government and the legislature of each states, and all local authorities; it would be reasonable to construe the expression ‘other authorities’ ejusdem generis with government or legislature.[4] Following such construction, ‘other authorities’ would only include such bodies functioning on or behalf of the union or state governments. The Supreme Court in the Rajasthan case rejected this restricted interpretation, and held that the doctrine of ejusdem generis is inapplicable to the interpretation of ‘other authorities’. The court said that there was no distinct genus or category running through the bodies already named, and those bodies could not be placed in one single category on any rational basis. The Supreme Court in its maiden expansion of the scope of Article 12 included all authorities created by the constitution or statute on which powers are conferred by law.

In Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi[5], the Supreme Court decided the question whether statutory corporations came within the definition of state. The court held statutory corporations to be a state under Article 12. The Supreme Court noted that the kind of function performed by the body was a crucial factor to determine whether it was a state.     

R.D Shetty v. International Airport Authority of India[6] and Ajay Hasia v. Khalid Mujib[7] laid down certain factors to ascertain whether a body was a state. One such factor was whether the functions of the corporation are of public importance and closely related to government functions. The Supreme Court’s emphasis on the function approach is evident in Justice Bhagwati’s opinion, that the enquiry to decide whether a body is a state or not must not be how the juristic person was born, but why it was brought into existence.

As elucidated above, the Supreme Court starting with the Rajasthan case[8], in a series of judgments has expanded the scope of Article 12 through a purposive interpretation of the phrase ‘other authorities’. They have substantially relied on the ‘public function’ approach by examining the functions performed by an authority in question and the reason why it was brought into existence. However, the last decade has witnessed a restrictive approach to the interpretation of ‘other authorities’. In  Pradeep Kumar Biswas v. Union of India[9], a seven judge bench held that in order to declare a body to be a state, the state or union government must have deep and pervasive, financial, functional and administrative control in that body. Zee Telefilms v. Union of India[10] relied on this principle to declare that BCCI was not a state. The present restrictive approach revolves around a principle, which requires ample government control in a body to declare it to be a state; and excludes the legal reasoning which focuses on the nature of functions discharged by a body instead of the source of its ownership or control.

The adoption of such a restrictive approach based on government control is fundamentally problematic. A bare reading of the text of Article 12 does not say that ‘other authorities’ must necessarily be under the control of the government. The word or used in Article 12 is disjunctive and not conjunctive.[11] Therefore, the restrictive approach in Pradeep Kumar Biswas[12] almost amounts to a misinterpretation of Article 12.

However, this stands as the Indian jurisprudence and legal position on the interpretation of ‘other authorities’ in Article 12. In the backdrop of such a legal position, this post argues in favor of including private Internet Service Providers within the legal contours of ‘other authorities’. The arguments supporting such a contention will substantially rest on the ‘public function’ approach.

The first legal obstruction in applying the ‘public function’ test is the deviation of a seven judge bench in Pradeep Kumar Biswas[13] from such an approach. However, this particular precedent’s binding nature can be questioned while deciding the question, whether private Internet Service Providers are a state or not. Justice S. B Sinha, in his dissenting opinion in Zee Telefilms[14] notes that a decision is an authority for the questions of law determined by it; and such a question is determined having regard to the factual circumstances of the decision. Pradeep Kumar Biswas[15], only decided the question, whether the judgment in Sabhajit Tewary v. Union of India[16] was correctly rendered or not. Therefore, the facts of Pradeep Kumar Biswas[17] are completely different from the question the post seeks to answer and the decision is not absolutely binding. More importantly, the ‘public function’ approach finds support in several other Supreme Court judgments such as Sukhdev Singh[18], R. D. Shetty[19] and Ajay Hasia[20]. The apex court, among several other factors considered the functions performed by corporations to decide whether they were a state or not. The post takes considerable aid of the judicial reasoning in these judgments to support its contention.

The ‘public function’ approach has been adopted in international judicial decisions and legislations as well. In Marsh v. Alabama[21], the United States Supreme Court had held that, a corporation when privately performing a public function is held to the constitutional standards regarding civil rights and equal protection of the laws which apply to the state itself. Section 6 (3) (b) of the United Kingdom Human Rights Act, 1998[22] provides that an authority subject to human right obligations, includes any person whose functions are functions of a public nature. Accordingly, Fundamental Rights can be enforced against private corporations as well, provided they are discharging a public function.

The next important question the post seeks to answer is what constitutes public function and whether Internet Service Providers discharge a public function. The First argument in this post also encompasses a response to the question, why private Internet Service Providers should be brought within the ambit of Article 12 and Article 32 in the first place.

The right to freedom of speech and expression also includes the right to educate, the right to inform, and to entertain, and also the right to be educated, be informed, and be entertained.[23] This right is equally applicable in all forms of communication media, including the internet. Article 19 of the ICCPR[24] protects all forms of expression, and the means of their dissemination, including all forms of electronic and internet based modes of expression. Thus the fundamental right to freedom of speech and expression is guaranteed while communicating through the internet.[25]

Rule 3 of the Information Technology (Intermediaries’ Guidelines) Rules, 2011[26] equips the Internet Service Provider which is an intermediary, to censor content, before publication and once content has been publicly made available online. Internet Service Providers are so situated that they can block any content on the internet.[27] Thus, while discharging their functions private Internet Service Providers can regulate and restrict freedom of speech and expression on the internet, which is a guaranteed fundamental right available to the general public.[28]

In a globalized modern world, numerous trade ventures are undertaken in the internet. Such trading has led to the development of what is known as the ‘Internet Economy’.[29] India is also a major stakeholder of this economy. A citizen can utilize the service offered by an ISP, and exercise his fundamental right to freedom of trade. ISPs are so situated, that they can restrict access to lawful content on the internet[30], and if that content happens to be a part of an online trading system, they can effectively regulate a citizen’s fundamental right to practice any trade or profession.

Therefore, the phrase ‘other authorities’ should be liberally interpreted to include private Internet Service Providers within its ambit. This is necessary in order to prevent Internet Service Providers from violating fundamental rights.

In order to ascertain whether a private body is discharging a public function, two major conditions among others must be fulfilled. Firstly, when it regulates the right of a citizen contained in Article 19(1) (a)[31] of the constitution of India available to the general public. Secondly, when a private body regulates a profession or vocation of a citizen which is a fundamental right under Article 19 (1) (g), its functions are deemed to be public functions.[32]

As demonstrated, private Internet Service Providers regulate the fundamental right of a citizen to freedom of speech and expression and the fundamental right to freely practice any trade or profession. As per the principles furnished, any person which regulates or restricts fundamental rights of a citizen in the course of its functioning is discharging a public function and should be amenable to fundamental rights obligation.

In Edmonson v. Leesville Concrete Company[33], the United States Supreme Court had held that a private body while discharging a function traditionally and exclusively reserved to the state is discharging a public function and is subject to fundamental rights obligation.

Traditionally, the duty to provide internet service in India was vested exclusively in the hands of the government, owing to the monopoly of the government in the telecommunication sector[34]. The telecommunication sector was opened to the entry of private corporations only in November 1998. The private Internet Service Providers in India today discharge a function which was initially performed only by the government. Following the principle in the Edmonson case, it is further argued that private Internet Service Providers are discharging a public function and fundamental rights are enforceable against them.

The phrase ‘public functions’ has been debated previously in Indian jurisprudence. The phrase has been described to be imprecise and general in nature.[35] In order to interpret an imprecise and general term, this post adopts a rule suggested in YL v. Birmingham City Council[36]. The rule suggests a close scrutiny of policy documents of the government as a method of interpreting anything imprecise and general in the legal context.

The post closely examines the National Telecom Policy of 2012[37] and Broadband Policy of 2004[38]. In these policy documents, the government has recognized the potential of ubiquitous broadband service in societal applications such as tele-education, tele-medicine, e-governance, as well as generation of employment by way of high speed access to information and wed based communication. The government considers it necessary to install fibre optics technology, which provides unlimited bandwidth potential. Out of the 4.5 lakh km of optical fibre laid down in this country, only 1 lakh km is owned by private internet service providers and the rest is owned by government.[39] The spread of networks of private ISPs will play a crucial role in achieving the objective of the government, of bringing optical fibre to homes and rural areas. Private Internet Service Providers are expected to focus on it.

Internet service seeks to enhance welfare of the public. National Telecom Policy- 2012[40] recognizes the predominant role of private ISPs, in furthering the prerogative of the government of increasing affordable access to broadband services all over India.  The National Telecom Policy- 2012[41] recognizes broadband connectivity as a basic necessity and is working towards creation of a right to broadband.[42]

From a perusal of these major policy documents of the government, it is submitted that the function discharged by private Internet Service Providers is not merely commercial in nature. The functions performed have an aim of public welfare, through the growth of internet services across the country.  The government seeks to create a right to broadband for its citizens and private Internet Service Providers have a crucial role to play to achieve that end. The functions private Internet Service Providers are of immense public importance as it caters to a basic necessity and are means of accomplishing governmental objectives. Therefore, private Internet Service Providers discharge public functions.

A major factor considered by Indian courts to determine whether a body is a state or not is the degree of governmental control or regulation. According to Black’s Law Dictionary[43], the meaning of the word control includes regulation as well. Therefore, a high degree of government regulation would amount to exercise of government control.

Private Internet Service Providers are highly regulated by the government. It has to obtain a license under Section 4 of the Indian Telegraph Act[44] to even initiate its operation. The quality and nature of services offered by a private Internet Service Provider, including the minimum speed at which it is supposed to provide access to the internet is governed by The Telecom Regulatory Authority of India Act, 1997. [45]Section 6A of the Information Technology Act, 2000[46] bestows upon the government, an authority to issue orders to Internet Service Providers to upgrade their services and perform other functions in the interest of the public. The functions of private Internet Service Providers are extensively regulated in the light of public interest. Therefore, private Internet Service Providers fulfill the major condition of high government control required in Indian jurisprudence, to be declared a state.

Those against the argument made in this post may cite the Jatya Pal Singh v. Union of India[47] judgment to support their opposition. Jatya Pal Singh held that VSNL does not discharge any public functions and is not a state as per Article 12. However, the Jatya Pal Singh[48] judgment can be distinguished from the arguments made in this paper. The function of VSNL is restricted to with respect to making telephone calls abroad. The scope of functions of an Internet Service Provider is much wider than that of a telephone service provider. Therefore, the Jatya Pal Singh[49] case will not negate the arguments raised in this post.   

There is a presumption that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes which have occurred since the Act’s passing in law, social conditions and technology.[50] Internet Service Providers occupy a position of utmost importance today, effectively controlling every sphere of life. The framers of the constitution did not envisage such a drastic change in technology. However, courts today are required to accord an interpretation to the law in question, which will prevent abuse of fundamental freedoms by corporations which occupy a position by virtue of which they can violate fundamental rights.

Internet Service Providers are an unique example of such a corporation. They discharge public functions which were exclusively reserved to the state initially, cater to a basic necessity as per government policy, regulate fundamental rights, and are highly regulated by the government. Therefore, the courts should recognize these extra ordinary features of an Internet Service Provider, liberally interpret the phrase ‘other authorities’ and include private ISPs within its ambit.

[1] The Constitution of India.

[2] Ibid.

[3] A.I.R 1967 SC 1857.

[4] University of Madras v. Shantha Bai, A.I.R 1954 Mad 67.

[5] (1975) 1 S.C.C. 421.

[6] (1979) 3 S.C.C. 489.

[7] (1981) 1 S.C.C. 722.

[8] Supra note 3.

[9] (2002) 5 S.C.C. 111.

[10] (2005) 4 S.C.C. 649.

[11] Ibid.

[12] Supra note 9.

[13] Supra note 9.

[14] Supra note 10.

[15] Supra note 9.

[16] (1975) 1 S.C.C. 485.

[17] Supra note 9.

[18] Supra note 5.

[19] Supra note 6.

[20] Supra note 7.

[21] 326 U.S. 501.

[22] United Kingdom Human Rights Act, 1998.

[23] Secretary, Ministry of Broadcasting and Information, Government of India and Ors. v. Cricket Association of Bengal and Ors., (1995) 1 S.C.R. 1036.

[24] International Covenant on Civil and Political Rights, 1966.

[25] Ajay Goswami v. Union of India, (1998) 1 S.C.C. 226.

[26] Information Technology (Intermediaries’ Guidelines) Rules, 2011.

[27] R.K Productions v. BSNL, (2012) 5 L.W. 626.

[28] Supra note 25.

[29] Broadband and the Economy, Ministerial Background Report, 8-9 May 2007.

[30] Beyond Denial: Introducing Next Generation Information Access Controls, 4-7, 2010.

[31] Supra note 1.

[32] Supra note 10, See Also: Daniel Lee v. Vera Katz, 276 F. 3d 550.

[33] 500 U.S. 614.

[34] National Telecom Policy 2012.

[35] Black Diamond Beverages and Anr. v. Commercial Tax Officer, Central Section, Assessment Wing, Calcutta and Others, A.I.R. 1997 SC 3550.

[36] (2007) U.K.H.L. 27.

[37] Supra note 34.

[38] Broadband Policy of 2004.

[39] Ibid.

[40] Supra note 34.

[41] Ibid.

[42] Supra note 34.

[43] Black’s Law Dictionary, 9th Ed, 2013.

[44] Indian Telegraph Act, 1885.

[45] Quality of Broadband Service Regulations, 2006, Telecom Regulatory Authority of India Act, 1997.

[46] Information Technology Act, 2000.

[47] (2013) 6 S.C.C. 452.

[48] Ibid.

[49] Id.

[50] Francis Bennion, Statutory Interpretation, pg – 762, 4th Ed.

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Latest Judgments by Supreme Court of India on Rights of Women

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This article is written by Divya Kathuria, a student of Raffles University.

Introduction

There is no tool more effective than the empowerment of women for development of a country.”- Kofi Anan.

 India being a developing country in order to develop needs the tool of women empowerment more than anything. According to World Bank, around 48.3% of our country consists of females[1] and there is no denying to the fact that since ancient times when women have been compared to goddesses in our country, ironically, they have been treated like rags. Although there is a huge difference the way women were looked at 50 years ago and today. But, the crimes against women are still rising rampantly and they still are deprived of certain rights which they deserve as men. However, judiciary has always tried its best to empower the females of country, be it by giving landmark judgments like of Shah Bano Begum or Daniel Latifi, Vishakha v. State of Rajasthan.

Through this article, I intend to analyze how our judicial system has actively played its role in the uplifting and empowerment of women in last 5 years.

  1. What if she is a prostitute, she is a woman and human being too: Budhadev Karmaskar State Of West Bengal[2]

In this case, a sex worker was brutally murdered by appellant Buddhadev. The appellant Budhadev kicked her with fists and legs, and she fell down on the floor. The appellant then caught her by her hair and banged her head against the floor and the wall several times which left the victim bleeding from her ear, nose and head. The incident was witnessed by four persons, Abida, Maya, Asha and Parvati.[3]

The Apex Court in its division bench headed by Markandey Katju, J and Gyan Sudha Mishra, J stated: ‘we strongly feel that the Central and the State Governments through Social Welfare Boards should prepare schemes for rehabilitation all over the country for physically and sexually abused women commonly known as prostitutes as we are of the view that the prostitutes also have a right to live with dignity under Article 21 of the Constitution of India since they are also human beings and their problems also need to be addressed.’

Not only this, but the bench acted quite actively and gave the directions to Central and State government to prepare schemes for giving technical/vocational training to sex workers and sexually abused women in all cities in India.[4]

Generally, our society views prostitutes as women of low character but, refuse to look at their situation from their perspective. The bench in this case must be appreciated not just for recognizing their right under Article 21 and directing the state and central governments to act for their welfare but also, to understand their perspective and impoverished situation. Even, they have cited the novels of Bengali writer Suresh Chandra Chattopadhya where many prostitutes have been shown to be women of high character. So, it sends a great message to society to not to look down upon on sex workers and give them a humane treatment always.

They are equally woman and equally human. It is that it was obvious that appellant would be punished because the eyewitnesses were there but, the message and directions it gave truly are an account of judicial activism.

  1. Two finger test, it’s like getting raped once again: Lillu @ Rajesh & Anr vs State Of Haryana[5].

For the first time, the Supreme Court in this case realized the agony and trauma of a rape victim who had to go through two finger test give her character certification and after analyzing through various precedents, held that it is violation of victim’s right to privacy and dignity.

It held: “In view of International Covenant on Economic, Social, and Cultural Rights 1966; United Nations Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power 1985, rape survivors are entitled to legal recourse that does not retraumatize them or violate their physical or mental integrity and dignity. They are also entitled to medical procedures conducted in a manner that respects their right to consent. Medical procedures should not be carried out in a manner that constitutes cruel, inhuman, or degrading treatment and health should be of paramount consideration while dealing with gender-based violence. The State is under an obligation to make such services available to survivors of sexual violence. Proper measures should be taken to ensure their safety and there should be no arbitrary or unlawful interference with his privacy. Thus, in view of the above, undoubtedly, the two finger test and its interpretation violate the right of rape survivors to privacy, physical and mental integrity and dignity. Thus, this test, even if the report is affirmative, cannot ipso facto, be given rise to presumption of consent.” 

https://lawsikho.com/course/certificate-criminal-litigation-trial-advocacy

The decision is definitely applaud able as it gave a sense of confidence and security to the rape victims. It did not grant any new right because women have already been conferred right to privacy by our Constitution but, it stopped the violation of their right to privacy and dignity which was going on from years and years and that too was of no use in the investigation. The Supreme Court very objectively and scientifically determined if it was helpful or not and even if it could be helpful, there can be nothing that can be kept on a pedestal higher than a woman’s dignity, that too an already traumatized woman. In my opinion, it was the repetition of the same crime against women behind the veil of legal medical procedures.

  1. Stop Acid attacks, regulate and restrict the sale of acid: Laxmi v. Union of India[6]

On account of increase in number of acid attacks on women in the past few years, Supreme Court in order to curb these gave directions to Home Secretary, Ministry of Home Affairs associating the Secretary, Ministry of Chemical & Fertilizers to convene a meeting of the Chief Secretaries/concerned Secretaries of the State Governments and the Administrators of the Union Territories to curb and restrict the sale of acid throughout the country.

Acid attacks on women and girls in 2013 and 2014 have been 56 and 47 in number respectively as per the statistics of acid survivors’ organization.[7] Acid attack on a women is equal to taking away her identity from her and such rampant increase in this heinous crime was leading to terror amongst women and Supreme Court took a vital step and certainly led to the empowerment of women to an extent and was an important step towards the safety of women in country.

 

  1. Unwed mothers need not name the child’s father: ABC v. The State (NCT of Delhi)[8]

Supreme Court in this latest and landmark judgment declared that now, an unwed mother is not bound to disclose the name of child’s father and also, she would have all the rights as a guardian to child under guardianships rights. She need not take father’s consent for guardianship rights.  Not only it was necessary to protect the child from social stigma but, also to protect mother’s fundamental right. It was certainly an avant-garde verdict on gender quality.

The Court emphasized that Section 6(b) of the Hindu Minority and Guardianship Act, 1956 makes specific provisions with respect to natural guardians of illegitimate children, and in this regard gives primacy to the mother over the father. Mohammedan law too accords the custody of illegitimate children to the mother and her relations. Name of father is always a myth while it is only mother whose name the person can always be sure of because she gave birth to him/her. This is one of the reasons why a mother should be given primacy or at least equality to exercise guardianship rights over the child. This judgment is evident of the fact that the highest court of land is deeply indulged in empowering women because it is the key to Nation’s development.

  1. Living under the same roof, you are married under law: Dhannulal and ors. V. Ganeshram and ors.[9]

In this case, it was held by the division bench that continuous cohabitation of a couple together that is, ‘live-in relationship’ would raise the presumption of marriage unless otherwise proven. This was a case regarding the dispute for the property that their grandfather possessed would also be inherited by the woman with whom he lived for 20 years or not as she was not his legally wedded wife. The appellants referred to her as his ‘mistress’ but, not wife. The woman clearly failed to prove that she was the legally wedded wife of deceased but, the bench still held that she was eligible to inherit the property.

Generally, our society views the woman who lives with a man without getting married as his ‘keep’ or ‘mistress’ and looks down upon her which clearly means that she is deprived of her right to choose whether to marry or not. While it is also the societal fact that man doing this will never be condemned, the woman is seen as characterless and does not gets the rights of legally-wedded wife whereas she does all her duties of a wife. Supreme Court in this case decided to take a step to change such orthodox notions and gave women their right to choose whether to marry or not.

Conclusion

The Supreme Court has understood the very fact that women empowerment is the most indispensable route to Country’s development and cannot be ignored except at the stake of country’s deterioration. If almost half of the population of country is suppressed and inactive, then, it is obviously foolish on the part of us to think that the country will ever develop in the next few centuries also. Therefore, the court is trying its best to break and do away with all such traditional norms that look down upon women, has given judgments to prevent violence against women and to put them equally as men in the society.

In the country of Gods and Goddesses, it is quite a famous shloka of Sanskrit that must be adhered to: ‘yatra naryastu pujyante, tatra devta ramante’ meaning where women are worshipped, there God resides.

 

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[1] http://www.tradingeconomics.com/india/population-female-percent-of-total-wb-data.html; http://search.worldbank.org/all?qterm=female+population+in+india&op=  last accessed on 9th July, 2015

[2] LC-2011-SC-CRL-Feb 14

[3] Ibid

[4] we direct the Central and the State Governments to prepare schemes for giving technical/vocational training to sex workers and sexually abused women in all cities in India. The schemes should mention in detail who will give the technical/vocational training and in what manner they can be rehabilitated and settled by offering them employment. For instance, if a technical training is for some craft like sewing garments, etc. then some arrangements should also be made for providing a market for such garments, otherwise they will remain unsold and unused, and consequently the women will
not be able to feed herself. We propose to have the response of the Centre and the States in this regard and hence the case shall be listed before us again on 04.05.2011 to be taken up as first case on which date the first compliance report indicating therein the first steps taken by the Central and the State Governments in this regard shall be submitted.

[5] on 11 April, 2013; Bench: B.S. Chauhan, J and Fakkir Mohamed Kalifulla, J

[6] (2014) 4 SCC 427

[7] http://www.acidsurvivors.org/Statistics/2 last accessed on 8th July, 2015

[8]  SLP (Civil) No. 28367 of 2011, DB:Vikramajit Sen,J; Abhay Manohar Sapre,J on 6 July, 2015

[9] 8 April, 2015; Bench: M.Y. Eqbal,J and Amitava Roy,J

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Commercial Sector and Indian Competition Law

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This article is written by Ananya Banerjee, a fourth year student of B.A.LL.B(Honours) from University of Calcutta.

Since the enactment of the Competition Act, 2002, Indian commercial sector has been comprehensive about the impact of the Act. But since the Competition Commission of India (“CCI”), a quasi-judicial body established under the provision of the Act to control and monitor the competition issues, has become fully functional from May, 2009, commercial sector is taking special care to incorporate provisions in their transaction documents, to avoid coming under the radar of CCI.

Financial Penalties

The CCI closely watches the market practices, including the marketing strategies obtained by several industries. Once CCI is satisfied of the existence of an anti-competitive agreement, or an abuse of dominant position, such business in contravention may have to pay up to ten percent of their average turnover for the preceding three financial years, or a penalty up to three times its profits. So, it is evident that the financial risk of a competition law violation in India can be significant.

Cartelization Issue – CCI has been known to initiate investigative proceedings against businesses on a frequent basis and often imposes penalties which can easily put a huge dent on any industry’s financial viability. CCI follows strict principle against cartelization. For example, In June 2012, CCI imposed a fine of USD 1,00,000,000 (United States Dollar one billion only) on 11(eleven) cement companies for cartelization. CCI claimed that cement companies met regularly to fix prices, control market share and hold back supply which earned them illegal profits.

Abuse of Dominant Position – BCCI Issue – On February 8, 2013, CCI imposed a penalty of USD 8,300,000 (United States Dollar eight point three million only) on the Board of Control for Cricket in India (“BCCI”) for misusing its dominant position. The CCI found that IPL team ownership agreements were unfair and discriminatory, and that the terms of the IPL franchise agreements were loaded in favour of BCCI and franchises had no say in the terms of the contract. CCI ordered BCCI to “cease and desist” from any practice in future denying market access to potential competitors and not to use its regulatory powers in deciding matters relating to its commercial activities.

Check-point for Commercial Transactions

Due to the wide power of CCI in controlling all competition-related issues, all commercial transactions like mergers, joint ventures etc. must be made full-proof, so that they don’t result in any non-compete agreement or action. While carrying on such transactions, the most important thing to keep in mind is the resulting market share post-transaction. If such share exceeds fifty percent, there’s a high chance of being held liable for violation of competition laws. Such transactional documents must also include provisions which prohibit explicitly, any measure that could possibly eliminate the competition. These two check-points must be kept in mind while entering into any co-branding (or bundling) agreement as well.

Loyalty Programmes and CCI

 Even the customer loyalty programmes come under the scope and purview of CCI. The principle is simple. Such programmes are a great way of retaining customers and ensuring that they keep coming back to the seller.  Be it the loyalty cards issued by the supermarkets, or the offering of cash-back on every purchase by the credit card companies, to the selling of discount coupons on every recharge – loyalty programmes have come a long way. Such programmes can be extremely novel. However, businesses creating such programmes need to ensure that they are not in violation of India’s competition law.  Customer loyalty programmes shouldn’t be such as to eliminate fair competition. Such programmes can easily come under the radar of CCI.

The Jet-Etihad Issue– The customer loyalty programme of Jet-Etihad, after their tie, attracted CCI’s interest as it was complained that such programme was against the provisions of Indian competition law. Although, after investigation and hearing, CCI was of the opinion that the proposed combination of Jet Airways and Etihad Airways and their resultant customer loyalty programme, operated through frequent flier miles, was not likely to have appreciable adverse effect on competition in India. The combination was, thus, allowed by CCI.

Discounts and Competition Law

The Competition Commission of India constantly notices and investigates on matters like huge discounts given by industrial or marketing giants. A manufacturer can give as much discount as he wishes. But, he must not reduce the price so as to sell them at a rate lower than the production cost, just to eliminate competition. If he is allowed to do so, there is high probability that such manufacturers would, in order to gain customer’s loyalty and support, sell the products at such a lower rate that other competitors wouldn’t even have a chance to gain any marker share. This would be against the fair market practice.

The Big Discount Day and its Impact – Remember the big billion day sale of Flipkart? Well, there have been a number of such huge discounts offered by several e-commerce sites in recent months. And with that, there has been rising concern of the retailers and small shop owners that the discount sales offered by such e-commerce websites like Flipkart, Amazon and Snapdeal, are anti-competitive in nature. Complaints were filed against a number of such e-commerce sites.

Such complaints were based on two anti-competitive issues:

  • the websites and the sellers have entered into agreements of anti-competitive nature by deciding to sell their products at some fixed portals; and
  • the discount sales offered by such portals were of anti-competitive nature.

 After looking into the matter of the case, CCI decided that there was no such adverse effect on the competitive market due to such exclusive agreements or discount sales and the said e-commerce websites were not in contravention of the competition laws of India. According to CCI, “the exclusive selling arrangements do not create any barrier for new entrants.” The consumers also have freedom in choosing the product which they like. Hence, CCI, in May 2015, rejected all allegations of unfair business practices against five online retail majors – Flipkart, Snapdeal, Amazon, Jabong and Myntra, as it did not find any prima facie evidence of violations against these e-commerce websites.

CCI- the fair trade watchdog

 The Competition Commission has thus become the fair trade watchdog of India. In a commercial market like India, cartelization, anti-competitive practices and other unfair trade practices are fairly common. There were many instances of cartelization in Indian history. So, having a regulatory authority to check on all the unfair trade practices helps in controlling the commercial market and also ensures stability of the market prices. With passing of each day, the prominence and importance of competition laws in Indian commercial sector is, thus, increasing.

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Complex Foreign Structuring held Colourable Device- in Violation of RBI Regulation

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This article is written by Rushab Dhandokia. Rushab is an associate with a law firm based in Ahmedabad. He specialises in advising startups on their legal queries and can be reached at [email protected].

  1. INTRODUCTION

The best laid schemes of mice and men often go awry. This phrase falls suitably apt in relation to a recent decision passed by the Bombay High Court in IDBI Trusteeship Services Limited V. Hubtown Limited[1] wherein the court held that the complex corporate structuring undertaken by a company to route its foreign investments in India as a ‘colourable device’ used to circumvent the Foreign Direct Investment Policy (FDI Policy).

At this juncture where India is at its forefront in receiving foreign investments, a careful analysis of the present case is important from a regulatory perspective in order to understand what is doable and what is not under the extant FDI Policy. Also, the present case presents an opportunity for corporate lawyers to revisit their corporate structuring strategies and put in place safety measures or roll back any of such methods advised by them to ensure that if not directly, even indirectly the investment structures advised by them does not fall foul of law specifically from FDI perspective.

Set out below is an analysis of the present case and provides a detailed perspective on the concept of FDI pricing guidelines and the instruments that can and cannot be issued as securities under the extant FDI Policy.

  1. BACKGROUND

In the present case Nederlandse Financierings– Maatschappiji Voor Ontwikkelingslanden N.V. (“FMO”)- a corporation constituted under the laws of Netherlands held 10% shareholding in Vinca- an Indian based company which was a step-down subsidiary of Hubtown- the defendant (“the Investee Company”). FMO also held 3 compulsorily convertible debentures (“CCDs”) issued by the Investee Company. The said three CCDs were to be converted within a period of 60 months from December 2009. Upon such conversion, FMO would hold 90% shareholding in in the Investee Company. The total investment amount invested by FMO in the Investee Company was Rs. 418 crores (“”Investment Amount).

This entire Investment Amount however, was invested by the Investee Company in its two wholly-owned subsidiaries Amazia and Rubix (“Subsidiaries”). It is this part of the investment structure that was held to be in violation of the FDI Policy and RBI Pricing guidelines (“RBI Regulations”) hence, the commercials of this bit of the transaction are important to be understood carefully.

In lieu of the Investment Amount that was invested by the Investee Company into its Subsidiaries, the Subsidiaries issued the Investee Company (and not to FMO) optionally convertible debentures (“OCDs”) which were to carry a fixed rate of return of 14.5% interest P.A. (“Downstream Investment”).

To successfully execute the Downstream Investment a Debenture Subscription and Debenture Trust cum Mortgage Deed (“Debenture Trust Deeds”) were executed wherein the plaintiff in the present case- IDBI Trusteeship Services was appointed as the debenture trustee. To further tighten the commercial relationship between the parties, Hubtown- the holding company of the Investee Company executed a deed of guarantee in favour of IDBI Trusteeship Services.

Hubtown as well as the Subsidiaries failed to meet their commercial obligations as discussed above therefore IDBI acting in its capacity as the debenture trustee filed a suit before the Bombay High Court to enforce the deed of guarantee on behalf of FMO. On a schematic analysis of the entire investment structure, the High Court held that the structure adopted therein was in violation of the RBI Regulations and that the Investee Company was a mere ‘colourable device’ used by FMO to circumvent the RBI Regulations.

  1. MANDATE OF FDI POLICY AND RBI PRICING GUIDELINES

In order to appreciate the findings of the court, it is important to first understand the mandate of the FDI Policy and RBI Pricing guidelines. For the purpose of this case, it is important to understand a) the eligible securities through which an FDI Investment can be made in India and b) the pricing mechanism that needs to be adhered to while issuing the eligible securities.

  1. Eligible Securities

A foreign investor under the FDI Policy can invest in an Indian company by subscribing/purchasing only to the Equity shares, compulsory convertible preference shares (“CCPs”) or compulsory convertible debentures (“CCDs”).

Thus, these are the only eligible instruments through which an investment can be made under the FDI route. The FDI Policy does not permit issuance of any optionally convertible security.

2. Pricing Mechanism

Further, RBI has put in place a specific mechanism according to which the above mentioned eligible securities can be issued to the foreign investor. The underlining principle of the pricing guidelines is that there cannot be any form of assured returns that can be guaranteed to the foreign investor. This means that an Indian company receiving FDI cannot issue any security the terms of which would allow the foreign investor at the end of the investment period to exit at pre-determined returns.

It is for this reason why FDI Policy does not allow issuance of any optionally convertible security because if say for example the FDI receiving Indian company issues say optionally convertible debentures or optionally convertible preference shares the FDI Investor may choose never to convert the said debentures or the preference shares thereby it would continue receiving the fixed coupon rate or the fixed rate of dividend as the case may be such that it would end up exiting at an assured rate of return.

Hence, if an FDI receiving Indian company either issues any optionally convertible security or issues any other security that guarantees the foreign investor a fixed rate of return at the time of its exit the same would be in violation of the FDI Regulations.

  1. VIOLATIONS IN THE PRESENT CASE

In the present case there was no such violations done directly, but the violations were held to be done indirectly. As can be seen, the foreign investor directly did not violate any of the RBI Regulations. In lieu of its investmentsin the Investee company, the Investee Company had issued FMO equity shares and CCDs, both these instruments are permissiable under the FDI policy. Further these instruments as issued by the Investee Company did not gurantee any assured returns to FMO.

However, as mentioned above it was the Downstream Investment that was held to be in violation of the RBI Regulations. As all the investment received by the Investee Company was invested in two of its subsidiries which issued the Investee Company optionally convertible debentures (“OCDs”) carrying fixed rate of return of 14.5% interest P.A.

  1. ANALYSIS OF THE JUDGMENT

The Court taking note of above facts held that:

1) Violation of Press Note 2 of 2005

The agreements executed between by FMO with the Investee Company permitted it to immediately pass the FDI received from FMO to the Subsidiaries against subscription of OCDs. Therefore, the Court held that according to their commercial understanding, the Investee Company was not allowed to retain the FDI amount or to utilize the same in any of its projects. It held that Press Note 2 of 2005 permits FDI investment in the real estate sector only if it is for township/construction project. Accordingly, the court held that the investment in the Investee Company cannot be said to be in accordance with Press Note 2 of 2005 and is not FDI compliant.

2) Routing of Money through an un-accepted structuring

It was contended by IDBI that the Investee Company being a separate legal entity, there was no bar on it to invest the Investment Amount in OCDs of the Subsidiaries and the said Investment Amount should not be treated as an investment by FMO.

However, the Court rejected the above contention on the same ground that the agreements established that the Investee Company did not have an option but to route the funds to the Subsidiaries. Further, it held that investment by the Investee Company in the Subsidiaries was through subscription of OCDs as opposed to instruments considered as equity under the FDI Policy.

It held that OCDs that were issued to the Investee Company allowed FMO to ensure that the FMO obtains the Investment Amount along with the interest which was against the FDI Policy as it was a risk free investment whereas FDI Policy provides for investment only through equity investment i.e. where equity risk is taken by the foreign investor.

  1. OCDs effectively were issued to FMO and not to the Investee Company

After carefully, analysing the terms of the OCDs and the CCDs the Court held that the cash up streamed from the Subsidiaries would ultimately belong to FMO since the CCDs issued by Investee Company to FMO could after conversion allow FMO to hold 99% of the capital of the Investee Company.

The Court held that the entire investment structure was designed in such a manner that it ensured that on receipt by the Investee Company the Investment Amount invested in the Subsidiaries along with the interest, FMO would convert its CCDs upon which it would become the owner of the Investee Company and thereby receive the amounts received by the Investee Company.

The Court also took note of how Articles of Association of the Investee Company had been structured to ensure that the decisions pertaining to matters relating to the OCDs and the enforcement thereof by the Investee Company were to made by the nominee directors of FMO on board of the Investment Company.

Accordingly, the Court held that:

I am prima facie of the view that the structure/device of routing FMO’s FDI amount of Rs. 418 crores to Amazia and Rubix through the newly interposed Vinca (as the nominal recipient of the FDI) was a colourable device structured only to enable FMO to secure repayment (through Vinca) of its FDI amount and interest thereon at 14.75%, contrary to the statutory FEMA Regulations and the FDI Policy embodied therein, which only permit FDI investment in townships/real estate development sector to be made in the form of equity (including Compulsorily Convertible Debentures) and preclude any assured return. I am also prima facie of the view that the Company’s Guarantee (which is the basis of the Company Petition) though ostensibly in favour of Vinca, an Indian Company, was part of the aforesaid illegal structure/scheme and was given to ensure that FMO received back its FDI amount with interest as aforesaid through Vinca. The Guarantee was therefore part of the aforesaid illegal structures/scheme and therefore prima facie illegal and unenforceable.

Conclusion

The present case is one of its kinds which adopted a ‘look through’ approach while adjudicating on the legality of the transaction. While independent steps were taken by FMO in arranging its investment structure carefully, the present case is significantly important for corporate lawyers to ensure that any of their proposed structure is not only ‘form compliant’ but also has substantial ‘substance’ in it to pass the judiciary test.

However, it should be noted that there are no end-use restrictions under the FDI Policy like the ECB guidelines- which mandates that the money recevied should be used only in a particular manner. Thus, in absece of such end-use restrictions in the FDI Policy itself, one will have to wait and watch whether the present judgment in appeal is upheld by a superior bench or by the Apex Court.

[1]http://www.moneycontrol.com/news_html_files/news_attachment/2015/CALL%20&%20PUT%20OPTIONS%20-%20BOMBAY%20HIGH%20COURT%20ORDER.pdf

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The Big Short – The Dark Secrets of the Recession Revealed

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The Big Short – The Dark Secrets of the Recession Revealed

This is being republished from A First Taste of Law.
This should be the best book on the subject so far. Well, Michael Lewis seems to have gotten into the habit of churning out thrillers consecutively, with the only difference being that his books do not feature detectives, but equally intelligent financial artists. And, he lauds not those who caused the calamity – the financial crisis – the recession that spread like wildfire and made the world reel under its disastrous impact, but those who were never acknowledged for correctly predicting the disaster that was about to come.

the big short

This post outlines some of the hacks of financial and legal wizardry which led to the recession.

It also traces out in detail the activities of people in three institutions in detail – Steve Eisman of FrontPoint Partners (acquired by Morgan Stanley), three partners at Cornwall Capital and Michael Burry of Scion Capital, all of which were scattered across the US, who made the most smartly calculated ‘bets’ to mint money from the happening of the recession itself.

To begin with the discussion, we first refer to a brief description of the process of securitisation as explained in the post on Liar’s Poker and Wall Street Meat

In the new millennium, securitization was done with an absolutely new flavour to it. The loans securitised now were those made to borrowers who did not have sufficient creditworthiness, and hence, could be likely or expected to default. These were known as sub-prime loans, for which there was no need of an adequate proof of income, proper documentation procedures or other processes to verify the credit-worthiness of the borrower. Interestingly, such loans were structured so as to require little or no interest payments initially, which meant that those who took the loans would not default immediately, but at the time when they were required to pay the actual interest that was applicable to them. This also meant that the effect of making the wrong kind of loans would not be felt immediately but after lapse of a certain span of time.

If it was known in advance that the practice was destined to be doomed, nobody would have carried it out. Surely, there was something more to it, something that masked its riskiness. Hence, I use guidance from Lewis and make an attempt to address some concerns which a lay person man may have, to show how it was possible for the free market system to deceive all the participants involved in it.

If defaults were so common or likely or predictable, how did the process survive?

For the answer to the above question, we must understand an axiomatic statement – housing prices had always been on the rise in the US. A uniform nationwide fall in housing prices was believed to be impossible. As the loans were given out on condition that the house so bought by the borrower using the loan amount would be mortgaged, the lenders could always take possession of the house or sell it in the event that a borrower defaulted. So, if a borrower defaulted, the lender would not suffer

For the borrower, till housing prices were on the rise, he could use his existing house, whose value would have increased by the time the first repayment fell due, and get a loan of a higher amount based on the mortgage of the house, as the value of the house would have increased. He would thus be able to pay off (or refinance, as it is known in financial jargon) the loan on the previous house, and still be left with some extra money for himself, maybe to buy a better house. This cycle went on and on, and could continue ceaselessly, so long as housing prices rose.

Artificial Bubbles

Housing prices started escalating and hit the roof, although, in reality, nobody was capable of paying for them. They had constantly risen because of an increase in demand, which was in reality artificial, and should not have existed, as a lot of the people were not in a position to pay for the houses that they were buying. So, in an ideal scenario, the actual demand for housing would have been much less.

Demise of the myth of rising housing prices

The artificial bubble in housing prices eventually burst, as there was a nationwide fall (or a ‘correction’, as it is called in financial jargon) in housing prices, implying that those who had taken housing loans on mortgages could no longer use the same property for refinancing them, that is, taking another loan (of a higher amount in this case) to pay off the prior loan, as the price of the houses they had taken loans on were now falling. They would now have to ultimately earn the money necessary to repay the loans. In fact, this encouraged a sort of moral hazard, as people were no longer interested in paying more money for a house whose value was now much less pursuant to the fall in prices.

What is worse, the lending institution was no longer secure, because the house was worth much less than the value of the loan now, so even if it took possession and sold the house, it would still be running at a loss.

Extra Topping 1: Securitisation

This, however, is a very simple picture and does not factor in any of the evils of securitisation. When housing prices fell, borrowers were evicted from their houses, and lenders ran into losses. In case of simple loans, the impact of these losses would have been confined to the lenders and the borrowers (primarily banking and mortgage companies). It should have resembled a banking crisis. Those who were neither lenders nor borrowers should have been left unaffected.

Now, we factor in the effect of securitization. Securitisation implied that the loan which was given by a lender to a borrower was split up into a number of smaller components, and each component sold off to a different entity (or ‘investor’). These entities were financial institutions – banks, investment banks, hedge funds, lending institutions, insurance companies, pension funds, just about anyone. So, with housing prices falling, not only the lending institution, but all the other participants who are actively involved in the market were ‘unguarded’ victims of default on even a single loan. These institutions are an integral part of any financial system, and an effect on them can seriously slow down economic activity.

Extra Topping 2: Credit rating errors

We have missed out another point – why would someone agree to take a portion of these horrible loans? Well, this one is simple – it was due to the rating agencies, which gave all of these loans much higher ratings than what they deserved. Why was this the case? From a description of how they functioned, it seems that rating agencies were very bureaucratic, much like the government sector. They would get money based on the number of loans (which were combined, divided and renamed into ‘securities’) which they rated, and not on the accuracy of the ratings. Consequently, there was no incentive for them to rate correctly.

Over and above that, investment banks, featuring Ivy League grads who were income-conscious, and who managed to find loopholes in and manipulate the rating models of the agencies. The model was simple – ratings agencies used a number known as a FICO score (named so because it was created by a company called Fair Isaac Corporation) to rate securitised loans. As per the author, the number was fairly, though not perfectly accurate (as it did not take into account the income of the borrower). It would indicate the likelihood of default, but only if it was applied to individual loans. With securitised loans, the model would work differently.

Ratings on Securitised Loans

A securitised loan implied that a buyer would get a mix of several loans, each of which would have a different likelihood of repayment. Ratings agencies did not split up and individually look at the combined loans at all, but simply looked at the average score of all the loans in the pool.

Let us take an example. Lewis states that the minimum FICO score required for the highest rating would be 623. Now, if a securitised loan had each component loan having a score of 623, there would be a very small or no likelihood of default. On the other hand, if a securitised loan had three loans, with two having a score of 580 and one a score of 719, the likelihood of default would be much higher. While both pools had an average of 623, defaults on the second pool would be much more likely, but it would still get the highest credit rating, the same as that of the first pool. This is how the rating agencies’ model was manipulated.

Now, there is another twist. The pooling was done in an interesting manner. You wouldn’t need to take a mix of all loans, but could take a set of the highest graded loans (triple A), loans with a somewhat lesser grading, and loans with the least grading (triple B). This was a pyramidal structure, with each layer being called a tranche. Triple A was senior, and triple B was junior. It meant that triple A holders were taking less risk (in an ideal scenario) than triple B holders. When the money would be repaid by borrowers, the owners of triple A securities would be paid off first, and after them the owners of triple B securities would be repaid. If there was insufficient money left for them to be repaid, they would have to bear the brunt of losses. As they were taking greater risk, owners of triple B rated securities would get a higher interest rate (assuming, of course, that borrowers repaid the money).

Interestingly, the triple B layer of the loan was further subdivided into three sub-layers. This triple B layer was known as a CDO (collateralised debt obligation). It had three components, the senior tranche, the mezzanine tranche, and the equity tranche. Ideally, as the parent layer was itself triple B, all of its component layers should have been assigned a triple B rating. However, they were, most strangely, be assigned triple A ratings. Ironically, as much as eighty percent of the loans in this triple B layer (CDO) were accorded triple A ratings!

Was it that bad?

In a normal situation, three to four percent of the loans can go bad despite all precaution, and therefore in a sub-prime scenario, it was not unlikely for 7 percent of them to have gone bad. What is significant is that a 7 percent loss in a pool of home loans could wipe out an entire tranche of triple B loans.

Extrapolation of greed

The profitability and ease of securitisation was very alluring. Securitisation happened so fast that very soon, there were no more loans left to securitise and package into CDOs. At this point, investment banks created what was called a synthetic CDO, that is, an instrument which did not require a person to actually buy a portion of a real loan. They started betting on existing loans in the market, not necessarily ones they had made, that if there were defaults on the particular loan (on which they did not stand to lose as it was not them that made the loans but some other lender), they would still be repaid an amount equal to the value of the loans.

Enter the Credit Default Swap

There were some people and institutions in the market who found out that this system would eventually fail. They entered into credit default swap (CDS) transactions. A credit default swap is essentially an insurance against a default. A person who owns a loan, and who fears a risk of default on that loan by the borrower, can pay a premium to buy a CDS from the seller, and the seller agrees to compensate the owner for any losses that he may suffer if the borrower does not repay.

How can insurance turn profitable?

Well, that’s correct – insurance only results in one getting indemnified, that is, covering up one’s losses, but never results in a profit. In the sub-prime market, people were purchasing ‘naked’ CDSes, that is, they did not need to own the loan on which they purchased insurance. If the loan was actually repaid, then they would not be paid the insured amount. In such a scenario, they would only lose the amount that they paid as premium, like any other normal purchaser of insurance. However, if there was a default on the loan, they would be compensated to the full value of the loan, the only difference being, that as they had not provided the loan, the entire amount they received was their profit.

A naked CDS was used to implement a synthetic CDO, as one no longer needed to make a new sub-prime loan to create a CDO out of it anymore. All one needed was another person in the market who held the opposite view about an existing loan getting repaid.

What happens to insurance companies / CDS sellers?

An insurance company earns revenue by collecting premium, and investing a portion of such premium for higher returns. As per an ideal model of pricing the risk (which is done by qualified people known as ‘actuaries’ who use elaborate mathematics for the same), everybody is not expected to actually default simultaenously, if the model of the insurance company is correct. Hence, if the insurance company adequately values the risk of loss, and prices the insurance accordingly, the insurance company can make some profit from its business.

Well, here comes the catch – insurance is priced based on the likelihood of a risky event actually taking place. The greater the likelihood of the event occurring, the more expensive the insurance is. If the event is less likely to happen, the insurance will be cheap. In the case of the financial crisis, a lot of loans which were likely to go bad were still accorded triple A ratings. Therefore, insurance on them was cheap. Hence, if they went bad, the insurance companies could actually run into tremendous losses.

Superprofits for choosing the most rotten apples in the basket

A naked CDS on triple A rated CDOs would not only yield windfall profits in the event of a default for the purchaser of the CDS. Further, the CDS would also be very cheap to purchase for a buyer, as insurance on triple A rated loan was priced very low, based on the incorrect presumption of a lower likelihood of default. Next, if somebody took the time out to select the worst of the triple A rated loans and purchased CDS on them, which would be priced at the same rate as CDS on a set of good triple A loans, the likelihood of a default, and of windfall profits for the CDS purchaser, would be that much higher. This is what the hedge funds which made money did.

Interestingly, the first mezzanine CDO (the mezzanine layer is the middle layer of the triple B component of mortgage bonds) was invented by Michael Milken’s junk bond department in 1987 , but the first CDO which had mortgages as the underlying assets was created at  (probably the highest paying investment bank that directly recruits from the IIMs) by a trader who had worked at Salomon Brothers (the same place where the author of the book, Michael Lewis) started his career.

Who provided the CDSes?

Credit default swaps (CDS) were created by bankers at J.P. Morgan, the world’s third largest investment bank. However, they acted as mere middlemen, and created the instrument, which still needed a buyer and seller. They found a seller in none other than American Insurance Group (AIG). AIG had a new department in 1987 known as AIG Financial Products or AIG FP, established, once again, by people from Michael Milken’s bond department at Drexel Burnham Lambert. AIG had stopped selling these loans sometime after early 2006, but other institutions continued.

Credit default swaps had initially been used to insure oneself against corporate debt. It had been presumed that different corporations which had taken loans for any activity would not all default simultaneously. This presumption had not proven harmful. However, the same assumption that different borrowers would not all default simultaneously was taken a step further and extended to consumer debt (credit card loans, auto loans, etc.) and then onto US mortgage housing loans, even those which were sub-prime (and hence more likely to default). The last stage was problematic, since the loans had been made despite the recognised inability of the borrower to repay, on the presumption that housing prices would continue to rise. In fact, it was possible for such borrowers to default simultaneously, if their payments fell due at the same time.

The downfall of AIG and the Goldman Sachs controversy

At its peak, AIG had sold around 20 billion US dollars of CDS to Goldman Sachs, the world’s biggest investment bank. This implied that in the event there was a default on those loans, AIG would have to pay Goldman Sachs 20 billion US dollars. If it was unable to pay Goldman Sachs and went into bankruptcy, it was possible that Goldman would not get fully compensated either, and could itself run into losses. Such an event was averted when the Federal Government sought to rescue AIG in an 85 billion US dollar bailout so that, amongst others, Goldman could also be reimbursed in full

However, the decision of the US Treasury to allow Goldman to be compensated by AIG in full prevented this from happening. There was much criticism for this decision, on the ground that the decision-makers, in particular Henry Paulson, had themselves worked at senior positions at Goldman Sachs during their career, and that they could be biased in favour of the investment bank. Getting the legal formalities right

Buying a CDS also had its own interesting nuances for the institutions involved. CDSes, like everything else, were governed by standardised contracts, created by an organisation called ISDA (the International Swaps and Derivatives Association). Interestingly, this had also been created way back in 1986, by some who worked at Salomon Brothers, to deal with another kind of instrument – known as an

The same organisation, that is ISDA, had made rules governing CDSes, but these were CDSes suited on corporate bonds. It was relatively simpler to use these CDSes, because a corporation may either pay up the money or default, but in the case of mortgage bonds which comprised several different loans, some borrowers could default, while others might not, or all of them could default at slightly different times. Hence, that would impose a difficulty in assessing what should be treated as a default. To accommodate this variation, after much negotiation, Goldman Sachs and Deutsche Bank devised the ‘pay-as-you go’ credit default swap, where the buyer of the CDS would be paid as and when there were defaults on individual loans in the securitised

The institutions covered in the book had been tremendously successful with their investing strategies. Scion Capital had provided returns of 489% to investors since 2000, after deducting its fees and expenses, that is, it had increased their money by about five times, making 750 million dollars in 2007 alone! Cornwall Capital had made 135 million US dollars from 30 million. Greg Lippman, a Wall Street trader working at Deutsche Bank who learnt about and then shared his pessimism of the market with the other institutions above, made 47 million dollars.

Another hedge fund manager named John Paulson (whose investing history is not covered in detail in the book) made about 4 billion US dollars in 2007, betting against the sub-prime market!
It is interesting to note how some people get paid even to lose money. There was a trader at Morgan Stanley named Howie Hubler, who bought CDSes on the lowest grade (triple B CDOs), and made over one billion dollars for Morgan Stanley when they defaulted. He was rewarded with, amongst other perks, an approximately 24 million dollar package and hopes of running his own independently managed sub-division within Morgan Stanley.

Next, believing that triple-A CDOs (though they still contained triple-B bonds) would not default, he bought around 16 billion dollars in CDSes on account of Morgan Stanley. As the crisis began, Morgan Stanley acknowledged a loss of about 9 billion dollars owing to his operations alone (7 billion dollars were offloaded to another entity). However, he was still given the 24 million dollar payout, and one is left to wonder why such salaries were always absolute and never conditional upon maintaining the level of profits attained prior to securing them. The only difference was, as he was paid the money, he was also fired. Nice way to earn a good vacation! Lewis points out how the incentive system on Wall Street has been haywire

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