Reserve Bank of India’s green deposit framework : analysis and recommendations

By

Rachit Garg

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May 28, 2023

0

This article has been written by written by Pranav M. Khatavkar.

It has been published by Rachit Garg.

Table of Contents

Introduction

The Reserve Bank of India (“RBI”) introduced a “Framework for Acceptance of Green Deposits” (“Framework”) on 11 April 2023. With the enactment of the Framework, India has now forayed into the globally-upcoming field of “Green Finance.” The Framework is slated to be enforced with effect from 01 June 2023.

The fundamental premise behind the enactment of the Framework seems to be twofold: firstly, to encourage banks and financial institutions to engage more in environment-related causes, and second, to regulate the activities of banks and financial institutions in the field of “Green Finance” (as defined under the Framework and elucidated further in this article).

The Framework applies largely to all banks, financial institutions, and to deposit-taking non-banking financial companies (hereinafter collectively referred to as “Regulated Entity/Entities” as the case may be). Whereas, the Framework categorically exempts “Regional Rural Banks,” “Local Area Banks,” and “Payment Banks” from its scope and ambit.

Green Finance & Green Deposit: An Overview

The International Organization for Standardization (ISO) in its report on Green and Sustainable Finance has stipulated that “green finance is one of a number of terms used to describe activities related to the two-way interaction between the environment and finance and investment.” The report further states that green finance includes “climate finance,” but it excludes the “social and economic aspects.”

The definition of “Green Finance” (hereinafter referred to as “Green Finance”) as it appears in the Framework, includes within its scope and ambit activities such as lending to or investing in environmental projects that contribute to “climate risk mitigation,” “climate adaptation and resilience,” and environmental projects that contribute to “other climate-related or environmental objectives such as biodiversity management and nature-based solutions,” etc.

Whereas, as per the scheme of the Framework, the term “Green Deposit” is a constituent of the Green Finance universe. The Framework states that in order to qualify as a “Green Deposit” (hereinafter referred to as “Green Deposit”), a deposit should satisfy the following criteria: (i) it must be an interest-bearing deposit; (ii) it must be received by a Regulated Entity for a fixed period; and (iii) the proceeds of such a deposit must be earmarked for being allocated towards Green Finance.

Denomination, Interest Rates and Tenor of Green Deposits

As per the Framework, Regulated Entities can issue Green Deposits either as cumulative or non-cumulative deposits. Upon maturity, the green depositor can either renew or withdraw the Green Deposit. Green Deposits shall only be denominated in the Indian National Rupee (INR).

The Framework mandates that the provisions of the RBI circulars pertaining to interest rate on deposits, deposit-taking non-banking financial companies, and housing finance companies shall apply mutatis mutandis to the Framework.

Board-Approved Policy and Financing Framework for Green Deposits

Regulated Entities are required to conceive a board-approved policy that must contain stipulations on the issuance and allocation of Green Deposits. Further, Regulated Entities are also required to put in place a “Financing Framework” (hereinafter referred to as “Financing Framework”) that should contain detailed stipulations on the effective allocation of Green Deposits.

Some of the stipulations that the Regulated Entities are required to make in their Financing Framework pertain to the classification of the environmental projects that may be financed from the Green Deposit proceeds, the third-party verification/assurance following the allocation of the Green Deposit proceeds, etc.

Regulated Entities are required to upload the copies of the aforementioned board-approved policy as well as the Financing Framework on their respective websites. Additionally, the Framework requires the Regulated Entities to get their respective Financing Frameworks reviewed by an external reviewer, and to also upload the report of the external reviewer on their website before implementing the Financing Framework.

Use of Green Deposit Proceeds

As per the Framework, the Regulated Entities are required to allocate the proceeds raised from their Green Deposits in accordance with the official Indian green taxonomy (“Taxonomy”). However, as of the date of the introduction of the Framework, the Taxonomy has not been codified.

Therefore, as an interim measure, the RBI has included an indicative list of eligible projects in the Framework, towards which the Regulated Entities can prospectively allocate their Green Deposit proceeds. The list specifies the particular sector as well as the description of the eligible projects in that particular sector towards which the Regulated Entities can prospectively allocate their Green Deposit proceeds. For instance, one of the prescribed sectors in the list is “Climate Change Adaptation.” Against this particular entry in the list, the description for the eligible project is- “projects aimed at making infrastructure more resilient to impacts of climate change.”

Other key environmental sectors covered by the list are renewable energy, clean transportation, sustainable water and waste management, green buildings, etc.

The Framework has also categorically excluded certain types of environmental projects from its scope and ambit. Some of the key exclusions from the Framework are nuclear power projects, direct waste incineration, landfill projects, hydropower plants larger than 25 MW, etc.

Third-Party Verification/Assurance and Impact Assessment

Regulated Entities are required to get the allocations from the Green Deposits verified and audited from independent third-party verification/assurance service providers. As per the Framework, the third-party verification/assurance report should stipulate whether the proceeds from the Green Deposit have been deployed in accordance with the indicative list of eligible projects (as detailed above), the criteria for project evaluation and selection, information on management of proceeds from Green Deposits, etc. Regulated Entities are mandated to upload a copy of the third-party verification/assurance report on their websites.

Impact Assessment Report

Regulated Entities (with the assistance of external firms), are required to prepare an annual “Impact Assessment Report” (hereinafter referred to as “IAR”) that is intended to assess the impact of the monies lent or invested in Green Finance activities. An illustrative IAR has been annexed to the Framework.

The Framework also states since impact assessment is an evolving concept, Regulated Entities may volunteer to prepare IARs for the Financial Year 2023-24; however, Regulated Entities are required to mandatorily get IARs prepared with effect from FY 2024-25.

Regulated Entities are also mandated to upload a copy of the IAR on their website.

Reporting and Disclosures

Regulated Entities are required to place a review report before their Board of Directors within three months from the end of a particular financial year. The review report should contain details such as the amounts raised pursuant to the Green Deposits, the environmental projects to which the Green Deposit proceeds have been allocated, etc.

Observations and Recommendations

The Framework has been codified with the simple yet noble objective of providing monetary encouragement to environment-related causes and activities. From that standpoint, the current version of the Framework is robust and conscientious.

Nevertheless (and as is the case with the first-instance version of any policy directive/mandate), there seems to be further room improvement and enhancement in the Framework. Therefore, elucidated below, are some of my observations and corresponding recommendations in relation to the scheme of the Framework.

Observations	Recommendations
The Framework requires the Regulated Entities to enact a board-approved policy as well as a Financing Framework primarily in relation to the issuance and allocation of Green Deposits. This could prospectively prove to be a repetitive exercise.	It is recommended that the Framework be amended so as to enable the Regulated Entities to enact a single policy/framework on the issuance and allocation of Green Deposits.
The indicative list of eligible projects towards which the Green Deposit proceeds can be prospectively allocated by the Regulated Entities is restrictive. For instance, one of the prescribed sectors in the indicative list is “Climate Change Adaptation.” Against this particular entry in the list, the description for the eligible project is- “projects aimed at making infrastructure more resilient to impacts of climate change.” A challenge could prospectively arise if an environmental project that studies the impact of climate change seeks funding. In such a scenario, the Regulated Entity might be constrained to deny financial assistance to this particular environmental project simply because that project’s description does not fall within the description.	It is recommended that the list be broadened to include varied types of environmental projects.

Conclusion

Enactment of the Framework is one step in the right direction towards making India into a green economy. With the regulatory recognition of Green Deposits, Regulated Entities are likely to feel more encouraged to extend financial assistance to and invest in green initiatives. The Framework in its current shape and form is certainly robust and conscientious, however, as stated above, there are certain areas in the Framework where there’s additional scope for improvement.

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An overview of challenges in ADR mechanism in India

By

Rachit Garg

-

May 28, 2023

0

This article has been written by Vibhuti Thakur, pursuing Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution and has been edited by Oishika Banerji (Team Lawsikho).

It has been published by Rachit Garg.

Table of Contents

Introduction

Considered to be a fast track system of dispensing justice, alternative dispute resolution (ADR) is one of the primary alternatives of the age-old court system. With the prime aim of reducing the excessive burden on the Indian judiciary, the Arbitration and Conciliation Act, 1996 was introduced. This introduction made rooms for arbitration and conciliation to be viewed as the prime ways of dispute resolution. Alongside these two, negotiation and mediation, although not governed by legislations, are considered to be methods of ADR. The ADR mechanism can be considered to be the consequence of the desire to settle disputes peacefully in a shorter time with more efficiency and it is expressly provided in the Directive Principles of States Policy under the Indian Constitu tion, that India being a welfare state aims at providing speedy and effective justice to all its citizens. One thing that needs to be aware of amidst this effective alternative of the court system, is the challenges that surround this mechanism. With every new thing introduced, comes a series of detriments that remain unwelcomed but does come along. The same has been discussed at large in this present article.

Origin and history of ADR

Although a system similar to ADR existed in society since ancient times. In almost all ancient societies such a system was there for dispute resolution. Examples can be seen in many mythological stories. One such prevalent example in Indian society is the Panchayat system which is redeveloped into Lok Adalat in the present day.

Meaning and purpose of ADR

Indian system recognises 5 types of methods of ADR:

Arbitration: It involves a voluntary and flexible method where parties choose the arbitrator (s) of their own choice. The award of arbitration is binding.
Negotiation: This technique requires parties to be ready and cooperative in settling the dispute in the presence of an unbiased third party called negotiator.
Conciliation: It is a method where parties try to improve and reconcile their relation with each other in the presence of a conciliator who helps the parties in the process.
Mediation: It is an informal way of resolving disputes where a neutral facilitator called mediator helps parties to come to a mutual agreement as to settlement of disputes.
Lok Adalat: It is one of the most effective methods of ADR as this involves voluntary actions of parties for solving disputes. It is very cost effective and is usually conducted on holidays so that it’s very convenient for parties to resolve disputes. Its primary purpose is peaceful and amicable resolution of disputes. Apart from that it is a speedier procedure and it saves money and anxiety cost of parties.

Why ADR is better than litigation

Litigation involves a huge sum of money from court fee to costs and advocate’s fees. Justice is expensive in the Indian judicial system. Whereas the ADR method is cost effective.
Litigation takes decades of time for settlement due to huge pendency of cases and large judges to population ratio. While ADR method resolves disputes in a very short span of time.
In litigation the final decision of the Court is imposed on both parties. One party always feels at loss. But in ADR due to mutual agreement both parties feel satisfied with the final award and the relationship between the parties does not become resentful.
ADR is less technical and procedural as compared to the litigation process. ADR saves the exertion of parties which happens in litigation.

Major challenges in ADR mechanism in India

Even after so many benefits, the ADR method is facing many challenges in its development in India. Few challenges are summed up below:

Circumstantial factors

There are certain factors which practically block the growth of ADR in India.

Lack of government support: India being a developing nation has a lot of uneven growth going on. Some areas are more developed than others and ADR is one such area which has got limited support from the government.
Lack of infrastructure and credible arbitral institutions: Even after 27 years of passing of Arbitration and Conciliation Act, 1996 there are not enough ADR centres in India. Main reason is the lack of funding. Small cities and towns are devoid of such methods of dispute settlement. In order to go for ADR parties will have to travel from their place to the cities where such facilities are available. ADR was meant to save the parties from anxiety about the cost of parties but lack of infrastructure defeats the purpose. This is one of the greatest hindrances in the growth of ADR in India.

Legal factors

Court’s check on arbitral proceedings: Courts in India very often interfere in Arbitral and ADR proceedings. Although Courts do that to ensure proper justice to the parties, it also hinders the autonomy of ADR mechanism and renders ADR less effective. One of the benefits of ADR was that parties are free to choose their procedure and conduct but due to over interference of courts this benefit is hampered.
Execution proceedings: After the award is passed, the parties again have to approach the Courts for execution purpose. In the ADR mechanism there is no other method for execution. The parties are now again in the same litigation process which was meant to be bypassed by ADR.
Lack of professionally skilled lawyers: In India there are very few skilled arbitrators,negotiators and mediators because of the generalised theoretical system of education. There is a lack of skill development and awareness among the students and lawyers because of non availability of proper institutions for such skill development. A large number of cases fail in ADR settlement due to unskilled professionals in the field.
Setting aside of award and appeal: Courts can set aside the award of arbitration on certain grounds and after that the dispute will be decided by the courts itself. It causes more complications and delay in the adversarial process. Moreover, there is a very narrow scope for appeal after the award from the ADR process. The parties have very few remedies.

Parties

Lack of awareness: The larger strata of our society live in poor conditions where for them getting a good income is their primary focus. In such conditions lack of awareness about such mechanisms is expected. The lack of legal education in society is one of the greatest hindrances in the growth of ADR in India.
Thought process of parties: Since the Arbitration and Conciliation Act,1996 has passed in 1996 and Courts have only recently focused on promoting the ADR mechanism, it has not become a very popular method among the Indian society as of that. Moreover, Indian society has more faith in the conventional judicial system as compared to the newly developed system of dispute resolution. It is good to cherish the judicial system but accepting the new change is equally important. There are many instances in today’s time when the courts themselves refer parties to pursue arbitration instead of the lengthy court process.
Presence of influential party: There are chances of coercion in cases where one party is more influential than the other. This is one of the major drawbacks of the ADR mechanism. If the weaker party is negatively influenced by the other party then it will be a mockery of the justice system and it will render the ADR mechanism infructuous.
Inability to settle: Despite all the efforts of negotiator/mediator/arbitrator if the parties are unwilling to resolve the dispute by mutual agreement then the ADR mechanism has failed and the parties will have to return to the adversarial system again after a loss of time they gave in the ADR process. It will cause the dispute settlement to further delay. There is no certainty as to the final award of the ADR. It all depends on the will and conduct of parties. Both parties have to come to an agreement in every step of the proceeding e.g., choosing arbitrator or the law by which they will be governed. If the parties don’t agree then the matter will go to Court again.

Other factors

Increasing cost: Nowadays due to lack of skilled professionals in the field of ADR a lot of retired judges and senior lawyers are taking up work as arbitrators, negotiators or mediators and charging huge amounts of fees. This makes the ADR system expensive and inapproachable to financially weaker sections of the society.
Inapplicability in criminal cases: All the cases are not suitable for the ADR process. Heinous crimes and serious cases of fraud and some issues of national and societal importance are not suitable cases of ADR mechanism. On one hand it is a positive thing that serious issues should not merely be resolved as a dispute but it is a drawback of ADR that in such cases this system is ineffective.

Solutions to the hindrances in growth of ADR

Minimal court intervention: Courts in India need to limit their interference in the ADR process to a reasonable level so that the process of ADR can be more effective and at the same time the interest of justice is also preserved.
Building infrastructure: There is a huge need of building ADR tribunals in every district of the states in order to make it more accessible to every citizen of India.
Creating awareness in society: Legal education must be a part of school curriculum in order to make all the citizens aware of their rights and remedies to their legal issues.
Regulation of fee for ADR: In order to make the process of ADR accessible and affordable to each and every sphere of society there must be a regulation of fee of arbitrators,negotiators and conciliators.
Proper training programmes for legal professionals: There must be proper training of legal professionals who wish to work in providing ADR solutions to the parties so that this method can be fructuous.

Conclusion

In the modern age of globalisation and technology it is the need of the hour to find better ways of dispute resolutions. Although the ADR system is comparatively new, it has a great role to play in the future judicial system. Developed countries already prefer such methods for settlement of disputes because time is of essence in the modern era. Our society and Government must also understand this need and address the challenges and shortcomings of ADR as soon as possible in a positive and more effective way.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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Brief about risk management of a company

By

Sneha Mahawar

-

May 28, 2023

0

This article has been written by Apeksha Choubey pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement and has been edited by Shashwat Kaushik.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

The company secretary plays a crucial role in a company; he/she performs duties of legal compliance and indirectly contributes to the company’s success. The company secretary identifies and evaluates the affairs and business of the company in such a way as to ensure that all legal and regulatory requirements prescribed by law are met. He also contributes to the risk management process of the company which is directly related to corporate governance, and he works closely with the risk management team to provide risk-related updates to all concerned parties. In this article, we will explore how the company secretary contributes to the risk management of the company. First, we will understand what risk management is and how it is related to good corporate governance, and, in the second part of this article, the company secretary’s role in it.

What is meant by risk management

Risk management refers to the process of identifying, assessing, and controlling potential risks that could impact a company’s operation and existence. There are different types of risks in any business such as financial risk, operations risk, market risk, legal risk, environmental risk, etc. Both external and internal factors affect the risks and their magnitude. These different risks may result in financial losses, legal issues, cyber security threats, supply chain disruptions, and market imbalances for a company. With the help of an effective risk management process, a company can mitigate or minimise these risks, monitor them on a continuous basis and accordingly apply risk strategies as necessary.

In large companies, the Board of Directors is mainly responsible for framing and implementing risk management policy and they can further delegate this work to committees known as Risk Management Committee (RMC).

What is meant by corporate governance

Risk management and corporate governance are two important concepts that are closely interrelated in every business. Various financial crises and scams all over the world induced the concept of “Corporate Governance.” The term corporate governance refers to the system of rules, practices, and processes that govern how a company is operated and controlled in a systematic manner. It involves the relationships between a company’s management, its board of directors, shareholders, investors, employees, creditors, suppliers, and other related parties. Good corporate governance ensures that a company operates in a transparent, better, and more ethical manner and makes sure that the interests of all parties are taken into account.

Risk management and its relation with corporate governance

The relationship between risk management and corporate governance is important because effective risk management is a key element of good corporate governance. By identifying and assessing the potential risks, companies can protect their stakeholders and other related parties to ensure they operate and manage in a responsible and sustainable manner. Additionally, strong corporate governance creates risk awareness and accountability within a company, which can further enhance its risk management capabilities.

The Risk Management Committee (RMC) should develop a strong risk management policy post-discussion with all members and stakeholders and contribute towards sustainable corporate governance. RMC formulates a detailed risk management policy, develops a risk methodology and process, and sets up controls to check that the process is working fine.

Risk management process

The risk management process broadly includes the following steps:

Deciding objectives: The first step is to decide the objectives for the risk management process. The goals of the risk process should be aligned with the aims of the company. The objectives are critical for setting up an effective risk management process.
Risk management plan: It is a formal plan made by the Risk Management Committee (RMC) in which goals, roles & responsibilities of team members, risk strategies to be adopted, method of assessment, review and feedback methods are documented.
Risk identification: It includes identifying potential risks that could impact a company’s operation and existence. In this step, past events and incidents are considered and data collation is performed to analyse the current situation. Here, different types of risks have been identified on internal and external factors such as market, finance, regulatory, legal, operations, creditors, counterparties, interest rate, employees, assets, competitors, environmental issues, inflation, liquidity, cyber security & information technology and so on.
Risk assessment: Risk assessment is the process in which the probability and magnitude of each risk is identified. This is done with the help of risk assessment tools and techniques to analyse risk impact on the company. Risk assessment is performed on both qualitative and quantitative factors for each risk identified in the above step.
Risk mitigation: It involved different risk strategies and their implementation. There are different ways of risk mitigation such as risk avoidance, risk transfer, risk reduction and risk acceptance. A company adopts all these strategies for each of the risks identified. Each risk strategy has its significance and can be deployed in a single mode or in combination with other strategies to eliminate or minimise risk and its impact in a company.
Risk monitoring and feedback: Ongoing monitoring is critical for the success of every risk management process in a company, which involves audits, reviews of risk strategies, and tracking as per objectives. It also includes immediate reporting of deviations from plans to take appropriate action to control them on time without disturbing the entire plan. Continuous feedback is the key component in this process.

Company Secretary’s role in risk management

In this section, the role of a company secretary is explained in the risk management process. The company secretary contributes to an effective risk management process in the following ways:

1. Legal and regulatory guidance: As we all know that the company secretary is responsible for ensuring that the company complies with all applicable laws, regulations, and policies. In the risk management process, he keeps up-to-date information of legal and regulatory changes and in this way helps the management of the company to identify and manage legal and compliance risks, which is considered very critical from the perspective of survival of the company and maintaining good corporate governance.

2. Disclosure: Every company is required to disclose material risks in its financial statements in a financial year. The company secretary ensures the material risks disclosure should be accurate and fair in the financial records of the company.

3. Maintain records and documentation: The company secretary acts as a guard to maintain accurate records and documentation as prescribed in applicable laws such as minutes of board meetings, resolutions, risk management plans, risk strategies and other required documents. This helps the company to demonstrate compliance with legal and regulatory requirements and also provides a record of decisions and actions taken in response to risks. The company secretary is required to record all risks identified, assessments done and mitigation strategies planned for each risk in the risk register. The board further approves these risk registers of directors in the meeting.

4. Coordinating risk management efforts: The company secretary also coordinates the risk management process by working with various departments and stakeholders to identify and evaluate risks, and by ensuring that risk management strategies are implemented effectively and document the risk monitoring results and action implemented. The company secretary is also responsible for conducting risk review meetings with the risk management team at periodic intervals and documenting the details of each meeting.

5. Communication: The company secretary is also responsible for supporting the board of directors in carrying out its duties and responsibilities, including oversight of risk management, and conducting stakeholders meetings to review and provide inputs on risk and mitigation plans. Additionally, he provides regular reports to the board with respect to the risk management team working and ensuring that the board is kept informed of any significant risks or issues. He also provides timely and ready information to the board to take any immediate decisions or respond to any emergency situation. He also communicates with other stakeholders to make them aware of risk management updates.

Risks associated with businesses

There are several types of risks associated; some of them have been mentioned below for your convenience:

Complying with the changing laws and policies;
Coping with the changing political competitive environment;
Protecting the assets of the company;
Safety of insider information of the company; and
Frauds and scams;

Conclusion

Overall, the company secretary plays a prominent role in ensuring that the company has an effective risk management framework in place, is working as per the objectives set and that risks are identified, evaluated, managed, and monitored in a timely and effective manner. He contributes to the entire risk management process, from planning to ultimate monitoring. He assists the Risk Management Committee (RMC) in creating a culture of risk awareness in the company through proper communication of all risk-related issues and decisions to the entire company on a periodic basis and maintaining essential documents.

In the current situation, corporate governance, environmental issues, and legal compliance are very important aspects to which any company should give first priority, as the survival of the company largely depends on these aspects only. The risk management team should develop an effective risk management plan considering all these important aspects and report its activities and plan of action to the board of directors with the help of the company secretary only. Bad corporate governance, environmental risks, and legal risks need to be considered while assessing risks. The company secretary is solely responsible for ensuring that the company has complied with all applicable laws and regulations, he has to prepare and maintain proper records as evidence that the company is keeping records as prescribed in the law, and he further furnishes all information requested by the government on behalf of the company.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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Analysis of Competition (Amendment) Act, 2023

By

Rachit Garg

-

May 27, 2023

0

This article is written by Shivam pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions). This article discusses the various nuances of the Competition (Amendment) Act, 2023.

It has been published by Rachit Garg.

Table of Contents

Introduction

The Competition Act, 2002 (“the Act”) is a legislation enacted by the Central government to promote and sustain market competition, protect consumers’ interests, and ensure freedom of trade and commerce. It aims to prevent anti-competitive practices, such as price-fixing, bid-rigging, and abuse of dominant position by companies.

In 2023, the Competition Act underwent an amendment to strengthen the provisions further and address emerging challenges in the market. This article will delve into the recent amendments to the Competition Act, 2002 and analyse their impact on the Indian economy and competition landscape. We will also explore the implications of the amendments for businesses, consumers, and other stakeholders.

Merger Control

Deal Value Threshold

The new amendment to Section 5 of the Act requires that for deals whose total value of the transaction exceeds INR 2000 cr and additionally the target enterprises (the acquisition of any control, shares, voting rights or assets of an enterprise, merger or amalgamation) has substantial business operations in India (SBOI to be specified by the further rules and regulations) will now qualify for the definition of the Combinations under Section 5 and the concerned parties to the deal have to file a notice to the CCI (“commission”) for approval of the deal according to Section 6 (2).

Change in definition of control

Previously the definition of control included only the control of the affairs or management of enterprises by another enterprises/group or the control of the affairs or management of the group by another group/enterprises.

But now, the definition will include the ability of one enterprise or group to exercise material influence in any manner over the management or affairs of another enterprise or group. This amendment has lowered the definition of control to material influence. Therefore the deals having a material influence on the management or the affairs of other entities can now invite scrutiny of the commission.

Value of the assets, turnover, and transaction where the whole enterprise is not involved in the transaction

Vide newly inserted Explanation (f) to Section 5, when a portion of an enterprise or division or business is being acquired, taken control of, merged or amalgamated with another enterprise, then the value of the assets, turnover and value of the transaction of the portion, division, or business shall be the relevant assets or turnover or relevant value of the transaction for the purpose of Section 5.

Timeline for the approval of the merger reduced

Time to file notice to commission

If any person or enterprise proposes to enter into a combination, then notice to the commission after the board of director’s approval of the merger/amalgamation or the execution of any agreement for acquisition (as the case may be) the previous restriction to file a notice to commission within thirty days of such approval or execution is omitted. Now the notice can be filed by the concerned parties before the consummation of the combination.

Reduction of approval period

The time period for the approval of the combination by the commission was reduced by the amendment Act from 210 days to 150 days. In other words, if the commission does not take any action on the notice of the combination submitted to it by the party concerned under Section 6(2) of the Act, then the combination is deemed to be approved.

Limiting the time for forming prima facie opinion

By introducing Section 29(1B), the time for forming the prima facie opinion on the notice received by the commission under Section 6(2) from the person or enterprises which proposes to enter into a combination is limited to 30 days. After that, the combination is deemed to be approved.

Reduction of the time to issue show cause notice to parties involved in combination

The time period to issue show cause notice to the parties involved in the combination, which in the opinion of the commission causes adverse effects on the competition, has been reduced from 30 days to 15 days.

Dilution of standstill obligation for open market purchases

Previously the parties to a transaction involving the purchase on the stock market which breached certain monetary thresholds provided in Section 5 required to notify the commission before consummation of the transaction for its approval. After the amendment, the standstill obligation is diluted for the acquisition which involved i) open offer; ii) an acquisition of convertible shares or securities on a stock market.

Now, the notice has to be filed with the commission after coming into effect of the transaction and the acquirer cannot exercise any ownership rights including voting rights and receipt of dividends, etc. unless and until the commission approves the acquisition according to the provision Section 6(2A).

Increased Penalty for False Statements

By amending Section 44 of the Act the maximum limit of penalty for giving false statements or omission to furnish information knowingly increased to 5cr from the previous penalty of 1cr.

Antitrust enforcement

Introduction of Settlement and Commitments

This is the most significant and important amendment by introducing Section 48A and Section 48B, which talks about the Settlement and Commitments in case of Vertical agreements and Abuse of Dominance cases. The parties investigated by the Commission for Abuse of Dominance and for Vertical Agreement causing an Appreciable Adverse Effect on the Competition (“AAEC”) can settle their dispute before the commission and put an end to the investigation by submitting the application for settlement or commitments to the commission according to the rules that will be formulated later. But cartels are not included in these sections therefore, in case of cartels, there will be no settlement or commitments.

When to make the proposal

For commitments, the offer is to be made any time between order to direct the director general (“DG”) to investigate the matter and before receiving the report of the DG by parties under Section 26(4).

For settlement, the application is to be made after receiving the report of DG by parties but prior to the final decision made by the commission in the matter.

Factors for consideration

The commission may after considering the nature, gravity and impact of the contraventions may agree to the proposal on other such terms as may be provided later in the regulations. While considering the proposal, the commission shall provide an opportunity to the parties concerned, the DG and other parties (if any) to submit their objections and suggestions. If the commission is of the opinion that the proposal is not appropriate or if the commission and the party concerned do not reach an agreement on the terms of the settlement or commitments within the time period as may be provided in the regulation, then the commission shall reject the proposal and proceed further with the inquiry.

Appeal

No appeal shall lie under Section 53B against any order passed by the commission under these sections regarding the settlement or commitments.

Revocation of the order

By application of Section 48C, in case the concerned party to the settlement or commitments does not give full and true disclosure or any material change that occurred in the facts and the party concerned fails to disclose to the commission, then the order passes under Sections 48A and 48B shall stand revoked and withdrawn and penalty up to 1 cr can be imposed and the inquiry can be restored by the commission.

Compensations for loss suffered due to settlement

If any loss is suffered by any enterprises, central govt., state govt., or any person due to contravention on which the commission passes the settlement order under Section 48A then that party which suffered the loss can claim compensation

Leniency plus for disclosing undisclosed cartels

According to new Section 46, if any seller, distributor, producer, trader, or service provided is being investigated for the alleged contravention of Section 3(3) and has disclosed about the cartel under Section 46(1), then makes a full and true disclosure about another cartel in which it is alleged to have violated Section 3, and that information enables the commission to form a prima facie opinion that there exists another cartel then the commission may impose lesser additional penalty.

The producer, seller, distributor, trader, or service provider may be allowed to withdraw their application for a lesser penalty according to the regulation provided later. But the commission and DG can act upon or use any evidence or information provided by such a person (mentioned above).

Hub and Spoke Cartels

The new proviso added to Section 3(3) provides that if any enterprises or association of enterprises or association of persons not related to the trade which is identical or similar in which the cartel is formed and if they participate or intend to participate in that cartel they are also presumed to have participated in that cartel and commission can proceed against that entity.

Limitation on Filing Information before CCI

The time period for filing information before the commission by person or entity mentioned in Section 19(1) for the alleged agreement which caused or is likely to cause AAEC vide Section 3(1) or abuse of dominance by any enterprises vide Section 4(1), limited to 3 years from the date on which cause of action arises but commission on providing sufficient cause for not filing the information can condone the delay.

Turnover i.e., Global Turnover

The amendment Act amended in Section 27(b) has introduced an explanation that defines the turnover as global turnover, which means when the commission finds that an agreement is in contravention of Section 3 or action of an enterprise contravenes Section 4, then the commission may impose a penalty up to 10% of the average global turnover for the last three preceding years.

This amendment is in derogation of the Supreme Court Judgment in the case of Excel Crop Care Limited v. Competition Commission of India & Anr. (2017), in which it was held that the turnover must be construed as relevant turnover, which means the turnover of the enterprises calculated as turnover specific to that product or services affected by the violation.

The Supreme Court, in this case, also talked about the doctrine of proportionality and observed that there should be a balance between the penalty imposed by the commission and the object that the commission wants to achieve i.e., to stop anti-competitive activities. The punishment imposed by the administrative authorities should not be too harsher than is necessary and rejected the contention of CCI to construe turnover as the total turnover of all the products. Therefore, this amendment can be challenged in a court of law as it violates the doctrine of proportionality and also the direction of the Supreme Court of India.

But this amendment has a positive side also that this will encourage more enterprises to resort to provisions such as settlement, commitments, or leniency.

Pre-deposit mandate of penalty for appeal

The amendment introduced in Section 53B mandates that to file an appeal against the order of the commission before NCLAT and if a penalty is imposed on the concerned party, 25% of the penalty is to be deposited by the party. Only then can it file an appeal to NCLAT.

Other important amendments

Provision related to Director General (DG)

Earlier DG was appointed by the Central government but now the provision has been changed and now DG is to be appointed by the CCI but with prior approval of the Central Government.

According to Section 41, the powers of DG have also been increased by the amendment Act and the DG can now summon and examine on oath the officers, other employees, and agents of the party being under inquiry and this examination can be used as evidence against them thereafter.

The agents under this section include bankers, auditors and legal advisors, etc. Although the legal advisor here means in-house legal counsel, this amendment raises a question regarding taking away the attorney-client privilege granted by Section 126 of the Indian Evidence Act, 1872.

Reduction in the punishment for contravening the NCLAT orders

Earlier (Acc. to Section 53Q), if a person contravenes the order given by the appellate tribunal was punished with imprisonment of 3 years and/or a fine up to 1cr but the new amendment reduces this punishment to mere contempt proceedings under Section 53U.

Experts to be called by parties

A party to a case before the commission can call experts from the field of economics, commerce, international trade, or from any other discipline to provide expert opinion in connection with the case.

Conclusion

This amendment aims to enhance the competition landscape in India and promote and improve the overall economic welfare of the country and has significant implications for businesses, consumers, and other stakeholders.

Reducing the timeline for the approval of the combinations and forming a prima facie opinion by the commission will provide more speedy approval for the combinations. The introduction of the new threshold of INR 2000 cr will increase the scrutiny of the commission on the large-scale combinations and the introduction of settlement and commitments provision will encourage the parties to resolve their disputes through these mechanisms quickly and efficiently and saving their significant time and legal costs. The introduction of the hub and spoke cartels and leniency plus will help burst the cartels and encourage competition in the country’s market.

But provisions regarding the global turnover and the examination of in-house legal advisors on oath also raise questions of constitutionality and breach of attorney-client privilege. They can be challenged in the courts. Nonetheless, the amendments represent a significant step towards strengthening India’s antitrust enforcement framework and promoting a competitive market.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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

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Section 10 of the Industrial Disputes Act, 1947

By

Sneha Mahawar

-

May 27, 2023

0

This article is written by Jaya Jha of the Vivekananda Institute of Professional Studies, Delhi. This article deals with a comparative analysis of Section 10 of the Industrial Disputes Act, 1947 and its various components. It also touches briefly on the aspects of voluntary arbitration under Section 10A of the said Act.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Industrial disputes can be a roadblock to the progress of any nation’s economy. To ensure a harmonious relationship between workers and employers, Section 10, a powerful provision that empowers the government to intervene and resolve conflicts through conciliation or adjudication, was incorporated into the Industrial Disputes Act, 1947. It serves as a vital tool in promoting the peaceful resolution of disputes in the workplace and safeguarding the interests of both workers and employers. Section 10 of the Industrial Disputes Act, 1947 deals with the procedure for the reference of disputes to the appropriate authority for adjudication.

The relationship between the workmen and the employee is very dependable despite many disagreements and disputes. This makes it important that they have a non-adversarial mode of dispute resolution. It outlines the process by which a dispute between an employer and a group of employees, or between employers and employees, can be referred to a third-party authority for resolution. The objective of Section 10 is to provide a legal framework for the resolution of industrial disputes in an orderly and peaceful manner. It seeks to prevent disruptions to industrial production and protect the interests of workers and employers alike. This article mainly deals with all the aspects of Section 10 in detail of the act and briefly discusses the scheme of voluntary arbitration mechanism provided in the act

What does Section 10 of the Industrial Disputes Act, 1947 say

Section 10 of the Industrial Disputes Act, 1947 empowers the appropriate government to intervene in an industrial dispute by referring it to a conciliation officer or a board for resolution. The Section states that if an employer or a group of employers, or any of their employees, or a group of employees, raises an industrial dispute, the appropriate Government may, by notification in the Official Gazette, refer the dispute to a conciliation officer for settlement. The conciliation officer then tries to resolve the dispute by bringing both parties to the table and facilitating negotiations. If the dispute is not resolved through conciliation, the government may refer it to a board for adjudication. This provision is aimed at promoting industrial peace and harmony by providing a mechanism for resolving disputes between workers and employers through peaceful means.

Who is an appropriate government under the Act

Under Section 10 of the Act, only the appropriate government has the power to refer disputes to the tribunal, court of inquiry, labour court, etc.

In the case of Prabhakar v. Joint Director Sericulture Department (2015), the Apex Court held that the aggrieved person cannot approach directly any labour court or any other body for adjudication until and unless the appropriate government has approved it, and the aggrieved person has to seek the reference of the dispute from the appropriate government.

In the case of Secretary, Indian Tea Association v. Ajit Kumar Barat (2000), the Supreme Court gives few points regarding the power of appropriate government

Without determining from the facts and circumstances brought to its notice that an industrial dispute exists or is apprehended, the appropriate government would not be justified in referring to Section 10 of the Act.
Order of the reference by the appropriate government will be considered an administrative order not judicial or quasi-judicial order.
The party has the right and they are open to prove that the reference made by the appropriate government is not an industrial dispute under the industrial dispute act,1947.

Section 2(a), tells who will be the appropriate government under this Act:

Central Government will be the appropriate government where:

any industrial establishment is under the control of the central government or carried on by the central government; or,
Railway Industry, banking and insurance company, a major port and mine and oil field.

The Supreme Court, in the case of Delhi International Airport (Pvt) Ltd v. Union of India (2011), held that the central government will be the appropriate government when the industry is under the central government, including industrial establishments related to the Airport Authority of India (AAI) and industries concerning air traffic.

And for any other industrial dispute, the state government will be the appropriate government.

The Court in the case of Hindustan Aeronautics v. The Workmen (1975), held state government as an appropriate government of a separate unit of the company if that company is in the jurisdiction of the state, even if the company is functioning under the company head office which is situated in any other state.

Dispute settlement mechanisms under the Industrial Disputes Act, 1947

The dispute settlement mechanisms under the Industrial Disputes Act, 1947 provide a range of options for settling disputes between employers and employees in India. These mechanisms aim to promote the peaceful and expeditious resolution of disputes and prevent disruptive industrial action such as strikes and lockouts. The mechanisms provide a framework for resolving disputes in a fair and impartial manner, with the involvement of neutral third parties where necessary and due consideration for the interests of both employers and employees.

Sections 10 and 10A of the Act provide the dispute settlement mechanism.

Power of the appropriate government to refer industrial disputes to the concerned authority

Section 10 of the Industrial Disputes Act, 1947 gives the remedies and explains under what circumstances and when the appropriate government can refer to the labour court, tribunal, and court of inquiry.

In the case of State of Madras v. C.P. Sarthy (1953), the Supreme Court held that the parties to the dispute do not have direct access, and the reference made by the government is the mode through which the parties can approach the judicial or quasi-judicial forum. Further, the Court said that the reference power has the utmost importance under the Industrial Dispute Act, 1947 as the main object of the Act is to settle the dispute and establish industrial peace.

According to Section 10(1), the appropriate government when it thinks that a particular dispute is an industrial dispute or it apprehends it to be an industrial dispute then it may in writing

Refer to the court of inquiry;
If that dispute is related or seems to connect with the matter concerning the Second Schedule of the Industrial Disputes Act,1947 the appropriate government will refer the matter to the labour court.
If the dispute concerning the matter is given in the Second and Third Schedule of the Act, the appropriate government will refer the dispute to the tribunal. But where the matter is related to the Third Schedule and that dispute is not affecting more than 100 workmen, the appropriate government, if it so thinks fit, can refer the dispute to the labour court.

The Supreme Court in the case of Steel Authority of India v. Union of India (2006) answered whether contractual labour should be abolished. The Labour Court held that contractual labour should be abolished. Further, the Apex Court held that this question should be decided by the central government, as it is the appropriate government in this domain and not the labour court.

National tribunal

Section 10(1A) tells us when the dispute should be sent to the national tribunal. Only the central government has the power to refer the dispute to the national tribunal, and it will be irrelevant whether the central government is the appropriate government for that industry or not. The central government will refer the dispute to the national tribunal in writing if in the government’s opinion the dispute

It is of national importance;
Or, by default of dispute nature involves two or more states or the industry establishment is situated in more than one state.

Section 10(2) gives power to the parties, saying that if they jointly or individually apply for the reference, the appropriate government shall refer it if it is satisfied.

Section 10(6) says that when any matter is referred to a national tribunal by virtue of Section 10(1A), no labour court or tribunal will have any jurisdiction to adjudicate any matter that is before the national tribunal, and accordingly:

If the matter referred before the national tribunal is pending before the labour court or tribunal then it shall be deemed to be quashed on the reference to the national tribunal from the labour court or the tribunals.
The appropriate government shall not refer as it is not lawful for the government to refer the adjudication matters before the national tribunal while the proceeding is pending related to that matter before the national tribunal to any labour court or tribunals.

Power to prohibit and put limitations by the appropriate government

Section 10(3) says that during the time of reference for the industrial dispute by the appropriate government, the government may issue a notice to prohibit the strike, lockout, etc. that is going on because of the dispute.

The Supreme Court in the case of Delhi Administration, Delhi v. Workmen of Edward Keventers (1978) expressed two important conditions which are necessary to make Section 10(3) applicable:

“There must be an industrial dispute existing and such an existing dispute must have been referred to a Board, Labour Court, Tribunal, or National Tribunal under this section, namely, Section 10(1). Section 10 stands as a self-contained Code as it were so far as this subject matter is concerned. The prohibitory power springs into existence only when such dispute has been made the subject of reference under Section 10(1).
Secondly, such a dispute must have been already referred for adjudication. Then, and then alone, the power to prohibit in respect of such referred dispute can be exercised.”

In the case of Madura Coats Employees v. State of Bihar (2017), the Patna High Court held that a conjoint reading of Sections 10(3) and 26(2) of the Act provides that the penal offence mentioned in Section 26(2) will only be applicable when reference by the appropriate government prohibiting the strike and lock-out is pending before the concerned authority. The Court further observed that if no such order or reference is there then the offence under Section 26(2) will not be applicable.

Limitations on adjudication proceedings

Section 10(4) puts limitations on the labour court, national tribunal, etc., and gives the scope of adjudication proceedings. When the appropriate government refers the industrial dispute by subsequent order to the concerned authority mentioned in Section 10 and also specifies the points of adjudication, the concerned court or tribunal should confine itself to those adjudication points only.

The Supreme Court in the case of National Council for Cement and Building Materials v. State of Haryana (1996) observed that Section 10(4) limits the jurisdiction of the adjudicatory tribunals and that jurisdiction is confined only to the points which were referred to in the matter by the appropriate government.

According to Section 10(5), the appropriate government is allowed to include any other establishment, group, or class of establishments of similar nature that are likely to be interested in or affected by the issue, either at the time of referring or at any time before the submission of the award.

Such inclusion is acceptable regardless of whether there are conflicts or apprehensions of conflicts at the time the establishment, group, or class of establishments is included. The appropriate government must have exclusive discretion to determine whether or not the dispute is of such a kind that any other establishment, group, or class of establishments of a similar nature is likely to be interested in or impacted by such a dispute. The appropriate government may come to this conclusion without receiving an application from another party.

Lapse of the matter

Section 10(8) says that no industrial dispute will lapse merely by the death of one of the parties to it, and the labour courts, national tribunals, and tribunals will pass the award and submit it to the appropriate government.

In the case of Satish Sharma v Union of India (2002), the Rajasthan High Court held that when the dispute is still existing and it has been not raised and it got a delay in raising, then reference that dispute can not be only refused on the ground that dispute has been delayed

Time frame for settlement of the dispute

Section 10(2A) of the Industrial Disputes Act, 1947 provides the time frame for settling the dispute.

The dispute was referred by the appropriate government to the labour court, tribunals, and national tribunal, and then, of course, the concerned authorities will have to settle the industrial dispute within the concerned time.

According to this Section, when the dispute concerns an individual workman, the time frame to settle the dispute is 3 months. Disputes should be resolved in at most three months.

According to Section 2(s), workman means any person who is skilled, unskilled, technical, manually, operationally, clerically, supervisory, etc. and hired for the reward in the industry, and the contract of the terms of employment can be implied or expressed.

And further for the dispute referring to the concerned authority workmen means any person who is being terminated, dismissed, discharged, etc.

Section 2(s) excludes “air force-governed persons, police, etc. from the definition of workmen”.

Further, Section 10(2A) provides that if parties to the dispute, according to the provisions of the Act, jointly ask for an extension of time from the labour court, tribunals, and national tribunals, then the concerned authorities mentioned in Section 10 can extend the time as they deem fit, and the reason for the extension should be recorded in writing. Computation of the extension period shall exclude the period where the proceedings before the labour court, tribunals, or national tribunals are being stayed by the civil court in the form of an interim order, injunction, etc.

This Section also says that the proceedings before the authorities mentioned in this Section will not lapse only because the time provided by them has expired.

All about Section 10 A: recourse to arbitration

The Industrial Disputes Act offers us numerous ways to recognise industrial disputes and also strategies to resolve them, and one of them is voluntary arbitration under Section 10A of the Act. This Section was added in 1956.

In the case of Karnal Leather Karamchari v. Liberty Footwear Company (1989), the Supreme Court observed that arbitration is one of the most effective and good ways to address and settle a dispute.

The Bombay High Court in the case of General Manager, Western Coalfields Ltd v. Sumit Mullick and Ors (2012) held that the remedies mentioned in Sections 10 and 10A are alternatives to each other, and if an agreement between the parties as per Section 10A for arbitration is being made, then the appropriate government can not refer the dispute to any of the authorities mentioned in Section 10 of the Act.

According to Section 10A, before the appropriate government refers the matter to the labour courts or tribunals, the parties to the industrial dispute may refer the dispute to arbitration in a written agreement.

Further Subsection 1A of Section 10A says that when an even number of arbitrators is being appointed, one umpire should also be elected so that when the even number of arbitrators give an opinion in the same different ratio, the umpire’s decision should prevail while passing the award.

Section 10A(3) says that the agreement to arbitrate must be given to the appropriate government, which must ensure it is published in the official gazette within one month of receiving it.

Section 10A(3A) mentions that the government must also make sure that parties who are interested in the dispute but are not parties to the agreement have an opportunity to present their matter before the arbitral tribunal. A notification to this effect must be issued according to Section 10A(3).

The arbitrators who were appointed by the parties will investigate the disputed matter, and the award that the arbitrator will pass shall be submitted to the appropriate government. The award should be signed by all the arbitrators as mentioned in Section 10A(4).

Where a notification under Section 10A(3A) has been issued to all parties, the government can prohibit the continuation of strikes or lock-outs that might have existed as described in Section 10A(4A).

The Supreme Court in the case of Rohtas Industries v. Rohtas Industries Staff Union (1976) held that the decision of the arbitrator appointed by the parties under Section 10A can be binding on the non-parties who are related to the parties in the agreement of the arbitration and that it was amenable to the jurisdiction of the High Courts under Article 227 of the Indian Constitution as these tribunals formed an extension of the sovereign justice system.

Conclusion

In conclusion, Sections 10 and 10A of the Industrial Disputes Act, 1947 play a vital role in ensuring the speedy resolution of industrial disputes in India. While Section 10 empowers the appropriate government to refer a dispute for conciliation, Section 10A provides for voluntary arbitration as an alternative method for dispute resolution. Both provisions are aimed at promoting industrial peace and harmony by encouraging parties to resolve disputes amicably and without resorting to strikes or lockouts. It is important to note, however, that the effectiveness of these provisions depends on the willingness of both parties to engage in the conciliation or arbitration process in good faith. With this in mind, it is essential that employers and workers approach the resolution of disputes with a spirit of cooperation and mutual understanding, in order to ensure the continued growth and development of India’s industrial sector.

Frequently Asked Questions

Is the decision by the arbitrator under Section 10A subject to judicial review?

Awards passed by the arbitrator are quasi-judicial and they can be challenged in the high courts. The Court in the case of The Engineering Mazdoor Sabha v. The Hind Cycles (1962) said that “The decisions of the arbitrators to whom industrial disputes are voluntarily referred under Section 10A of the Act are quasi-judicial decisions and they amount to determinations or orders under Article 136(1).”

Is it possible to challenge an award passed by the industrial tribunals after it becomes enforceable?

Yes, it is possible to challenge an award passed by the industrial tribunals after it becomes enforceable. The Supreme Court held in Bharat Bank Ltd. v. Employees of The Bharat Bank Ltd. (1950) that even though the Industrial Tribunal is not a court in the traditional sense because it performs quasi-judicial duties, it is still subject to the overriding jurisdiction under Article 136 of the Constitution, and it set aside the award made by the industrial tribunal.

What are the types of industrial disputes?

An industrial dispute can broadly be categorised into two parts:

Disputes related to rights mean disputes relating to the application or interpretation of an existing agreement or contract of employment.

Disputes related to interest relate to claims made by employees or suggestions made by management regarding the terms and conditions of employment.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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

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Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

An analysis of digital searches and general warrants through judicial lenses

By

Sneha Mahawar

-

May 26, 2023

0

This article has been written by Bhuvnesh Manchanda, pursuing Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution ( MAR-01-2023 ) and has been edited by Oishika Banerji (Team Lawsikho).

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Chances are there that you might have heard about the seizure of computers and mobile phones of the five academicians of Jawaharlal Nehru University by the Police as electronic evidence. Also, you might have also heard about the seizure of mobile phones of some Bollywood personalities in Sushant Singh Rajput’s case. On a frequent basis, we see the seizure of personal electronic devices hereinafter referred to as “PED” of the accused by investigating agencies across the country. In some cases, investigating agencies seize and search the PED at the drop of a hat without it being relevant to the case. The primary objective of writing this article is to define the extent of the power of law enforcement agencies regarding the search and seizure of PED. If you want to know about the evidentiary value of electronic devices then you may also refer to this article on Ipleader’s website. This article discusses the concept of digital searches and general warrants through judicial lenses.

Statutes that entitle the investigating agencies to search and seize the PED of the accused

Section 165 (Power to Search)

Section 165 of the Code of Criminal Procedure (CrPC) gives the power to a police officer to search the accused’s electronic devices while making an investigation in case of reasonable grounds. Although the police are under the obligation to get a search warrant issued before conducting a search. But if the police officer making the investigation has reason to believe that evidence cannot be obtained without undue delay then such is permitted under the law, provided that the police officer has to record his reasons for the search in writing after the search.

Section 102 of Crpc (Power to Seize)

Section 102 of the CrPC gives the power to any police officer to seize any property which may be alleged to be stolen or found under circumstances that create suspicion of the commission of any offence.

Section 29 r/w Section 69 of the Information Technology Act, 2000

Sections 29 and 69 of the IT Act, 2000 grants absolute power to the Controller or any other person authorised by him to access any computer system, any apparatus, data or any other material connected with such system, to search for obtaining any information or data connected in or available to such computer system if the officer has reason to believe that there is some contravention under the chapter.

Section 3 and Section 5 of the Criminal Procedure (Identification) Act, 2022

The Delhi High Court has affirmed that Section 3 and Section 5 of the Criminal Procedure (Identification) Act, 2022 gives the power to police and magistrate to ask the accused to furnish his biometrics which includes fingerprints along with other biological samples.

Position of exercising vested powers

Various law enforcement agencies like police, IB, SEBI, CBI, RAW, NIA, etc enjoy explicit power of search and seizure under their concerned statutes. Today, the procedure for search and seizure for PED and other articles is not different in India, both fall under the same category. PEDs are treated the same as any other ‘property’ under the definition. However, the procedure for other articles and PED should not be the same, the approach for search and seizure should be different in the case of PED. The existing IT Rules seem to be more one-sided, favouring investigating agencies more. Even the Committee of Experts On A Data Protection Framework for India, which was headed by former Supreme Court Justice B.N Srikrishna recommended suggestions to improve the existing IT Rules. Although the bill was withdrawn due to criticism.

The US Supreme Court has laid down certain protective measures against the arbitrary seizure of electronic devices in the case of Riley vs State of California (2014). However, the case of search and seizure of PED is different in India. Law enforcement agencies power to search and seize anything is wide and mostly unchecked in India. One can agree that the investigating agencies enjoy as much power to seize and search your PED, as your wife or parents.

There is no dispute over the search of PED through forensics, it is within the rights of law enforcement agencies, and such is also affirmed through various precedents. The dispute is whether the investigating agencies can compel the accused to furnish his/her Passwords or biometrics. Which we shall discuss further in this article. Guidelines regarding the search and seizure of PED are yet to come.

The constitutional validity of PED

One may say that search and seizure of PED violate the Right to Privacy and the Right to livelihood both of which are fundamental rights. But no fundamental right is absolute in nature. Courts consider the search and seizure of PED as a reasonable restriction. The court in the judgment of State of Bombay v. Kathi Kalu Oghad (1961) has already held that the information collected from electronic devices comes under the purview of “testimonial fact”.

Further, the Delhi High Court interpreted the Selvi judgment related to self-incrimination in light of searching data of the PED in para 42 of its order as, when the password is demanded by the investigating agencies for the identification or comparison of already existing information/data, it is not violative of Article 20 (3) of the Constitution of India but when it is required or sought for the sole purpose of accessing data from the accused from his PED, then the accused is within his right to refuse to provide such password as such would be self-incrimination. Right now, the matter is pending before the Hon’ble Supreme Court.

Procedure for search and seizure of digital devices

1. Seizure

As far as Section 102 of CrPC is concerned, police enjoy ample power to seize any electronic device if it relates to the investigation. The police can also seize the electronic device without a warrant provided that the officer must record the reasons in writing after the search.

2. Search

The primary motive for the seizure of the electronic device by the investigating agencies is to extract the data for investigation which may provide them with some lead. There are two ways in which a police officer can search your PED: by seizing the PED and sending it to the forensic department and the second is by compelling the accused to give the password or biometric of his PED.

First case (Searching the device itself)

The I.O. is within his rights to access the data of his electronic device which is seized from the accused. The only check and balance maintained while diagnosing your PED is the ‘hash’ process. Hash is generated using cryptographic tools. Hashing is used to check the authenticity of the data, whether it may have been tempered or not. Whenever someone makes a change in the PED then its hash value changes. One can know that there has been some modification or tampering in the data by knowing its hash value. Ideally, when a police officer seizes your phone or laptop, they are supposed to clone all the data in another system, which is called ‘image’, and then generate a hash of the system. Unfortunately, the police are often found to be violating this process left right and centre.

Second Case (Compelling the accused to give his credentials of the PED)

A Police Officer may ask the accused about the passcode but it is up to the accused to share the password or not. If anyone resists giving his PED then an adverse inference can be drawn against the accused according to the Karnataka High Court whereas Delhi High Court has held that no adverse inference can be drawn if the accused denies furnishing his password. Though both the Hon’ble High Court agreed that investigating agencies can compel the accused for the biometrics. The disagreement between the High Courts is for the furnishing of the password. Only the Court can compel the accused to share the credentials of his PED with investigating agencies (Karnataka High Court). The investigating agency needs to approach the court and ask for a search warrant under Section 93 regarding the PED for its search. The court can legally compel the accused to share his passcode and provide biometrics from the accused.

Also, the court has to issue an order that will comprise of

1. What device is to be searched

2. The role of the device in the crime

3. That nature of the search to be done

4. The place where the search has to be done, interdict the persons who conducted the search from disclosing the material procured during the search to a third party.

Judicial decisions

Karnataka High Court

The Karnataka High Court has already issued guidelines regarding the search and seizure of PED in a criminal investigation. The Karnataka High Court has held that furnishing passwords or biometrics does not violate the right to privacy and information obtained from the PED during the investigation, it falls within the exception of the Puttaswamy judgment. Some highlights of the judgment are-The I.O. must obtain a search warrant in the regular course of the investigation.

In case of apprehension that the device can be destroyed or made unavailable then the I.O can search the PED without a search warrant, provided that he/she must record his reasons in writing. No distinction was made between biometrics and passwords, both were allowed to be furnished by the accused at the demand of the investigating agency. You can also see the detailed guidelines by visiting the following link.

Delhi High Court

In this case, a computer system was seized by the CBI from the custody of the accused and when it was sent to CFSL agencies, the data of the computer could not be obtained. Therefore, an application was filed before the Delhi HC seeking direction for the password from the accused.

The Prosecution has every right to seize and search the accused’s mobile for forensic examination, but the court said that the law with regard to seeking passwords is different. Section 79 (A) of the IT Act, 2000 provides for the establishment of laboratories to examine an electronic record. The laboratory then examines such devices. The IO is within his right to access the data of the PED which were seized from the accused with the help of the specialised agency at the risk of accuse loss of data. Although the hon’ble court held that giving of the password itself is not a ‘self-incriminating testimony’ in a practical point of view, but the accessing of the data from the device to be self-incriminating in nature and therefore unconstitutional.

A distinction was drawn between passwords and biometrics, both were considered separate. The Hon’ble Delhi High Court held that the investigating agency has no right to seek the passcode of the electronic device of the accused without his consent as it will be violative of Article 20 (3) of the Constitution of India and Section 161 (2) of CrPC. Also, no inference can be drawn if the accused does not give the password of his PED. Although the investigating agencies can ask for biometrics under CRIMINAL PROCEDURE (IDENTIFICATION) ACT, 2022, it is within their right.

Supreme Court

The Hon’ble Supreme Court has imposed costs on the union government for failing to file a counter-affidavit in a writ petition seeking guidelines for the seizure of personal electronic devices by the investigating agencies, as the guidelines provided by the union government were not in standard to international practices. The matter has been pending before the Supreme Court since then. A detailed guideline for the search and seizure of PED by law enforcement agencies is yet to come.

Conclusion

The statutes in India are actually posed at giving us safeguards, remedies, and rights so that we are not convicted improperly. To gather evidence law enforcement agencies are granted wide powers of searching and seizing the PED of the accused if the PED of the accused is somehow related to the investigation. The Doctrine of Fruit of the Poisonous Tree does not apply in India. That is why the present law and approach for search and seizure is more one-sided and more favourable towards law enforcement agencies. If law enforcement agencies want to seize your PED, then they can do so, it is within their power. But the question was, whether investigation agencies can make the accused furnish the password of his PED? The question still remains unanswered. There is ambiguity on this topic, as Karnataka High Court has held furnishing passwords and biometrics does not violate the Right to Privacy, whereas Delhi High Court has held that giving passwords amounts to a violation of the Right to Privacy without the consent of the accused and is self-incriminating in nature. The Hon’ble Supreme Court of India has asked for the guidelines regarding the search and seizure of PED to be in standards with foreign judgment from the Union Government. However, the matter is still pending before the Hon’ble Supreme Court of India.

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M/S Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. & Ors : case analysis

By

Sneha Mahawar

-

May 26, 2023

0

This article has been written by A R K Ashrith pursuing Diploma in US Corporate Law for Company Secretaries and Chartered Accountants and has been edited by Oishika Banerji (Team Lawsikho).

Table of Contents

Introduction

The doctrine of separability states that an arbitration agreement would remain in force even after the termination, regardless of the outcome of the conclusion in a separate contract or arbitration. In other words, the spirit of agreement between the parties to uphold the engagement of arbitration would continue even after the termination of the main contract. The case of the N.N. Global Mercantile Private Limited vs M/S Indo Unique Flame Limited (2021) gives raise to some key issues in respect of the application of the above-introduced doctrine, following are the same-

Whether an arbitration clause is non-existent in law and unenforceable, if the substantive underlying contract which contains the arbitration clause is not stamped as per the relevant Stamp Act.
Whether the allegations of fraudulent invocation of bank guarantee furnished in the substantive underlying contact would be an arbitrable dispute.

This article discusses the doctrine of separability in light of the case of M/S Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. & Ors (2021).

Facts of the case

Indo Unique Flame Limited was allotted a tender by Karnataka Power Corporation Limited (KPCL) for the supply of coal, in an open tender. Subsequently, Indo Unique Flame Limited (IUFL) entered into a sub-contract with Global Mercantile Private Limited (GMPL) to supply the coal. Along similar lines, KPCL was provided a guarantee by IUFL and further IUFL provided a guarantee by GMPL for the supply. The guarantee was extended from time to time by the parties over the period of the contract.

KPCL due to certain differences with IUFL led to the invocation of the guarantee provided by IUFL. Further, IUFL invoked the guarantee provided by the GMPL. This invocation of guarantee by IUFL led to the proceedings in the commercial court initiated by the GMPL stating that “Indo Unique had not allotted any work under the Work Order, nor were any invoices raised, or payments made by it. Consequently, there was no loss suffered which would justify the invocation of the Bank Guarantee”

The main contract entered by the parties i.e., IUFL and GMPL is at the start of the contract which has a clause referring the disputes to the arbitration. After that all the transactions overwrite the main contract via the Work Order generated by the IUFL, this allows the arbitration clause to continue on the basis of the doctrine of separability

IUFL made an application to the Commercial Court referring to Section 8 of the Arbitration and Conciliation Act, 1996 asking for referring the dispute to the arbitrator for resolution. GMPL opposed the application stating that a bank guarantee is a different contract and there is no clause referring to the arbitration. The Commercial Court held that since neither party performed the contract entered upon in respect of the recent work order which overwrote the main contract, the court held that it would not accept the application made by the IUFL and would enforce its jurisdiction.

IUFL approached the Bombay High Court challenging the order issued by the Commercial Court. The Bombay High Court issued an order stating that arbitration is maintainable. The contention of the court was that the allegations of fraud on the invocation of the bank guarantee provided, should not be construed as a criminal offence. Henceforth, admitted the application under Section 8 and directed the matter to the arbitrator.

Whether the arbitration clause mentioned in the main contract is enforceable if the substantive underlying contract (main contract) is not stamped

The substantive underlying agreement is an unstamped agreement and contains the arbitration clause. The doctrine of separability states that parties entered into two separate agreements, where one is the agreement on the rights and obligations of the parties from the commercial transaction, the second one is the arbitration agreement which binds the parties to resolve the disputes through arbitration.

This doctrine of separability indicates that the validity of the arbitration agreement continues even if the substantive commercial contract is invalidated, ineffective or terminated except if the arbitration agreement itself challenged that. The autonomy of the arbitration agreement is based on twin concepts of separability and kompetenz.

To explain further the doctrine of kompetenz, it must be stated that the competence of the arbitral tribunal has the competence to determine and rule on its own jurisdiction, including objections with respect to the existence, validity, and scope of the agreement. It is an established fact from the various pronouncements that a change in the competence of the arbitration agreement would continue even if the substantive underlying commercial agreement is held as invalid.

Other factors considered for the competence of the arbitration agreement

An arbitration clause that is a part of the contract shall be treated as an independent agreement excluding other terms of the contract; and
The decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidation of the arbitration clause in that contract. In other words, the contract should not be invalidated by operation of law.

GMPL contended before the Supreme Court of India, the main agreement can’t be considered as evidence as per the relevant state stamp act. However, IUFL argued that it would be enforceable after it is duly stamped, for which opportunity must be given to the parties to make up the deficient stamp duty. So, it was further argued that it is a curable defect. The relevant stamp act, it is said that the instrument may be accepted as evidence provided the duty and applicable penalty for the same is paid in accordance with the provisions of the act.

It was made clear that the payment of Stamp Duty on the substantive contract as assessed by the collector, would be subject to the right of revision/appeal available under the relevant Stamp Act. Hence, the instrument can be admitted as evidence and it is a curable defect.

What is an arbitrable dispute

Disputes which are under the jurisdiction of the arbitrator. To understand this topic better is to understand the areas which are not arbitrable disputes.

The question of arbitrability was solved by the Supreme Court of India in Booz-Allen & Hamilton Inc vs SBI Home Finance Ltd. & Ors (2011).

In the above-mentioned judgment passed the three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under:

Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts).
Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters’ excluded from the purview of the arbitration agreement.
Whether the parties have referred the disputes to arbitration?

Fraudulent invocation of bank guarantee

The civil aspect of fraud is defined by Section 17 of the Indian Contract Act, 1872 as follows:

Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his [agent], or to induce him to enter the contract:

The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
The active concealment of a fact by one having knowledge or belief of the fact;
A promise made without any intention of performing it;
Any other act fitted to deceive;

GMPL claimed that the invocation of a bank guarantee is fraudulent as the agreement was never acted upon by the IUL. There is no invoice raised or payment received, hence omitting from the legal liability. Hence, the GMPL was on the contention that the invocation of the Bank Guarantee was fraudulent.

In N. Radhakrishnan v. Maestro Engineers (2009), the applicant made serious allegations of fraud against the respondents. Court took the view that the issues require detailed investigations and the arbitrator cannot properly deal with the same. The doctrine of kompetenz is applicable to understand the arbitrability of the agreement with the exception that the agreement itself is impeached as it is obtained by fraud.

Analysis of the judgment delivered

Impugned the judgment and order passed by the high court.
Directed for the payment of Stamp Duty to the Secretary of the court and forward the same to the Collector of Stamp Duty of the respective state within a period of 45 days from the date of receipt.
Directed the Appellant / Plaintiff to make the payment of Stamp Duty in the next four weeks from the date of communication of the order. Court said a contract is enforceable only if the contract is duly stamped in the earlier judgments. But after considering the evolved positions in modern law and arbitral jurisprudence, held that the non-payment of the Stamp Duty on the substantive main agreement will not make the arbitral agreement unenforceable.
The court placed main consideration on the doctrine of separability and kompetenz, and gave a verdict that the arbitral agreement stands valid irrespective of whether the main substantive contract is stamped adequately or not.

Conclusion

This judgment made several practices undertaken by the reluctant parties to rest and minimised the undue judicial interference in the matters. The judgment made the Indian Arbitration law in line with the international benchmarks. This also improved the overall efficacy of the arbitration processes for Indian businesses and improved the trust among the international communities for enforcing the contracts in the Indian business environment.

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Damages for emotional distress caused by insurer

By

Sneha Mahawar

-

May 25, 2023

0

This article has been written by Kajori Roy, who is pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution, and has been edited by Shashwat Kaushik.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Mental suffering is a kind of emotional distress caused by someone else’s action, either intentionally or accidentally. Mental suffering is something that is a psychological injury not related to physical. The law recognizes emotional distress as mental suffering, which is invisible. An insurer is a company or entity that pays out that compensation when the customer suffers a loss. The insurance policy is a kind of promise to reimburse the policyholder for a loss, and the insurer is liable for fulfilling those promises.

With the passage of time, acknowledgement of mental health is increasing gradually, and the law plays a vital role in this. There are a number of cases where the law recognizes mental suffering. Laws that recognize mental suffering are: –

Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013,

The sections of the Indian Penal Code that deal with mental harassment are:

An analysis of emotional distress in the eye of the Law

Earlier, damages in cases of mental injury were only recoverable in tort in the case of assault, battery, or false imprisonment. Eventually, the court recognized the mental injury as independent harm. Tort law provides protection to people from the wrongful conduct of others in terms of their person or property. With the passage of time and the advancement of society, emotional distress is considered one of the most serious harms. Emotional distress is further divided into two parts-

Intentional infliction of emotional distress, and
Negligent infliction of emotional distress.

Intentional infliction of emotional distress

There are certain kinds of behaviour where there is no physical harm, but that is deeply offensive in terms of physiologically involving such a kind of behaviour that it causes mental trauma to the plaintiff. Not all offensive conduct is considered intentional infliction of emotional distress.

The essential elements of intentional infliction of emotional distress that a plaintiff must prove to recover damages are:

The defendant must act intentionally or reckless;
It should be extreme and outrageous conduct; and
Causes severe emotional injury.

Fletcher v. Western National Life Insurance Co.,

U.L. Fletcher was a forty-year-old man who was a victim of an industrial accident. He was a family man, and to give protection to his family, he purchased a disability insurance policy from the defendant. He suffered an injury in his back while he was at work; he was eventually placed on disability by his employer. Despite all the medical reports, the insurer’s company found a way of avoiding Fletcher’s claim and concluded that the claim was only for sickness and not for any injury. Fletcher filed a case at this point against Western National for intentional infliction of emotional harm. The court found that the insurer acted maliciously in bad faith and awarded compensatory damages to Fletcher. The case moved to the California Court of Appeals, where the Court found the defendant’s actions extreme and outrageous, and due to the defendant’s wrongful action, the plaintiff suffers mental injury. So historically, it was the first case to make use of a new tort, the intentional infliction of mental distress, in the insurance sector.

Negligent infliction of emotional distress

Negligent infliction of emotional distress is a tort where a defendant’s negligent act becomes the reason for someone’s mental suffering. To establish the claim, plaintiff has to prove: –

That the act of the defendant was negligent,
That due to the defendant’s negligent act, the plaintiff suffered severe mental distress. Recognition of the intentional tort of bad faith is an altogether new concept in tort law. Recovery of damages for the tort of bad faith develops through judicial decisions. At common law, there was no tort of bad faith actionable against an insurer. Hilker v. Western Automobile Insurance Co. (1931) was the first case that shed light on and sanctioned a cause of action for bad faith conduct by the insurer.

Crisci v. Security Insurance co. (1967)

In the law of contract, normally an insurance contract is governed by the obligations of the parties and awards damages for the breach of the contract, and the general rule is that damages for mental suffering are not allowed. The English case of Hadley v. Baxendale(1854) talks about two types of damages one is general damages and the other is consequential or special damages. According to the rule of Hadley v. Baxendale, consequential damages can be claimed by the non-breaching party only if both parties to the contract are aware of the possibility of the loss. Generally, insurance contracts are observed by the court as commercial in nature rather than personal, and damages for mental suffering are allowed only in the case of a personal contract. However, the situation changed after the case of Crisci v. Security Insurance Co., in which Rosina Crisci, who was the owner of an apartment building, purchased general liability insurance of $100,000 from Security Insurance Co., covering her apartment building. One of the tenants of Mrs. Crisci suffered a physical injury and experienced psychosis after this incident, falling down from the staircase of the apartment. He filed a suit against Mrs. Crisci, seeking damages for personal injury against her for $400,000. The defendant insurance company had an opportunity to settle the claim but neglected to do so. As a result, the suit went for trial, and Mrs. Crisci was held liable and instructed to pay damages of $101,000. Due to this, she suffered a huge financial loss, which led to mental trauma and a suicidal tendency in her. She brought a suit against the Security Insurance Company for neglecting to settle the claim, which is covered under the policy. The court held in this case that emotional distress damages were recoverable for an insurer’s bad faith conduct and introduced the ‘bad faith law.’ Further, the court made the observation that, though the bad faith law is generally treated as a tort, the plaintiff is not precluded from maintaining a claim in the contract as well. Generally, damages for mental suffering are not available under a commercial contract. The court found that liability insurance is a personal contract in nature that is responsible for the peace of mind of the insured person.

Damages in a bad faith case

Broadly, there are three categories of damages, and those are:

Economic,

Non-economic, and

Punitive,

Economic damages are the damages that are caused in monetary terms and can be measured as a quantity. For e.g.,- a medical treatment bill. These damages can easily be compensated for or restored, which helps restore a person to their original condition. But non-economic damages can’t be restored or compensated; these include pain, humiliation, damage to reputation, etc. Punitive damages can be awarded if it is proved that the insurance company’s intention was to commit fraud with the client, or acted with ill will, etc.

Economic damages

Economic damages are directly related to the claims you file for if you suffer losses. For e.g.,- if your car meets with an accident, you can easily calculate the cost of restoring it. We all get insurance with the hope that these companies will compensate us for our losses, but sometimes these companies underpay, refuse to pay, ignore some portion of the claim, etc., in such cases, they are said to act in bad faith. As a result, you are entitled to seek economic damages caused to you because they acted in bad faith.

Non-economic damages

We get insurance for times of emergency, and the last thing we can expect in such times is for these companies to act in bad faith. So when these companies act in bad faith we obviously suffer losses, and because of those, we get stressed, feel mental pain and agony so in such cases you can sue for damages for causing mental pain, agony, etc. Non-economic damages include pain, stress, harm to reputation, public humiliation, etc.

Punitive damages

Punitive damages are the damages that are awarded over actual damages as a punishment, these are added additionally to the actual damage amount. These damages are generally awarded at the court’s discretion if they consider the defendant’s behaviour to be exceptionally harmful.

How much is a bad faith claim worth

This question can’t be answered directly because the value of the claim is greatly influenced by the type of damage. Every case has its own factors and complications, and the amount of damage depends only on those factors.

Conclusion

In order to recover damages under a contract, both parties must be aware of the possibility of future losses due to the breach of the contract. Mental suffering is not foreseeable by an insurer, and recovery of damages for mental suffering in a contract is not so smooth because it is caused by an insurer. Tort law played a huge role in recognizing intentional infliction of mental distress. The new tort remedies compensate the insured and deter insurers from denying future claims. Tort law is not codified in India, largely following the British Common Law. Though there is an awareness of emotional distress, there is still a long way to go. Emotional distress caused by an insurer is not well addressed in India. The “new tort” law added altogether a new dimension to an insurance contract where remedies for mental suffering are available.

References

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Analysis between Indian Contract Law and English Contract Law

By

Sneha Mahawar

-

May 25, 2023

0

This article is written by Diksha Ranjan, pursuing Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution. In this article, various important aspects of contract law will be dealt with from the comparative perspective of India and UK analytically.

This article has been published by Sneha Mahawar.

Introduction

In our day-to-day life, we deal with various transactions and negotiations and we are unaware of the fact that we enter into a contract by doing such transactions, agreements, negotiations, etc. The basic essentials, principles and validity of contracts in India are governed by the provisions of the Indian Contract Act, 1872 (hereinafter referred to as ICA, 1872). It deals with various ingredients of contracts in India like proposal, acceptance, consideration, free consent, quasi-contract, breach of contract, damages, etc. In this article, various nuances of contract law will be discussed from the comparative perspective of India and the UK.

What is a contract

It is pertinent to discuss very briefly what is a contract before discussing the important aspects of contract law from the comparative perspective of India and the UK.

According to Section 2(e) of the ICA, 1872, an agreement is defined as any transaction in which two parties enter into a promise or set of promises forming consideration for each other and this agreement if it is enforceable in the eyes of the law, then it turns out to be a contract as per Section 2(h) of the ICA, 1872. For a contract to be valid and enforceable in India, it must fulfill all the conditions mentioned in Section 10 of ICA, 1872 i.e. the following factors must be met:

It must be made with the free consent of the parties.
The parties must be competent to enter into the Contract
There must be lawful consideration and lawful objective.
The contract should not be declared void by any law in force in India.

However, every country has its own law to govern the contracts in their jurisdiction. Let us analyze how the provisions of contract laws in India differ from the provisions of English Contract law through relevant provisions and case laws.

Capacity to contract with respect to a minor’s agreement

Position in English Law

A minor is a person who has not completed the age of 18 years as per the Births and Deaths Registration Amendment Act (No 1 of 2002). In English Law, a minor’s agreement is considered to be a voidable contract. It is voidable at the option of the minor. A “voidable contract” is a contract that can be unenforceable at the option of one party of the contract and he can rescind the contract as per his discretion

Position in Indian Law

A minor is a person who has not completed the age of 18 years as per the Indian Majority Act, 1875.

Section 11 of ICA, 1872 provides for the provision of persons who are legally competent to enter into a contract. According to Section 11 of ICA, 1872 only a person who is a major is in a position to enter, negotiate or deal with a contract. The jurisprudential essence behind this provision is that since the parties enter into a legal obligation, the parties must be mature enough to assess the contractual obligation they are entering into.

There was a controversy in India about whether the minor’s agreement was void or a voidable contract and this controversy was laid to rest by the Privy Council in Mohori Bibee vs. Dharmoda Ghose (1902-1903). The facts of the case are as follows:

Brahmodutt, who was a Mahajan, carried out the business of money lending through his agent.
Dharmodas Ghose approached the agent of Brahmodutt for money lending. Even though he was a minor, he represented himself to be a major.
The agent was aware of the fact that Dharmodas Ghose was a minor and still the loan agreement was made between the Mahajan and the minor through the agent.
Mahajan made the part payment of a certain sum of money and the minor mortgaged his two properties.
Since Dharmodas Ghose was a minor, his mother filed a suit for cancellation of the mortgage on the ground of his minority.
Mahajan raised the contention that the minor’s agreement is a voidable contract and not a void contract, but the Trial Court held that the agreement is void as it was entered by the plaintiff when he was a minor.
Brahmodutt then appealed the same in Calcutta High Court and the High Court upheld the decision of the Trial Court, dismissing the appeal of Brahmodutt.
Brahmodutt (the original appellant) had died at the time of appealing to the Privy Council, so he was replaced by his successor, Mohori Bibee. The controversy regarding the minor’s agreement was settled by the Privy Council, stating that “minor’s agreement is void-ab-initio i.e. void from the very beginning”.

Doctrine of Restitution with respect to a minor’s agreement

Position in English Law

When a minor enters into an agreement with another and receives benefits out of the agreement, then the question arises that will the minor be liable to restore the benefit or not i.e. can there be restitution against the minor? This principle is settled in English law in Leslie (R) Ltd. vs. Sheill (1914). The facts of the case are as follows:

In this case, a minor borrowed a certain sum of money and did not return and the creditor filed a suit for return of money.
In this case, the Court made a distinction between repayment of debt and restitution of money.
The Court held that if the debt is repaid, it will not be restitution. It will instead amount to enforcement of the contract. Court remarked that ‘restitution stops where repayment begins’. The Court opined the following in the case of restitution against minors:

1. If, in any agreement, the benefit received by the minor is property, then restitution is allowed, provided that the property is traceable by virtue of the equitable doctrine of restitution.

2. The minors cannot be allowed to be liable for contracts in a manner it would become an indirect manner of enforcing the contract.

Position in Indian Law

The question of restitution in India in the case of a minor’s agreement was first raised in Mohori Bibee’s case. The contention in the case is that if the mortgage deed could not be enforced, the minor should return the benefit he has received under Section 64 and Section 65 of ICA, 1872. The Court held the following:

The Court held that restitution could not be granted under Section 64 of the Act because Section 64 is applicable in cases where the contract is voidable. In the minor’s agreement, the contract is void ab initio.
Court further held regarding Section 65 of the Act that Section 65 is applicable when the contract becomes void. There is no question of ‘contract becoming void’ because, in the first case there is no contract in the case of minor i.e. the contract does not become void; it is an agreement that is void ab initio.

Privity of consideration

According to Section 10 of ICA, 1872, one of the essential elements of enforceability of agreements is ‘lawful consideration’. In Currie vs. Misa (1875), the Court held that a valuable consideration in the eyes of the law must consist of some right, interest, profit or benefit in favour of one party or some forbearance, detriment or loss suffered by the other party. The doctrine of privity of consideration provides that the consideration must move from the parties to the contract only.

Position in English Law

Under English Law, the consideration must move from the promisee only. If the consideration is furnished by any other person, then the promisee becomes a stranger to consideration and, therefore, cannot enforce the promise.

For example, If ‘X’ and ‘Y’ enter into a contract wherein ‘X’ agrees to pay a certain sum of money for a work to be done by ‘Z’. In this case, Y has no privity of consideration. If ‘Y’ sues for non-performance of promise, he will not be allowed to do so.

Position in Indian Law

Consideration is governed under Section 2(d) of the ICA, 1872. Section 2(d) of ICA, 1872 uses the phrase “promisee or any other person”. This clearly indicates that under Indian law, the consideration can either move from promisee or any stranger to consideration. Therefore, a person may be a party to a contract but he may be a stranger to the consideration. For example, if ‘A’ and ‘B’ enter into a contract wherein ‘A’ agrees to pay a certain sum of money to B for a work to be done by ‘C’. In this case, ‘B’ is a stranger to consideration, whereas C is not a stranger to consideration but he is a stranger to contract.

In English law, a stranger to consideration cannot sue and in Indian law, a stranger to consideration can sue. This principle was settled by the Court in Chinnaya vs. Ramayya (1882) and the brief facts of the case are as follows:

In this case, an old woman, by gift deed, gave certain properties to her daughter.
It was provided in the gift deed that an annuity of Rs. 653 was to be paid to the plaintiff, who was the sister of the old woman.
The defendant executed an agreement in favour of the plaintiff, promising to give effect to the stipulation in the deed, but the annuity was not paid.
The contentions of the daughter were that the plaintiff was a stranger to the consideration. Hence she cannot sue.
It was held by the Court that strangers to the consideration can sue.

Doctrine of frustration

The doctrine of impossibility of performance of contract connotes that when the performance of the contract becomes impossible due to some unforeseeable event, the contract is said to be frustrated. Impossibility can be of two kinds; initial and subsequent. Initial impossibility means that at the time of agreement formation, the act was impossible i.e. impossible from the very beginning. Subsequent impossibility means that at the time of the formation of the contract, the act was possible to perform but due to the occurrence of certain events after the formation of the contract the act subsequently became impossible.

Position in English Law

In England, the ‘absolute contract theory’ was laid down in Paradine vs. Jane (1647), which stipulated that once a contract has been made, it must be performed and the subsequent change in circumstances should not affect the contract already made. Subsequently, this rule was changed in Taylor vs. Caldwell (1863) and the Court formulated the ‘doctrine of implied term’. This indicates that an implied condition would be read into the contract when the performance of the contract becomes impossible. The brief facts of the case are as follows:

In this case, the defendants agreed to let the plaintiffs use their music hall for a concert.
The hall was destroyed by fire before the concert could start.
It was held by the Court that in every contract there is always an implied term that in case the performance of the contract becomes impossible, the parties shall be excused in this case and will not be held liable for non-performance of the contract.

In Krell vs. Henry (1903), the concept of frustration was not only limited to physical impossibility but also extended in cases where the object which the parties had in mind failed to materialise. The brief facts of the case are as follows:

The defendant hired a flat to witness the coronation procession of the king.
The procession was cancelled due to the illness of the King.
It was held that the real object of the contract, as recognised by both parties failed. Therefore, the object of the contract was frustrated and the plaintiff was not entitled to recover the balance amount of rent from the defendant.

Position in Indian Law

Section 56 of ICA, 1860 provides for the provision of frustration of contract. Section 56 (The first paragraph talks about initial impossibility) provides that any agreement which the parties enter into, knowing that the act agreed to be performed in the contract is impossible to perform, then such contract is void.

Second 56 (Second Paragraph talks about subsequent impossibility) provides that after the parties have entered into the agreement, and some unforeseen circumstance arises which makes either the performance of the contract impossible or the object of the contract become unlawful which cannot be prevented by the parties, then such contract becomes void.

The word “impossible” used under Section 56 covers both physical and practical impossibility as held by the Supreme Court in Satyabrata Ghose vs. Mugneeram Bangur (1954). It was also held by the Court that the ‘ Doctrine of implied term’ has no application in India because Indian law is governed by Section 56. The ambit of frustration is wider in English Law as it covers implied conditions of contingent situations, which is an aspect covered in Indian Law under Section 32 of ICA, 1872. Section 56 only covers the aspect when a situation has arisen after the formation of the contract, which is by its interference defeating the purpose of the contract only. Therefore there is no applicability of the implied conditions in this scenario.

Damages

Non-performance of contract which is not excused by law amounts to breach of contract. The party who is injured by a breach of contract may bring an action for damages. ‘Damages’ means compensation in terms of money for the loss suffered by the injured party. If the parties at the time of making the contract agree to the compensation payable in the event of a breach of contract then it is either liquidated damages or penalty.

Position in English Law

According to English law, the sum prefixed by the parties to be paid in case of breach of contract falls into two categories; liquidated damages and penalty. If the sum agreed upon is the genuine pre-estimate of the prospective damages, it is known as liquidated damages. If the sum is excessive or highly disproportionate to the likely loss, then it is known as a penalty.

In Dunlop Pneumatic Tyre Co. Ltd. vs. New Garage and Motor Co. Ltd. (1915), the House of Lords laid down the following proposition with respect to liquidated damages and penalty:

The expression of the parties is not conclusive, and it is the duty of the Court to find out whether the payment stipulated is liquidated damages or penalty.
In penalty, the damages is usually a high and unreasonable amount, while in liquidated damages, the sum named is a genuine pre-estimate of the damage. It depends upon the terms and conditions of a contract whether the sum named is penalty or liquidated damages.
If it is liquidated damages, then in such condition, the whole sum is recoverable, but if the sum named is penalty, then the whole sum will not be payable. The Court will grant reasonable compensation in such cases.

Position in Indian Law

Section 74 ICA, 1872 provides for liquidated damages and penalties. Essential elements of Section 74 of ICA, 1872 are as follows:

There must be a breach of contract.
A sum must be mentioned in the contract which is payable on breach or any other stipulation by way of penalty.
Proof of actual loss is not necessary.
The party complaining about the breach is entitled to receive reasonable compensation from the other party.
The compensation must not exceed the amount named or the penalty.

Therefore, it is immaterial whether the sum named is liquidated damages or penalty as the distinction between both is abolished in India. Moreover, It is not necessary to prove the actual loss suffered by the party. Section 74 dispenses with the necessity for determining the actual loss suffered by the party.

Indemnity

Position in English Law

The term ‘indemnify’ means to make good the loss of another in certain situations. It is a contract in which one party promises the other party to compensate any loss which arises either by the conduct of the promisor himself or by the conduct of any other person. In English Law, the scope definition of indemnity is wider than indemnity in India. It also covers the cases of loss arising from accidents like fire, natural consequences, etc. Every contract of insurance except life insurance is a contract of indemnity under English Law.

Position in Indian Law

Section 124 of ICA, 1872 deals with ‘Contract of Indemnity’. A contract of indemnity is a contract between two parties i.e. indemnifier and indemnity holder, wherein the happening of the loss is the contingency on which the liability of the indemnifier is dependent.

Under Indian law, the concept of indemnity is limited only in cases where the loss is caused either by the promisor himself or by any other person. This definition of Indian law under Section 124 of ICA, 1872 does not cover within its ambit loss arising from accidents like fire, natural consequences etc. In Indian law, the loss to claim indemnity must be caused by human intervention only. Therefore, in India, contracts of insurance are covered under the contingent contract and not under a contract of indemnity. Indemnity in English Law is wide enough to cover loss arising from any cause whatsoever.

Conclusion

Therefore, Indian Contract Law differs on the above-mentioned points from English Contract Law. Indian Contract Law came into force in the year 1872 and with the evolving time, the Indian Contract Act also needs to be re-evaluated and certain provisions should be changed. For example, during Covid-19, the Indian Courts treated the contracts as force majeure and not as a doctrine of frustration. The reason behind this was that there is no such concept of “Doctrine of implied term” in Indian Law. We deal with different kinds of contracts and negotiations on a day-to-day basis. Therefore, with time the law should also evolve to make a smooth process for the parties entering into a contract.

References

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Section 468 IPC punishment

By

Rachit Garg

-

May 25, 2023

0

This article is written by Panya Sethi, a law student at Symbiosis Law School, Noida. The article covers the meaning of forgery as laid out under Section 463 of the Indian Penal Code, the essential ingredients that entail forgery, including the creation of a fake document or electronic record, the intent to harm any member of the public, and illustrations to explain the instances of forgery and the punishment for the same under Section 468 of the Indian Penal Code, 1860.

It has been published by Rachit Garg.

Table of Contents

Introduction

Forgery is defined as an offence under Chapter 18 of the Indian Penal Code, 1860. Cases involving the falsification of written or digital records are addressed in Sections 463 through 477-A. One such law is Section 468 of the Indian Penal Code, 1860. The definition of forgery under Section 463 and the penalties for it have been thoroughly examined in this article. In addition, my research has led me to conclude that extreme examples of forgeries do exist. (Section 466-469). For example, forgery with the intent to defraud (Section 468), forgery with the intent to smear (Section 469), etc. Case laws are cited and examined in the last section of the article, which covers Sections 472 through 477-A.

Forgery defined

The purposeful creation or alteration of a document or electronic record with the goal to deceive or fraudulently obtain money or property is known as forgery, which is a severe felony. According to Section 463 of the Indian Penal Code, this unlawful conduct qualifies as a serious crime. Given the potential damage that may result from using counterfeit papers, it is crucial to implement strict methods to stop, detect, and punish such fraudulent behaviour.

Punishment for the crime of forgery committed with the purpose to defraud another person is laid forth under Section 468 of the IPC. Forgery is committed by anyone who creates false documents or false electronic records, or parts of documents or electronic records, with the intent to cause damage or injury to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with the intent to commit fraud or the possibility of fraud.

The following examples illustrate:

Making, signing, sealing, or otherwise executing a document dishonestly or fraudulently with the intent to make it appear as though it was made, signed, sealed, or otherwise executed by the authority of a person over whom the maker did not have authority to do so, and then transmitting any electronic record to that effect.

Second, each time an individual, either alone or with assistance, engages in dishonest or fraudulent activity using a written or digital record.

Third, when someone is dishonest or fraudulent by having another person sign, seal, execute, or amend a document when that person cannot do so because of drunkenness, mental impairment, or dishonesty.

Under Section 463 of the IPC, forgery is defined as the “making of any forged document or electronic record.”

In the case of Sheila Sebastian v. R. Jawahraj & Another (2018), both Sections 463 and 464 of the IPC were discussed. Forgery is defined in Section 463, and Section 464 supports this definition by explaining when a forged paper or digital record might be considered to have been created with the intent to conduct forgery as defined in Section 463. Section 464, however, only addresses one of the key components of forgery, namely, the creation of a counterfeit document. The Supreme Court also ruled that an accusation of forgery could not be brought against someone who was not the original creator of the forged document.

In T.N. Rugmini v. C. Achutta Menon (1990), the Supreme Court of India stated that, using another person’s name to apply for anything does not constitute forgery under Section 464 of the IPC.

Illustrations

In order to sell an estate to B and get the purchase money from B, A forges a document claiming to be a transfer of the estate from Z to A and affixes Z’s seal to the document without Z’s permission. A has forged certain documents.

To get work with Z, A forges B’s signature on a letter attesting to A’s good moral character without B’s knowledge or consent. To the extent that A faked the certificate with the intent to convince Z to enter into an explicit or implicit contract for service, A has committed forgery.

To commit the crime of forgery under Section 463 of the IPC, a person must behave dishonestly or fraudulently in order to cause hurt or damage to another person by preparing and signing the fake document.

Requisites of forgery

The essential element of the crime of forgery, as defined by Section 463 of the IPC, is “the intentional creation of a false document or part thereof with the intent to damage or injure another person or the public; to support any claim or title; to induce the transfer of property; to induce the entering into of an implied or express contract; or to commit fraud or that fraud may be committed in the future.”

Producing a forgery

The primary element necessary to establish criminal liability for the crime of forging is the creation of a fake document or electronic record. According to Section 464, the accused individual is the one who creates the forged document. Section 464 defines the acts that constitute the creation of a fraudulent document or electronic record. It does not need to be published or prepared in the name of a real person for the fraud to take effect; it only has to be legitimate.

A person is said to have prepared a fake document if, as noted by the Supreme Court in Mohd Ibrahim v. State of Bihar (2009), they signed anything as someone else or with someone else’s signature on it; tampered with an official record, or got a document by lying to or otherwise duping an inebriated person.

Injure or harm any member of the public

The second requirement is that the forgery must have been done with the specific intent to harm someone or something. According to the ruling in Sanjiv Ratanappa v. Emperor (1932), the Bombay High Court ruled that a police officer who alters his diary to represent that he did not keep particular people under surveillance would not be guilty of the crime of forgery since no other person was put in danger. As a result, if no one is hurt, no charges will be filed under Section 463 of the IPC.

As evidence for a position or a title

Section 463 makes it illegal to forge papers to prove ownership of property and makes anyone guilty of doing so. For instance, D has promised that my estate would be split three ways between A, B, and C following his death and intentionally erased B’s name from the deed so that he and C could divide the whole estate. As such, A is guilty of forgery and subject to punishment under Section 463 of the IPC.

To coerce a person into giving up their possessions

The fact that the property in question already existed at the time the forged document was prepared is irrelevant if the forgery was committed with the aim to defraud, harm, or injure another person.

Here’s an illustration: Say A commissions B to manufacture a sofa bed for him, but then C, before B completes the order, forges A’s signature on a letter claiming to authorise B to send the sofa bed to D. This would constitute fraud.

Fraudulent intent

A person may be held responsible for fraud if he or she creates a fraudulent document with the aim to deceive another person. There must be dishonest intent for there to be fraud.

Here’s an illustration: B creates a painting and pretends to sign it with the name of a famous artist. He puts up for auction the identical photograph that C eventually bought. By making C believe the artwork was created by a famous artist when, in fact, it was created by B, B will be guilty of the crime of forgery. Even if nobody bought the image, B might still be charged with forgery if he or she exposed it to the market with the purpose of misleading the public.

The consequences of forgery

Forgery is a crime that carries the penalties outlined in Section 465 of the IPC. Forgery is punishable by a maximum 2-year sentence, a fine, or both, as stated in this section. For a person to be held guilty under the ambit of Section 468, it must be proved that he has made a wrongful gain by deceiving the person or other entity. It is necessary that some kind of advantage be enjoyed by the person deceiving others.

The offence under this section does not require that the accused actually commit the offence of cheating; what matters here is the intention, or we can also say the purpose, of the person committing such an act of forgery.

The offence committed under this section is cognizable, non-bailable and triable by a Magistrate of the First Class. The term of punishment includes imprisonment which may also be extended to 7 years, or with fine or with both, depending on the matter.

Judicial precedents

One of the landmark judgements by the Supreme Court of India for Section 468 of the Indian Penal Code was given in the case of Dr. Vimla v. Delhi Administration (1962). Dr. Vimla bought a power car in the name of her minor daughter and transferred the policy to her daughter’s name. Later, the car met with two subsequent accidents, and Dr. Vimla filed two consecutive claims against the insurance policy.

Dr. Vimla signed the claim papers as Nalini (her daughter) and acknowledged the receipts as well. It was held by the Supreme Court that the accused, Vimla, was not guilty of the offence under Section 468 IPC. It was so because the said deceit neither secured to her the advantage of the claim amount nor did the insurance company face any kind of economic loss.

In the case of State of Orissa v. Bishnu Charan Muduli (1985), the bus’s driver and cleaner were found guilty of causing an accident after switching the vehicle’s licence plate and fabricating the registration book to match. Both were held guilty of violating Section 477-A of the Indian Penal Code by the Orissa High Court.

In Mohd Ibrahim v. State of Bihar (2009), the Supreme Court of India held that “a person is said to have made a false document if he or she made or executed a document claiming to be somebody else or authorised by someone else, altered or tampered with a document or obtained a document practising deception or from a person not in his senses.”

In Sanjiv Ratanappa v. Emperor (1932), the Bombay High Court stated that “a police officer who makes any changes in his diary so as to show that he had not kept certain persons under surveillance will not be liable for the offence of forgery because there is no risk of damage or injury to any other individual.”

In Sheila Sebastian v. R. Jawaharaj (2018), the Supreme Court of India declared that a person who is not a manufacturer of forgeries cannot be given the command of forging. The Court also ruled that a forgery offence is incomplete without the elements of Section 463. Hence, an individual cannot be convicted under Section 465 based merely on the essentials of Section 464.

In the matter of Guru Bipin Singh v. Chongtham Manohar Singh (1996), the Supreme Court explored another facet of forgery’s provisional interpretation. Forgery with the intent to defraud to a greater extent is discussed in Section 468 of the Indian Penal Code and is punishable by up to seven years in jail. The Supreme Court determined that forgery is the primary claim and cheating is a secondary effect in this case. Consequently, if forgery is not relevant, neither is cheating. Section 468 talks of a more aggravated form of forgery.

In the case of Kishan Lal v. State (1989), the Delhi High Court stated that the defendant claimed to be the payee when he was not and signed the postal acknowledgement in the name of the real payee. According to the Court’s ruling, Section 467 of the IPC holds the accused accountable for the offence.

The Supreme Court held that the defendant was found not guilty in Nand Kumar Singh v. State of Bihar (1992) due to a lack of evidence showing that he knew about and gave his approval for the co-accused to fake the papers in order to get the LIC insurance. The sole proof in front of the Court was the crediting of premium amounts to his account, which was insufficient to establish his culpability under Section 468.

Conclusion

Forgery is considered a serious offence under Indian law, and it carries significant penalties. Section 468 of the IPC prescribes a maximum punishment of seven years of imprisonment and a fine for individuals found guilty of forgery. In simple terms, forgery involves creating a falsified document with the intention to deceive or cause harm to others. This may include using false documents to support fraudulent claims, induce someone to give up property, enter into contracts, or commit other types of fraud. Any such action is deemed illegal and can result in severe legal consequences.

Frequently asked questions (FAQs)

What is forgery?

Section 463 of the Indian Penal Code defines forgery as making any false document or any part of it with the motive to cause injury or damage to the public or any particular person, supporting any title or claim, causing any person to part with his property, or entering into any implied or express contract to commit fraud or fraud that may be committed. The definition of a forged document is given in Section 470 of the Indian Penal Code.

What are the essential ingredients that cause forgery for the purpose of cheating?

The following elements need to be proven under Section 468 of the Indian Penal Code

The document or electronic record is forged.
The accused forged the document or electronic record.
The accused forged the document or electronic record intending that the forged document would be used for the purpose of cheating.

What are the defences available for the charge of forgery?

Usually, the lack of proof of forgery is something most defence attorneys rely on. The general argument is that by merely being a beneficiary of the act, one cannot be held liable for forgery, i.e. There cannot be a presumption of guilt. Suspicion cannot replace actual proof of the crime. The principle of strict interpretation of the law is followed in criminal cases since the doctrine of presumption of innocence of the accused is seen.

The defences available are as follows:

The forged document was not made by the offender;
The document was not made with the purpose of causing injury or damage, supporting a title or claim, entering into any contract, causing any person to part with property, or causing fraud;
The accused had authority over what he did; and
The accused was forced to commit the offence by way of coercion.

Who does the burden to prove damage lie on?

The burden to prove damage lies with the prosecution. The essence of the crime of forgery is the intention of the accused to defraud the victim is beyond reasonable doubt.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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

https://t.me/lawyerscommunity

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