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An Analysis of the Burgeoning Character Merchandising Industry in India

By
Rahul Bajaj
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0

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Character merchandising has emerged as one of the most lucrative methods of popularizing different forms of entertainment, with an estimated $2.5 billion industry in India. At the heart of the principle of character merchandising lies the belief that the persona of every character is a merchantable property and, therefore, the person owning the character ought to have the right to control its commercial exploitation. In its present form, the principle of character merchandising applies in the context of a fictional humans such as James Bond as well as non-humans such as Donald Duck and Mickey Mouse. Real celebrities in a diverse array of fields such as sports and music also fall within the auspices of this concept. In addition to mapping the growth of the concept of character merchandising, this article seeks to grapple with the legal norms governing character merchandising in India. It succinctly analyzes prominent cases pertaining to this concept and briefly examines contemporary challenges and emerging trends in this field.

Origin of the concept of character merchandising

Interestingly, it is widely believed that the idea of character merchandising originated in South East Asia and specifically in India. For centuries, characters in prominent Indian mythological works such as the Ramayana have been represented in the form of puppets, toys and statues even though such representations are generally not made for a commercial purpose. The origin of character merchandising in an organized form can be traced back to the emergence of Walt Disney’s cartoon characters such as Mickey Mouse, Minnie Mouse and Donald Duck in the 1930s. During this period, one of Disney’s employees, Kay Kamen, set up a department focusing on the secondary commercial exploitation of these characters in the form of buttons, badges, posters, etc. Similarly, the secondary commercial exploitation of literary characters started with the creation and dissemination of soft toys based on books by Beatrix Potter and Lewis Carroll. The merchandising programs associated with movies like Star Wars, Rambo and James Bond that came into existence in the second half of the 20th century took the phenomenon of character merchandising to a whole new level.

Reasons for growth of character merchandising

The last 2 decades have witnessed unprecedented growth in the area of character merchandising which can be attributed to several factors. First, technological advancements have allowed people to access large amounts of television, film and radio content that were hitherto inaccessible to them. In addition, several channels specifically designed for the entertainment of kids have gained greater popularity in the last few years. As a result, kids can relate at a visceral level with pencils, mugs or T-shirts that are associated with Powerpuff Girls, Ben 10 and Chhota Bheem. Secondly, and more fundamentally, character merchandising is increasingly being seen as an effective tool for offsetting a major portion of the money that is spent on television and film production. This is the reason why a plethora of entertainment production companies are creating separate divisions within their organizations to exploit the potential latent in this industry. Third, character merchandising is increasingly being viewed as a tool for increasing the viewership for the entertainment content with which it is associated. Viewed through this lens, the target audience of character merchandising is not the customer who is an ardent follower of the character in question; it is the customer who is unaware of the said character and who may develop a keen interest in the character after seeing the merchandise. Finally, character merchandising is seen as a way of taking a show or movie to the next level. Viewers generally forget about a movie or show after watching it. However, if they purchase a product that is associated with the main character in the said movie or show, the product constantly reminds them of the character and helps the brand owning the character in surpassing all its competitors who choose to confine their work to the creation of entertainment content.

Types of character merchandising

Broadly speaking, character merchandising can take the following 3 forms:
A. Merchandising of fictional characters
This is the most common and lucrative form of character merchandising. It essentially entails the merchandising of the cardinal features of a fictional character’s personality – the character’s name, voice, image, etc. This can include the merchandising of a diverse array of characters. For example, the merchandising of characters like Pinocchio, Zorro, Tintin, Snoopy, etc would fall in this category. Similarly, characters that are primarily designed for the purpose of merchandising and not TV shows or movies such as the character of Fido Dido which was designed for popularizing Seven-Up would also come under this category. This would also include puppets or dolls created for a movie or show such as the Muppets.
B. Personality merchandising
This type of merchandising, which is sometimes referred to as reputation merchandising, is associated with the commercialization of the principal features of the characters of real persons such as their voice, image, etc. Companies that want to popularize their products often seek the help of famous personalities for associating these products with the traits of such personalities. This can act as a very effective marketing vehicle, especially if the product is relatively new in the market. The idea of personality merchandising is inextricably intertwined with the right of publicity – a right which guarantees to its holder the ability to control how his personality is commercialized.
C. Image merchandising
Image merchandising can be called a hybrid form of the merchandising of fictional characters. More specifically, it not only includes traits of the fictional character such as their attire, but also includes the most important aspect of the movie or show with which the character is associated. For example, a product showcasing the appearance and wand of Harry Potter or the knife scene in Crocodile Dundee would fall under the category of image merchandising.

Legal implications of character merchandising

The concept of character merchandising is riddled with legal complications in most jurisdictions. Courts across the globe are increasingly recognizing the importance of stipulating clear principles for regulating this burgeoning industry. Generally speaking, most countries have unequivocally recognized, either through the judicial or the legislative route, that the person or entity owning the rights in a character is exclusively entitled to commercially exploit that character in whatever manner it deems fit. As a result, any other entity which wishes to commercialize a character must, of necessity, acquire the approval of the entity owning the rights in the character either through a license or otherwise. Sec. 2 (1) of the Indian Trade Marks Act, 1999, sets out the things that can be registered as trademarks. It states, inter alia, that personal names, designs and the packaging of goods can be registered as trademarks. Indian courts have upheld the registration of character names as trademarks – the best example being the case of Sholay Media vs. Parag M Sanghavi, CS (OS) No. 1892 of 2006 in which the court prevented the defendant from using plaintiff’s trademarks such as the word “Sholay” and “Gabbar Singh”. The Indian Copyright Act provides an exclusive right to an individual to authorize the reproduction of a work into another form, such as the conversion of a 2-dimensional work into a 3-dimensional form. This provision can serve as the legal basis for authorizing the reproduction of merchandise like toys. Courts in India have dealt with the concept of character merchandising in several important cases. In the case of Star India Pvt Ltd vs. Leo Burnett (India) Pvt Ltd, 2003(2)Bom CR 665, the plaintiffs sought to prevent the defendants from using the characters whose merchandising rights were owned by the plaintiff in an advertisement. The court held that, in order to prevent a party from using a character whose rights are owned by the plaintiff, the plaintiff must prove that the characters in question have gained immense public recognition and an independent life which is distinct from the show or movie that they are associated with. Furthermore, the plaintiff must also show that the connection between the character and the plaintiff is so strong that any reference to the character would automatically remind the public of the plaintiff. In the instant case, one factor which heavily weighed against the plaintiff was that the plaintiffs had not engaged in character merchandising at the time of filing the lawsuit. As a result, the court held that the plaintiffs were unable to show that the characters had gained enough recognition in the public eye for the plaintiffs to be able to prevent the defendant from using those characters in other contexts. An interesting contention that was raised by the plaintiffs was that the defendant’s use of the characters greatly undermined the plaintiffs’ ability to use those characters for the purpose of merchandising in future. In answer to this question, the court held that the plaintiffs were unable to prove that the characters had become so famous as to be capable of being merchandised and, therefore, the plaintiffs were unable to show that there was any likelihood of any damage being caused to them because of what the defendants did. In the case of Chorion Rights Limited Vs. Ishan Apparel and Ors. (2010)ILR 5Delhi481, the plaintiff, who claimed to be the owner of the worldwide trademark and merchandising rights in a fictitious character named NODDY, sought to prevent the defendant from selling apparel under the trade name NODDY. While the court recognized the importance of upholding character merchandising rights, it held that the registration for the mark was granted to the defendant sometime in 1995 whereas the plaintiff’s claim on the mark was with effect from 1997. As a result, even though the plaintiff owned the merchandising rights in NODDY in most jurisdictions, the defendant was first past the post with regard to India. The court extensively analyzed the concept of personality merchandising in the case of D.M. Entertainment Pvt. Ltd. Vs. Baby Gift House and Ors CS(OS) 893/2002. In this case, the plaintiff – a company representing Daler Mehndi – sought to prevent the defendant from selling dolls that could, inter alia, sing portions of Mr. Mehndi’s songs. The court recognized that Mr. Mehndi’s persona was improperly used by the defendants in the dolls and that this misled consumers into believing that the dolls were endorsed by Mr. Mehndi. The court further stated that such commercial exploitation caused significant losses to the plaintiff and held the defendant liable for passing off. In a recent case of Disney Enterprises Inc. & Anr. Vs. Santosh Kumar & Anr. CS(OS) 3032/2011, The Delhi High Court held the defendant liable for selling products containing representations of characters such as Hannah Montana, Winnie the Pooh, etc whose merchandising rights were owned by the plaintiff. The court held that there is an intense degree of association between the plaintiffs and the aforementioned characters which is why any reference to these characters reminds the public exclusively of the plaintiffs.

Emerging trends and contemporary challenges

The licensing and merchandising industry is fundamentally transforming the relationship between TV and movie characters and viewers. The increasing popularity of this method of marketing is evidenced by the fact that the top 125 licensors in this industry have reportedly accounted for sales amounting to more than US $ 184 billion. Disney has widely been regarded as the most innovative and influential player in this industry with sales of US $ 28.6 billion in 2010. Even though the licensing and merchandising industry in India is still in a nascent stage, there has been significant progress in the last few years. The partnership between Disney and the KK Modi Group in 1993 for selling Disney-branded merchandise and the launch of Turner India’s consumer products division, Cartoon Network Enterprises, in 2001 have played a pivotal role in the growth of this industry. The emergence of big retail chains such as Pantaloons, Westside, Shoppers Stop, etc in India has paved the way for greater access to merchandised products. Estimates show that organized retail in India is expected to grow from 9 per cent of the total retail market in 2015 to a staggering 20 per cent by 2020. This growth is expected to mark a quantum leap in the merchandising industry in India. Sports stars are also increasingly engaging in the business of character merchandising with the best example being Harbhajan Singh. Merchandising featuring animated characters such as Chhota Bheem and Hanuman and superheroes such as Krrish and Ra.One have also become commonplace, but creators of these characters have still not been able to commercially exploit them to the fullest extent possible. Moreover, it is dismaying to note that authors of comics and other literary characters have not been able to make the most of what this industry has to offer. From a legal standpoint, now, as never before, there is a dire need to put in place a robust framework for regulating the sale of character merchandise. In a bid to buy the cheapest available merchandise, customers often fall prey to the deceptive tactics of those who sell counterfeit merchandise. As neither the Indian Copyright Act nor the Indian Trade Marks Act clearly delineates the norms governing character merchandising, it is an arduous task to bring the sellers of counterfeit merchandise to book.
In sum, there is a pressing need to streamline overlapping, and often conflicting, norms which inhibit the growth of this industry and to put in place clear guidelines that would promote the progress of this innovative form of marketing.

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Social Impact Assessment and Consent Rules: a Major Step Toward Improving the Process of Land Acquisition

By
Rahul Bajaj
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0

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In keeping with the goal of establishing a comprehensive, participative and meaningful process of land acquisition that the Land Acquisition Act, 2013 espouses, the Central Government issued the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Social Impact Assessment and Consent) Rules, 2014 on 8th August. The rules have been designed to serve 3 principal objectives. First, they seek to put in place a robust framework for conducting a comprehensive analysis of the social impact of the proposed acquisition along with obtaining the consent of land owners. Second, they aim to put in place adequate safeguards as well as checks and balances to ensure that the social impact assessment is free and fair and that the consent is not acquired by any coercive method. Finally, they clearly delineate the time period within which the acquisition has to be completed in order to make the entire process more expeditious. Notably, they require the Appropriate Government to maintain a web-based work flow and information management system to track every step of the acquisition process. Against this backdrop, it would be apposite to succinctly analyze some salient features of the Rules.

Social Impact Assessment Unit

In order to lend credibility to the acquisition process, the Rules impose an obligation on the central or state government to appoint an independent organization as the Social Impact Assessment Unit that has to oversee the Social Impact Assessment. The Unit has to maintain a database of qualified independent practitioners and social activists, regularly conduct studies to add to its database and formulate strategies for improving the quality, efficacy and transparency of the assessment process. It must consistently strive to take capacity building measures to improve the quality of social impact assessment teams in particular and the entire process in general. It has to formulate the terms of reference of Social Impact Assessment for any acquisition proposal and determine the estimated cost of the assessment with a clear break-up of the amount required for every activity or item. Thereafter, the body requiring the land has to pay the assessment fee to the Unit which is to be used for conducting the assessment.

Social Impact Assessment Team

The Rules explicitly state that a new Social Impact Assessment Team (“the Team”) has to be constituted in order to conduct a thorough social impact assessment for every project. The criteria for the appointment of members to such a team has to be in accordance with the terms of reference that is prepared by the Unit which sets out the intricacies of the tasks that the Team has to perform. Ideally, the Team should include independent practitioners, qualified social activists, academics and technical experts and must necessarily include 1 female member. One team leader has to be appointed to act as a connecting link between the Unit and the Team. A bare perusal of these provisions brings to light 2 interesting features. First, the Rules repeatedly assert that the organization which wishes to acquire the land must not be involved in any way in the appointment of the Social Impact Assessment Team. In fact, every member is required to sign a written undertaking stating that they do not have any relationship with the body wishing to acquire the land and any conflict of interest shall result in immediate disqualification. Second, it is heartening to note that the Rules emphasize the importance of ensuring that only those who have a considerable amount of experience in the area of land acquisition are appointed to conduct the Social Impact Assessment. At a time when most quasi-judicial and administrative bodies are unable to fulfill their goals and perform their assignments due to excessive governmental interference and incompetent members, it is hoped that this framework will go a long way in increasing the public’s faith in the process of land acquisition.

Process of conducting Social Impact Assessment

The Rules impose an obligation on the Team to assiduously analyze the relevant quantitative and qualitative data, undertake frequent site visits and employ other strategies such as focused group discussions, detailed rural appraisals, informant interviews, etc to fully appreciate the nuances that would shape and influence the views of land owners whose land is sought to be acquired. Furthermore, the Team is obligated to scrutinize relevant land records and data, to conduct field verifications and to compare the proposed project with existing projects that are of a similar nature. All local authorities have been mandated to provide relevant information that would allow the Team to formulate a more informed view about the effect of acquisition within 10 days of receiving the request for such information. The investigation of the Team should focus on the following cardinal areas:
A. The areas that would be most adversely affected by the project, especially from an environmental and social standpoint;
B. The quantum of land that is sought for the project and whether it is more than what is necessary;
C. The feasibility of executing the project on other alternative sites;
D. In the case of scheduled areas, whether the acquiring body is able to prove that the land that they wish to acquire is a demonstrable last resort;
E. Whether any land has already been acquired and the utility of every plot of land that is sought to be acquired;
F. Whether any public unutilized or waste/barren land can be used for the project;
G. A detailed analysis of the type, structure and location of the land. In case of an agricultural land, the irrigation coverage and cropping pattern must be analyzed.
H. Whether the acquisition would be in accordance with food security laws or not; and
I. The ownership pattern, holding size and details of land owners, with special reference to change in ownership in the preceding three years.
In order to make the process more participative, the Rules impose an obligation on the Team to conduct a public hearing in all Gram Sabhas where members of such Gram Sabhas would be affected by the proposed acquisition. A public notification should be issued three weeks prior to the public hearing to inform all stakeholders about the meeting. All members should be given a copy of the draft Social Impact Assessment Report and Social Impact Assessment Plan before the hearing in order to allow them to contribute more meaningfully and substantively to the hearing. The proceedings of the hearing must be video recorded and the meeting must be conducted in the local language of the area in question. The entity intending to acquire the land must send its representatives to the hearing in order to assuage the unease of land owners about the acquisition and to address their legitimate concerns.

Social Impact Assessment Report

A Social Impact Assessment Report has to be prepared within six months of the commencement of the assessment process. The report should describe in detail the findings of the Team with regard to all the key areas of investigation mentioned earlier. More specifically, it must encompass details about the number of affected/displaced families, specific areas of concern raised by affected families and a socio-economic profile of the affected area. The report must indicate whether the advantages of the project would clearly outweigh its socially pernicious effects. It must examine the efficacy of the measures that would be undertaken for mitigating the rigours of acquisition from the perspective of affected families and grapple with ways of ensuring that affected families do not end up enduring more social and economic hardship than what they had to endure before the acquisition. The report must be in the local language so as to make it accessible to affected families and local authorities and must be clear and concise. It has to be submitted to an expert group which must scrupulously examine all its facets. The expert group has to give its report within a period of two months from the date of its constitution. The Appropriate Government has to assiduously analyze the report along with recommendations of the expert panel and formulate a strategy to minimize the ecological impact, harm to affected families and adverse consequences of the acquisition. The views of the appropriate government must be framed in the local language and must be widely disseminated among all stakeholders.

Social Impact Management Plan

The Team has to prepare a Social Impact Management Plan which should address, inter alia, the following 5 fundamental areas:
1. Strategies for avoiding, mitigating or compensating the adverse impact of the project;
2. Steps for rehabilitation and resettlement of affected families that the Act mandates;
3. A brief explanation of the measures that the body requiring the land intends to take for the benefit of affected families;
4. Additional claims made by the body requiring the land during the Social Impact Assessment Process; and
5. Details of key personnel responsible for overseeing every aspect of the mitigation measures along with timelines and expected costs.
In sum, the Social Impact Assessment Plan serves as a useful source of reference for developing the most efficacious strategies to reconcile the interests of land owners as well as the requiring body.

Provisions pertaining to consent

The second part of the Rules deals with the modalities for obtaining the consent of land owners whose land is sought to be acquired. At this juncture, it would be apposite to remember that the new law makes it mandatory to obtain the consent of at least 70% of land owners when the land is to be acquired for a project in the public-private partnership mode and 80% of land owners when the land is to be acquired for a private company. The Appropriate Government, via the District Collector, has been tasked with the responsibility of obtaining the consent of land owners. In order to make the consent process smoother, the Appropriate Government is required to maintain a record of all land owners, land rights and names of occupants at all times. The District Collector must notify the members of the Gram Sabha about the special Gram Sabha meeting for acquiring consent at least three weeks in advance. The quorum of the Gram Sabha must be at least 50% and one-third female members of the Gram Sabha must be present. The body requiring the land must also send its representatives who are competent to negotiate with members of the Gram Sabha and to address their concerns in the meeting. The proceedings of the meeting must be video recorded and made available in all local Panchayat offices and uploaded on the website of the Appropriate Government to make the entire process more transparent. If the members of the Gram Sabha are satisfied with the assurances given to them by the body requiring the land, then they must pass a majority resolution certifying their consent and containing the terms and conditions of rehabilitation, resettlement and other mitigation measures. Such a resolution must contain the signature of Gram Sabha members and representatives of requiring body and must be countersigned by the District Collector. Similarly, for acquiring the consent of the concerned land owners, a meeting of affected land owners must be held. The itinerary of such meetings shall closely mirror the itinerary of Gram Sabha meetings, but 3 features of the process of acquiring consent of land owners stand out. First, in addition to a copy of the draft Social Impact Assessment report and plan, they must explicitly be informed about their rights under all revenue laws, in particular the Forest Rights Act. Second, all land owners must be given a written declaration from the Collector stating that refusal to give consent shall not result in any adverse consequences. Land owners would be given contact details of officers whom they can contact in case they are coerced or intimidated to give consent. Finally, the consent of land owners has to be recorded in writing and details of the consent process have to be made available on the website of the Appropriate Government.

Conclusion

The emphasis of the Rules on e-governance, strict adherence to the prescribed timeline and making every aspect of the acquisition process accessible to the last man in the line are indeed commendable. If implemented correctly, these Rules could go a long way in righting the wrongs of the last 120 years and in bridging the wide chasm between the interests of land owners and private companies. It would not be unfair to assert that the Rules are in accordance with the central idea of minimum government, maximum government that undergirds most of the initiatives that the NDA Government has taken thus far. However, there is only so much that the Rules can do; it is essential to make substantive changes to the law to transform it from a charter of de-industrialization to a catalyst for ushering in transparency and efficiency in the process of land acquisition.

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Competition Appellate Tribunal upholds penalty against realty developer DLF

By
Amartya Bag
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0

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This article is written by Saurabh Mishra, a student of  HNLU, Raipur.

INTRODUCTION

The Competition Appellate Tribunal (‘COMPAT’) in the appeal M/s. DLF Limited (‘DLF’) v. Competition Commission of India (‘CCI’) and Others[1] upheld a penalty of INR 6,300 million (USD 140 million) on real estate firm DLF at the rate of 7% of the average turnover for the last three financial years, for abusing their dominant position in industry against buyers.

In 2011, the CCI had slapped the penalty after complaint filed by Belaire Owners Association, a flat buyer association of DLF project in Gurgaon. The CCI pronounced DLF guilty for grossly abusing its dominant market position in the concerned relevant market and imposing unfair conditions in the sale of flats/apartments to home buyers/consumers in contravention of the provisions of the Competition Act, 2002 (‘Act’).[2]

In the present case, COMPAT had clubbed all the appeals against the orders of CCI where it held similar view in complaints made by other flat buyer associations, Park Place Resident Welfare Association and Magnolia Flat Owners Association of respective DLF projects in Gurgaon (all three together ‘informants’).

Now the only option DLF has is to appeal to the Supreme Court against the present COMPAT order within 60 days of the communication of the order.[3]

BACKGROUND­

DLF announced the launch of Group Housing Complexes, known as The Belaire, Park Place and Magnolia upon which the informants booked the apartments and entered into the Apartment Buyer’s Agreements (‘ABA’). Also by that time informants had already paid substantial amount as they hardly had any option but to adhere to the dictates of DLF.

The DLF unilaterally without intimating the informants modified the original scheme in the following manner[4]:

Name of Complex Original Scheme Modified Scheme
Belaire 5 multi-storied residential building, each of this building was to consist of 19 floors Added 10 floors to each building
Park Place 13 multi-storied residential building, each of this building was to consist of 19 floors Added 5-7 floors to each building
Magnolia 19 multi-storied residential building, each of this building was to consist of 17 floors Added 5-9 floors to some buildings

Therefore the DLF increased the number of apartments by 53% combining all the three projects of Belaire, Park Place and Magnolia.[5]

Consequently, on the grounds of the construction being abnormally delayed and substantial compression of the common areas and facilities originally earmarked for each apartment, a complaint was filed by the Informants against DLF, Haryana Urban Development Authority and Department of Town and Country Planning, State of Haryana under Section 19 (1)(a)[6] of the Act. The Informant alleged in the complaint that DLF, by abusing its dominant position, had imposed highly arbitrary, unfair and unreasonable conditions on the Informant.

The CCI on the basis of DG’s in-depth investigation held that the Act is applicable in the instant case. It delineated the relevant market on the basis of services provided by developers for construction of ‘high end buildings’ in Gurgaon. The CCI analysed the dominant position of DLF by placing reliance on each of the factors as mentioned in Section 19 (4)[7] of the Act and held DLF to be abusing its dominant position under Section 4(2)(a) [8].

APPELLANT’S SUBMISSION

The DLF appealed before the COMPAT against this order of CCI on various counts such as the ABA is neither sale of ‘goods’ or ‘services’ and therefore outside the scope of the Act.[9] Further, Section 4 of the Act came into force on 20.05.2009 and all the ABA’s were entered into in 2006-07, therefore, the Act is not applicable to ABA’s as it is not having retrospective operation.[10] Moreover, the determination of the relevant market is grossly wrong[11], and the DLF is not a dominant player in the market[12] and there is no act of abuse of that alleged dominance by DLF[13].

INFORMANT’S SUBMISSION

The Informant submitted that the sale of apartments amount to ‘services’ and hence the act is applicable and further since the ABA is in force after coming into force of ‘abuse of dominance’ provision therefore these provisions will apply to ABA. They alleged further that the DLF had used its position of strength in dictating the terms of the ABA and imposed unilateral and one-sided clauses. DLF had excluded itself from any obligations and liabilities; and on the contrary has compelled the Informant to agree to all the terms of the Agreement in toto. The Informant has alleged that the various clauses of the agreement and the action of DLF pursuant thereto are prima facie unfair and discriminatory, thus attracting the provisions of Section 4 (2)(a) of the Act.

 

KEY ISSUES

The CCI on the basis of the DG’s report framed four major issues for consideration which are as follows[14]:

Issue 1: Whether the provisions of Competition Act, 2002 applied to the facts and circumstances of the instant case?

Issue 2: What was the relevant market, in the context of section 4 read with section 19 of the Act?

Issue 3: Whether DLF is occupying a dominant position in the above relevant market?

Issue 4: If yes, whether DLF has abused its dominant position in the relevant market?

The CCI in its order has ruled in favour of informants and answered all the above issues in affirmative. The COMPAT in appeal has dealt with all the issues again and mostly approved the CCI’s order however it differed majorly in the approach while answering the first issue in affirmative.

The issues can be discussed as follows:

  • Issue 1: Applicability of the Act to the present dispute

CCI ordered that the act is applicable to the present dispute. DLF appealed against this on following counts:

  • ‘Sale of an apartment’ can neither be termed as sale of goods nor sale of service, and thus section 4(2)(a) of the Act is not relevant and inapplicable in the present case because it can be invoked only when there is purchase or sale of either goods or service.
  • The terms and conditions of the agreements were executed in December 2006 and 2007 prior to coming into effect of the provisions relating to abuse of dominant position under the Act. The application of these provisions being prospective in nature could not have been made applicable to a period prior to the coming into force. (‘May 20, 2009’)
  • It was also urged that prior to the provisions of the Act coming into force, there was no legally recognized concept of an enterprise having a dominant position. Therefore, the dominance of an enterprise can be seen only on or after May 20, 2009 in terms of section 4 of the Act and it is only thereafter the question of contravention of section 4 would arise, if any unfair or discriminatory condition is imposed.

COMPAT verdict:

COMPAT dealt with each of the above submissions individually.

Whether ‘sale of apartment’ would constitute ‘service’ under the Act?

The appellant relying on case of Magus Constructions Pvt. Ltd. v. UOI[15] argued that if the title or ownership of the property was retained by the Appellant while constructing the apartment, it could not be said to be providing services to the apartment owners to earn his title or ownership only after the sale deed executed between the Appellant and flat purchaser.[16] COMPAT rejected this argument by saying that, before ABA was executed there was an understanding that the Appellant will give a particular apartment to a particular allottee and it will be constructed exactly as per the instructions of the allottees, therefore it was providing a service.[17]

The COMPAT also placed reliance on several Supreme Court judgments[18] and concluded that housing activities undertaken by development authorities are considered as services and covered within the definition of service as provided under section 2(o)[19] of the Consumer Protection Act, 1986. Relying on this definition along with section 2(u)[20] of the Act, COMPAT agreed with the CCI order which held that “it is clear that the meaning of ‘service’ as envisaged under the Act is of very wide magnitude and is not exhaustive in application, thereby including the activities undertaken by DLF within its ambit.”

Whether provisions relating to abuse of dominant position can be applied retrospectively?

Looking into the aspects of applicability of the Act to agreements entered prior to the coming into force of the Act, the CCI relied on the recent judgment passed by the Bombay High Court in the matter of Kingfisher Airlines Ltd. v. CCI[21] and held that the Act applies not only to all existing agreements but also covers those agreements, entered into prior to the coming into force of the provisions under the Act, and implemented now.

In contrast, COMPAT held that the approach by the CCI in examining ABA in this way is a serious error. As section 4 of the Act was not available on the day when these agreements were executed, the CCI could not have examined the clauses of ABA, which were valid at the time when it was executed in December 2006-07. CCI was wrong in examining the abuse on the part of the Appellant on this count alone.[22] However, COMPAT specifically said that it has not commented on merits or demerits of these clauses in the ABA. These observations were also said to be limited only to the ABA executed prior to 20th May, 2009.[23]

Yet COMPAT held that CCI had jurisdiction in the case even though it cannot look into the clauses of ABA, because there are various other acts of the appellant after May 20, 2009 which are “imposition” of unfair and discriminatory conditions amounting to abuse of dominance. The CCI has the duty and jurisdiction to take into account such impositions and complaints about the breach of section 4 of the Act.[24] These acts will be discussed further in Issue 4.

  • Issue 2: Determination of Relevant Market

CCI ordered that the relevant product market (‘RPM’) is of service of developer/ builder in respect of ‘high-end’ or ‘luxury’ residential accommodation and the relevant geographic market (‘RGM’) is Gurgaon. The DLF appealed against this order on following counts:

  • There is no difference between luxurious or high-end residential accommodation on one hand and economic or low-end residential units on the other. Therefore both belong to same product market.
  • The RGM for the purposes of this case should be National Capital Region. Gurgaon in itself does not constitute the RGM.

COMPAT Verdict:

COMPAT completely agreed with the CCI and its finding on RPM as well as RGM.

RPM: COMPATheld that a “luxury” apartment has to be differentiated from an ordinary apartment. The factor of additional facilities such as club, dispensary, swimming pool, etc being made available to high-end luxury apartments not only differentiates them from an ordinary housing scheme of the private builders, but such luxury apartments do stand on their own separate distinctively higher pedestrian. Therefore it constitutes a separate and distinct market from the ordinary market of residential accommodation.[25]

RGM: COMPAT after considering several factors including local specification requirements and consumer preferences held that the relevant market is the market for services of developer/builder in respect of high-end residential accommodation in Gurgaon. A decision to purchase a high-end apartment in Gurgaon is not easily substitutable by a decision to purchase a similar apartment in any other geographical location.[26]

COMPAT also accepted CCI’s application of SSNIP Test that small increase in price does not affect the customers as they will not move to non-luxurious apartments or outside Gurgaon.[27] Further it held the CCI’s view as correct which relied upon the CMIE data as available in the public domain and refused to place reliance on the JLLM report by concluding that high end residential apartments in Gurgaon would constitute the relevant market.

  • Issue 3: Determination of Dominance

CCI ordered that DLF ltd. is a dominant player in the relevant market determined above. The DLF appealed against this order on following counts:

  • There being intense competition in the market, none of the market players are in a dominant position.
  • It does not enjoy ‘position of strength’ in the relevant market, there is no entry barriers as number of new developers has entered into the market, and also there is no question of countervailing buying power.
  • The DG’s conclusion on the market share was derived through a faulty ‘All India Sales Figure’ as a large number of real estate companies were not considered and no reliable analysis of market share could have been made on basis of sales figure alone.

COMPAT Verdict:

COMPAT do not find any error in the consideration given by the CCI about the dominance of the DLF in the market. It affirmed CCI’s order that DLF had the highest market share (45%), vis-à-vis the market share of the nearest competitor (19%) which was more than twice of its competitor, leading to hardly any competitive constraints. Further, DLF had a clear early mover’s advantage and occupies a leadership position as real estate is a sector with natural entry barriers due to high cost of land and brand value of incumbent market leaders. The CCI while analysing several factors held that DLF due to its level of vertical integration, presence in real estate sector and financial strength was way ahead of its competitors. The market having low level of concentration, DLF faced negligible threat from its rivals and enjoys sufficient ‘position of strength’ in the market. Therefore COMPAT held that the DLF was a dominant player in the relevant market.[28]

  • Issue 4: Abuse of Dominance by DLF

CCI ordered that the DLF has abused its dominant position in the market. DLF appealed against this order on following counts:

  • Alleging mere abuse is not enough unless the same is corroborated with necessary evidence.
  • The conditions imposed in the agreement are standard clauses inserted as per industry practice and are in no way a reflection of abuse of dominant position. At the same time several benefits have been provided by DLF to the buyers and the same must not be ignored.
  • Further, there is no law which acts as an impediment to launching new projects prior to submitting building plans/lay-out plans of the project.
  • All agreements have been entered between the parties consensually and are thus binding; thereby the issue of abuse of dominant position does not arise.

COMPAT’s Verdict

COMPAT reiterated its view that CCI is not in a position to examine the clauses of ABA’s which came into existence when section 4 of the Act was not available to the parties. CCI was wrong in holding that those clauses are one-sided, unfair and heavily leaned in favour of the DLF.[29]

However COMPAT held that the DLF has abused its dominant position in the relevant market on account of the following ‘impositions’ of unfair and discriminatory conditions in sale of services within the meaning of Section 4(2)(a):

  • The mysterious silence on the part of the DLF, to let the informants know the number of additional floors, which they planned to and would be constructing, which in fact they knew at the very moment of starting of the construction. Further the intimation about the increase of the number of floors after 20th May, 2009 amounts to an imposition of unfair condition.[30]
  • The ‘magnanimous’ offer of the DLF to the informants to move to a higher floor was also not an absolute option as the DLF reserved its discretion in allowing the movement. As the power can discriminate between individual buyers it amounts to imposition of unfair and discriminatory condition.[31]
  • The unfairness lies on the sinister silence on part of DLF about the increase in number of floors. The informants did not have even a ghost of idea, as to how many persons they would have to share lifts with or their common area, or for that matter their swimming pool and gymnasium. There was a duty on the part of the DLF to let the informants know about proposed increase and obtain their views about the same.[32]
  • Also by decrease in the common area due to increase in number of floors, the DLF breached the ABA which became possible only due to its dominance as informants had no other option but to accept the same since the exit option was unimaginably costly.[33]
  • The adding a new condition that in order to be liable to get the compensation on account of delayed construction, the concerned person would have to concur the increased holding charges. This unilateral increase in the holding charges and the threatened consequence amounts to rewriting of the contract and is therefore amounts to an unfair condition.[34]
  • The DLF started constructing additional floors before the final approval from the concerned authorities which came in 2009, is wholly illegal and unauthorized. Therefore the DLF was actually offering to the informants a piece of illegal and unauthorized construction, which amounts to imposing unfair conditions against the wishes of the consumer.[35]

Thus COMPAT held that the DLF has abused its dominant position and committed breach of section 4(2)(a)(i) and section 4(2)(a)(ii) of the Act. Accordingly COMPAT confirmed the findings of the CCI to the extent discussed above.[36]

PENALTY

The CCI in its order of 2011 has inflicted a penalty of INR 6,300 million which is 7% of the turnover of the DLF. COMPAT refused to bring down the penalty and confirmed the order of CCI.[37] However on the point of imposing similar penalty in other two cases of Park Place and Magnolia as well, the COMPAT refused as all the three ABAs were practically identical therefore penalty was not imposed again.[38]

CONCLUSION

This judgment will restore the balance between the real estate developers and property buyers. It has although imposed a lot of penalty upon the realty developer DLF of INR 6,300 million, but we can see there is no individualistic remedy provided to the ultimate consumers i.e. apartment allottees of Belaire, Park Place and Magnolia. The tribunal refused to modify the ABA clauses as they were outside the jurisdiction of Competition Act because of its execution before May 20, 2009.[39] Further there is no provision of compensation to the customers under the Competition Act which is a big lacuna of the Act.

The DLF has however announced that it will move the Supreme Court under Section 53T of the Act against this judgment of COMPAT.[40]

[1] MANU/TA/0012/2014 decided on 19.05.2014.

[2] Case No. 19 of 2010, MANU/CO/0044/2011 decided on 12.08.2011; see also NDA Hotline.

[3]Section 53T of the Competition Act, 2002.

[4] MANU/TA/0012/2014 ¶ 99.

[5] Id. at ¶ 104.

[6] Section 19(1): The Commission may inquire into any alleged contravention of the provisions contained in subsection (1) of section 3 or sub-section (1) of section 4 either on its own motion or on—

(a) receipt of any information, in such manner and accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association.

[7] The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely:—

(a) market share of the enterprise;

(b) size and resources of the enterprise;

(c) size and importance of the competitors;

(d) economic power of the enterprise including commercial advantages over competitors;

(e) vertical integration of the enterprises or sale or service network of such enterprises;

(f) dependence of consumers on the enterprise;

(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;

(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;

(i) countervailing buying power;

(j) market structure and size of market;

(k) social obligations and social costs;

(l) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;

(m) any other factor which the Commission may consider relevant for the inquiry.

[8] Section 4: Abuse of dominant position.—

(1) No enterprise shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,—

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or services; or

(ii) price in purchase or sale (including predatory price) of goods or service.

[9] MANU/TA/0012/2014 ¶ 47

[10] Id. at ¶ 57

[11] Id. at ¶ 80

[12] Id. at ¶ 86

[13] Id. at ¶ 94

[14] Id. at ¶ 42

[15] (2008) 15 VST 17 (Gauhati)

[16] MANU/TA/0012/2014 ¶ 47

[17] Id. at ¶ 52

[18] Lucknow Development Authority vs. M.K.Gupta (1994) 1 SCC 243

[19] Section 2(o) “price”, in relation to the sale of any goods or to the performance of any services, includes every valuable consideration, whether direct or indirect, or deferred, and includes any consideration which in effect relates to the sale of any goods or to the performance of any services although ostensibly relating to any other matter or thing.

[20] “service” means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising.

[21] [2011] 100 CLA 190 (Bom)

[22] MANU/TA/0012/2014 ¶ 73

[23] Id. at ¶ 97 & 118

[24] Id. at ¶ 76

[25] Id. at ¶ 80

[26] Id. at ¶ 84

[27] Id. at ¶ 80 & 83

[28] Id. at ¶ 93

[29] Id. at ¶ 96

[30] Id. at ¶ 101

[31] Id. at ¶ 102

[32] Id. at ¶ 104

[33] Id. at ¶ 108 & 111

[34] Id. at ¶ 117

[35] Id. at ¶ 121

[36] Id. at ¶ 123

[37] Id. at ¶ 126

[38] Id. at ¶ 94

[39] Id. at ¶ 128

[40] http://www.thehindubusinessline.com/companies/competition-appellate-tribunal-upholds-ccis-rs-630cr-fine-on-dlf/article6025288.ece

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Types of discrimination in workplace and their legal protection in India

By
Amartya Bag
-
6

Discrimination in workplace can be in different forms; there might be a single reason or a combination of multiple grounds of discrimination. Discrimination in a workplace may constitute in form of: 1. Age, 2. Sex, 3. Qualification, 4.  Disability, 5. Pregnancy, 6. National origin, 7. Race/ Colour, 8. Religion, 9. Sexual harassment, 10. Equal pay or compensation, 11. Region/Place of origin, 12. Caste and 13. Ethnicity.

According to a survey made by TeamLease, 48 % of Indians have faced some kind of discrimination or the other at the workplace. Most of the biases are based on gender (25%), age (22%) and caste/religion (18%). Amongst the cities, employees in Delhi, Pune and Chennai faced the highest rate of discrimination, while employees in Ahmedabad faced the lowest amount of discrimination. Surprisingly, only 30 % of the surveyed companies stated that they have a clear policy on discrimination.

While, certain types of discrimination is illegal in India like, equal remuneration, sexual harassment, discrimination due to pregnancy and disability. Other types of discrimination in workplace like based on ethnicity, caste or religion are not illegal in the private sector. However, in the public sector apart from the protection granted to the employees of the private sector, the employees are also protected from discrimination on the basis of caste, creed, colour, sex, religion or place of birth.

Legal Protections

The Constitution of India has several provisions which grant certain fundamental rights to its citizen, which includes right to equality.

Article 14 guarantees Equality before Law.

Article 15 prohibits state from discrimination on the grounds of religion, race, caste, sex and place of birth.

Article 16 empowers the state to make reservations with respect to appointment for posts in favour of backward classes of citizens if in the opinion of state such classes are under-privileged.

However, these protections can only be opted when the discrimination has been made by the State or any Governmental bodies, including Government offices of both Central and State Governments. In case of discrimination on any of the grounds mentioned in Article 15, ie, religion, race, caste, sex and place of birth by the Government through its policies, or regulations, or otherwise, including recruitment, promotions, transfers, demotions and removals, the affected person can file a writ before the concerned High Court of the State or the Supreme Court.

The Constitution further lays down certain fundamental duties, which though cannot be challenged before a Court of law; the duties should ideally be implemented by the Government. Article 39 in part IV of the constitution urges state to ensure that citizens ,men and women equally have the right to an adequate means of livelihood, right to shelter ,food, education and work.

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Disability

Disability discrimination occurs when an employer or an entity treats a qualified individual with disability who is an applicant or employee unfavourably due to that person being disabled. This unfavourable behaviour can be experienced during hiring, pay, promotion, etc.

India, being a party to U.N convention on the Rights of Persons with disabilities made an International commitment for promoting, protecting and ensuring the rights recognised in that convention. In furtherance of this commitment India has legislated The Persons with disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 for safeguarding and protecting the disabled in India.

Under the Act, only the following categories of  ‘disabilities‘ are protected – (i) Blindness; (ii) Low vision;  (iii) Leprosy-cured;  (iv) Hearing impairment;  (v) Loco motor disability;  (vi) Mental retardation and (vii) Mental illness

‘The Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation)Act, 1995 made it compulsory for all government establishment to reserve not less than six percent of vacancies arising against all posts and in promotion of all persons with disabilities.

Moreover, Section 24A of the Act guarantees no discrimination in employment, Section 24C provides an environment free from discrimination in promotion by reason of disability , Section 24D is focussed towards an equal opportunity policy and Section 24F provides for no removal or reduction in rank on acquiring disability.

Remuneration

Discrimination may also exist in the payment of compensation to the employee which includes salary, overtime pay, bonus stock options, life insurance and other benefits.

Principle of Equal pay for Equal work

It is the duty of employer to pay equal remuneration to men and women workers for same work or work of a similar nature as per the Equal Remuneration Act, 1976.  Section 5 of the Act prohibits the employer from formulating a hiring process putting women on disadvantage on account of their gender which is in reference to the work that is same or similar to that which is offered to men and even in respects of transfers and promotions.

Discrimination on the basis of sex

Discrimination on the basis of sex can happen when an employee or a probable candidate is discriminated on the grounds of a person belonging to a particular sex. Discrimination on the basis of sex might be seen in the areas of hiring, conditions of employment, promotion, benefits, dividing work tasks based on whether staffs are male or female.

Discrimination on this ground is prohibited by Article 15 of the Constitution which says no citizen shall on the grounds of sex, caste , place of birth  be ineligible for ,or discriminated against in respect of ,any employment or office under the State. However, the State can make laws which might be discriminative towards male but which might be beneficial for the women on the grounds of affirmative action. Discrimination on the basis of sex is not prohibited under the law for those involved in the private sector.

Discrimination on the grounds of pregnancy

Discrimination can be refusal of grant of job to a women who is pregnant or dismissal of the women from the organisation subject to her disclosure of the fact of pregnancy.

Safeguards against such discrimination under the Maternity Benefit Act, 1961

When a women absents herself from work in accordance with the provisions of this Act it shall be unlawful for her employer to discharge or dismiss her during or on account of such absence or to vary to her disadvantage any of the conditions of her service.

No deduction shall be made from the normal and usual daily wages of a woman entitled to maternity benefit under the provisions of the Act,

No woman shall work in any establishment during the six weeks immediately following the day of her delivery.

Discrimination on the basis of caste

In India, one of the forms of discrimination that affects around 18 % of the workforce is discrimination on the basis of caste. Under the Protection of Civil Rights Act, 1955 if a person molests, injures, annoys, boycott, obstructs, or insults or attempt to do such act toward a person of Scheduled Caste, that person may be punished with imprisonment of term not less than one month and may extend upto six months and with fine not less than one hundred rupees and not more than five hundred rupees. If a person of Scheduled Caste faces boycott in form of not allowing that person to work or do business with other person or receive from him the services he renders, or any other things which are commonly done in ordinary course of a business is a punishable offence and he may file a FIR in the local police station.

 
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Liability of the director of a company in cheque bouncing cases

By
Amartya Bag
-
1

11080482376_516a96b049_k

This article is written by Saurabh Mishra, a student of Hidayatullah National University, Raipur

 Introduction

Honesty and integrity of the parties play an important role in any business transactions, particularly in the cases of cheques. If there is dishonor of cheque by the bank, it causes irreparable loss to the payee and further causes serious setback to the entire creditability of the business transactions.

 In commercial transactions, cheque bouncing occurs quite frequently. The legislature has inserted Section 138 in the Negotiable Instruments Act, 1881 to prevent this. The drawer is liable to be criminally prosecuted if there is dishonor of cheque either due to insufficiency of funds or if it exceeds the arrangement made by the drawer.  In order to invoke Section 138 it is necessary that the cheque must be issued in discharge, wholly or in part of any debt or other liability of the drawer to the payee. There are certain other conditions as well that needs to be fulfilled. They are as follows:

  1. Within a period of 6 months from the date on which the cheque is drawn, it should be submitted to the bank or the period of validity, whichever is earlier.
  2. If the payee or the holder in due course receives information from the bank regarding the return of the cheque as unpaid, then he must make a demand in writing to the drawer of the cheque , within 30 days of the receipt of such notice, and
  3. Within 15 days of the receipt of the said notice, the drawer of the cheque fails to make the payment of the said amount of the money to the payee or the holder in due course.

If the above conditions are fulfilled, then the offender will be sentenced to imprisonment for a term which may extend to two years or a fine which may extend to twice the amount on the cheque or both. This kind of offence is bailable, compoundable and non cognizable. [2]

Section 141 of the Negotiable Instruments Act, 1881

In cases of criminal liability the normal rule is against vicarious liability, that is, no one can be responsible for an act of another. However Section 141 of the Negotiable Instruments Act, 1881 is an exception to the above rule. A company is an artificial person created by law and acts through its directors and the officers who are responsible for the conduct of the business of the Company.

 141.  Offences by companies. —

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: 22 [Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

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(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation. — For the purposes of this section,—

(a) “Company” means anybody corporate and includes a firm or other association of individuals; and

(b) “Director”, in relation to a firm, means a partner in the firm.

Analysis of Section 141

Severe consequences could be faced by the directors in case of dishonor of cheques. Section 141 covers following categories of persons:

a)      The Company which committed the offence.

b)      Every person who was in charge of and was responsible for the business of the company.

c)      Any other person who is a director or a manager or secretary or officer of the company with whose connivance or due to whose neglect, the company committed the offence.

Section 141 of the NI Act makes the directors, manager, secretary and other officer of the companies liable if the offence is committed because of negligence on their part.Any corporate officer accused under Section 141(1) of the NI Act has to: (1) be a person responsible to the company for the conduct of the business of the company under the provisions of the Company law and (2) be in-fact also a person in-charge of the business of the company.[3] With regards to the legal position concerning the vicarious liability of the Director in a company, the Supreme court has laid down following principles in the case of National Small Industries Corporation Limited v. Harmeet Singh Paintal[4]

  1. In order to make the accused vicariously liable, the complainant must make specific averments as required under the law in the complaint. There is no presumption that the director knows about the transaction in order to make him criminally liable.
  2. The director must be at the time of commission of offence in charge and responsible for the conduct of the business of the company. Section 141 does not make all the directors liable for the offence.
  3. Vicarious liability should not be inferred but should be pleaded and proved.
  4. It is not necessary that specific averments should be made in the complaint, if the accused is a managing director or a joint managing director. By the virtue of their position, they are liable to be proceeded with.
  5. When a director or an officer of the Company signs the cheque on behalf of the Company, no specific averments are required to be made in the complaint.

Section 141 (2) makes those corporate directors/officers responsible who may not be in charge of the conduct of the business of the company, but the offence was committed with their consent, connivance or due to their negligence provided specific averments are made in the complaint illustrating the manner in which they are guilty of consent, connivance and negligence.[5]

In the case of SMS Pharmaceuticals vs. Neeta Bhalla[6], the Court held that since Section 138 of the NI Act, imposes criminal liability, the conditions mentioned in Section 141 of the NI Act should be strictly complied with. In order to make the director of a company criminally liable under Section 138 read along with Section 141 of the NI Act, 1881, the affected party must make a specific allegation in the complaint with regard to the specific role played by the accused in the transaction.

The Supreme Court in the case of Central Bank of India vs. Asian Global Limited[7], held that the averments in the complaint must be specific and unambiguous, showing clearly that the director was responsible for and in charge of the conduct of the business of the Company at the time of the commission of offence.

In the case of K.P.G. Nair vs. Jindal Menthol India Ltd[8], the Supreme Court held that the word “was in charge of and responsible for the conduct of the business of the company” refers to a person who is in  overall control of day -to -day business of the company. The court observed that although a director is making the policy followed by the company yet there is a possibility that he is not in charge of the business of the company. There is no universal rule that a director of a company is in charge of its everyday affairs.[9]

In the complaint the mere reproduction of the wording of Section 141 (1) is not sufficient to make person liable to face prosecution, as this would imply that if a company has 100 branches and the cheque issued from one of the branches was dishonored, the officers of all the 100 branches could be made accused by simply making an accusation that they were in-charge and were responsible for the conduct of the business of the company. This is not intended under the act because the harassment and hardship of the criminal proceedings in such cases can be more serious than the ultimate punishment.[10]

The reason for requiring specific averments before any corporate officer/director can be held liable is that the liability under Section 141(1) arises because of legal fiction .i.e. even though the person is not personally liable, he will be held vicariously and hence a clear case linking the accused with the commission of crime has to be stated in the complaint through specific factual averment.  The complainant being an outsider might not be aware of the how the internal business of the accused company is organised this serves as a disadvantage to the complainant.[11]

Quashing of Complaint

In spite of the aforesaid, the directors are being made a party without any rhyme or reason. Thus flooding the Courts with such frivolous cases. In such cases, the remedy available to the Director is to approach the High Court under Section 482 of Criminal Procedure Code which talks about inherent powers of the High Court. However, whether a director is involved in the day –to- day affairs of the Company is a question of fact and cannot be decided in the petition under Section 482 of Criminal Procedure Code. Once a notice under Section 138 of the NI Act, 1881 is served to the director, he will be subjected to the rigorous criminal laws.

In the case of Madhya Pradesh vs. Awadh Kishore Gupta[12], the Supreme Court observed that if the investigation is not complete then at that stage it was not proper for the High Court to look into the materials, the acceptability of which is a matter of trial. While exercising its jurisdiction under Section 482, it was not permissible for the Court to act as if it was a trial judge.

When the accused approaches the Court under Section 482 in order to quash the complaint, it is not proper for the High Court to consider the defense of the accused or to look into the merits of the accusation. However in the case of Harshendra Kumar D vs. Rebatilata Koley[13],  the Court held that the High Court may look into the material which prima facie have a significant bearing on the matter in order to prevent miscarriage of justice. This is necessary in order to prevent misuse of the provision of law and to save the innocent director who was not involved in the day-to-day affairs of the Company from all the hardships

Thus, it becomes important for all the Companies to ensure that all their filings (regarding appointment and resignation of the directors, etc.) with the Registrar of the Companies are up-to-date. If all these documents are up-to-date, it will be helpful to the accused to produce the required document as evidence under Section 482 in order to quash the complaint filed against them. [14]

Frivolous Litigation and Duty of the Court

In order to invoke Section 138 of the NI Act, 1881 it is necessary that the director must be in-charge of and responsible for the conduct of the business of the Company. However, in order to put extra pressure on the Company, the complainants join all the directors in the complaint. This causes huge hardship to the directors who are not concerned with the day-to-day affairs of the Company.  Hence at the initial stage proper scrutiny should be made in order to avoid multiplicity of litigation.  It is the duty of the Trial Court to ensure that all the averments that are made in the complaint along with the preliminary evidence justify an action under Section 138 of the NI Act, 1881. This will protect the innocent person from going through all the hardships involved in litigation.

Conclusion

Thus in order to make the director liable it is important that all the necessary averments must be made in the complaint. Under Section 141 of the NI Act, 1881 all the people connected with the company can become vicariously liable. In the complaint, a clear case should be spelled out against the person who is sought to be made liable. It is the duty of the Magistrate to examine the averments made in the complaint. If the Magistrate is satisfied that a case falls under Section 141 of the NI Act, 1881 then he would issue the process. The averments made in the complaint serve the purpose that the person sought to be made liable would know what the case that is alleged against him is. This will enable him to meet the case at the trail. Just because a person is the director of the Company that will not be enough to make him guilty. A person who was responsible for the conduct of the business of the Company but was not in-charge of the conduct of the business of the Company can be held liable only when the offence was committed with his consent or connivance or was a result of his negligence. [15]

 

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References:

[2]Rabindra Jhunjhunwala & Stuti Galiya, Director’s Liabilty for “Cheque Bouncing” under Negotiable Instruments Act, (October 16, 2014), http://ctconline.org/pdf/chamber-journal/CJ%20March%202014.pdf

[3]Avirup Bose, Director and Officer Liability for Dishonour of Cheques, (October 16, 2014) http://indiacorplaw.blogspot.in/2009/07/director-and-officer-liability-for.html

[4]2010 3 SCC 330

[5] Supra, 2

[6] 2005 (8) SCC 89

[7] AIR 2010 SC 2835

[8]  [2001] 104 Comp Cas 290

[9] G.P. Sahi, Vicarious Liability of Directors and Officers on Bouncing of Cheque, ( October 16, 2014) http://www.taxmann.com/taxmannflashes/flashart9-2-10_3.htm

[10] K.K. Ahuja v. V.K. Vora (2009) 94 SCL 140 (SC).

[11] Supra, 2

[12] AIR 2004 SC 517

[13] 2011 Cri LJ 1626 (SC)

[14] Supra,1

[15]  Supra, 8

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Are deep-discounts in e-commerce anti-competitive? Flipkart’s Big Billion Day Sale and the way forward

By
Esha Shekhar
-
2

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100 million dollars in 10 hours–that’s the revenue which Flipkart generated on its Big Billion Day sale on October 6th, 2014, envious for any company. The revenues were generated twice as fast as the company itself estimated. Apart from a lot of limelight, the event attracted some regulatory attention as well. There were reports that the Ministry of Commerce and Industry received complaints from traditional brick and mortar traders that Flipkart was trying to sell products below cost price and indulging in unfair competition (under competition law, this is known as ‘predatory pricing’).

This raises a fundamental question which is not limited to Flipkart’s megasale itself, but the entire business model of e-commerce. Unlike other industries, businesses in e-commerce typically have a very long road to profitability. Many e-commerce companies are known to make losses on every sale they make – that is, the cost of each product sold is less than revenues. The immediate goal for them is not to make profits, but to capture market share. It took Amazon 13 years to break-even.

In that case, how is this loss-making activity fuelled so sustainably? While a loss-making business may not seem attractive ordinarily, e-commerce businesses are an exception – they can be very attractive for venture capitalists and private equity investors. For investors, profits need not necessarily be in sight – an increase in market share of the business can lead to a windfall increase in its valuation, and a growth in its investment. Now, let’s understand the competition law problem.

The curious case of ‘Predatory Pricing’

Flipkart, along with other online retail giants like Snapdeal, Amazon etc. has been accused of predatory pricing. Under Indian laws, predatory pricing is defined in the Competition Act, 2002 (“Act”) in Section 4 which states that “predatory price means the sale of goods or provision of services, at a price which is below the cost of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.”(Cost is determined as per the regulations – it is generally the average variable cost but the Commission has power to use another more appropriate measure of cost keeping in mind the nature of the industry, market and technology used).

Is selling below cost a prohibited or illegal? No, selling products below cost is alright. The issue of predatory pricing arises when the seller (who is selling below cost) is ‘dominant’ in a particular market. If you are not a dominant player, you may sell below cost just to stay competitive or improve your market share – but it will be difficult to establish that you are attempting to eliminate competition.

However, the situation changes completely when you are a dominant player. In that event, selling products below cost can amount to an abuse of dominant position, which has serious consequences – including payment of past 3 years’ average turnover as penalty.

Flipkart’s strategy of selling products online at low prices and offering massive discounts has made traditional brick and mortar retail traders raise the question- whether it is fair, aggressive pricing (a necessary ingredient of competitive markets) or unfair pricing which may slowly eats into the traditional retail system, which consists not only of giants such as Walmart and Pantaloons, but also smaller store owners. These players often have a market limited by geographical restrictions and have limited capacity to bear losses. For consumers, the sale of products below cost now does not mean that this is a sustainable outcome – once these players are eliminated and the fight for market capture is over, e-commerce companies will be free to charge much higher prices than what they are charging now (unless competition with one another keeps price increases in control).

Has Flipkart been involved in predatory pricing? Of course, that will be answered for sure once the Competition Commission initiates an inquiry, but I will try to answer that in light of available information. I argue that it has not been involved.

The test for predatory pricing

In order to be liable for predatory pricing, a firm/company indulging in predatory pricing needs to:
a) Enjoy a dominant position in the relevant market: The first test of determining a firm who indulges in predatory pricing is establishing the dominant position that it occupies in the relevant market. Dominant position as explained under the Act (Explanation II to Section 4) says that a dominant means the position of strength enjoyed by a firm which enables them to operate independently of the competitive forces prevailing in the market and also, affects the consumers, competitors and the market in its favour.

b) Dominate in the “relevant market” which is the market in which a particular product or service is sold:Relevant market can be identified both on the basis of product and geography. A product market is identified on the ease with which consumers can interchange or substitute a product. A geographic market is identified as an area where the supply or demands of goods are distinctly homogenous.

c) Operate independently of competitive forces (read: other players) prevailing in the relevant market

d) Abuse the dominant position by creating barriers for the new entrants or trying to drive them out by selling at a price below the cost of production
Now the question arises- has Flipkart by offering massive discounts on its Big Billion Day engaged in predatory pricing or not.

5 reasons why it may not be a case of predatory pricing

#1 – E-commerce players (at least those which operate through a marketplace model) are merely platforms and not retailers
The Competition Commission of India (“CCI”) itself has given its first word on dominance in the online portals’ market in the matter of Ashish Ahuja vs Snapdeal and Anr (see the order here). The complainant was a merchant who was selling San Disk products through Snapdeal – Snapdeal had banned the sale of his items through the portal saying that he was not an authorized partner of SanDisk. He argued that Snapdeal and SanDisk were collaborating to compel him to become an authorized dealer for SanDisk, which prevented him from offering competitive pricing to the customer.

The CCI rejected that Snapdeal could not be a dominant player in the e-commerce space, because it is not engaged in the purchase or sale of storage devices itself -it is merely an intermediary which owns and manages a web portal, enabling sellers to sell storage devices through the portal for commission.

Of course, this observation is restricted to e-commerce players which use a marketplace model. Flipkart’s model has changed considerably since 2012, after it shifted from its earlier inventory model to the marketplace model- where it became a technology platform allowing small and medium sellers to sell online as well, rather than just being a retailer itself. And this model has been identified by the competition regulator as just being a different platform than offline market for selling the same product. Hence, as long as it is different distributors offering goods on these web portals and not the web portal itself, there may not be a case of predatory pricing against the online retail companies.

#2 – The e-commerce space itself has several competitors, none of whom is clearly dominant
Establishing a dominant position for any one player in the e-commerce space is not easy. Market share (of usually more than 50 percent) is used as an indicator of dominance. In e-commerce, it is not just Flipkart or Amazon or Snapdeal which are dominating the world of online retail to the detriment of other players. The Commission in the Snapdeal order had observed that there are many web portals such as Flipkart, Amazon, eBay, Yebhi and Junglee.com competing with each other. These stores were themselves competing to offer a platform to two kinds of market participants – sellers (to offer products to customers), as well as customers (to select the best deals/prices).

#3 –E-commerce is not a separate market from that of brick and mortar retail stores but just a channel of product delivery – no e-commerce retailer is currently dominant in the combined retail space (including both e-commerce and brick and mortar)
When it comes to violation of competition law norms, a firm/ enterprise needs to be a dominant player in a relevant market. This means establishing whether two or more products can be considered substitute goods and whether they constitute a particular and separate market for competition analysis.

At present, the CCI has not recognized offline and online retail as different markets, but merely as channels of distribution of the same product. In Ashish Ahuja vs. Snapdeal and Anr, CCI observed that “both offline and online markets differ in terms of discounts and shopping experience and buyers weigh the options available in both markets and decides accordingly. If the price in the online market increase significantly, then the consumer is likely to shift towards the offline market and vice versa. Therefore, the Commission is of the view that these two markets are different channels of distribution of the same product and are not two different relevant markets.”

What does this mean for e-commerce players?
This just means that to establish dominance of an e-commerce player such as Amazon or Flipkart, one needs to argue that the player dominates the entire retail space (including online and offline retail), which is a much harder task. Let’s take some estimates to get a reality check here – the current share of e-commerce is USD 13 billion, in comparison to the current retail market size of USD 500 billion (see Economic Times story here and Firstpost data here). By 2021, total retail market size is likely to reach USD 1.3 trillion, of which e-commerce is expected to be far in excess of USD 70 billion. If the Commission continues to use this test, it makes it can be very difficult to establish dominance of an e-commerce player.

#4 – Offering deep discounts is not anti-competitive per se, and is not targeted at hitting out at other competitors
Dominance of one player cannot be established in the online retail segment. There are many players in this emerging space and the market thrives on offering discounts and deals which in effect benefits the consumers. Generally, low pricing is seen as a benefit of successful competition. The deep discounts offered by Flipkart, was in no means, preventing other players to enter the market and not offer similar discounts. Along the same period of time when the Big Billion Day sale happened, Snapdeal and Amazon as marketplaces offered heavy discounts on the goods sold through their web portal.

Can we say that this practice was essentially designed to defeat competition and abuse of dominant position by one player? No. One web portal did not work to the detriment of the other players in the same space. The discount offered by one did not result in an ‘appreciable adverse effect on competition’. On the contrary, the multiple players were offering similar discounts at the same time. The issue of predatory pricing may not arise here since, it is not the case of a dominant player killing competitors and thwarting the entry of new players.

For establishing predatory pricing against online web portals, one also needs to look into the sustainability of the pricing strategies and the funding of the discounts in the long term. For now, the pricing strategy that these online retail companies had adopted was for a limited period, ranging from a day to three days. Even in the physical market, clearance sales and deep discounts on limited occasions is a part of the trade, so it may not be feasible to argue that this is anti-competitive. In fact, in the Snapdeal case above, the Commission had also made an observation that the e-commerce market thrived on special discounts and deals.

#5 –A causal link between incurring short term losses with the intention to subsequently eliminate competitors and charge excessive prices in future is missing
To test predatory behavior of an enterprise, one important criterion that needs to be established is whether the enterprise deliberately incurs short term losses to eliminate competition and be able to charge excessive price in the future. Fortunately for e-commerce stores, it is extremely difficult to establish a causal relationship between the discount and any future increase in price, especially because the road to profitability is also very long. Therefore, initial short term losses faced by the online retail companies may not be classified into losses incurred for engaging in predatory pricing in the longer term.

Further, the online retail business in India is still in the nascent stage, having taken off only in the last 2-3 years. The initial losses could be attributed to these companies’ investment in building brand name, customer loyalty, and relationships with the sellers for their marketplace model. A difference in the economies of scale of the online and offline retail companies show that it is not that online retail companies are deliberately lowering prices of goods to adversely affect offline retailers. Their business model ensures that they could have lower overhead cost structures than the traditional brick and mortal model – leading to the creation of a more efficient market. For example, many reputed US publications and journals are no longer available in the print version and only accessible online – this happened after a realization that the print model may not work as efficiently in light of a changed market reality (i.e. the widespread use of internet). Similarly, brick and mortar businesses also have the option to participate in the e-commerce revolution without undertaking heavy investment themselves (through the market place model), to adapt to new market realities.

Are the e-commerce players completely safe?

The case against the online retail companies look weak from the standpoint of “predatory pricing” – especially where the e-commerce store is following a market place model, or till the time that the Commission considers the entire retail market together to identify a dominant player (it much harder to find a dominant player in a larger market).

However, this does not generalize the verdict for the entire e-commerce sector, as different e-commerce businesses have different operating models, and competition law inquiries are very fact-specific. Apart from that, there is possibility of other anti-competitive malpractices that the Commission can look into (apart from predatory pricing). For example, consider an exclusive deal from Motorola to release all its Android phones exclusively on Flipkart, or a laptop manufacturer insisting that it will only provide warranty and customer support to customers who purchase a product from a specific e-commerce site. These can be a threat to developing a competitive e-commerce market. While the Competition Commission of India has powers to take suomotu action, for now e-commerce companies may be safe, if the CCI chairman Ashok Chawla’s statement can be relied upon (see story here).

The option for brick and mortar stores in this market

The option for brick and mortar stores is very clear – they can’t afford to ignore e-commerce. A more prudent idea would be to participate in the model. For example, Tata’s retail store Croma, for example, sells not only through its own store but also through other portals. E-commerce increases the reach for brick-and-mortar stores without undertaking heavy investment in purchasing distribution outlets. To participate in the model, a brick-and-mortar store owner can identify e-commerce stores with maximum market penetration and sell there. They can also sell on multiple e-commerce sites. They may have to redirect efforts towards pitching their products better online (say, by describing product features better, showing more images, giving faster shipment and showcasing better customer feedback for the product).

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Is Uber Legal in India?

By
Rahul Bajaj
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1

Uber-Completely-Redesigns-Its-Android-App-Makes-It-More-Intuitive-3

At a time when fuel prices show no sign of declining anytime soon, the radio cabs industry has taken off in a big way in India and has captured the imagination of India’s burgeoning middle class. Studies show that the radio cabs business is worth $ 9 billion in is growing at an impressive rate of 17% per year in India. Against this backdrop, the rise of Uber as a leader amongst the new generation of dematerializing, demonetizing and democratizing technologies in the transport sector has been hailed in some quarters and reviled in others. Uber’s growth since its inception in 2009 has been nothing short of exceptional – it has established its footing in 45 countries and is valued at over $18 billion. Uber claims to provide hassle-free and expeditious services that not only resolve a major pain point in the transport industry, but also have the potential of obviating the need to buy one’s own vehicles in order to be able to commute in a smooth, fast and reliable manner. It would be apposite to understand how Uber exactly works in order to determine what legal impediments can stultify its growth in India.

An overview of Uber’s services

Uber follows a fairly simple system of operation. First, Taxi users as well as taxi operators need to get themselves registered on Uber in order to access its services. While registering, customers are required to supply their credit card details which are used to process the payment after every ride. After registering, customers can use Uber’s GPS facility to find out if there are any taxi operators in their vicinity. In order to get the most relevant results, customers are asked to select what kind of car they require along with the details of their destination. Thereafter, the app informs the user about the estimated price of the journey and the expected time of arrival of the taxi along with details of the driver such as his/her name, photo and contact number. On reaching the desired destination, the app automatically charges the bill to the user’s credit card and a copy of the bill is mailed to them shortly afterward. Interestingly, Uber also allows multiple customers to split the fare. Uber pockets 20% of the fare amount and the remaining 80% goes to the taxi operator. The cars most commonly used by Uber are Toyota Innovas, Camrys and Fortunas. Uber’s business model is in consonance with what is commonly referred to as the 6D strategy. The 6 components of this strategy are:
A. Digitized experience: Uber seeks to fully digitize the experience of booking taxis, choosing one’s desired destination, making payments, etc.
B. Deceptive: Uber’s business model appears deceptively simple even though it includes within its fold an admixture of a large array of complex components.
C. Disruptive: Uber has certainly caused a major disruption in the radio cabs business and has ushered in a paradigm shift in the relationship between taxi users and operators.
D. Dematerialized: Uber has fully dematerialized the need to own a personal vehicle in order to be able to commute efficaciously as well as the need to own a large number of vehicles in order to operate in the ridesharing business.
E. Demonetized: Uber seeks to cut down on the unnecessary fees and taxes that are associated with the services provided by taxi operators and also advises its customers not to pay any tips to drivers.
F. Democratized: Uber seeks to provide every smartphone user access to its facilities and thereby aims to make a sector that has hitherto been the preserve of the rich accessible to every person who has a smartphone.

Provisions of the Motor Vehicles Act, 1988

There is considerable ambiguity about the applicability of various facets of the Motor Vehicles Act, 1988 to Uber. This is primarily because it is difficult to clearly classify Uber’s services into one of the categories that the MV Act envisages. Section 66 and 69 of the Act make it explicitly clear that any person owning a motor vehicle who wishes to use such a vehicle as a transport vehicle for carrying passengers must obtain a permit in the prescribed manner from the Regional Transport Authority. These provisions would be relevant to private car owners who wish to join hands with Uber to provide transport services. State governments, in exercise of their powers to frame rules for the effective administration of the Motor Vehicles Act, have put in place radio taxi schemes for the functioning of radio taxis. Broadly speaking, these schemes unequivocally state that operators must possess a fleet of a certain minimum number of taxis and must establish a control room with the ability to conduct radio communication round the clock with their taxis plying on roads. Moreover, every vehicle must have an electronic fare meter and must be fitted with GPS/GPRS-based tracking devices and a mobile radio. In addition, it is essential for the applicant to show that it has enough parking space and the necessary infrastructure for running radio cabs in order to obtain the required permits. However, it is unclear whether it is Uber’s prerogative to perform any of these functions or not. The ambiguity can be attributed to three principal factors. First, Uber doesn’t own or manage any cars; it merely acts as a connecting link between customers and taxi operators. Since the MV Act does not contain any provisions grappling with the working of taxi aggregators, it is difficult to clearly delineate Uber’s functions and rights under the existing legal framework. Second, Uber’s story can best be described as an example in a long thread of cases in which the law has been found to be woefully inadequate in regulating technological innovations. In such a situation, law enforcement authorities often try to stretch the existing provisions wide enough to bring circumstances that those provisions were never designed to grapple with within their ambit. Third, a closer inspection of the MV Act clearly shows that the Act was designed with the primary goal of regulating the conduct of drivers and car owners to prevent untoward incidents. Therefore, it does not contain any substantive or meaningful provisions for regulating complex business models that are designed to address pain points in the transport sector.

Safety concerns

Since Uber seeks to leverage the power of various services whose safety has been a subject of active debate, concerns about Uber’s safety are bound to arise. The main areas of concern are the method of processing credit card payments; the authenticity of the drivers that Uber partners with; availability of safeguards to deal with different contingencies and ways of ensuring the safety of female passengers, especially at odd hours. In order to assuage the unease of its customers, Uber claims to follow a two-fold approach in this regard. First, it works with its partners to follow a rigorous screening process to ensure that only those drivers who possess the required competence and have a legitimate license and insurance cover are selected. Second, customers are encouraged to rate every driver on a 5-star scale. This allows Uber to assess the competence of its drivers and to take appropriate steps to improve the quality of the drivers that are associated with it. In addition, the app also includes a feature using which customers can inform their friends or family about their estimated time of arrival along with all necessary details of the driver and vehicle. Since the app collects substantive personal data, it is necessary to comply with contemporary data protection standards. More specifically, since Uber collects sensitive financial information, it has to ensure that its privacy policy and security practices and procedures are in accordance with the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. This basically implies that such information must be collected in accordance with the 8 principles underpinning data protection laws across the globe: Collecting only necessary data; maintaining the quality of the data collected; collecting the data for a clearly defined purpose; using the data for the specified purpose; putting in place adequate safeguards; having a fair and transparent system; allowing customers to alter their data and, finally, maintaining accountability.

Method of processing payments

The greatest roadblock to Uber’s growth in India lies in the methodology that it adopts for processing payments received from taxi users. In order to clamp down on credit card frauds and to restore the public’s faith in cashless transactions, the RBI put in place a 2-step authentication system a few years ago. Under this system, the user is not only required to enter his credit card details i.e. the card number, expiry date and CVV number, but is also expected to complete the second step in the authentication process by entering a one-time password, which is sent to his/her registered phone number on request, to complete a transaction. This second step in the authentication process is what has emerged as a thorn in Uber’s side. As mentioned earlier, the payment is automatically collected by Uber when a customer reaches his destination; he is not required to enter any additional password or PIN to complete the transaction. In a note issued on August 22nd, the RBI accused companies that do not follow the second step in the authentication process of camouflaging and flouting extant instructions on card security. The position taken by the RBI is totally incompatible with the business model that Uber adopts in that it significantly undermines, if not diminishes, Uber’s competitive advantage. The RBI has asked companies who do not follow the 2-factor authentication process to get their act together by the 31st of October. Only those companies whose payment gateways are not in India can circumvent the 2-step requirement. For example, a person does not need to enter a one-time password while shopping on amazon.com, even though the OTP has to be entered while shopping on amazon.in. Although Uber’s payment gateways are not located in India because all the payments are processed by its operating firm called Uber BV located in the Netherlands, it still has to comply with the 2-factor authentication process because 80% of every payment that it receives has to be funneled back into India in favour of taxi operators. Uber now basically has two options. Either it will have to completely shut down its operations in India, or it will have to incorporate the second step in the authentication process into its app to make its business model legally sustainable. In case it chooses to opt for the latter, it is believed that all payments will automatically get delayed by a period of 2-10 minutes. Furthermore, this problem would be further exacerbated by the fact that many telecom operators are unable to provide good network coverage to their users in a large number of areas. Many experts argue that the 2nd step would be superfluous in the context of services like Uber. The main reason why the second step provides additional security is because, after entering the credit card details, a user receives a message on her phone which informs her about the transaction and contains the one-time password. This ensures that the person executing the transaction is in possession of his/her phone. However, since Uber is a smartphone application, the user would anyway have access to her phone while making the payment, so the second step would not provide any additional layer of security.

Foreign exchange laws

Another impediment which poses a serious threat to Uber’s future in India is the fact that all its transactions are processed in the Netherlands. Although it is not clear what modalities Uber adopts for processing payments, it is believed to follow one of the following two methods. First, at the end of every journey, the entire fare is repatriated to the Netherlands where Uber’s operating firm is located. Thereafter, Uber deducts its own share of the payment and pays the remaining amount to taxi operators located within India. Second, the entire fare is collected in a non-resident account in India and the amount that is left after the Indian taxi operator is given its due is then transferred to Uber’s account overseas. The first of the aforementioned methods is believed to be inconsistent with foreign exchange laws. More specifically, it is argued that it amounts to a capital account transaction and results in the alteration of assets and liabilities of Indian taxi operators abroad. Generally speaking, capital account transactions are not allowed under the Foreign Exchange Management Act. In addition, the kind of transactions that Uber engages in do not fall within the ambit of the Foreign Exchange Management (permissible Capital transactions) Regulations, 2000 which allow for certain capital account transactions. In sum, it would not be unfair to say that the lack of clarity and transparency in terms of how payments received by Uber are precisely processed coupled with the fact that its operating firm is located in the Netherlands – a country famous for its favourable withholding tax regime – gives rise to the assumption that Uber adopts a surreptitious and clandestine methodology for processing payments.

Tax laws

Recent reports indicate that Uber has not paid a single penny in taxes to Indian tax authorities since it began operating in India. As a result, the Mumbai Service Tax Department recently asked Uber to set out cogent reasons explaining why it hasn’t paid service tax so far. What makes this issue especially complicated is the fact that tax authorities are not sure whether taxes will have to be paid by Uber or by taxi operators that Uber works with. It is a matter of active debate whether Uber can actually be mandated to pay service tax. It can be stated with reasonable certainty that Uber’s income exceeds the basic exemption limit of INR 10 lakh, so, viewed through that lens, it is obligated to pay service tax. In addition, radio cab operators such as Meru Cabs and EasyCab do pay service tax on an ad valorem basis in accordance with a circular issued by the Central Board of Excise and Customs that makes it mandatory for radio cab operators to pay service tax. However, as mentioned earlier, Uber is very different from other radio cab operators because Uber does not actually rent its own vehicles to passengers; it merely acts as an intermediary between customers and cab drivers. It would be interesting to see how this controversy plays out.

Other legal issues

First, since Uber’s drivers are independent contractors, it is difficult for Uber to constantly monitor their conduct. The upshot of this is that customers often choose to repose their faith in a particular driver merely because they fully trust Uber’s recommendations. However, if that driver behaves in an irrational, negligent or unreasonable manner, it may not be possible to hold Uber fully liable for the actions of the driver. Second, Uber has not set up any legal entity in India. As a result, it is very difficult for any regulator to hold Uber accountable for its actions. Moreover, Indian regulators also do not have a single point of contact to enquire about Uber’s operations in India. Finally, Uber users report that charges for a journey are either deducted in the form of rupees or dollars. Indian citizens cannot do business in a foreign currency. Therefore, as Uber is responsible for facilitating transactions between passengers and drivers, it can be argued that it is encouraging Indian citizens to break the law by transacting in a foreign currency.

Legal position of Uber in other jurisdictions

As Uber is still in a nascent stage in India, it may be instructive to succinctly analyze how other countries have viewed its rise. Uber has been banned in Brussels on the ground that it partners with taxi drivers who do not have a license or the required permission to use their private vehicles for earning money from passengers. Similarly, local authorities in Brazil have repeatedly imposed a fine on drivers working with Uber and have advocated in favour of suspending Uber’s services. In many jurisdictions, most prominently England, various groups have tried to ban Uber on the ground that the criteria that it uses i.e. time/distance for calculating the fare of a journey is similar to the methodology adopted by a taxi meter. As a result, they argue that Uber should be banned because it has not explicitly been authorized to use a taxi meter. In most other jurisdictions, Uber has been at the receiving end of a large number of cease and desist letters for not complying with transport, banking and tax laws.

Conclusion

The steps taken by the RBI and other regulators to clamp down on Uber’s activities are reflective of their desire to engage in paternalistic micro-management instead of developing new mechanisms and evolving existing mechanisms to promote, and not inhibit, market-based innovation. Although the 2-factor authentication system for cashless transactions provides additional protection, it is necessary to relax existing norms to accommodate socially beneficial business models, especially for the kind of small-value transactions that companies like Uber engage in. A failure to revamp existing frameworks to promote innovation-based growth would not only have several deleterious effects on the economy, but would also run afoul of the goal of making our banking system more accessible and affordable that lies at the heart of most government policies.

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Appointment of Directors, their appointment terms and procedural formalities under Companies Act, 2013

By
Amartya Bag
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7
appointment of directors

Day-to-day affairs of a company are run by its directors and employees. The companies act recognizes the board of directors and key managerial personnel in the company as the persons responsible to execute the activities of the company. Some directors may also have an employment relationship with the company. For example, the office of the Chief Executive Officer, the Chief Financial Officer or the Chief Operating Officer positions may be offered to persons who are also directors. This chapter explains the provisions relating to the directors of the company.

Number of directors

The Companies Act, 2013 fixes the minimum and maximum number of directors a company can appoint. Under the 2013 Act, a private company is required to appoint at least two directors; while a public company must appoint at least three directors and a one person company is required to appoint at least 1 director. A company can appoint a maximum of 15 directors (a maximum of 12 directors were allowed under the Companies Act, 1956).It is possible for a company to increase the number of directors beyond 15 by passing a special resolution to this effect. Moreover, one of the directors of the company must be resident in India, that is, he must have stayed in India for a period of not less than 180 days in the previous calendar year.

How are directors appointed?

Generally for a private company, typically the promoters (i.e. the founders who are signatories to the articles of association) of the company become the first directors of the company.

Although the articles of association should ideally mention names of the first directors of the company, if that is not done, the subscribers to the memorandum (that is, the initial shareholders who incorporate the company) shall be considered as the directors. In all other cases, the directors can be appointed by the company through a resolution passed in the general meeting. However, before such appointment can be made, the members must be informed by either email or through postal communication at least seven days before the meeting about the candidature of the person as a new director.

How to accept appointment as director

A person who is intended to become a director must apply to the Registrar for obtaining a Director Identification Number (DIN) in Form No DIR-3. The prospective director should give a declaration to the company that he holds a DIN and is not otherwise disqualified to become a director. A person who has been appointed as a director must notify the company about his consent to act as director in Form No DIR-2 and to the Registrar within thirty days of appointment in Form No DIR-12.

What will happen if the director or the company fails to notify the Registrar within the specified date?

Failure to notify the Registrar of one’s appointment as a director is an offence – if a director fails to notify the Registrar of his appointment within the specified dates as mentioned in the previous paragraph, he is punishable with imprisonment for a period of six months or may have to a pay fine which may extend to fifty thousand rupees and if the non-compliance continues he might have pay an additional fine of rupees five hundred per day of non-compliance.

Block A person cannot be a director in more than twenty companies (out of which a person can be a director in a maximum of ten public companies) at the same time. However, a company is allowed to fix any lesser number of companies a director is allowed to act as directors, by passing a special resolution.

https://lawsikho.com/course/diploma-companies-act-corporate-governance

Special requirements for public companies

The new Companies Act has imposed additional requirements with respect to appointment of independent directors and women directors on public companies (whether they are listed or not). All listed companies are required to appoint special categories of directors like independent directors, small shareholders (minority) directors and woman directors in the Board. Some of these requirements even apply to unlisted public companies, if certain share capital, debt or turnover thresholds are exceeded.

Independent Director – All listed public companies must appoint independent directors (i.e. those who are not related to the promoters of the company and do not have a financial relationship with the company) as per the listing agreement, however, the proportion of independent directors cannot fall below more than one-third of the toal directors, for better transparency and good governance.

Unlisted public companies must appoint at least two independent directors in the following circumstances:

i.            If their paid up share capital exceeds Rs. 10 crores.

ii.            If their turnover exceeds Rs. 100 crores.

iii.            If the aggregate of all the outstanding loans, debentures and deposits exceeds Rs 50 crores.

Woman director – All listed companies and other public companies having a paid-up share capital of more than Rs 100 crores or turn-over of more than three hundred crore must appoint atleast one woman director.

Director appointed by minority shareholders– To have a fair representation of the minority shareholders in a listed company (a shareholder having shares whose nominal value is less than twenty thousand rupees), the minority shareholders may elect one director.

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Term of appointment of directors

Generally a director is appointed in the Annual General Meeting (AGM), and can hold the post till the next AGM. However, the articles of the company can provide for appointment of permanent directors in the articles of the company. In case of a public company or its subsidiaries, only one-third of the directors can be appointed as permanent directors, rest of the directors must retire by rotation at the AGM of the company.

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An independent director can be appointed for a period of consecutive five years. Such directors can be re-appointed after passing a special resolution by the Board for a period of another 5 years. After two consecutive terms, an independent director can be re-appointed only after a gap of three years (provided that the person was not appointed or associated with the company during these three years).

Resignation and removal of directors

A director can by giving a notice in writing to the company and the board, resign from the post of director. The effect of resignation will take place from the date when such notice has been received by the company or on such date as the director has conveyed to the company, whichever is later. Moreover, a director must convey the notice of resignation along with reason for resignation to the Registrar in Form No DIR-11 within thirty days from the date of resignation. The company in a similar manner has to inform the Registrar and post the information on the website of the company about the resignation of the director within thirty days from the date of notice of resignation in Form No DIR-12.

Suppose the company found out that one of the directors is working in a manner which is detrimental to the interest of the company, or the director is involved in fraudulent activities. What are the steps the company can take to remove the director? Can they remove them immediately?

A director can be removed at any time by passing an ordinary resolution (at least 51 % of the shareholders must pass the resolution) at a shareholders meeting, at any time before the completion of the term of the director. However, the director must be given reasonable opportunity of being heard before the decision is taken.

For this purpose, a shareholders meeting (called a general meeting) can be specifically called (see the chapter on meetings for further details). The notice that must be given to shareholders is called a ‘special notice’.

 

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Jail or a second chance?

By
Amartya Bag
-
0

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This article written by Kalpana Purushothaman, Senior Counselor, CCL – NLSIU

In August, 2014,  the Ministry of Women and Child Development (MWCD) introduced the JJ Bill 2014 in the Lok Sabha, seeking to repeal the existing Juvenile Justice Act 2000. The JJ Bill 2014, seeks to re-enact the law and allow the transfer of juveniles between 16 and 18 years apprehended for specified ‘serious offences’ to the adult criminal justice system.

As a counselor working with children in conflict with the law,  I have had the opportunity to work closely with juveniles alleged and found to have committed crimes, in some cases over a period of 4-5 years; children who would most likely be transferred to adult courts through judicial waiver if the JJ Bill 2014 is enacted.

We often imagine these youthful offenders to be cold, remorseless, dangerous and vicious monsters out to wreak havoc on defenseless women and children. The popular perception also seems to be that once these ‘dangerous and out of control ‘youth are sent away to prison, our society would become safe and sanitized.

I have experienced these allegedly and guilty ‘youthful offenders’  as scared, hurt, angry, frustrated, lonely, misunderstood, confused young people desperately seeking help and support, wanting to change, eager to make amends to their families, victims and society. I have seen child after child plead for another chance to make amends and become a better person.  And it is here that we fail them – as a family, as a society and as a State.

My experiences with these children strongly reaffirms my belief that children in the age group of 16 and 18 years who have allegedly committed ‘serious’ crime have to be treated in developmentally appropriate ways. These children will benefit tremendously from competent; multi-disciplinary interventions provided on the solid foundation of sustained psycho-social support and caring relationships – at an individual, institutional as well as family level. It is in such relationships, systems and settings that children who struggle to recover from the impact of their own actions, find healing and hope. Not in adult jails, amidst hardened criminals and exploitative environments.

There is a need to for the juvenile justice system to balance the need for accountability to the victim and community and the need to ensure public safety with the need to ensure that the system addresses the developmental needs of the juvenile to heal and mature into responsible contributing individuals. Sending the juvenile to an adult prison does not bring justice to anyone – neither the victim, nor the community nor the juvenile himself/herself.

But for that to happen, we first need to acknowledge that ‘juveniles’ are real people too. Real people who may often come from impoverished families, abusive, violent and exploitative backgrounds but who could as easily be someone we know, in our neighborhood, or wait, even in our own homes. Real people who are teenagers going through the ‘storm and stress’ of growing up in a complex, confusing and very often unsafe world. Adolescents making mistakes as they try to figure out themselves and the world – adolescents that all of us adults once were.

I would like to share the story of a young girl I had the privilege of working with for over 4 years. The real story of a real person. Hers is a story that is haunting and horrifying, moving and inspiring all at once.  Do you think that she, and others like her – should be given a ‘second chance’ at life or should be sent to jail?

Nonda Manasu: A Wounded Heart

I have found a new job today. I have found a job as a salesgirl in a cloth shop, where I have to show customers different kinds of sarees.  I am very excited as I will go to work from tomorrow. All my friends at the hostel are asking me for sweets, but I don’t have any money now and promised to get them as soon as I get my first salary.

I learnt tailoring for the last almost one year from Roopa aunty who is my teacher at the hostel. She taught me how to do sari embroidery, stitch blouses, petticoats, dress, school uniform, lehenga blouse, etc.

I used to hate cooking earlier and would never take up any cooking work. But for the last few months,  Shruti akka who used to cook has had an operation and cannot cook and since there are many mouths to feed, including children, I feel I should also help and have started learning to cook and helping out in the kitchen.  I am responsible for teaching prayers to the children and I love doing that.  Every day, after prayers, I gather the children in a group for an hour.  I give them a word as the ‘word for the day” and we all talk about it. I usually love to give words like appa, amma, anna, thangi, prapancha, bandhana, etc (meaning father, mother, older brother, young sister, universe, and relationship in Kannada) and we all talk about our feelings and thoughts about it. I found a book with some exercises in the hostel and started doing this on my own. Now I have been given the responsibility to do it and I really enjoy doing this. There are some young children who go to school, studying in Kannada medium – I try to help them with their studies. Actually it is an excuse for me to also study because I also get to study along with them. About 25 children have been admitted to a local English medium school and I am taking ‘tuitions’ for them –teaching ABCD, and also learning to read and write English along with them.

However, life was not always like this. 4 years back when I was just over 16 years old, I was found guilty of having kidnapped a 12 year old girl and selling her into sex work. I was brought before the Juvenile Justice Board and stayed at the Government reception centre for women for almost two and half years while my case was going on. I did not even apply for bail because there was no one to take me home and no home to go back to, because my family disowned me for having brought dishonor to their name. My uncle and some neighbors in my village threatened to kill me if I stepped into the village.

Life in my home and family :

Appa – I was in 9th standard and my father did not allow me to appear for my 10th standard exam. My chikkappa (father’s younger brother), – used to sexually abuse me, make me do all kinds of work and hit me with a big stick if I didn’t do what he asked. Unable to bear this, my father took up another house nearby in the same village. Only my akka (older sister) used to go for work in a factory nearby. She was the only one earning some money and feeding all of us. But my uncle used to hate this and started harassing us for money from her salary as well. My uncle insisted that I should also earn and sent me to sell flowers at the local flower and vegetable market  along with my ‘atthai’ (father’s older sister). I used to wake up at 3.00 a.m everyday, to sell flowers. If I didn’t earn much in a day, my chikkappa used to beat me really badly. He used to tell everyone that he was looking after all of us in front of the whole village, but in reality, he used to come to my house at night and snatch the money I had made during the day and spend it on drinking.

My ajji (maternal grandmother) had put some money in the bank in my name and my uncle used to continuously torture my grandmother and all of us for that money.

My amma died when I was 7 years, by drinking poison. My uncle used to harass my mother a lot. My mother had even lodged a complaint against him at the local police station. She walked all the way with us 3 young children to the police station to do this but no action was taken. My uncle found out and beat her really badly for this. My ajji then came and took us all away to her place and we lived for a few days in a rented house in my ajji’s village.  I feel my mother did not see any other way out as my father was also a drunkard and finally she took her own life. My uncle then started blaming my father saying he was the one responsible for killing my mother and my father started drinking even more. None of my father’s relatives supported us and even his sisters were not bothered about us.

When I dropped out of school, I and my sister started going for a job in a garments factory, where I worked for 3-4 months. I used to earn Rs. 2,500 per month. I took leave from work twice when I was feeling moody and didn’t feel like going to work. My sister beat me up for this and told me that she had tried really hard to get me this job. I used to love to play with children my age or younger than me. I used to love to play in the water in the local tank. I did not want to go to work – where the manager used to try to misbehave with me and scold me for small things.

How I got into the world of crime : My ajji fell sick one day. I had gone to the hospital to look after her. One morning, she gave me Rs 500/- to buy her some food, fruits, etc. I was feeling homesick as I had been in the hospital for 3-4 days and went home. I spent some of the money on snacks and some beads, earrings, etc. from the local market on my way home.  In the evening I got scared as I had not got her any food and went back to the hospital, but seeing my uncle and aunt angrily arguing about my whereabouts, I got scared and hid in the hallway of the hospital all night and went back home next morning. My father beat me badly saying everyone had been searching me. I was really upset and left home and went to stay with a ‘thatha’ – an old man related to my grandmother, in a nearby village.

During this time, I was friends with a boy called Auto Manja. He used to get me gobi Manchurian. He told me he liked me but I found out later that he was married and had children. I used to stay in different relatives houses for a day or two and didn’t want to go back home. I tried going back once or twice but my father and uncle used to scold and beat me very badly so I was in confusion as to what to do.

At that time, a lady called Sarala  came forward and told Auto Manja that he should bring me to her house and she promised to look after me. Manja was a good person and did not allow me to go and scolded her, but his friend took money from her and lied to me saying Manja was calling me to meet him at a nearby place a few kilometers away. . I sat in the auto and went with him.

He took me to Sarala  aunty’s house where I was kept in a room along with another pregnant lady and a middle aged lady. In the night, a middle aged man paid Rs. 5,000/- for me and Sarala  aunty asked me to go and sleep with him. When I refused, she beat me badly and forcibly made me eat sleeping tablets. I didn’t know what was happening. The pregnant lady told me the next day that I had been raped by many men through the night. After that I was taken to a farm house along with other girls and every time I was forced to go and sleep with different men, beaten, made to eat sleeping tablets and the same nightmares followed with different men.

I ran away once and came home, but was beaten up badly by my father, uncle, aunts etc. for bringing a bad name to the family so I didn’t want to go home again. Then one day, I met Sunita[1] in the bus and made friends with her. After a few days, I was desperate as I could neither go home nor had anywhere to go and so I went back to Sarala . She asked me to bring Sunita to her and I took Sunita and left her in Sarala ’s house, without thinking anything. Sarala  gave me some money for this.  Later I came to know that Sunita had been taken to different places, including a temple town and some famous tourist places. , etc. and treated very badly, burnt with cigarettes, etc. Then I realized that what I had done was a very big mistake but it was too late. I was taken by the police, who also slapped me and beat me badly. My family were called and they too beat me in the police station itself saying they didn’t want to take me home.

My contact and experiences with the juvenile justice system : I then came to the reception centre. I used to struggle a lot, because girls used to say very sharp and hurtful things. One of the staff hit me with a stick, I was crying when Geeta[2] aunty told me she will complain to the JJB . They then stopped hitting me because I would blackmail them that I will tell the judge, but they started using very bad language with me.  They would call me very bad names which made me feel really sad and ashamed.

Then Vasanthi[3]  doddamma came into my life, she was very affectionate and was the mother I never had. Then I met Kalpana[4] aunty– she steadied me.  I was very homesick, felt orphaned and abandoned by my family, but when Kalpana aunty told me that she would help me reconnect with her family, I felt some hope.

Because of Kalpana aunty – my family came back to me – they at least agreed to talk to me on the phone. She and Geeta aunty went to my house and convinced my family to talk to me. Then my granny died and I was totally shocked. My family told me that I was responsible for her death. They did not tell me about her death or my sister’s marriage. They got my sister married off early thinking she will also become a ‘bad girl ‘ like me. I was very pained by all this and felt life was not worth living anymore.

Ramadevi[5] aunty was a very kind person in my life. She always gave me a security person to accompany me to the JJB hearings, she always spoke to me with so much respect and affection that I used to look forward to go to the JJB just to spend some time with her. She kept assuring me that I had a long and bright future and that I should focus on learning good behavior as well as some skills that would help me build my life again.

One day I cut myself at the reception centre, using glass from a window pane. I used to be full of anger and hate those days. Anger with my family, anger with the society that so much ‘daurjanya’ (exploitation) had happened with me, so much ‘anyaya” (injustice) had happened with me, anger and shame that I had done so much damage to Sunita, anger that no one had corrected me when I made my first mistakes.

Then Kalpana aunty took me to NIMHANS, Preeti[6] aunty gave me tablets to calm me down. I felt much calmer and better able to manage my anger when I had those tablets. I really looked forward to Kalpana’s aunty’s visits and bragged to all my friends that I had a ‘good mother’ who had adopted me. I knew it was a lie, but I wanted it to be true and it made me feel strong and good about myself. When her visits became lesser, I told my friends, she was busy and would come to see me directly at NIMHANS.

One day I was taken to a place called Jeevodaya[7] by Kalpana and Geeta aunty. Then I was taken to the CWC[8] and asked my consent for placement in this institution. I was very happy that they were asking me my opinion. I liked the place and the sisters were very kind to me. Sr. Ancy[9] used to take care of me but used to scold me sometimes. One day, my friend Nagina told me let’s run away. Without thinking, I also accompanied her to the station. It seemed like an exciting adventure at that time.

I was very grateful that they did not report me to the police and treated it like a stupid mistake and brought me back to the reception centre. Again, Kalpana aunty met me and I told her that I was really frustrated and wanted to commit suicide.

Dodamma told me she would be leaving / getting transferred. I got really upset about this and felt that she too was leaving me. I fought with her without knowing how to express myself and told her that she was neither sending me home, nor finding a way out of the system for me. Then Ramadevi aunty and Vasanthi aunty found this hostel for me[10]. I was placed there and Kalpana and Geeta aunty used to call me and visit me at this place.

At the hostel where I was staying, , they tried to find me a boy to marry. I told them I was open to marry but I needed time to think about it. I also told them that as far as I was concerned my family was dead to me and that I was an orphan, but that I would like to ask permission from Kalpana aunty and like her to be present at my wedding.

Ek choti si love story : During this time, I  met a boy called Surya and fell in love. I used to tease him as he used to pass in front of my hostel. I used to think about him and day and night. I even went and tried to find out where he lived and if he would be able to look after me well. He lived in a small house and worked as a construction laborer. My tailoring teacher,  at the hostel then took me aside and talked to me. She told me it was natural to have such feelings but that I was still young. She then made me learn embroidery and I got so involved in that that I slowly started forgetting about Surya. After a few days, he went away to some other construction site and I forgot him and became happy again.

When I first came to the reception centre, all I could feel was anger and hatred towards men for what they had done to me. Today, I feel warm and good inside when I think I too can fall in love with a boy like any other teenage girl. It didn’t work out, but that’s ok. Like Kalpana aunty says, there’s always time in life for love and I’m willing to wait for the right man.

What if ? : On quiet evenings, sometimes I think about how my life would have been if all these people had not helped me and supported me over the last 3- 4 years.  If Vasanthi aunty had not corrected me when I behaved badly, if she had not shown me affection when I was suicidal, if Ramadevi aunty had not encouraged me and given me hope that she would find me a safe place to live someday, if Kalpana aunty had not become my mother when my family abandoned me, if Geeta aunty had not explained my actions to the JJB, if I had not got a chance to go to Jeevodaya or this hostel, if Dr. Preeti had not saved me when I tried to kill myself, I don’t know if I would even be here today.

I feel very, very afraid thinking about what kind of life I would have had.   I made a horrible mistake of taking a young girl who was my friend to a bad person like Sarala aunty. I really didn’t know what I was doing then, I was so caught up in my own problems and miseries in life that I did not think that her life would be spoilt by my foolish act. I felt really sorry for what I had done and even asked Sunita for forgiveness when she came to the JJB. Someday, when I am grown up I want to look after my younger brother and educate him, take care of my both my sisters, support my mother’s family financially. I often pray that Sunita should be healthy and happy wherever she is, I feel like telling her that I want to help you if you are ever in any trouble, but I don’t know how I can do it.

Geeta aunty told me that the government is now planning to bring in a new law, and explained it to me. I strongly believe that this new law should never be passed. If every young girl who has committed an offence like the one I had committed also gets the kind of support I have got, gets good advice and guidance from good people, I believe 100% that they will surely become a good person. I am not a bad person; I did a bad thing, because I didn’t understand that my action can cause bad things to happen to Sunita. Please give me a chance to live a better life than what my family and society have given me, please give me a chance to do something for other ‘Sunitas’ by becoming a good mother, a good teacher and a good woman. My own family and village had no place for me and did not want me back, so where would I have gone other than back to the brothel from where the police caught me? If you had sent me to jail, I would have become a criminal seeing only the bad things of bad people around me. I would have probably become another Sarala  aunty. By sending me to the reception centre, JJB, Jeevodaya, and this hostel and by giving me a chance to meet so many good people and learn so many good things from them, I have today become a good person and not a criminal.

So please give young girls like me a chance to be a good citizen in this society.

When I look at so many leaders in our country, I feel and know that many of them have made many mistakes – big and small in their lives. Yet, have they not turned their lives around and become leaders and are they not doing great things for our country? Please give young people a chance and we will also show you what good we can do for this country. Please do not kill our spirit and hopes by sending us to jail. Help us, guide us, advise us, support us and show us the right path – don’t condemn us to a life in jail.

*******************************************************************************

This testimony was narrated by “G’ in Kannada and was transcribed in English by Kalpana Purushothaman, Senior Counselor, CCL – NLSIU over a 4 hour period. G was found guilty of kidnapping a 12 year old girl and selling her into commercial sex work.

G was invited to share her story and her thoughts about the new proposed legislation for children between 16 to 18 years committing serious offences. G felt very strongly about this issue and insisted that her story should be told so that other children like her could also benefit from rehabilitation and reformation oriented law rather than a punishment –oriented law.

She was emotionally prepared to tell her story and supported throughout her telling of it.  G is a huge movie buff so the counselor invited her to tell her story as if she were the heroine of her story, explaining some significant events, heroes and villains in her life, as well as what dreams she had for the future.  This story is exactly as she has narrated and has been read back to her and confirmed as accurately capturing what she has shared. The Kannada title of her story has also been coined by her. The English translation does not adequately capture the essence of her title. 

 

 

[1] Name changed to protect the identity of the child survivor.

[2] Adv. Geeta Sajjanshetty, Centre for Child and the Law who legally represented the child before the JJB.

[3] Ms. Vasanthi, Superintendent, Government Reception Centre for Women.

[4] Ms. Kalpana Purushothaman, Senior Counselor from Centre for Child and the Law, NLSIU.

[5] Ms. Ramadevi, Superintendent and Probationary officer.

[6] Dr. Preeti Jacob, Child Psychiatrist, Department of Child and Adolescent Psychiatry, NIMHANS.

[7] Jeevodaya – a fit institution.

[8] CWC – Child Welfare Committee.

[9] Sister Ancy – nun in charge of Jeevodaya, an NGO fit institution for girls.

[10]  A fit institution.

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Mediation: From Convention to Process

By
Amartya Bag
-
0

This article is written by Ayush Agarwal, a student of UPES, Dehradun

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It is well-said principle, which I found to be true if applied with sincerity, that,

‘To be a good speaker first you have to be a good listener’

Mediation is the best exercise where the phrase holds practicality. Convention holds that the mediation, which is a process that can be held anywhere and everywhere, starts with listing and ends with judgment given by the mediator. The convention does not hold true in the modern world. Process of mediation is not just about listening and speaking, it is about understanding for the benefit of society as a whole. The process, as though, doesn’t start when the mediators ask about the problem; it starts as soon as the parties enter the chamber and greets the floor.

A well conventional quote is true that ‘first impression is the last impression’. The environment of the room, the mood of the mediator and the energy in its floor marks a success of the mediation at its first instance. Mediator is an unknown person with the thought of holding a solution to a problem, a person who comes in, shares and interacts. Mediation is not just confined to the solutions of matrimonial disputes; it extends its hand upon the problem of cheque bounce, property dispute and general business transactions dispute. One thing, which is common in all the problems, is that it confers the problem of egoistic behavior behind every individual. Behind every successful mediation there is a sheer hardship of mediator who, in the process of mediation, successfully curbs the egoistic behavior of the both the parties.

There is one practical solution to a successful mediation that is a ‘win-win’ situation for both the parties. Neither of the parties loses anything through the process of mediation. After the completion of a successful mediation both the parties gets the joy of being together or if the mediation proves to be unsuccessful then parties still have an option of approaching to the Honorable court to enforce their rights. So a person never loses anything. It is somewhat a doctrine of alternative resort where no one loses, either they win, or they chose an alternative remedy.

Cases to the mediation are generally referred by the Honorable High Court to its Mediation Center for the disputes which could have an alternative redressal, could be settled outside the court and they do not create burden on the court’s proceedings. Mediation is generally carried on between two parties: the first who has approached the mediation center (generally the one who wants dispute to be settled without courts interference) and the other is the one who comes to center, because the party, who has invoked mediation, wants it to. The party invoking the process of mediation has to deposit a certain amount of money which is fixed by the mediation center, fixed as per se the financial capability of the party. A certain percentage of the amount is deducted by the mediation center and the remaining money is handed over to the other party for the expenses they incur on the travel and to make their way to the mediation center.

Mediation is an art as well as science. It works on certain laws and norms and learned through practice and experience. For the sheer comfort of both the parties, the process of mediation has no bar on the language. The party can either use English or the regional local language. The process starts with welcoming on parties with a short welcoming speech, which is mostly a written speech, read by the mediator.

It follows as such:

‘I ……..(name of the mediator) welcome you to the Allahabad High Court Mediation Center. Through the process of mediation we will be your mediator and will help you to reach a common solution. We will in no way reveal the information given by one party in front of the party if the other party does not consent so. We will not be as a witness in the court of justice. We hope that both the parties have approached this mediation center in the search of a common solution. We wish both the parties all the best and hope everyone leaves with a smile on their face.’

The opening words always help the parties to settle in the environment of the place, so that the mediation could be taken up in a very peaceful manner.

Mediation is a well-tested process in the modern scenario not a conventional hit and trial method. The process of mediation involves three different steps: the very first and foremost is welcoming the parties and finding the common problem of both the parties, the next step is meeting both the parties one by one so that the actual personal problem could be made out and then the last stage is mutually calling both the parties and to find out a common solution for both of them to come to a win- win situation.

In cases of matrimonial dispute, the parties have three different solutions to the problem that a mediator can provide. The first being that they can mutually figure out the dispute and keep aside their ego they could agree to a point as to how they want to spend their lives together. The second option which the parties hold is that they can come to a contract where the husband gives permanent alimony to the wife, and they could avoid the dispute being referred to the court. The last solution which the parties could have is that without wasting any of the time they could go back to the court and fight a long battle for their rights.

Procedure of mediation involves no legal formalities, so for this process they do not need to hire counsel and waste any further money. It is between two individuals, and no one else is needed to carry it on.  After making the opening speech and telling about the end result the mediator pleads any of party to speak of the problem in a gentle manner in front of the other so that the party on the other side knows exactly the problem is. The mediator from the very beginning keeps note of all the important points and chain of events, as told by the parties in their whole communication. When the party is done with its speech, the mediator repeats the main highlighted problem to the other party. He then asks the party to reply to the allegations and convey his own story and set of problems he is facing. After the parties are done with all allegations and statement, the mediator concludes with his whole story highlighting the important problem and set of solutions. The problem generally lies  with only two persons but when all set of people (the close ones) get involved with it, the problem in a way gets bigger.

The mediator after finding out the problem calls both the parties in person. Apart from the problem and the solution, the thing which counts is the will of both the parties to settle the matter and stay together. The process of personal conversation aims to check the will of both the parties to dissolve the dispute after which, only, the mediation could mark its success. Calling the person (herein referred to the person who holds the dispute) one by one, asking for a solution and then putting the mediator’s solution with it, this is how it goes. After identifying the problems, counting the will and if a possible solution could be seen, then both the persons, with whom the problem lies, are called upon and a solution is given for them to decide, to decide whether they can seek a solution or continue with dispute. If there is absence of will and no common solution, then, mediator leads the parties to a common path which could be the only possible solution to the problem that they hold. At last, both the parties are called upon together and the solution, which they wish to follow, is marked by the floor. All this happens over multiple weeks and not in a day. It takes a whole lot of time to identify and dissolve the problem. Sometimes the parties are asked to meet or to stay together if the ray of hope is seen at any instance.

The things which light up the mood apart from the environment, of the mediation center, are refreshments, refreshments which are mostly sweet in nature and at the same time not very costly as the center needs to manage the budget. Sweets, which always fill the mouth with sweetness and stays for a longer period of time, are the best thing to keep the mood light.

Mediation is a form of alternative dispute mechanism which at the instance helps the parties to settle the matter outside the court and give their life a new beginning, in turn it lowers down the burden of the courts and in turn it creates more jobs. Mediation Center is a mere replica of the old Indian culture where the elderly sit together to find a solution to the chaos created by young ones in the family. Statistics says that mediation proved to a success in 80% of the cases. Still India lacks in the amount of Mediation Centers when compared to its population. Need is to create more Center where the professionals could solve the dispute without being referred to the court. It saves money, time and emotions (being hurt). However, unfortunately, the matter mostly gets “unheard”.

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