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Guardianship of illegitimate children in India

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This article is written by Rimjhim Vaishnavi a student of NUSRL, Ranchi.

What is the meaning of illegitimate child?

As per Black Law dictionary illegitimate means “something which is contrary to law”. Illegitimate children as stated by S.C. of India, are children who are not born out of a lawful wedlock. The legitimacy or illegitimacy of a child depends on the status of valid or void marriage. Hence social status of a child depends on the act of its parents.[1]

Hence, Leon R. Yankwich, stated that “there are no illegitimate children-only illegitimate parents”

Earlier legislation regarding Guardianship of  children  under Indian laws.

Though India is a secular country, but to maintain the diversity and to provide equal status to all the religion and to maintain the essence of every religion, some customary laws are being promoted which guides the person who belongs to that particular religion. The laws relating to the legitimate and illegitimate children are dealt under those customary laws.

  • Guardianship of an child under Hindu Minority and Guardianship Act

Guardianship basically means the authority and responsibility of an individual backed up by law to take care of a minor child and his/her property till the child attains its majority. Under Hindu Minority and Guardianship Act Sec. 6 which states that as per law the natural guardian of a legitimate minor male or female child is the father.

Under Sec.6 of Hindu Minority and Guardianship Act ,which also deals with the concept of illegitimate children  where the mother of the illegitimate children has been stated as the natural guardian of the children.

 Where the mother of an illegitimate child without any notice to the father is the natural guardian and after her the father may be given the guardianship.

  • Guardianship of children under Mohammedan law

Under Mohammedan law mother is not the natural guardian of the legitimate and illegitimate children. But the custody of the illegitimate child is given to the mother and her relatives.. Father is not entitled to have the guardianship or the custody of the minor illegitimate children and in case of a minor legitimate child the father is the natural guardian.

  • Guardianship of a child under Guardians and Wards Act, 1890

With regards to the guardianship of a Christian and Parsi Children are dealt under the Guardianship and Wards Act, where the provisions have been laid down that for acquiring a guardianship of a child, the mother has to send a notice to the father of the child, this has been dealt under Sec.11 of the Guardianship and ward Act.

The loophole in this provision is relating to the child who was not born within a marriage. What if the mother does not want to disclose the name of the father? What if the father is not aware of the child? What if the father is aware but has not contacted the child and the mother. Is it necessary to send a notice to the father?

As Hindu Minority and Guardianship Act as well as Mohammedan law, gave the sole authority of the illegitimate child to its mother, but what about people other than these two religions, what about other religion?

About the Case

These questions which have been raised above were solved in the case filed by a Christian unwedded mother, who wanted the custody of its child and had applied for it in the district court under Sec. 7 of the Guardianship and Ward Act, who directed her to send a notice to the father of the child under Sec.11 of the concerned Act. She appealed against it in the Delhi High Court, stating the fact that the father was not aware of the child and that he was not in contact with them, hence she does not wanted to disclose the identity of the child’s father. The H.C. rejected her appeal on the basis of Sec. 11 and Sec.19 of the Act, stating that in the matter of guardianship it is necessary to send a notice to the father, as the natural father might have interest in the welfare and custody of the child even if there is no marriage.

Later she appealed to the SC , who set aside the decision of the trial court and the H.C. of Delhi and gave a judgement in favour of the women on 6th July, 2015.The judgement was passed by  Justice. Vikramajit Sen  with the advice of  Mr Luthra as an amicus curaie.

Issues which were raised

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  • Under Sec. 11 of the Guardianship and Ward Act is it necessary for a mother to send a notice to the father for the guardianship of the illegitimate child.
  • Is the right of the parents or the welfare of the child the main concern of Sec.11 of Guardianship and Ward Act?
  • Will Sec.19 of the Guardianship and Ward Act applies when the father is not in contact with the mother and child?

To answer these issues S.C. not only interpreted the provisions of Guardian and Ward Act but along with it, it also interpreted the provisions of Hindu Minority and Guardianship Act on the basis that India being a secular religion, it does not pays an onus to the religion of the appellant, what has to be done in this case is to interpret the law of the land in light of legislative intent and prevailing case law, and has to decide  “whether an unwedded mother can have the sole guardianship of its child without sending any notice to the father?

Points considered by the Supreme Court in declaring the new legislation  relating to the guardianship of unwedded mother.

To reach to a satisfying judgement keeping in view all the facts and circumstances of the following points were considered in determining the same.

  • Law Commission of India report, 2015[2] this stated that the main purpose of any legislation dealing with a child, its main focus should be towards the welfare of the child. Hence the main essence of the Guardianship and Minority Act is to ensure the welfare of the child[3] therefore under Sec.7 the initial thing which has to be taken into consideration for guardianship of a child is the child’s welfare and the rights of the mother and father and their interests are subservient.
  • Also in view of Sec. 11 of the Guardianship and ward Act, if the notice is not given to the father would deprive him from his right and also as per Sec. 19 of the Act , which states that a guardian cannot be appointed if the father of the minor is alive and is not unfit to be the guardian of the child in the opinion of law but if the father shows no interest and has no involvement till date in the child’s life. Then the priority should be given to the mother who has been with child and has taken care of the child[4].
  • In this case the question regarding right to privacy also came up on which the court sustained that the right to privacy of the women would be violated if, she discloses the name of her child’s father, and right to privacy is a fundamental right provided by constitution.
  • The Supreme Court also used foreign legislation as per reference of countries and came to the conclusion the child welfare has to be seen wholly and to promote it judgement should be passed, hence in this case the father was not in contact with the child and the mother, and the mother was financially strong as she by herself had taken care of the child without anyone help. Therefore sending a notice to the father would not add to the welfare of the child.

New legislation

New legislation was made in favour of the unwedded mother of the child, which ensured the mother the power of the guardianship and custody of its child, when the father was not in contact of the mother and the child.

  • It is not necessary to state the name of the father in applications for admission in school and while attaining passport for the minor child.
  • If single mother or unwedded mother applies for the birth certificate, then the authorities may only require the women to get an affidavit and on basis of it should issue the birth certificate, unless there is a contrary court direction to it.
  • The unwedded mother under the Guardianship and Ward Act, can have the guardianship as well as the custody of the child without sending notice to the father.

Hence the appellant application for guardianship expeditiously without requiring notice to be given to the father of the child was accepted.

Conclusion

Society is dynamic, it changes with time and hence the issues also changes with time. The new judgment indicates the flexibility of law, which can be changed as per the new grievances of people. This judgment also shows the change in patriarchal society, where since from beginning the name of father was required even though the father was not concerned regarding the child and the mother. Therefore this judgement made the meaning of guardianship more clear, that the one who is working for the welfare of the child and who is concerned about it will have the custody and not just because the person might be concerned about the child. Also as per the Indian Succession Act, 1925, which is applicable to Christians in India, it stated that the domicile of the illegitimate child is based on the domicile of the mother at the time of the birth.  Apart of it the Convention on the Rights of the Child, which India has acceded on 1992, states that not only under Indian legislation but also under all jurisdictions across the globe, child welfare is the most important aspect which has to be determined and not the right of parents, hence through this new judgement the S.C. also paid importance to the welfare of the child.

[1] Smt. Parayankandiyal v. K.Devi & Ors: 1996 SCC (4) 76

[2] http://lawcommissionofindia.nic.in/reports/Report%20No.257%20Custody%20Laws.pdf

[3] Laxmi Kant Pandey v. Union of India; 1985 (Supp), SCC 701

[4] Githa Hriharan v. RBI; 1999, 2 SCC 228

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Taxation and Stamp duty on Transfer of HUF Property

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

Introduction

The term ‘Hindu Undivided Family’ has not been defined under the Income Tax Act. It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters. This means membership of a HUF does not come from a contract but from status of the person in such families. A HUF cannot be formed by a group of people who do not constitute a family. Lineal descendents with a common ancestor is a must.

Further, the transfer of HUF can be by several ways that is, by will (intestate succession), by partition, by family arrangement while partition and inheritance. The law on stamp duties is quite difficult to understand and hence, it usually becomes difficult for the transferee to ascertain whether he needs to register the property received by him under Section 7 of the Registration Act or not and as a result of that, if stamp duty needs to be paid or not and if to be paid how much. However, payment of stamp duty varies from state to state as every state has its own stamp duty statute.

Registration of partitioned portions of HUF

An instrument of partition, of immoveable property, of the value of Rs. 100 or upward requires registration.[1] According to Hindu law, a partition of immoveable properties between coparceners or co-owners can be made orally, and is not required to be in writing; but, if there is an instrument effecting partition of immoveable properties, it requires registration.[2] Partition deed attracts stamp duty and must be registered.

A decree of partition is an instrument of partition and therefore is required to be stamped under Schedule 1 of Article 45 r/w Section 2(15) of the Stamp Act. However, an oral family settlement dividing or partitioning the property is not required to be stamped. Similarly, a memorandum recording an oral family settlement which has already taken place is not an instrument dividing or agreeing to divide property and is therefore not required to be stamped.

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Registration of property attained by Family arrangement/settlement

A family arrangement does not involve a transfer, but a settlement in which each party takes a share of the family property by virtue of an independent title which is, to that extent, admitted by other parties.[3] A family settlement would be entered into to purchase peace by resolving any of the existing disputes or rival claims, or claims or disputes which may or likely to arise in future. Though in a family settlement or arrangement there may be sharing of immoveable property, it is not ‘partition’ in normal sense of term. It is well known that a memorandum of past partition does not require registration. But, if by virtue of that document a right is created for the first time in a property worth Rs. 100 or more, it does require registration in view of Section 17 of the Registration Act.[4]

The law as to registration of documents comprising family arrangements was considered by the Allahabad High court in a full bench in Ram Gopal v. Tulshi Ram.[5] And the following propositions are laid down:

  1. In the usual type of family arrangement, unless any item of property which is admitted by all the parties to belong to one of them is allotted to another, there is no ‘exchange’ or other transfer of ownership. A binding family arrangement of this type can be made orally, and if made orally, no question of registration arises.
  2. If such arrangement is followed by a writing containing reference to it, then the question is whether, thereby, the terms of arrangement have been ‘reduced to the form of a document’, within the meaning of Section 91 of the Evidence Act 1872, ie, formally recorded in a document with the purpose that they should be evidenced by that document. This is a question of fact in each case to be determined upon a consideration of the nature and phraseology of the writing, the circumstances and the purpose with which they were written.
  3. If such arrangement was in fact ‘reduced to the form of a document’ for the purpose of recording the arrangement, registration ( when the value is Rs. 100 or upwards ) is necessary under S. 17 of the Registration Act, in proof of the arrangement, and under s. 91 of the Evidence Act no other proof thereof can be given.
  4. If the terms were not ‘reduced to form of a document’, for the purpose of recording the arrangement, registration is not necessary, even though the value is Rs. 100 or upwards.

While referring to its earlier decision in Sahu Madho Das v.Mukund Ram,[6] the Apex court, in Roshan Singh v. Zail Singh,[7] declared:

The true principle that emerges can be stated thus: If the arrangement is one under which a person, having an absolute title to the property, transfers his title in some of the items thereof to the others, the formalities presented by law have to be complied with since, the transferees derive their respective title through the transferor. If, on the other hand, the parties set up competing titles and differences are resolved by the compromise, there is no question of one deriving title from the other and, therefore, the arrangement does not fall within the mischief of S. 17 read with S. 49 of the Registration Act, as no interest in the property is created or declared by the document for the first time. It is assumed that the title had always resided in him or her, so far as the property falling to his or her share is concerned, and therefore, no conveyance is necessary.

In Tek Bahadur v. Debi Singh and Ors.[8] the Constitution Bench of this Court considered the validity of the family arrangement. The question was whether it is required to be compulsorily registered under Section 17. This Court, while upholding oral family arrangement, held that registration would be necessary only if the terms of the family arrangements are reduced into writing. A distinction should be made between the document containing the terms and recital of family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of record or for information of the court for making necessary mutation.

Inherited property that is, by intestate succession and will

There is no inheritance tax in India. So the property, shares or any other investments will not attract any tax at the acquisition stage.[9] Under section 56 of the Income-tax Act, any money received by an individual from a person during any fiscal year without consideration, the aggregate value of which exceeds Rs 50,000, is taxable under the head Income from other sources. However, an exemption could be availed if the money is received from a relative, which includes among others, any lineal ascendant or descendant of the individual. At present, there is no inheritance tax in India.[10]

As regards stamp duty and registration of the property acquired through will, legal practitioners suggest and say, one need not pay any stamp duty. But, if any dispute with regard to the will and one has to go for probate of the will then, one has to pay the stamp duty on it before going to the court for probate. However, if there is no such dispute, the position remains still and no stamp duty needs to be paid. The amount of stamp duty to be paid in such situation will vary from state to state as per the State Stamp Duty Act. Recently, in its new budget session, government of Maharashtra announced that there will be no stamp duty applicable on transfer of land, building and estate to legal heirs and successors as 5% tax was a burden to pay.[11]

Further, if the property is inherited through intestate succession, there is no need to pay any stamp duty at all.

So, in all, there is no stamp duty that needs to be paid on inherited property by will or by succession.

 

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[1] Shankar v. Vishnu, (1875) 1 Bom 67; Diwakar Prasad Dubey & Anr. V. Prabhakar Prasad Dubey & Anr. AIR 1985 All 133

[2] Ramnagina v. Harihar, AIR 1966 Pat 179

[3] Hiran Bibi v.  Sohan Bibi, (1914) 18 Cal WN 929; Khunni Lal v. Govind Krishna (1911) 38 IA 87

[4] PN Wankudre v. CS Wankuder AIR 2002 BOM 129

[5] (1928) 51 All 79

[6] AIR 1955 SC 481

[7] AIR 1988 SC 881

[8] AIR 1966 SC 292

[9] http://articles.economictimes.indiatimes.com/2010-02-18/news/27574138_1_ancestral-property-tenant-inheritance last visited on 10th July, 2015

[10] http://www.bemoneyaware.com/blog/inheriting-property-fd-tax/ last visited on 10th JULY, 2015

[11]http://accommodationtimes.com/no-stamp-duty-on-property-transfer-to-legal-heirs-in-maharashtra/comment-page-1/ on 10th July, 2015

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Licenses Required for Manufacturing Hand made Soaps in India

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hand made soaps

This article is written by Rimjhim Vaishnavi,  a student of NUSRL, Ranchi, on the License requirement for manufacturing hand made soaps in India.

Introduction

Among increasing demand for different goods, there is also an increase in demand for hand made soaps. People now a days not only require hand made soap for just washing their hands, but they expect more from it. They require that it should kill 100% bacteria or should make their hand feel soft, or make their hand smell good or for any other reason. The scenario is same for all other cosmetics also. These all demand shows that the people are becoming more conscious about how they look, towards their health and all of these are making them more brand conscious. Westernization can also be considered as a reason behind it. And hence to fulfil the entire requirement more and more production and manufacturing houses are being established.

There is no particular or separate legislation relating to the manufacturing of hand made soaps. The Drugs and Cosmetics Act 1940 and Rules 1945 in India regulate all the manufacturing process relating cosmetics and drugs and under which manufacturing of hand made soap is covered.

Does hand made soaps come under the ambit of cosmetics?

As per the definition of cosmetic under Sec. 3 (aaa) of Drugs and Cosmetics Act 1940 and Rules 1945, which includes any article which is intended to be rubbed, poured, sprinkle or sprayed on or has been introduced into, or otherwise applied to, human body or any part either for the purpose of cleansing, beautifying, promoting attractiveness or for altering the appearance.

As hand made soap is used for the purpose of cleaning hands, it comes under the ambit of cosmetics under this act.

Manufacturing of hand soap under Drugs and cosmetics Act and Rule

As defined under the Drugs and Cosmetics Act manufacturing includes many stages like the process of making, altering, ornamenting, finishing, packing, labelling and breaking up or treating or adopting any drug or cosmetic with view of its sale or distribution. But the manufacturing process does not include the compounding or dispensing in ordinary course of retail business.  But the foremost thing which is required for manufacturing hand made soap is to get a manufacturing licence, for which the procedure and the grounds for acquiring a licence has been mentioned in part XIV of Drugs and Cosmetics Rule. After acquiring a licence the other thing which has to be determined is the area or place where the manufacturing process should be done.

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How to get a manufacturing licence for hand made soaps?

As per the Drugs and Cosmetics Act and Rule, the Central Government and the State Government makes rule regarding issuance of licence to a person for manufacturing cosmetics. Basically it is the State Drug Authorities of respective States, who are authorized to issue manufacturing licenses.

  • Firstly, a person applying for a manufacturing licence for hand made soap needs to fill the application form 31 along with it; the person is required to pay an amount of Rs 3,500 and Rs 2,500 as a government and inspection fee of 2500 respectively.
  • Secondly, the cosmetics for which the licence is being acquired should be specified into classes of cosmetics, as has been mentioned under Schedule M-II, where the cosmetics have been classified into 10 categories.
  • A person applying for the license of manufacturing hand made soap or any other cosmetics should have passed intermediate exam with Chemistry as one of its subject or any examination which is recognised by the Licensing authority.
  • Apart from it to get a license it is required to hold a diploma in Pharmacy which should be certified and approved either under the Pharmacy Council of India under the Pharmacy Act, 1948 or under the Pharmacy Act, 1948
  • At the time of applying for the licence it is required to mention other information like the lists of equipment, manufacturing facility details with minimum area required for manufacturing, Technical Competent personnel details, etc.
  • Apart from those details the licencing authority also considers before approving the licence that whether the cosmetic is misbranded or is a spurious cosmetic.
  • For renewal also the manufacturer is required to categorise the cosmetics as per Schedule M-II, apart from it Rs. 1000 has to be paid as a charge for every inspection for renewal

It is mandatory for the Licensing Authority to direct an inspection of the area where manufacturing will take place, before approving or rejecting the application of license. After the inspection a report is send to the Licensing Authority on the basis of which they either approve the licence application or reject it.

Place of Manufacturing

While determining the place for manufacturing the hand made soaps it has to be seen that the manufacturing house should work in a manner it benefits the public at the same time it should not affect the environment adversely. Also there has been rule laid down relating to the factory premises which have been mentioned in the Schedule M-II of the Drugs and Cosmetics Act and Rule. The manufacturer has to comply with those requirements and conditions.

  • Location and surroundings– The production house or factory should not be established near residential areas. Also it should have measures to avoid risk of contamination from the external environment including open sewage, drain, and public lavatory.
  • Building and premises– ventilation openings and similar lines shall be designed Apart from it the factory should have proper sanitation facilities, hygiene should be maintain in the manufacturing building, for that it has to be ensured that the workers are provided and are using hand gloves and masks. They shall also conform to the conditions laid down in the factories Act, 1948. They should design, construct and maintain to prevent the entry of insects, pests, birds and rodents.
  • Waste disposal– Proper arrangement should be made for disposal of solid waste as well as liquid waste. All bio-medical waste shall be destroyed as per the provisions of the Bio-Medical Waste Rule, 1996. Apart from it provision should be made for proper and safe storage of waste material waiting for disposal.
  • Health, clothing and sanitation of workers- prior to employment all personnel shall undergo medical examination including eye examination. It should be ensured that any of the working staff is not suffering from any communicable diseases. Also all the employ should be required to report about their illness or abnormal health condition to their immediate supervisor.

Drugs Controller General is appointed by the Central Government as a head of the Central Drug Standard Control Organization who is authorised to regulate the cosmetics and drugs in India.

Action which can be taken when the manufacturing of hand made soap is against the provisions of Drugs and Cosmetics Acts and Rules

 The act provides provisions for penalising the manufacturer who does not comply with the Act, which has been dealt under Sec.26 to Sec.29 of the Act, by manufacturing cosmetics which are prohibited by the Act, or is not disclosing the name of manufacturer, place of manufacturing, any other records or documents prescribed by the legitimate authority. The person may either be imprisoned or may be fined or both. The fine may exceed upto Rs. 5000. Also a person is penalised if uses any report of a test or analysis which the Central Drugs Laboratory or Government Analyst has given.

Import and export of the hand made soaps

For a manufacturer to import hand made soap has to fill form 10. As per the new amendment 2010, it is required to have prior registration before importation of any cosmetic to India, which includes hand made soap. The Central Government has the power to prohibit the import of cosmetics in public interest only. If the Central Government is satisfied that the use would harm the public then it can prohibit the import of the cosmetics.

The Central Drug Standard Control Organization also controls the import of cosmetics and drugs at the same time regulate the approval of new drugs. The basic requirement for the import and export of the hand soap are Manufacturing license, good Manufacturing Practice (GMP), Free sale Certificates, labelling of a cosmetic is required for bot importing and exporting of a cosmetic. Labelling should be done as per the methods prescribed under Rule 148 of the Drug and Cosmetic Act, the product should not contain prohibited items as prescribed by the Act and the hand soap should either comply with the Bureau of Indian Standards or of the International Cosmetics Standards.

Conclusion

Increase in manufacturing house for hand made soaps on one hand fulfils the demand of the public and on the other hand it also generates employment opportunities. The Act not only deals with the licencing process but also deals with import and export of the hand soap; it also looks into the working of the manufacturing department. The Act gives power to the Central and State Government to check the working these manufacturing companies after they get licence. Hence, the Central government establishes different committees under this Act like Drug Technical Advisory Board who advises the Central Government as well as the State Government on matters arising out of the Administration of the Act. A Central Drugs Laboratory is also established by the Central Government in order to determine the working of the manufacturing company that they comply with the Act or not.

Click on the below mentioned links to know more on the related topics:

Licenses required for starting a tiffin service/home delivery of food in India

Licenses Required To Open a Cafe in Delhi

Licenses required for opening a microbrewery in India

Procurement and Renewal of a Liquor License

Mechanisms for Dispute Resolution Concerning Assignment of Licenses

How to obtain trade license in Kolkata

 
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References-

  1. P, “Provisions Relating to Manufacture of Cosmetics”
  2. “Basic Guidelines for manufacturing Cosmetics in India”,June 13, 2011,Bussiness and Employment.
  3. “The Soap and Others Detergents manufacturing Industry: trends and Characteristics: Trends and Characteristics”-A report of the Center for Competitive Analysis, May 2000 .
  4. Drugs and Cosmetics Act,1940 and Rule,1945.

 

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Why lower courts are bound to follow the principles laid down by the Supreme Court of India?

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This article is written by Rimjhim Vaishnavi,  a student of NUSRL.

Introduction

Decision which have already been taken by a higher court are binding to the lower court and at the same time stand as a precedent  to the lower court judgement, which cannot be altered by lower court. This principle is known as Stare decisis, which is derived from the Latin phrase “stare decisis et non quieta movere”, which  basically means to stand by the decided matters. In India it is commonly known as the concept of precedent.

As per Black’s law dictionary stare decisis means to stand by decided cases, to uphold precedents or to maintain former adjudications.

As explained by prof. A. Lakshminath, the doctrine of stare decisis helps to generate judicial accountability along with it, it also ensures fairness in adjudication and excludes arbitrariness and helps in maintaining stability and certainty. Prof. further explained that stare decisis is both a social as well as a legal norm.

Historical background

The desire for certainty and continuity in law gave rise to the doctrine of stare decisis. This doctrine was initially used in medieval England and America, where the common-law courts looked into the judgement of earlier cases as guidance also they had power to reject those which they does not considered good or which they considered bad.

Initially due to the lack of recording the decisions or judgement of cases in written form, doctrine of stare decisis was not freely used, but after the concept of recording the judgement came, widespread use of this doctrine was witnessed.

It was in 17th century for the first time in England, the decision of Exchequer courts were given a binding force. Later in 1883 the urgent need for recognizing the binding force of precedents was brought into notice in the case of Mirehouse v. Rennel. Further in 1873 and 1875 came up the Supreme Court Judicature Act, were the theory was stare decisis was established. In India the concept of precedent established after the Britishers came to India, which lead down the hierarchy of courts and the concept of higher courts judgement binding the decision of the lower courts.

In 1935 the Government of India Act, explicitly mentioned that the decision of Federal Courts and Privy Council will be binding all the other Courts decision in British India.

Hence, from 18th century till date stare decisis is a characteristic feature of our legal system.

Doctrine of stare decisis under Art. 141 of the Constitution of India

Art. 141 of the Indian Constitution states that “law declared by Supreme Court to be binding on all courts within territory of India.” Art. 141 state that only the ratio decendi of a case is binding not the obiter dicta and the mere facts of the cases. Therefore, while applying the decision of S.C. by other courts, what is required is to understand the true principle lay down by the previous decision.

Some basic concept of Art.141

  1. All the courts in India are bound by law to follow the decision of Supreme Court.
  2. Firstly the judgement has to be read as a whole and at the same time the observation from the judgement has to be determined in the light of the questions presented before the court.
  • A judgement is used as a precedent only if it is based on deciding or resolving a question of law.
  1. Sometimes while deciding a case court is divided, during that situation the decision taken by the majority of judges will be later used as precedent not the decision taken by the minority of judges.
  2. Ex-parte decisions by S.C are also binding in nature and can be used as precedents.
  3. The S.C. is not bonded by its own decision.
  • Procedural irregularity and immateriality does not invalidate the binding nature of a judgement.
  • Special leave petition are binding in nature.

Types of precedents

  1. Original and Declaratory precedents– original precedents refer to those cases where there is a question of law which has not been decided before, and then in such a case the decision of the judge forms original An original precedent is a law for the future, which creates and applies new rules. Declaratory precedent means those cases where application of an existing rule of law is used. In such cases it is seen that the rule is applied because a law already existed on it.
  2. Authoritative or Binding precedent– it is also known as mandatory precedent or as a binding authority. It means those decisions which the judges must follow whether they approve it or not. It basically denotes the higher courts decisions which are binding over the lower courts of that region.
  3. Persuasive precedent– these precedents are not as binding as the authoritative precedents. These precedents means that while making any judgement the judge has to consider these precedent and has to give higher weightage to it. The main concept behind considering it is that it is relevant and can help in making a fair decision. These cases could be of could which are put at similar level in the hierarchy of courts. Even lower court decision can play a role of persuasive precedent.

Decisions which are not considered binding under Art. 141 of Indian Constitution

There are some decision which are not considered as a precedent or which do not have a binding effect. Those are:

  1. The decision that is not expressed
  2. The decision not founded on reasons,
  3. The decision that does not proceed on consideration of the issue.
  4. Obiter dicta of a case is not binding, hence it cannot be relied upon solely as a ground to hold any statutory rule invalid.it has a persuasive value.
  5. Decision is rendered per incuriam is not binding in nature. Per incuriam’s literal meaning is resulting from an ignorance. Hence any decision made on per incuriam, it is not used as a precedent.
  6. Decision is rendered sub-silentio, and then also it is not used as precedent. Sub-silentio means to a situation when the point of law involved in the decision is not perceived by the court. It means when a point of law or particular question of law was not consciously determined.
  7. C’s observations on the facts of the cases are not binding.

Advantages of precedents

Precedent means to follow the same which has been done earlier. Hence the first step while considering the precedent is to look the similarity, if there is any then the magnitude or degree of similarity that existed between the problems. After this it has to be seen whether the same has been used before a precedent and has resolved the problem.in this manner the precedent works. Therefore the advantages our legal system enjoys by adapting this doctrine are-:

  1. It is time saving avoids unnecessary litigations
  2. There is an orderly development of the law
  • It brought greater certainty and consistency in law, which is the most remarkable advantage. As a good decision making body needs to have consistency
  1. Avoid arbitrariness in judgements.
  2. It eliminates the element of ambiguity and enables the lower courts to follow the decision of higher court unanimously.
  3. The presence of precedent decreases the probability of a judge making a mistake.
  4. It also serves the concept and interest of justice as giving different decision to similar situation might be considered unjust.

Disadvantages of precedents

Every good thing comes with it by-products which are bad or has negative effect. Some of the negative effect of stare decisis doctrine are-:

  • Also practical law is based on experience, by considering precedent the scope of experience decreases which hampers the essence of practical law.
  • It is being criticised because of its limiting effect over the development of law.
  • The first and foremost disadvantage of this doctrine and the precedent system is its rigidity.
  • Other disadvantage is its complexity which sometime makes situation more uncertain.
  • Many time judicial mistakes are being continued in the form of precedent.

Conclusion

Hence, the stare decides doctrine is very helpful for our judicial system. But at the same time the convenience of following the precedent should not be let to degenerate into just a mechanical exercised performed without any thought. It should be used carefully, in the view of promoting justice and equity.

 

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 How can a citizen take action against industries polluting ground water?

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What action can you take against industries that pollute water?

 
This article is written by Ms. Mrinal Kanwar, lawyer (WBNUJS, batch of 2011) and an environment enthusiast. To read more articles, visit www.watchfulobserver.com

Is the factory next door polluting your drinking and bathing water?
Is your and your family’s health suffering because of using that water?
Are you sick of the stench in the area around your house?
Do you want to take any action against the factory owners?

We are all victims of water pollution in some or the other way. In most areas surrounded by industries, the presence of toxic matter in drinking water is much higher than permissible limits. The levels of toxicity depend on the nature of pollutants. For instance, Mercury is known to cause damage to functioning of the brain, cause other neural disorders, reproductive abnormalities, abortions, obstruction of growth in children and disruption of the gastrointestinal system; pesticides are carcinogenic and fluorides lead to bone deformities.

The government has enacted various environmental laws for dealing with problems of water pollution. These laws provide a mechanism through which citizens like you and I suffering at the cost of these industries may bring to the notice of the authorities instances of pollution and violation of environmental laws to get respite.

Who are these authorities?

The Central Pollution Control Board (‘the CPCB’) established under the Water (Prevention and Control of Pollution) Act, 1974 (‘the Water Act’) is a statutory organization under the Ministry of Environment and Forests. The CPCB along with its equivalents State Pollution Control Boards (‘the SPCBs/the Boards’) are entrusted with the responsibility for execution of environmental legislations relating to prevention and control of pollution.

The Complaint Procedure

Complaints regarding water pollution can be made to the regional office or the head office of the SPCB or to the State Government. Every state has a head office in the state capital and regional offices in all major districts in the state. There are certain matters in which the authority lies with the District Collector or the Municipal Corporation, depending on the laws they are implementing. In such cases, the right forum will be those authorities to deal with such matters.

A citizen can contact the regional office of the SPCB to report a case of pollution of water by an industry under section 24, 25 and 26 of the Water Act. Once the complaint is recorded, the Board will inspect the facts alleged in the complaint, take samples of the water from the polluted area, send them for analysis and examine the results.

If the results are positive, the Board has the power to direct ‘the closure, prohibition or regulation of any industry, operation or process; or order the stoppage or regulation of supply of electricity, water or any other service’ to the polluting unit, under section 33-A of the Water Act. The Board also has the power to withdraw the consent of operation granted to the polluter under section 27 of the Water Act. The Board can also file a criminal complaint to a Metropolitan Magistrate or a Judicial Magistrate of the first class, against the polluting unit, under sections 43 and 44 of the Water Act (penalty provisions) for violation of the provisions of section 24, 25 and 26 of the Water Act. The punishments prescribed under the Water Act range between one and half years to seven years.

In case the Board does not take any action on the complaint, the aggrieved citizen can knock at the doors of the Indian judiciary after giving a mandatory 60 days notice (in the manner prescribed in the Water Act) to the Board or the authorized officer. No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class will try any offence under the Water Act.

What to do in case of an Emergency?

In case of a situation where the conduct of any business is hazardous to the health or physical comfort of the community requiring such a polluter to immediately stop its functions, the aggrieved citizen can file a complaint with the District Magistrate or the Sub-Divisional Magistrate or any other Executive Magistrate (empowered by the State Government for this purpose) under section 133 of the Criminal Procedure Code, 1973. The Magistrate may immediately make a conditional order requiring the polluting unit to desist from carrying on such activities or regulate its functions in the manner prescribed. The polluter is given an opportunity to show cause as to why the conditional order should not be made absolute.

Other provisions

An aggrieved citizen can also approach the Courts by filing an FIR or initiating complaint proceedings against the polluter under various provisions of the Indian Penal Code, 1860 (‘the IPC’). Section 277 makes fouling of water of public springs and reservoirs an offence (punishable with imprisonment upto 3 months) and Section 284 makes a person who is handling poisonous substances in a negligent manner so as to endanger human life criminally liable (punishable with imprisonment upto 6 months).

Word of Caution

The overall experience dealing with pollution control boards may not be too pleasant, as these watchdogs do not have teeth to punish polluters. Most complainants have experienced that these pollution control boards are normally reluctant to deal with lawbreakers and are mostly ineffective at implementing the environment protection and anti-pollution laws. Therefore, one’s best bet then is to make a formal complaint with the pollution control board, wait for it to not respond, serve a sixty day notice on the Board and then make a complaint to the Court. That said, the cumbersome bureaucratic set up should not deter us citizens from fighting for our rights, our future and the health of our families.

For any further assistance regarding filing a complaint or understanding/ executing paperwork in this regard, please feel free to drop in a request at [email protected]

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Investments by NRIs – Domestic Investments!!

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Visible through the lobby window at the Hong Kong Convention and Exhibition Centre are skyscrapers of Hong Kong, and Victoria Harbour. ca. 1980-2000 Hong Kong, China

Visible through the lobby window at the Hong Kong Convention and Exhibition Centre are skyscrapers of Hong Kong, and Victoria Harbour. ca. 1980-2000 Hong Kong, China

 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].

Introduction

The Modi government has off-late taken various policy measures and undertaken numerous regulatory changes to walk its talk with respect to various propositions it has made in order to fuel growth to the economy. The government understands that clearing fundamental regulatory intricacies is paramount to get the economy straight and encourage foreign investors to invest in India. In order to reflect this intention of the government, the cabinet recently approved amendment to the definition of Non Resident Indians (NRIs) to include Overseas Citizens of India (OCIs) cardholders and Persons of Indian Origin (PIO) cardholders for FDI purposes. Also in the same approval the cabinet agreed to approve investments made by NRIs on non- repatriation basis to henceforth be considered as domestic investments. This is a major regulatory reform the implications of which are elaborated in detail below.

Cabinet Approval and DIPP Amendments

The Cabinet in its May 21, 2015 approval[1] basically approved two relevant amendments to the FDI Policy which were later in print brought into force by the Department of Industrial Policy & Promotion (DIPP) vide its Press Note No. 7 of 2015[2].

The First amendment that was approved by the cabinet and brought into force by DIPP relates to amending the definition of NRI as defined in the FDI policy in order to align it with the definition of NRI as defined in the Citizenship Act which was amended early this year.

Before the said amendment was brought into force, the term ‘NRIs’ from the perspective of exchange control regulations governing FDI referred to an NRI who is a citizen of India or is a PIO, and the term PIO covered individuals who held an Indian passport in the past or who are children or grandchildren of an individual who was a citizen of India (after the Constitution of India came into force) or who is a spouse of an Indian citizen or a PIO.

However, early this year, in January 2015, the Citizenship Act, 1955 was amended replacing the concept of registration as a PIO cardholder with the concept of registration as an OCI cardholder. The category of individuals entitled to apply for registration as OCI cardholder are similar compared to those who were entitled to apply for registration as a PIO cardholder.

Therefore, in order to bring parity in the definition of NRI with the amended definition of the Citizenship Act, the DIPP Press Note reads as follows:

“‘Non-Resident Indian’ (NRI) means an individual resident outside India who is a citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7(A) of the Citizenship Act, 1955. ‘Persons of Indian Origin’ cardholders registered as such under Notification No. 26011/4/98 F.I, dated 19.8.2002, issued by the Central Government are deemed to be ‘Overseas Citizen of India’ cardholders.

Pursuant to the said amendment, the definition of NRIs’ from the perspective of FDI would cover non-residents who are either Indian citizens or OCI cardholders. Individuals who have registered as PIO cardholders under the erstwhile Issuance of PIO Card Scheme, 2002 would be deemed to be OCI cardholders.

The amendment would bring in consistency between exchange control regulations and the Citizenship Act, thereby aligning the definition of NRI under the two laws. The change in definition would apply to a broad range of transaction by NRIs, particularly, investment in Indian companies, partnerships and proprietary concerns, lending to Indian companies in INR and acquisition of immovable property in India.

The Second amendment that was approved by the cabinet and brought into force by DIPP by amending the relevant clause in the FDI Policy is an important one which states that investments by NRIs on non- repatriation basis would be considered as domestic investments. Under the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 (TISPRO Regulations), investment by NRIs on non-repatriation basis is dealt with separately under Schedule 4. This schedule specifically categorizes investments by NRIs as foreign investments whether on repatriation basis or on non- repatriation basis.  However, to ease the law and encourage foreign investments, the amendment seeks to increase foreign investments on non- repatriation basis by NRIs as domestic investments.

The language of the amendment reads as follows:

Investment by NIRs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.

As a result of this amendment all the restrictions relating to investment by NRIs from FDI perspective- specifically being sectorial caps, pricing guidelines, cap on coupon rate etc. which otherwise were applicable in case of regular FDI investment in India by NRIs would henceforth not be applicable in case of NRIs investing on non-repatriation basis.

Thus, the direct implication of this amendment is that investments by NRIs on non- repatriation basis are immune from all sorts of FDI restrictions, which thereby would give comfort and encourage NRIs to invest in India on non- repatriation basis. The other direct implication of this amendment from FDI perspective is that while determining whether an Indian company is a foreign owned company with 50% or more shareholding held by non-residents, investment by NRIs on non-repatriation basis would not be included. Therefore, from the perspective of downstream investment in companies engaged in sectors subject to sectorial caps or specific conditions existing limitations would not apply in case of investment by NRIs on non-repatriation basis.

Conclusion

The amendments discussed above are aimed at bringing certainty in treatment of NRI investments. The decision that NRI would now on include OCI cardholders as well as PIO cardholders would align the FDI policy. This thereby would meet one of the proposed policy of the government which is to provide PIOs and OCIs parity with NRIs in respect of economic, financial and educational fields.

Also the amendment to the effect that NRI investment under Schedule 4 of TISPRO Regulations i.e. on non-repatriation basis would from now on be deemed to mean domestic investment made by residents, would provide clarity in the FDI policy as discussed above. The said amendments would boost foreign investments across sectors and accelerate the inflow of foreign exchange remittance which would have positive implications on the economic growth of the country.

[1] http://pib.nic.in/newsite/PrintRelease.aspx?relid=121914

[2] http://dipp.nic.in/English/acts_rules/Press_Notes/pn7_2015.pdf

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What are the new initiatives taken to make doing business in India easier?

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

What is “Make in India”?

Most of us are enthusiastically discussing about the ‘make in India’ scheme, may be, because we rarely get to see any product with such wordings on it and we undoubtedly crave to see this as being Indians. But, actually, all of us barely know about what it actually is, except that it is the new scheme launched by Modi Government to make endeavors to encourage and increase manufacturing in India itself instead of importing. The official website of make in India campaign displays its homepage defining the campaign as short as possible- “A Major new National Program. Designed to facilitate investment. Foster innovation. Enhance Skill development. Protect Intellectual property. And Build Best-in-class manufacturing infrastructure. There’s never been a better time to MAKE IN INDIA.”[1] The attractive term was coined by Mr. Narendra Modi and was formally launched on September 25, 2014 after hinting towards this initiative on Independence Day of the same year.

What is meant by ‘ease of doing business’ ?

‘Ease of doing business’, as the term itself says all means how easily one can start up a business in India that is, how many formalities he has to go through or what are the impediments that the investors face while starting up. There is an ‘ease of doing business’ index given by World Bank every year. One of the impediment investors have always faced while doing any business in India that procedure is too difficult and generally requires a very long approval process. Unfortunately, India’s ranking on the World Bank’s ‘Ease of Doing Business Index’ has remained more or less stagnant, in the 130s and 140s, over the last few years in a list of 189 countries.[2] India has been ranked142nd on the Ease of Doing Business Index and 158th on Ease of Starting a Business. And it is a delight for the investors because one of the key highlight and object of this scheme is to make it easier to do business in India to facilitate ‘make in India’. The government is taking several steps to bring India into the top 50 ranks.

How easing business will boost ‘make in India’?

There is an obvious and direct relation between ‘ease of doing business’ and ‘make in India’.  It is quite obvious that if more difficult it is to achieve something, more reluctant people will be to go for it. Similar is the case with business. Investors are often resisted towards starting up any business in India because it includes various impediments. So, by removing such impediments and making it easier to do business here will naturally attract the investors who were earlier resistant to invest in India thus, boosting ‘Make in India’.

Steps taken by government to make doing and starting up of business easier:-

  1. INC-29

INC-29 gives a fast track procedure for registering any company in India. To simplify and fast track the procedure for company registration in India, the Ministry of Corporate Affairs (MCA) has introduced Form INC-29 – Integrated Incorporation Form. Form INC-29 Company Registration has merged the process of getting Director Identification Number (DIN), Name Approval and Incorporation application into one single process – thereby significantly reducing the time taken to start a company in India. The INC-29 form can be accessed through http://www.mca.gov.in/MinistryV2/Download_eForm_choose.html.

Earlier 8 forms had to be filled for getting the company registered. As the  entire process of incorporation is in a single form, correct filing could mean an approval in 48 hours, that is what government has claimed. If the form is rejected then you can apply for refund through Refund Form. Also, one can apply for PAN- Permanent Account Number and Tax Deduction Account Number-TAN.

INC-29 will provide following services through a single e-form:

  1. Allotment of DIN-Director Identification Number
  2. Name of a company
  3. Incorporation of a company

However, it has certain disadvantages too. One of these is that it has narrower name proposal. Earlier, 6 names(of applicants) in order of priority could be submitted whereas INC-29 allows only single name to be submitted. And on top of that, in case the name applied is rejected, then there is only one single chance left for re-submission and it is unclear as what would follow the second rejection

Another point worth noting here is that it has combined various forms but, earlier procedure has yet not been eliminated. It is just that you now submit everything at once which would mean that if there are errors, one will get to know about them at once. The change is good until we come to know that only a single re-submission is allowed before one needs to fill the entire form once again and paying Rs. 2000 once again.

Further, Section 8 of the Companies Act, 2013 has not been included which includes incorporation of a charitable company and company defined under Chapter XXI are also not facilitated under this new system. Maximum DIN allotment is just 3 in number that is, DIN for only 3 directors can be applied at one time which is another shortcoming of the new system.

  1. Easing of trading across border component of ‘ease of doing business’

India has been ranked 126th in Trading Across Borders component of “Ease of Doing Business”, out of 189 countries ranked by the World Bank in its 2015 Report. This year, there has been reduction of number of documents to only three in number from around ten for imports and exports of goods. After issue of the DGFT’s Notification[3] dated 12-3-2015, only three documents each would be mandatory documents for export and import.[4] Mandatory documents required for export of goods from India now include Bill of Lading/Airway Bill; Commercial Invoice cum Packing List, and Shipping Bill or Bill of Export and mandatory documents required for import of goods into India include Bill of Lading/Airway Bill; Commercial Invoice cum Packing List, and Bill of Entry.

As such, after issue of DGFT’s Notification only three documents each would be mandatory for export and import as two documents (Packing List and Commercial Invoice) required by Customs have been merged into one document, whereas one document required by RBI (Foreign Exchange Control Forms – SDF for exports and A-1 for imports) and one document required by Ministry of Shipping (Terminal Handling Receipt) earlier, have now been dispensed with. ‘Cargo Release Order’ is not a mandatory document required by any regulatory agency, but is a commercial document issued by the Shipping line to the concerned importer. As regards, ‘Technical Standard Certificate’/ ‘Certified Engineer’s Report’, ‘Product manual’ and ‘Inspection report’, these documents are required in specific cases/products/tariff lines only and are not mandatory for all products.[5]

“These new measures will go a long way in reducing the transaction costs of exporters and importers. They would considerably reduce the turnaround time at the ports and for the banking channels as well,” EEPC India Chairman Anupam Shah said.[6]

It is widely expected that this step would help India to improve its ranking to a great extent. Not only this, it would also lead to corresponding reduction in transaction cost and time.

  1. Construction permits

On this count, India ranks 184th among 187 countries and the major problem  lies with local authorities who issue permits. To curb this, common application forms have been launched in Delhi. MCD will get clearances from all departments, doing away with the running around involved and cumbersome procedures involved. Also, online color-coded maps for Delhi and Mumbai airports have been introduced to get no-objection certificate from Airports Authority of India. Similar steps are being taken for Archaelogical Survey of India and National Monuments Authority.[7]

  1. Enforcing Contracts

India has been ranked 186th among 189 countries due to poor enforcement of contracts, including those between phone users and telecom companies. Measures so far include the setting up of Special commercial courts in Delhi and Bombay High Courts to speed up cases related to enforcement of contracts.[8]

  1. Resolving insolvency

There are many pending litigations related to insolvency in National Company Law Tribunal due to the cumbersome process involved. Only measure taken in this regard by the government is the announcement of introduction of bankruptcy code in India by Finance Minister while giving the Union Budget.[9]

  1. Corporate Tax

Total tax rate estimated at 61.7% in India, compared to 41.3% for OECD countries, India has been placed 156th.[10] In this regard, Corporate tax will be reduced from 30% to 25% in  a phased manner.[11]

Number of steps of procedure to apply for electricity connections has been reduced by Maharashtra and Delhi government.

 

Conclusion

Looking at numerous steps taken by government in making the process of starting up and doing business in India mentioned above, it seems that Prime Minister’s dream of bringing India at 50th position of ‘ease of doing business’ index can be realized very soon if the reforms keep taking place at this pace. There would definitely be criticisms, but, Rome was not built in a day. One must be optimistic about the scheme and enjoy the benefits that it evolves day by day. Such ease in doing business would undoubtedly boost ‘make in India’ campaign of NDA government.

[1] http://www.makeinindia.com/

[2] www.worldbank.org/

[3] http://pib.nic.in/archieve/others/2015/mar/d2015031208.pdf

[4] http://pib.nic.in/newsite/PrintRelease.aspx?relid=116935

[5] Ibid

[6] http://indiainbusiness.nic.in/newdesign/index.php?param=newsdetail/11455

[7] http://www.newslivetv.com/top-news/ease-of-doing-business-modi-govts-9-steps.html last accessed on 6th July, 2015

[8] Ibid

[9] http://www.firstpost.com/budget/union-budget-2015-live-jaitley-promises-indias-own-chapter-11-bankruptcy-law-2127063.html; http://finmin.nic.in/reports/Interim_Report_BLRC.pdf

[10] Supra 8

[11] http://articles.economictimes.indiatimes.com/2015-03-01/news/59642338_1_corporate-tax-rate-tax-regime-shefali-goradia

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Mining laws in India

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This article is written by Rimjhim Vaishnavi, a student of NUSRL, Ranchi.

Historical Background of mining legislation in India

Mining is not a new phenomenon; neither the need for law regulating mining is new. There has been laws guiding and regulating mining activities since 19th century. The first proposal for regulation of mining in India came in 1890, which was introduced by Lord Cross, who at that time was the Secretary of State of India, later in 1894 for the first time Inspector of Mines was appointed for the purpose of management and supervision.

In the year 1901, first Mine Act enacted in India which was only applicable to the mines situated in British India, which was accompanied with establishment of “Bureau of Mines Inspection” in Kolkata. Since then Mine Act has been re-enacted in 1923, 1928 and 1935.

In the year 1952, Mine Act was now applicable throughout India. Since then the Mine Act has been guiding and regulating the mining activity in India, through the act is open to necessary amendment and it has been amended from time to time. It has also been witnessed that every state is guided by different state mining laws, as every state differs from one another.

Laws relating to mining in India

Along with Mines Act, 1952 there are many other acts which regulates and provides a framework to mining, which includes “mines and Minerals (Development and Regulations) Act, 1975”, “Auction by Competitive Bidding of Coal Mines Rules, 2012”, etc.

Mining is considered as one of the important component of the economy of a developed as well as of a developing country, it adds to the national income of a country at the same time results in employment generation on one hand and on the other hand it entails depletion , over utilization and exploitation of non-renewable resources.

Mine as per section 2(j) of Mines Act means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried from the earth by means of tunnelling and shafting as well as it includes open working or quarries. All power stations, convertor stations, rectifier stations, etc. used for supplying electricity[1], are also being covered under the ambit of mining. It includes different type of mining like,

Hydraulic Mining – mining by means of the application of water under pressure.

Open cut or strip mining –it deals with the excavation of the surface above the coal to expose the coal and then the digging and removing of the coal.

Placer mining – it is a process of obtaining the valuable material from placers by simple washing, by dredging, by hydraulic or other methods.

Quartz mining – it includes mining on veins or ore bodies in place as distinguished from surface digging or washing.

Oil and gas mining – it deals with the extraction of oil and gas from the earth, which earlier was not considered as mining but due to the recognition of oil and gas as minerals and due its common usage, extraction and products of oil and gas from earth is now regarded as mining.

Whether any excavation is a mine depends on the mode in which it is worked not on the substance obtained from it.[2]

Ownership

Owner S.2(l) means any person who is the lessee( person who holds the lease of a property), immediate proprietor or occupiers of the mine or any part of the mine.it also includes the contractor and the claimant, but it does not include a person who merely receives a royalty, rent or fine from the mine, or is merely proprietor of the mine, subject to any lease, grant or license or license for the working thereof, or is merely the owner of soil and not interested in the mineral of the mine. Any contractor or sublessee for the working of mine or any part shall be subject to this Act.

In order to examine the working Central Government has power to appoint Chief Inspectors and Inspectors. Along with it Central Government also is empowered to appoint a committee. The Chief Inspector is a part of the Committee and along with the committee members it look into the issue relating to mining which includes the wages, health care and working hours of the workers.

Licensing

According to Black fifth edition law dictionary, license means “the permission by competent authority to do an act which without such permission would be illegal.” Licencing can be seen as a medium or source of imposing a legal framework and legal backup support for allocation of resources which are scares, to manage the completing interest. Many country for the safety of environment and in regards to public health, are using licencing as a blanket

Mining right is right granted to occupy land for purpose of mining either by underground excavation or open working to obtain minerals or ore from it. Right of mining is guided by the process of licensing, which has been mentioned in The Mines and Minerals (Regulation and Development) Act, 1957. No licensing or mining lease shall be granted otherwise than in accordance with the provisions of this Act.

As per Mining Act, 1952 the owner, agent or manager of a mine before commencement of mining operation has to provide a notice in writing to the Chief Inspector, the Controller, Indian Bureau of Mines and the District Magistrate in which the mine is situated and the notice should reach the concerned person one month before commencement of any mining operation.

Types of licensing

Minerals have been defined under Section 2(jj) of the Mining Act, which includes all substances which can be obtained from the earth including natural gases and petroleum. Minerals are further divided into minor minerals which include building stones, gravel, ordinary sand and other minerals which the central government may declare to be minor minerals. Major minerals are minerals other than minor minerals. These licensing provisions applies to major minerals.

Licenses in mining sectors have been divided on the basis of different fees and different conditions, according to which licensing has been divided into three types:

  • Prospecting or exploration licenses – this license grants a company right to search for exploitable mineral resources which are for commercial use within a defined area and for a time which has been prescribed by law.
  • Production license – this type of license grants a company to extract minerals from a specific area for a prescribed period. Production license covers smaller area in comparison to prospecting license, but at the same time is granted for a longer duration.
  • Others – the third type of licensing basically deals with small scale mining.

As per “The Mines and Minerals (Development and Regulation) Amendment Act, new category of mining license has been created

  • Prospecting license-cum-mining lease – according to which a two stage process has been established, which includes prospecting operations followed by mining operations.

Law relating to grant of licensing

To obtain licensing, one has to provide an application accompanied with the prescribed fee to the State Government concerned. It is the discretion of the concerned State Government either to grant or refuse to grant license or lease on the basis of grounds mentioned in the Act. Licensing is also provided through the process of auction also.

In a case where two or more person has provided application for a prospecting license, the applicant whose application has been received earlier shall have the right for grant of licence. In this matter the court also look into the applicants.

  • Special knowledge of or experience in mining operation,
  • The financial resources it possess,
  • Nature and quality of staff being employed,
  • And such other qualification as may be prescribed by the state government.

The Central Government also has power in respect of granting and limiting the grant of license as the State government.

Limitation to licensing or mining lease

State government cannot grant license or mining lease to a person who unless:

  • holds a certificate of approval in form prescribed by State Government,
  • produces an income-tax clearance certificate
  • satisfies other conditions as may be prescribed by stated

Also license or lease of mining is not provided to a person who is not Indian as well as in respects to those minerals as prescribed in the First Schedule of Indian Constitution, unless there is a previous approval of the Central Government.

Licensing is also limited on the basis of area being granted, which states that a person cannot acquire in any one state with respects to mineral or prescribed group of minerals:

  • one or more licenses covering a total area of more than twenty-five square kilometres,
  • one or more mining lease covering more than ten square kilometres.
  • any mining lease or license in respect to area which is not compact or contiguous.

Unless the Central government finds it in the interest of development of any mineral.

The government when provides licensing at the same time it grants the period for which a prospecting license is valid which has been mentioned in Mines and Minerals (Regulation and Development) Act, which states that:

  • in case of mica, license is granted for a period of one year
  • whereas in the case of any other minerals, license is granted for two years.

And after the expiry of the prescribed period it can be renewed again for the same prescribed period.

If the prospecting licence or a mining lease holder fails without sufficient cause to provide information or documents or returns, shall be punishable with imprisonment which may extend to one year or fine which may extend to five thousand or both.

Conclusion

The provisions of this  Act does not applies to mine or a part therefore in which excavation is being made for prospecting purposes and not for the purpose of obtaining minerals for use or for sale. This Mining Acts covers all the part included in the process of mining licensing, ownership, role of both central as well as state government at the same time it provides protecting to the workers through its different provisions which deals with the working hours  and the wages of the workers. The main purpose of establishing licensing system was for promoting environmental protection, hazardous material control, safety and effectiveness of medicines, controlling the use of scarce and finite resources and protecting workers safety and rights, which has been ensured by this Act.

 

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References:

[1] D.L.F. Power Ltd v. UOI, AIR 2002 Jhar.

[2] Certainteed Products Cor. V. Comly

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Need of a transparent recruitment system in India: Analysis in the light of Vyapam Scam

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road-sign-464641_1280

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

Introduction

The process of finding and hiring the best-qualified candidate for any job, in a timely, fair and cost effective manner constitutes the recruitment system. Recruitment may be by interviews or even by written examinations. This system will include the recruitments in all the departments of government like police officers, doctors and so on. Vyapam Scam is a scam related to admissions and recruitments in state of Madhya Pradesh where Vyapam (Vyavsayik Pariksha Mandal) is a government body responsible for conducting several entrance tests in the State. These entrance tests are especially for the government jobs and admissions to the educational institutions in the state. The scam involves politicians, businessmen, senior officials who allegedly took bribe for passing and recruiting the undeserving candidates. This is not the first time that any such scam has come to the cover. Latest was the scam related to recruitment of JBT teachers in Haryana for which the former CM of state Mr. Chautala is behind bars. Such scams are deep rooted cancer in the country which direly needs a chemo therapy of transparency as soon as possible otherwise; the day is not far when our system will be nothing better than a corpse.

What is Vyapam?

The Madhya Pradesh Professional Examination Board was initially set-up as Pre Medical Test Board by Government of Madhya Pradesh in the year 1970. Later, in the year 1981, Pre Engineering Board was constituted. Soon after, in the year 1982 both these Boards were amalgamated and named as Professional Examination Board (P.E.B.). Professional Examination Board by Govt. Order No.1325-1717-42-82 dated 17.04.1982 has been assigned the responsibility of conducting entrance tests for admission to various colleges in the state.[1]

The Madhya Pradesh Professional Examination Board is a self-financed, autonomous incorporated body of State Govt. The Government has re constituted the Board of Directors for taking decisions on policy and organizational matters through Madhya Pradesh Professional Examination Board Act. 2007. The Board is a body corporate by the name of the Madhya Pradesh Professional Examination Board and has perpetual succession and a common seal with power to acquire and hold property both movable and immovable and has the power to transfer any property held by it and to contract and do all other things necessary for the its constitution and may sue or sued in its corporate name.[2]

What is scandalous about Vyapam?

There is nothing scandalous about Vyapam; it is just that whole Vyapam system of recruitment has been working as a scam just like hundreds of other scams in India. So, it’s just a silly matter according to our honorable law minister- Mr. Gowda.[3] But, unfortunately, the silly issue has affected the lives of countless deserving candidates and moreover, has undoubtedly affected the functioning of government departments those were recruiting the candidates by choosing the undeserving candidates. So, the issue needs to be paid some heed if not by Mr. P.M. then, at least by law abiding citizens like us who can be the victim of such scandals any moment if the issue continues to be treated as silly.

One of the first complaints about it were registered way back in 2000, but it was only by 2007 that the scam came to fore as a fully fledged professional racket. Investigations and arrests started in 2013 after new details emerged.[4] The Vyapam scam pertains to manipulation in the selection process for government jobs conducted by MPPEB which came to light after a report by the Madhya Pradesh Local Fund Audit office for 2007-08 found alleged financial and administrative irregularities, including unauthorized disposal of application forms, the audit found a difference of about Rs 4 crore in revenue earned from sales of application forms by the MPPEB or ‘Vyapam’.[5] From 2000-2012, there have been around 55 cases of impersonation in exams filed in MP. On July 7, 2013; Indore Crime Branch registered an FIR after arresting 20 impersonators.[6]

This is basically a well planned racket which now to avoid the lifting of veil over its face is leading to various deaths, murders and suicides. Since the investigation into the scam began, 35 people have died. They include witnesses, accused, those assisting the investigation and a journalist who was covering the scam. Since August 2013, the investigation has been handled by a Special Task Force of the Madhya Pradesh police. Now, Chief Minisiter Chouhan has asked for the CBI to take over.[7] While the updates of more death tolls and progress of making arrests will definitely be given by all our leading dailies, here it is important to unfold the reason behind such scams and the arising need of transparency and accountability for these.

Why such scams?

“Common citizens of the country pay a bribe of Rs. 21,068 crores while availing one or more of the eleven public services in a year. As high as 62 percent of citizens think that the corruption is not a hearsay, but they in fact had the firsthand experience of paying bribe or “using a contact” to get a job done in a public office.”[8] This study even makes it clearer that corruption and runs through our veins more than the blood itself. It’s quite simple that when somebody is recruited by paying the bribe, he does so because he sees great prospects of getting his money back in many folds after getting the job from under the table and then, this vicious circle goes on for eternity.  That is what the situation of bureaucracy is in our country.

A 2009 survey of the leading economies of Asia, revealed Indian bureaucracy to be not only the least efficient out of Singapore, Hong Kong, Thailand, South Korea, Japan, Malaysia, Taiwan, Vietnam, China, Philippines and Indonesia, but also that working with India’s civil servants was a “slow and painful” process.[9]

It is normal tendency of any human being to choose the easiest path. So, it is quite normal  for a candidate with contacts with political parties or with certain political alliances would choose to bribe the officials or politicians who are sitting ready to accept it with their mouths wide open to gulp public’s money than working hard for their recruitment. This makes the recruitments sham and leads to the appointment of undeserving candidate which would definitely hamper the growth of the particular department and in turn, the growth of country.

I do not here intend to provide philosophical reasons but, actually the basic reasons. I mean to say here that these scams might appear to be quite technical and typical, but actually the reason is as simple as anything. The question is that human tendency is universal, so why such scams in India and not in other countries like Singapore? The answer is transparency and nothing else. Obviously, when I know everybody is watching me taking or giving bribe, I would never ever do it. The circumstances should be such that one must not get a chance to cheat.

Even caste is prevalent factor in job recruitments in our country. A person of same caste can be easily contacted to and bribed in the name of same caste to get you recruited. However, this is different from reservation.

Then the other reason is prevailing nepotism in all the departments of government. Every other official who has power in hand thinks of recruiting his/her own kin to the vacancy. It is high time that such practices of nepotism must be shed away. When nepotism is high in the pillar of state itself that is, in Legislature itself then, what can we expect out of other departments. A shocking 100% of Indian MPs under the age of 30 are hereditary in our country.[10] There is a dire need to formulate anti-nepotism policies for every department of government and no initiatives should be given to the working staff of educational institutions to get their relatives or children admitted because it is always done by disregarding the right of a more deserving candidate.

Lack of effective corruption treatment is another reason. That means, instruments which are in use, are not running properly. For example Prevention of Corruption Act 1988 came into force on 9th September, 1988. But corruption is still flourishing. Why? Because of weak actions and proceedings towards corrupt people. People don’t have any fear of this act and the court. The act may thus be revised for its better implementation.[11]

The factor as to what facilitates and what is exactly the reason behind such scams can never be compiled but, whatever are the reasons, the cure is one that is transparency and accountability.

How do we achieve it?

This is the question that would have obviously arisen in readers’ mind while proceeding with the article and is also very pertinent to be answered. RTI is one way through which endeavors have been made to make the system transparent but, this too has not come a very long way. Recent example of this is when Haryana Government To bring in transparency in the selection process, fixed the limit of interview marks in any recruitment in the state government to 12 while fixing 88 marks for written examinations to decide the merit[12] as there are more chances of practicing nepotism and bribing while interviews than the written examinations. There can never be concrete criteria on as to achieve transparency but, for every kind of job, some new methods must be formulated as per the nature of process of recruitment.

Conclusion

There is nothing to panic at all! Our country ranks highest for the tolerance levels, she has survived numerous of such scams and would survive this one too, I believe. Just keep your fingers crossed and wait and make efforts to make the recruitments transparent. Making efforts includes being honest and pledging to never give bribe or subject to methods like nepotism for getting recruited and also never to take it after you get recruited with your hard, sincere and honest efforts.

[1] http://www.vyapam.nic.in/e_default.htm

[2] Ibid

[3] http://www.hindustantimes.com/india-news/vyapam-scam-union-minister-sadananda-gowda-says-pm-narendra-modi-need-not-answer-on-silly-issues-a-day-after-rajnath/article1-1366657.aspx last accessed on 8th July, 2015

[4] http://www.thenewsminute.com/article/what-vyapam-scam-and-who-are-implicated-explainer-31869 last accessed on 8th July, 2015

[5] http://www.dnaindia.com/india/report-irregularities-worth-crores-of-rupees-in-mppeb-audit-report-1992723 last accessed on 8th July, 2015

[6] http://indianexpress.com/article/explained/across-the-board-vyapams-spread/ last visited on 8th July, 2015

[7] http://www.ndtv.com/cheat-sheet/vyapam-scam-900-arrested-are-students-or-candidates-for-government-jobs-779324

[8]https://web.archive.org/web/20130811123343/http://www.iri.org.in/related_readings/India%20Corruption%20Study%202005.pdf ; TRANSPARENCY INTERNATIONAL INDIA, India Corruption Study to improve governance, Volume 1: Key Highlights, Jun 2005

[9] http://www.dnaindia.com/world/report-indian-bureaucracy-asias-most-inefficient-survey-1391150

[10] http://www.theindiasite.com/family-politics/family-politics-how-nepotistic-is-the-indian-parliament/ last accessed on 8th July, 2015

[11] http://www.youthkiawaaz.com/2010/08/5-ways-to-reduce-corruption-and-5-places-where-it-exists/ last accessed on 8th July, 2015

[12] http://timesofindia.indiatimes.com/india/For-transparency-in-government-jobs-Haryana-cuts-interview-marks/articleshow/47218439.cms last accessed on 8th July, 2015

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The prerequisites to start investing and trading in the stock exchange – An insight for first time equity investors

7

This article is written by Ria Dalwani, a student of Symbiosis Law School.

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years” – Warren Buffet

Current market trends and analysts suggest that the bull run for the Indian markets will continue this year. While many of us have been conditioned to invest in safer options with minimal risks and guaranteed returns such as fixed deposits, we fail to acknowledge the consequence of inflation chewing into our investments. To generate wealth from income, it is vital to understand and utilize the present resources for future gains. Money kept idle is money diminishing in value. That being said, while it is important to invest, it is equally important to hedge losses.

An investor should plough his/her funds in bonds, commodities, gold, mutual funds, real estate, shares etc. only after carefully studying every facet. A new investor must chalk out an investment plan that reflects logical thinking, long term planning, independence and a realistic goal. A new investor, should note that investing in the stock market is risky, avoid plugging money in one stock, spread risks, study the company before investing and opt for long term investments over short term trading. Buy low and sell high is the ideal trading mantra. However, to follow this mantra an investor needs to plan, research and study.

You are the driver of your own destiny. Remember, there is a difference in being invested and being well invested. With the manifold increase in startups, the spending power of the younger generation has multiplied. Subsequently, many young entrepreneurs have turned potential first time investors in direct equity. ‘Where to invest’ and ‘when to invest’ is an independent choice you have to make.  ‘How to invest’ is a question we can answer for you!

DIRECT EQUITY INVESTMENTS

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are the two pillars of the Indian Stock Market. The BSE’s Sensitive Index (SENSEX) and the NSE’S S&P CNX Nifty are the stock indices. The SENSEX is the oldest index for equity.  An equity share is a unit of ownership in a company. The concentration of an equity shareholder’s ownership in the company increases when the number of shares held by the equity shareholder increases.  Equity, also known as shares or stocks should constitute a part of an investor’s portfolio and not dominate the entire portfolio.

INITIAL PUBLIC OFFER

An Initial Public Offer (IPO) is when a company offers its equity shares to the public for subscription for the very first time.  Selling shares to the public is a common route to raise capital for funding operations and expansion. In a primary market, a company raises capital by floating its shares for subscription, through an IPO. This is called a primary issue because the subscribers purchase the shares from the company itself.  A private company converting to a public company and even a new company can make an IPO.

The company has to submit a prospectus to the Securities Exchange Board of India (SEBI) before making an IPO. Once, the company meets all the compliance requirements it can open the IPO.

Before investing in an IPO, the investor must thoroughly study the company to make a healthy investment. To carefully study a company, one has to invest time, dedication and patience. Being an educated investor is the most important prerequisite.  An investor must assess the business plans, financial health, promoters’ background, market expectations and risks involved.

A Book Building process is when the company making an IPO fixes a price band. Thereafter, investors are invited to bid within the set limits of the price band. However, the difference in the upper limit and the lower limit of the price band cannot exceed twenty percent. The bids made by investors, demonstrate the demand for the stocks. These bids are then used to set the cut off price or offer price for the stocks. The share price determined from the bids within the price band is the cut off price. Usually the price at which the maximum number of bids are made is deemed to be the offer price. In the event that an investor had bid at a higher price than the offer price, the company will return the difference to the investor. Investors (retail investors) who would like to buy the stock at the cut off price will mark the cut off price option in the application form.

Allotments of the shares are made to the public.  A common question that arises is “What happens if there is over subscription?”. Over-subscription occurs when the number of shares being demanded is much more than the number of shares available. In this case, the company will allot shares on a pro-rata basis and refund the money to the investors when no allotment is made.

THE PROCEDURE TO INVEST IN AN INITIAL PUBLIC OFFER

Step 1- Demat Account
Dematerialization
is the conversion of physical certificates into securities in an electronic form, which are credited to the investor’s account. The certificate must be in the name of the investor for dematerialization to process.

In an IPO shares are issued in a dematerialized form.  Hence, a demat account with a depository participant has to be opened. A depository holds shares in an electronic form like a bank holds money.  Depository participants are legally authorized to open demat accounts and to act as a middlemen between the investor and the depository. The depository participant must be registered. Depository participants are agents of the depository and they charge an annual depository fee, holding fees etc. Additionally, depository participants charge a fee on a per transaction basis as well. The National Securities Depository and the Central Depository Services monitor the dematerialized securities.

The following documents and details are required to open a demat account-

  • Address proof
  • Identity proof
  • Bank account details
  • Nominee details

Step 2 – Application Form and Allotment Money
An application form needs to be filled. These forms are available with brokers, financial companies, distributors, mutual funds etc. If you have setup an online transacting account you can submit your application online as well. The application form will include a list of collecting bankers. The form along with the application money and allotment money has to be deposited with the collecting bankers.

Step 3- Allotment of Shares
The company will make the allotment of shares after the issue has closed.

Step 4 –Listing on the Stock Exchange
Following, the IPO, the company is listed on the stock exchanges to start trading in the secondary market. The company will make an announcement of the listing date. The price of shares on the first day of the listing will be determined after considering the demand for the company’s shares in the market.

Dividends and Tax Payments              

The returns to an investor can be in the form of dividends and/or capital gains. Firstly, dividends earned on shares are TAX FREE. Secondly, shares sold after one year of purchasing the shares is also free from long-term capital gains tax. However, shares sold within one year of the issue are subject to short-term capital gains tax. Thus, formulating an investment plan is crucial for the decision making process.

Once an investor becomes a shareholder of the company, he/she is eligible to subscribe to bonus shares and rights shares of the company as well.  Bonus shares are shares allotted to existing shareholders at no cost. The cost of purchasing bonus shares is nil. Rights shares are a benefit given to existing shareholders wherein shares are allotted at a discount to the existing market price. Rights issues are offered to the shareholder depending on the number of shares held. In the event that the existing shareholder does not wish to purchase the rights shares he can sell his right by charging a price in addition to the actual price of the shares.

SECONDARY MARKET INVESTMENTS

In the secondary market the regular trading of the company’s shares begins. The shares are bought from the existing owners of the shares and not directly from the company.  Hence, the buyer purchases the shares from a person who already owns the shares of the company. Trading in the secondary market is buying and selling of shares of a listed company. The buying and selling of shares is facilitated through a stockbroker or an online trading portal.

PROCESSING A SECONDARY MARKET TRANSACTION

Step 1- Demat Account
A demat account with a depository participant has to be opened. The depository participant must be registered.  An investor can opt for a “Three in one” demat account which operates as a demat account, bank account and broking account. Thus, all three accounts are opened with the same entity to simplify the transaction.

Step 2- Register with a broker
A stock-broker can be a physical broker/ offline broker or an online broker. After choosing the broker, registering with the broker is necessary. An offline broker must be personally contacted, either physically at his office or on the phone. An online broker allows trading without personal contact. At the outset, it is recommended that first time investors opt for offline brokers.

Step 3- Trading
A settlement cycle is the time period between placing the order for shares with the broker and actually receiving the shares in the demat account. Similarly, while selling the shares, it is the time between the order to sell shares and actually receiving the payment in the seller’s bank account. Presently, the settlement period is such that actual receipt of shares or payment occurs on the second business day.

Investors can opt for marginal trading wherein money is borrowed from the broker to buy stocks. This is an intraday trading, as the investor has to repay the broker on the same business day irrespective of whether the investor made a profit or loss. Marginal trading is risky and has often backfired on investors.
Stop loss order is a mechanism to hedge losses wherein an investor can book an order with the broker to sell the shares if the market price falls to a particular price. This price is called trigger price and it cannot exceed the price of the stock. The trigger price can be changed in the event that the price of the stock rises.

While trading online, the shares can be purchased at the prevailing market price by placing a market order. In the event that the investor wishes to transact (buy or sell) at a particular price, a limit order can be placed setting the price of the stock at which the transaction should be processed.

To trade in the secondary market-
Firstly, the buyer pays his broker money to buy the shares.
Secondly, the broker hands over this money to the stock exchange.
Thirdly, the stock exchange pays the money to the seller’s broker.
Lastly, the seller’s broker hands over the money to the seller and the seller gives his shares to the broker.

Dividends and Tax Payments

In the secondary market, returns in the form of dividend are TAX FREE. On every transaction made on the stock exchange, a Securities Transaction Tax (STT) is levied. Service Tax (ST) is levied on the brokerage fee and is calculated on a per share basis. Shares sold after one year of purchasing the shares is free from long-term capital gains tax. Shares sold within one year of the issue are subject to short-term capital gains tax.

There is no perfect time to start investing. An investment decision should not be based on market tips and speculation. Avoid investing in a company merely because the stock prices of a particular company are increasing exponentially, the buy high sell higher approach rides on a high risk factor. Invest in a company because you believe in its business plans, you have studied its financial records and you have assessed its future prospects.

To, all the young entrepreneurs- expertise does not come with age, it comes with experience! Happy Investing!

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