This article is written by Taniya Yadav, a law student at Allahabad University. This article attempts to explain mutual divorce and various aspects related to the mutual divorce process in India in an understandable way.
It has been published by Rachit Garg.
Table of Contents
Introduction
“Divorces are made in heaven,” as aptly said by Oscar Wilde in his play “The Importance of Being Earnest.” One cannot control loving or unloving another human being, it’s just the way it is. Had it been in anyone’s control, there would not have been so many people unhappy in their marriages. In today’s world, people want to be married, but on their own terms and conditions, and when those terms and conditions are not met, they are, without any social stigma, ready to leave the marriage for their own well-being. Every individual has the right to live a happy and fulfilling life, and if marriage is preventing the individual from attaining that, then it should come to an end. That’s why the concept of mutual divorce exists, and basically, it came into existence to bring people out of unhappy marriages so that they could reclaim their lives and their happiness. The mutual divorce process in India is going to be the subject matter of this article.
What is a divorce
A divorce is a judicial declaration that the marriage between two individuals has come to an end. Marriages in India are governed by various laws, and so is divorce. It gives an individual the opportunity to live life from a fresh perspective and saves them from unnecessary mental stress.
What is a mutual divorce
Mutual divorce is a type of divorce where both parties decide that their marriage should come to an end. It is one of the most preferred types of divorce as it saves the time and energy of the parties involved and doesn’t make a hole in their pocket by extending the process unnecessarily to infinity.
Mutual divorce in India can be obtained by applying the following provisions –
In uncodified Muslim law, divorce by mutual consent is divided into two types –
1. Khula – Khula is a divorce with the consent of the husband and at the instance of the wife in which she gives or agrees to give a consideration to the husband to release her from marriage.
2. Mubarat – In Mubarat, both parties are in favour of judicial separation.
Section 28 provides the grounds on which a petition for mutual divorce can be filed in court. The grounds are –
Both parties are living separately for one year or more.
There is no scope for reconciliation between the parties.
Both parties believe that their marriage should come to an end.
Things to keep in mind before heading for a mutual divorce are:-
Settlement of maintenance can accelerate the divorce process.
Settlement of assets and properties between the parties.
Settlement of child custody.
Settlement of pending litigation.
Where can a mutual divorce be filed
A mutual divorce can be filed in the family court of the following jurisdictions –
Jurisdiction in which the parties last resided together.
Jurisdiction in which the husband is living separately.
Jurisdiction in which the wife is living separately.
Jurisdiction in which the marriage of the parties had taken place.
Requirements to consider a mutual divorce
The grounds for obtaining a mutual divorce are more or less the same in all religions and therefore a mutual divorce can be filed when the following conditions are fulfilled –
Both parties agree on getting a mutual divorce
This means that the parties agree on getting their marriage dissolved throughout the divorce proceedings in court. If at any point either of the parties withdraws their consent, the divorce will not be granted by the court as it no longer remains a mutually contested divorce.
In Mr. Prakash Alumal Kalandari vs. Mrs. Jahnavi Prakash Kalandari (2011), the Bombay High Court held that when a joint petition under Section 13B of the Hindu Marriage Act, 1955, is filed, the Court assumes that the parties are consenting to divorce throughout the divorce proceedings until they prove otherwise. If either of the parties withdraws their consent, then the court no longer holds the power to grant a divorce decree.
Both parties are not living with each other for not less than one year
This means that a mutual divorce cannot be filed when parties are living with each other. Separation for at least a year before filing the divorce petition is a mandatory criterion for obtaining a mutual divorce. If parties are living under the same roof but are not living with each other as husband and wife, then such a situation will also be counted as separation.
In Miten vs. Union of India (2008), the Bombay High Court held that living separately for one year is an essential condition for filing for divorce under Section 13B of the Hindu Marriage Act, 1955. It cannot be waived as the legislature has inserted this section keeping in mind the existing situation in society, and any interpretation of the law does not support such a waiver.
Both parties agree that there is no scope for reconciliation
The parties, in spite of putting in all the effort, are not able to live with each other, and the only option left to them is a mutual divorce.
In Sureshta Devi vs. Om Prakash (1991), the Supreme Court opined that the phrase ‘had not been able to live together’ simply means that the marriage has broken down to such an extent that reconciliation cannot be imagined. It is obvious that they cannot tolerate each other anymore, and that’s why they have filed a mutual divorce petition. Though, it is important to verify that their consent is based on their free will and not on any fraudulent means.
What is the mutual divorce procedure in India
The process goes in the following steps –
In Hindu Marriage
Filing of a joint petition before the family court –
This petition is presented before the family court by mutual consent of the parties. In this petition, the parties specify the time and place of their marriage, the time since when they are not living with each other, the reasons behind their broken marriage, and why they should be given a divorce. The period of living separately should not be less than one year, and both parties are mandated to sign the petition. Court fees are submitted along with the petition.
The Appearance of the parties before the court or First Motion –
After the filing of the petition, the parties will appear before the court and make their statements. The court will examine the facts mentioned in the petition and the documents submitted with it. The court may attempt to unite the parties, but if the marriage is broken beyond reasonable limits, the court may continue with the process. The court may even waive the cooling-off period, which is a minimum of six months and a maximum of eighteen months. If the cooling-off period is not waived, then the second motion can be filed after six months of the presentation of the petition before the family court and before eighteen months of the same.
Second Motion –
As soon as the parties appear for the second motion, they proceed with the final hearing. Joint statements are recorded again, and if the issues relating to alimony, custody of the child, and maintenance are settled, then the court passes a decree of divorce. After the decree has been passed, the marriage gets dissolved.
Documents required
The following documents are required for filing a mutual divorce petition in India –
Marriage Certificate (if the marriage is registered)
Identity Proof of both husband and wife
Address Proof of both husband and wife
4 Photographs of Marriage
Marriage Invitation Card
Passport-size photograph of husband and wife (2 each)
Income tax statement of last 3 years
Details of property and assets owned by the parties
Proof of not living together for not less than one year
Proof to support failed attempts of reconciliation
In Christian marriage
Divorce proceedings are initiated when the parties file the divorce petition along with an affidavit in the district court.
The petition includes the following details –
Name of the parties
Status and domicile of the parties
Date and place of marriage
A permanent address where the parties live
The Place where the parties last cohabited together
Children’s names with date of birth
The ground for seeking mutual divorce
The facts and details by which the petitioner seeks the relief
That the parties are not deceiving the court by collaborating
The statements are recorded by the parties before the court.
After six months and before eighteen months of the filing of the petition, the parties reappear before the court and file the second motion.
On hearing both parties, if the court is satisfied that the averments made in the petition are true and correct, then the marriage gets dissolved.
In Parsi marriage
A mutual divorce petition is filed by the parties before the court of law.
The court records the statements of both parties and examines whether the statements mentioned in the petition are correct or not.
Upon hearing both parties, if the court gets satisfied with the statements mentioned in the petition, then the marriage gets dissolved.
No cooling-off period is provided in Parsi Marriage and Divorce Act 1936.
In Muslim marriage
In cases of Khula –
The wife makes an offer of divorce to the husband.
The husband accepts the offer with consideration given by the wife.
On acceptance by the husband, the marriage gets dissolved.
After the marriage gets dissolved, the wife is required to observe iddat.
In cases of Mubarat –
Either husband or wife can make the offer.
The other party accepts the offer.
On acceptance by the other party, the marriage gets dissolved.
After the marriage gets dissolved, the wife is required to observe iddat.
In Special marriage
A mutual divorce petition is filed by the parties before the court of law.
The court records the statements of the parties and examines the statements.
The parties re-appear before the court after observing the six months of the cooling-off period.
The parties file a second motion after six months and before eighteen months of the filing of the divorce petition.
Upon hearing both parties, if the court gets satisfied with the statements mentioned in the petition, then the marriage gets dissolved.
Case laws
In Smruti Pahariya v. Sanjay Pahariya, (2009), the Supreme Court held that the non-attendance of a spouse in court in a mutual consent divorce petition cannot be assumed as consent after the expiry of the six-month cooling-off period. The fact that they signed the first motion under Section 13B of the Hindu Marriage Act, 1955, plays no role in establishing their consent in the second motion.
In Anamika Srivastava v. Anoop Srivastava, (2022), the Allahabad High Court held that it is not supposed to force parties to engage in mediation where the marriage has irretrievably broken down, considering the fact that the parties have been living separately for eleven years and have appeared before the mediation centre of the court and have failed to reconcile.
In Sandhya Sen v. Sanjay Sen(2019), the Chhattisgarh High Court held that the existence of a dispute was not a prerequisite for the grant of divorce by mutual consent as the parties had lived together for only two days after the marriage. The Court held that if an application is otherwise duly constituted and properly presented before the court, it is not the responsibility of the court to search for grounds or reasons which has compelled the parties to seek divorce by mutual consent.
In Amardeep Singh v. Harveen Kaur (2017), the Supreme Court held that the cooling-off period provided in Section 13-B(2) of the Hindu Marriage Act should be read as a directory provision and not mandatory. As the parties, in this case, had been living separately for eight years, there was no hope of them getting back together.
In Hitesh Bhatnagar v. Deepa Bhatnagar (2011), the Supreme Court held that if the second motion is not passed within eighteen months, the court is not bound to pass a decree of divorce by mutual consent. It also held that either party might withdraw their consent at any time before the decree is passed. In this case, it was held that unless both parties mutually agree on getting a divorce and convince the court regarding the same, the court will not grant the divorce.
Conclusion
Anna Quindlen, in her novel ‘Alternate Side,’ said, “When one of you wanted one life, and the other wanted something completely different, there was a technical term for that: irreconcilable.” Divorce is a tough decision that should be taken with the utmost care as it not only affects the people involved in the marriage but also the people related to them. But it cannot be held back if the marriage has reached a point where it is causing more pain than happiness. Therefore, divorce by mutual consent is a great way to end all that trauma, and the process for the same is made extremely uncomplicated by the legislature and judiciary to help people walk out of unhappy marriages without burdening them with more mental stress.
Frequently Asked Questions (FAQs)
In how much time a mutual divorce can be obtained?
The time varies from case to case, but usually, it takes anywhere from 6 months to 2 years to obtain a mutual divorce.
Can the court waive the cooling-off period in cases of mutual divorce?
Yes, if the court is of the opinion that the marriage has broken down irretrievably and there is no scope for the parties to come to terms with each other, then the court can waive the cooling-off period.
Can a mutual divorce petition be withdrawn after being filed in court?
Yes, it can be withdrawn anytime before the court has passed the decree. If either of the parties withdraws their consent, it no longer remains a mutual divorce.
Can Non-Residents of India file a petition for mutual divorce in India?
Yes, Non-Residents of India can file a petition for mutual divorce in India, but they need to produce additional documents to prove their jurisdiction.
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The company’s board of directors is the main element for influencing corporate governance. Over the years the stakeholder’s trustworthiness and expectation has increased with the introduction of the concept of independent directors by the Companies Act, 2013. Apart from this, it has also added a female chair to the board. Women on boards is not about women’s rights, but the inclusion of people with different perspectives, diverse experience and the right combination of skills which result in better decision-making for the corporation. Women’s representation brings in a different perspective, intuitiveness, and a more collaborative style of leadership into corporate boardrooms. These factors, combined made it necessary for policymakers and women rights activists across the globe to either adopt mandatory legislation or voluntary persuasion for boosting women’s representation in key managerial positions of corporations. This article discussed the need for gender diversity on boards in India in current times, thereby covering all essential aspects included in the same.
Need for gender diversity in boards
Attitude matters more than the regulation
It is apparent that having a law requiring some mandatory minimum level of female board representation is effective in causing companies to fulfil at least the minimum criteria. There has been a debate among academicians on the relevance of mandatory provisions over moral persuasion.
Countries like Sweden, Finland, U.S. have no obligatory quotas for the inclusion of women on board but their willingness to comply with the soft laws has significantly improved their men-to-women ratio on board. Their attitude towards attaining gender-neutral boards has brought a remarkable change. They have adopted national campaigns and organisation-led awareness programmes which have accelerated the growth of women’s representation in corporations.
Then comes the countries that have a traditional viewpoint with respect to gender diversification. Countries like these have strict gender roles with respect to men and women. China, Japan, South Korea and Russia fit these criteria. They have fewer women directors on boards. Contrasting to this, countries like India, and Norway have made hard laws for the representation of women with penalties to maintain a minimum threshold of women directors on corporate boards, or a mandate to furnish justifications in case of non-compliance.
Legal framework in India promoting gender diversity in Boards
If the Indian Constitution is brought to view, Article 21 read with Articles 14 and 19 clarifies that women’s representation is equally significant as men’s in any workplace whatsoever. While Article 14 guarantees equal protection of the law and equality before law, Article 19 lists a set of freedoms that are applicable to individuals irrespective of their gender. Following this, Article 21 of the Indian Constitution deals with the right to a dignified life and personal liberty, which along with 14 and 19, forms the golden triangle of the Indian Constitution, thereby establishing the supremacy of law. Therefore, every legislation that comes into existence, has to abide by the fundamental principles laid down by the mother of all legislation, the Indian Constitution.
Section 149 (1) of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 states that every listed company and every public company either having paid up capital of Rs. 100 crore or more or a turnover of Rs. 300 crores or more should appoint at least one women director on its Board. This was further strengthened by introducing Regulation 17(1) of the Securities Exchange Board of India (Listing Obligation Disclosure Requirements) Regulations, 2015.
The regulation ensures the appointment of a women director. It states that the composition of the board of directors of listed entities shall have an optimum combination of executive and non-executive directors with at least one women director and not less than fifty percent of the board of directors shall comprise non-executive directors. It was further clarified that the Board of Directors of the top 500 and 1000 entities shall have at least one independent women director by April 1, 2019 and April 1, 2020 respectively. The top 500 and 1000 entities are determined on the basis of market capitalization at the end of the immediate previous year.
Directorship data of India and abroad
Traditionally, the only positions available to women on boards were leadership in the grievance and Corporate Social Responsibility committees. However, this has started to change and a legislative push seems to be working. Gender diversity on boards is increasing in Indian Incs. The report on ‘Diversity in the Boardroom: Progress and the way forward’ released by Ernst & Young on 17th October, 2022 validates the aforesaid progress. The high points of the reports are as follows:
Significant increase in women representation on board in the year 2013-2022 from 6% to 18%. It has tripled in ten years.
Almost 95% of NIFTY500 companies have one female board member, up from 69% in 2017.
With a 24% women representation on board, the life sciences has taken the lead, followed by the Media & Entertainment sector.
The Technology (IT & ITeS) industry has one of the highest female representation at 34%. It has also increased from 1.19 to 1.75 in 2017- 2022.
Growth in women’s representation remained stagnant at 15% in the Energy & Utilities sector (Oil & Gas and Power & Utilities) in the year 2017-2022.
Historically, women on Indian boards were in the leadership in grievance and Corporate Social Responsibility committees. However, it has started to change.
Women account for only 6% of executive positions in banking and capital market boards.
The Equilieap in its 6th Gender Equality Global Report disclosed that the UK-based drink supplier Diageo is the second highest-placed firm in a study of global gender equality which makes France to be the best country overall for gender equality. Australian property developer Mirvac tops the list with a 79% gender equality score. The progress was reckoned on the basis of 19 gender equality criteria such as the gender pay gap, gender balance from the board to the workforce, and policies related to sexual harassment and sexual leave, which remained uneven across the globe.
The report found that women in top leadership positions were still very rare. Only 6% of companies globally had a female Chief Executive Officer, 15% had a female Chief Financial Officer, and 8% had a female chair on the board. Women represented 28% of board members and 20% of executives but 38% of the total workforce. Only 18 companies globally achieved 40-60% of women at all levels (board, executive, management and workforce). The best markets for corporate gender equality were rated as France, Spain, Italy, Norway, the UK and Australia; in contrast, the US, Japan and Hong Kong had the lowest average score globally.
It has been observed that either through soft laws or awareness the policymakers have rolled the stones for appointment on board but the male members look out for their fellow male members at the time of promotion and the cycle continues leaving behind the competent female member. Now that the appointment of a women director has become mandatory, there is another practice of giving the chair to their immediate female relatives. Mainly for the sake of compliance, she is appointed as a symbolic director. This defeats the purpose of law.
Implementing gender diversity in workplaces
A booming economy and cultural change are bringing women to the workforce but women-oriented challenges such as childbirth, relocation with the spouse, maternity, etc. It would not be out of place to point out that there exists a separation of work for men and women, particularly in our Indian culture, which makes it difficult to make a balance between professional and personal life. It is the combined effort of all the people which makes a woman successful. So the biggest challenge vests with the organisation is to retain their employees by providing a congenial, progressive and supportive environment for them to flourish.
The organisations can strive to improve this discrimination in gender by providing women employees flexible working options in order to maintain their work-life balance. It should adopt full transparency and disclosure when it comes to appointment, promotion and remuneration. Corporations should appoint independent directors, free from any ties with any of the directors, thereby giving them all the authority to make bold and independent decisions. More women should be appointed at all levels in the corporation to have a balanced atmosphere within the organisation.
Their appointment in the major committees such as the remuneration and nomination committee, stakeholder relationship committee, audit committee not only portrays a positive message to the shareholder and investors but encourages other female employees at the workplace.
Even though a country like India has adopted a legal route to regulate diversity in its boardroom, the corporation and the members holding executive positions should abstain from practising favouritism and biases. Appointing immediate female relatives to the position serves their twofold purposes – act as a puppet of the rest of the members and fulfills the legal requirement. The law should be accepted and applied in its spirit. The essence of the law is to cut the first turf by mandating the appointment of at least one woman member to the board. The corporation should strive to give importance to talent over gender. There is no “one size fits all” solution to increase gender diversity, each region has different levels of societal acceptance for gender equality, and regulation would have different impacts in each region. The time has come that women should not be treated as another gender but should be recognized from their skill and competency keeping aside the gender.
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There have been many prominent historical moments in the Indian freedom struggle which have helped India to gain independence and fight against the cruel rule of the Britishers. Some of them are the Indian Rebellion of 1857, the Salt Satyagraha, the Quit India Movement, and the Non-Cooperation Movement (1920-1922). It was the dark day of 2nd February 1922 when the non-cooperation movement was catching momentum and the cruel Britishers opened firing on the protestors in the city of Chauri Chaura, of Gorakhpur district of the united province (modern Uttar Pradesh) which led to a horrific incident in which angry crowd set the police station on fire to take the revenge on the British officers. The incident led to the killing of 26 people, 3 of them were civilians, and the rest 23 were police officers. This protest led to the degradation of the principles of the non-cooperation movement which was non-violence (Ahinsa), Gandhi ji who was the leader of this movement called it off after getting to know about the incident and the killings. This article talks about the legal implications associated with the Chauri Chaura incident in detail.
Relation of Chauri Chaura incident with Non-cooperation and Khilafat movement
As we have discussed above, the Chauri Chaura incident of being part of the non-cooperation movement took a turn when it was linked with the Khilafat movement which was organized and managed by the Muslim league brought in drastic change and revolution at the moment, the efforts of Mahatma Gandhi were successful and congress which was backing them got their target of national integration successful. It resulted in the successful integration of the spirit of nationalism and brotherhood between the Muslims and the Hindus. Both of the movements integrated to be a pan-Indian Movement against the British.
Major events which led to this mishap
On that dark day of 2nd February 1922, the protestors entered the market of Chauri Chaura with the intention of peaceful protest against the unethical taxing practices of the British Government which aimed to forcefully take money from already poor Indians. While the protest was ongoing, from nowhere, the police attacked them and ended up arresting some of their leaders which resulted in anger among many. After a few days on the 5th of February, they gathered a mass crowd of around 2500 people who then started yelling loudly towards the police to free their leaders, as they were not wrong, but the police did not listen to them.
After some time when there was no sign of the protestors calming down, the police officers decided to give the order to fire in the sky as a warning shot to disperse the crowd. The protestors got more enraged they started pelting stones at the police. Left with no other option, the police sub-inspector instructed his officer to open fire on the protestors, killing three of them.
The dissenters, looking for revenge for the deaths that occurred, kept terrifying the police by drawing nearer to them until the tremendously dwarfed officials had to escape by taking asylum in the Chauri Chaura police headquarters. This strategy misfired as the angered horde was unafraid to set the police headquarters ablaze while its occupants were inside. Numerous Indian cops and ‘chaprassis,’ or official couriers, were caught inside the Chauri Chaura police headquarters, which was fiercely burning. Afterward, it was uncovered that 22 cops had died in the episode, a significant number of them had been killed at the station’s entry as they endeavored to escape the flares.
Mahatma Gandhi’s reaction
Gandhi Ji’s reaction was unexpected at that time as he reprimanded the homicide of cops as wrongdoing. To show “certified compassion” and look for compensation, the worker associations in the contiguous towns were dissolved. He formed the Chauri Chaura Support fund to support the affected inspectors’ families, Gandhi pursued the choice to stop the Non-Cooperation Movement since he accepted it had been influenced to the violent path (Hinsa). He constrained the Congress Working Committee to agree with his requests.
Legal implications of the Chauri Chaura incident
All the selfish British officers who were proud of them being white and thought of themselves as supreme prevailed in a justice and tribunal system, which can be called today a mass murder of the judiciary and justice system. 172 people were given capital punishment for the incident without any supporting proof, evidence, or witness, the incident a white military man named Sergeant Andrew who want to take the range from the crowd went out of the nearby villages after gaining vigilance over the station and brought in hundreds of men in small carriages where there was no space and everyone was dying for some drops of water. There were neither witnesses nor evidence nor pleaders nor jury for the charge, and one day the Appointed Judge Sahib without a second thought, passed the judgment to give capital punishment to 172 people, thereby awarding the death penalty was given for the attack on 21 police officers by the crowd.
While the Sergeant caused the death of not less than 100 men was viewed as honest. The Bihar Bandhu looks at the English arrangement of equity by taking confirmations of two occurrences the Jallianwala Bagh and Chauri Chaura and contends that General Dyer who had killed 1000 individuals in the Jallianwala Bagh was delivered free thereby making ways for injustice for the masses.
One can note that if this incident is put parallel to the concept of personal liberty and Article 21 of the Indian Constitution, the same stands as a gross violation of the fundamental rights of the citizens of the nation. While the Constitution was absent then, principles of human rights and fairness were not unfamiliar. The decision by the court of law in this massacre was indeed in abeyance of such fundamentally established rules of law.
Conclusion
The examples of Chauri Chaura, Moplah, and the Jallianwala Bagh, tell us about the noble justice system of the Britishers and how desperate they were that in order to maintain their ego, they killed many. Although the Chauri Chaura event was an outcome of prompting given by the police to the crowd, the case was known about by the sensible judges of English who prevailed in criminal offense in the name of value by allowing capital disciplines on 172 individuals additionally, transportation for life to more than hundred people and setting free an English Sergeant who was primarily guilty.
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This article is written by Prabha Dabral from IMS Unison University, Dehradun. The article discusses the concept of indemnity in detail. It revolves around the meaning, types, and contents of the letter of indemnity and its format, and other details.
It has been published by Rachit Garg.
Table of Contents
Introduction
Let’s say you have a construction business. You enter into a contract with party ‘A’ to construct an office building on his plot. You have also taken the deposit for it. After some time, you realise that the construction could not be completed due to the absence of enough workers. In this case, ‘A’ is clearly at no fault. He has fulfilled his part of the bargain by submitting the deposit to you. So here comes the concept of indemnity, through which ‘A’s rights can be protected.
You can write a contract of indemnity assuring ‘A’ that he will not suffer any loss that may occur or arise out of the operations of the business. You will either return the deposit or find somebody else to do the work. The letter of indemnity here plays a part in reassuring party ‘A’ that, in case he suffers any loss, the liability will be that of the construction business. It means that he will be compensated because they could not fulfil the terms of the contract.
In the above scenario, the provision that protects ‘A’s rights is known as the “letter of indemnity”. And in this article, you will learn more about the concept.
What is a letter of indemnity
Merriam Webster defines the term ‘indemnity’ as a protection against a loss, damage, or injury. This concept is explained under Section 124 of the Indian Contract Act, 1872. It says that a contract by which a party promises to compensate the other party for any loss or damage incurred during the transaction is referred to as a contract of indemnity.
The best example that clearly explains this is an insurance policy. Here, the insurance company creates a contract with its clients stating that they will bear all the losses incurred by the client in relation to a specific situation. Car insurance is one of them.
In simple terms, a letter of indemnity (or LOI) is a document in which one party (i.e. the promisor) guarantees the other party that certain provisions will be met between them. And if, in any case, the other party faces any loss or damage due to the conduct of the promisor or any third party, then the suffering party will be compensated. It basically protects the promisee against some unexpected loss.
This contractual document is generally drafted by a third-party institution like a bank or an insurance company. And these third-party institutions pay the financial compensation, on behalf of the promisor, to the losing party in a loss.
Some examples to understand it better
A letter of indemnity is used in business dealings like global trade and commerce. For example, moving companies and delivery services have the job of transporting valuable items from one place to another. In a situation where the valuable items are lost, damaged, or stolen during their transport, a letter of indemnity ensures that the person who owns the valuable items will be compensated.
Here is another example of the usage of letter of indemnity. Suppose ‘A’ borrows a valuable item from ‘B’. So, here, B (i.e., the owner) can present ‘A’ (the borrower) with a letter of indemnity. The letter states that any damages done to the item are solely the responsibility of the borrower, i.e., ‘A’. This letter is then signed by a witness. The witness can be an insurance carrier representative, i.e., a banker.
Parties involved
Two parties are involved in the contract of indemnity. They are as follows
The promisor (i.e. the indemnifier)
This is the party that promises that it will bear the loss.
The promisee (i.e. the indemnity holder or the indemnified)
This is the party whose loss is compensated.
In the above-stated example,
‘A’ (i.e. the borrower) is the promisor as he promises to bear the loss, if any, done to the valuable item. Hence he is the indemnifier.
‘B’ (i.e. the owner) is the promisee as to who will be compensated. Hence he is the indemnity holder or the indemnified.
Who can issue LOI
As we have already discussed in this article, the LOI is usually issued by a third-party institution like a bank, an insurance company, or a shipping company. But if necessary, any person or organisation can also issue LOI. When they issue the LOI, it becomes their responsibility to compensate either of the two parties in case the other party fails to fulfil the terms of the contract.
Who signs LOI
In general cases, the signature of a witness is required in the document. But in some cases, it is considered better for the insurance carrier representative or a banker to sign this document.
Where can one obtain LOI
LOI is generally prepared and drafted by a financial institution. It can be a bank or an insurance company that acts as the guarantor in a transaction. Hence, one can obtain it from a bank, an insurance agency, or a provider.
The rights of the indemnity holder or indemnified
In the letter of indemnity, the majority of the rights are in favour of the indemnity holder.
Section 125 of the Indian Contract Act, 1972, talks about certain rights that the indemnity holder has. The indemnity holder, or promisee, can claim the following rights against the indemnifier if they are sued.
All the damages must be paid by the indemnifier to the indemnity holder as per the terms of the LOI. This is what the main motive of the letter of indemnity is.
The right to recover the costs incurred [Section 125(2)]
If some cost is incurred in a suit for indemnity, it can be recovered from the indemnifier. The indemnity holder is entitled to compel him to pay the costs that have been incurred in a suit. Provided that the suit is in respect of any matter where the indemnity contract applies.
Right to recover the sum paid in compromise [Section 125(3)]
The indemnity holder is also entitled to recover the sums paid under any terms of compromise in a suit. For example, sometimes the parties decide to compromise by opting for an out of court settlement. The cost paid by the indemnity holder in this compromise can also be recovered from the indemnifier. Provided that the cost can be recovered only if such a compromise is not against the order of the indemnifier.
The rights of the indemnifier
There is no such provision regarding the rights of an indemnifier. But there have been certain judicial pronouncements that say that the rights of the indemnifier are similar to the rights of the surety. One such judgement was held in the case of Jaswant Singh v. The State (1965).
Hence the following are the rights of an indemnifier as per Section 141 of the Indian Contract Act.
Sue on behalf of the indemnity holder
After the indemnity holder is indemnified, the indemnifier can sue the third party on behalf of the indemnity holder. Suppose your car gets damaged by a third party, and you have car insurance. After the insurance company has compensated you, it can sue the third party on your behalf for the losses.
Regain the rights delegated to the indemnity holder
After the indemnifier has paid the damages under an indemnity, he regains the rights that were delegated to the indemnity holder. Provided that he has paid the damages to the indemnity holder.
Refrain to compensate when he is not liable
When some damage has occurred that was not mentioned in the indemnity contract. The indemnifier is not liable to pay for such damages.
Need for a letter of indemnity
The LOI is basically required to protect a person or a business from such claims for which they are not directly responsible. It outlines those measures and clauses that are there so that the aggrieved party does not suffer any harm.
The primary purpose of this document is to ensure that both parties to the contract fulfil the requirements stated in it to avoid any losses in a transaction. And since it is a legal contract, it has some value. The idea of drafting the LOI is to avoid any losses happening to one party because of the mistake of the other party. This document uses extensive steps to protect the innocent party from any losses incurred during the transaction.
Moreover, LOI can be used in shipping as well. Here, the document exempts a party from any liability arising from the other party. For example, when the goods are being transported through a risky or dangerous route. In this case, the carrier (i.e., the company that transports the goods on the shipper’s behalf) can issue a letter of indemnity to the shipper (i.e., the company that owns the goods that are being shipped) for the protection of the goods. This means that in the event of a mishap, the carrier will not be responsible for any damage to the goods.
Essentials of letter of indemnity
Parties to a contract
There are supposed to be two or more parties to the letter of indemnity. One of them is the indemnifier, and the other is the indemnified, or the indemnity holder. Both parties are required to have the capacity to contract. That means either of the parties must not be a minor or a lunatic.
Must fulfil the essentials of a valid contract
The letter of indemnity is a special kind of contract. Since it is a contract, the general principles of what constitutes a contract are applicable to it. Hence, it will be valid only when it fulfils all the requirements as required for any contract in general.
Promise to pay for the losses
The main objective of the letter of indemnity is to protect a party from any unexpected loss incurred during the transaction. For this, there must be a promise made between the two parties. When a party accepts the condition made by the other party, it is a promise as per the Indian Contract Act.
So, there must be a promise to secure the promisee from any loss or damage. The loss might occur due to the promisor or by any other person. So, a promise must be made between the two parties.
Express or implied
As per contract law, the letter of indemnity is of two types. It can be expressed or implied. Express contracts are those made by words spoken or written in the form of a contract. For example, insurance contracts, construction contracts, etc.
Implied contracts are those that are invoked by the conduct of the two parties. It is not a written contract. For example, the master-servant relationship. Here, the master is responsible for indemnifying his/her servant if there is some loss incurred while working as per the master’s instructions.
In the following situation, the bartender and an intoxicated customer got involved in a fight, which resulted in the customer throwing a glass at the barman. In response, the bartender threw the piece of glass at him, which hit the customer’ eye. The customer filed a complaint against the hotel under which the bartender was employed. So here, the hotel cannot deny responsibility for the actions of the bartender as they have a master-servant relationship between them.
Lawful object and consideration
Just like a general contract, the letter of indemnity also requires a lawful object and consideration. The purpose for drafting an LOI must not be prohibited by law, otherwise, it would be considered an unlawful consideration. In other words, LOIs drafted for some illegal acts will be considered invalid. For example, if ‘A’ issues an LOI, it will be illegal if it is drafted for the protection of a car that has been stolen by him.
Content of a letter of indemnity
An LOI contains detailed steps for preventive measures to be taken by both parties to the contract. Along with this, it contains the following content, also.
Details of both parties
The LOI must have the details of both parties to the contract. The details include their legal name, complete official and residential address with the pin code, affiliation, and the name of the third party involved.
Signature and date of execution
Both parties must sign it, and the date of execution should be mentioned in the document.
Jurisdiction
The jurisdiction must be mentioned to avoid any ambiguity. The document must contain a statement stating the specific state whose laws will govern the document.
Acceptance of the terms and conditions
The document must mention the confirmation by the parties. It must highlight the point that both parties have accepted the terms of the contract.
Goals of the agreement
The goals of the agreement must be mentioned in detail, along with the specifications (if any). The document should clearly state what action could be taken to ensure the other party does not suffer any loss. The document should mention all these specifications.
Mention the repercussions clearly
It should be mentioned clearly what might happen if any of the parties fails to fulfil their obligations. It should not create any ambiguity later.
Sample letter of indemnity
The structure of the letter of indemnity must include the following key details. They are as follows
Name and address of both parties;
Name and the affiliation of the third party;
Description of the items that are shipped or for which the LOI is being drafted;
Signature of the parties; and
The date on which the contract was executed.
Here is the sample of the LOI (bank format)
Letter of Indemnity
Date:
[Name of the contact]
[Address]
[Address 2]
[City, State]
[Postal code]
Object: Letter of indemnification
Dear [Name of the contact]
For good and valuable consideration, we, [Your company name (Example, ABC)], hereby undertake and agree to indemnify you and your heirs and legal representatives, respectively from and against any expenses incurred by you regarding any action or suit brought or commenced against you or to which you are made a party by reason of being a director of ABC, except such expenses are occasioned by your own fault.
The term ‘expenses’, as used in this letter of indemnity, shall include all liabilities and costs whatsoever, including fines, penalties, lawyer’s fees and the settlement amount.
This letter of indemnity shall be governed in accordance with the laws of the [State].
Signed and dated in [City, State], this [Day] of [Month, Year].
[Your name]
[Title]
[Phone number]
[Email ID of company]
[Company name, i.e. ABC]
[Address]
Though LOI is similar to an insurance policy in that they both cover losses experienced by the parties, they differ in many other ways.
LOI is not just a contract. In a regular contract, there is a requirement for both parties to agree to certain provisions. But an LOI can be requested by one of the parties. The request is to guarantee the other party that all the losses incurred due to contractual breaches will not be left uncovered.
Here are the pointers to understand the difference better
S.No.
Letter of indemnity
Insurance policy
1.
A letter of indemnity is an agreement in which one party takes financial responsibility for the liabilities of the other party.
In the context of insurance, indemnity is a contractual obligation in which one party has to provide compensation to the other party in the event of any loss.
2.
These are mostly used in legal contracts to have protection against being held responsible for an accident.
These are mostly used in commercial contracts.
3.
One can be indemnified without insurance
But one can not have insurance without indemnity.
Comparing LOI with bank guarantee
Here is the difference between them
S. No.
Letter of indemnity
Bank guarantee
1.
LOI involves paying compensation to the other is responsible for a loss in a transaction to which you are a party yourself.
A bank guarantee involves a lending institution that stands as a guarantor and promises to cover all the losses in case the borrower fails to do so.
2.
Any person or organisation can issue a letter of indemnity.
A bank guarantee can only be issued by a bank.
3.
These are mostly used in legal contracts to have protection against being held responsible for an accident.
These are generally used for international transactions.
What is a bill of lading (BOL)
A bill of lading, or BOL, is a legal document between a carrier (i.e., the transportation company) and a shipper regarding the goods that are being shipped. This document is generally issued by the carrier to the shipper. It also acts as a receipt for the carrier’s delivery of the goods to their destination.
It is basically a document required to move a cargo shipment that represents the terms and conditions agreed upon for the transportation of goods.
For example, ‘A’ is a spice distribution company. It entered into a contract with a supplier company called ‘B’ to import some of the spices. Now, company ‘B’ takes this order of shipment to carrier ‘C’. And ‘C’ issues the bill of lading to keep the record of the receipt of the goods from ‘B’.
What is a letter of indemnity bond
It is a form of surety provided while undertaking that one party will indemnify the other in the event of possible losses. The bond assures that its holder will be duly compensated in case there are any losses. In simple terms, an indemnity bond is a legal agreement through which a party promises to bear a loss in the event of a breach of contract.
What is a letter of indemnity in shipping
In shipping agreements, a letter of indemnity protects the cargo owner from any possible losses. In case, the goods are damaged or the parties to the contract (i.e. transport company) breach the contract, LoI renders the cargo owner harmless.
Case laws
Mohit Kumar Saha vs. New India Assurance Co. (1997)
Facts of the case
In this case, there was an insurance policy signed between the two parties. The petitioner signed an insurance policy with the insurance company regarding his truck. One day, his truck was loaded with fish feed and got stolen on the same day. A claim was lodged for the stolen truck against the insurance company.
Issues involved in the case
What amount does the respondent owe the petitioner for the stolen truck?
Judgement of the Court
The Calcutta High Court held that the insurance company is liable to pay the full value of the vehicle. Paying a lesser value for it will be considered arbitrary.
State Bank of India and anr. vs. Mula Sahakari Sakhar Karkhana (2006)
Facts of the case
In this case, a letter of indemnity was signed between the two parties. One of them is a cooperative society (i.e., a business organisation with the aim to help people), and the second party is a company named Pentagon. They entered into an agreement for the installation of a paper mill. As per the agreement, the company furnished a guarantee regarding the machinery it supplied.
Later, some disputes and differences arose between the two parties. Due to these differences, the cooperative society terminated the contract with the company and invoked a bank guarantee against it.
Issues involved in the case
Whether the company is liable to pay for the bank guarantee?
Judgement of the Court
The Supreme Court held that the term of the contract clearly states that it is not a contract of guarantee but a contract of indemnity. According to this, an indemnity holder should be indemnified against all losses or damages. Hence, in this case, the company is liable to pay.
Conclusion
To conclude, a letter of indemnity is a guarantee given by a third party to compensate for any financial damage to the parties involved. Here, the third party takes responsibility on behalf of the parties to the contract and says that it will cover losses incurred if certain obligations have not been complied with.
One can say that a contract of indemnity is a special kind of contract furnished to pay compensation to the party in a loss. What makes it special is that the obligation taken on by the indemnifier to indemnify the promisee is voluntary.
Frequently asked questions (FAQs)
Is LOI different from an insurance policy?
The terms of an LOI can be compared with the clauses of an insurance policy. But unlike an insurance policy, the letter of indemnity can be used for different kinds of business transactions.
Is LOI a legally binding document?
Yes, it is a legal document. The signatories of the LOI are bound by its terms and conditions.
What does ‘indemnity’ mean?
In its most literal sense, indemnity means security or protection against a loss. This protection is provided in the form of a contract between the two parties.
Can we change the terms of the LOI?
Yes, we can change the terms of the LOI. It can be done with the mutual consent of both parties.
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In this article, we are going to discuss the case of Deshraj Singh vs Rohtash Singh (2022). The case involves an appeal against a judgment of the Punjab and Haryana High Court dated 15.05.2019, which was heard by the Supreme Court of India. This case revolves around a property situated in the revenue estate of a village named Tigra, Tehsil and District Gurgaon and the same was jointly owned by Appellants as a part of their respective shares.
Facts of the case
There was a property of 23 Kanals 4 Marlas, Khewat No.226, Khatoni No 225, Rect no 27 kila number 3 min (29), 4 min (415), 7(80), 14(40). This property was located in the revenue estate of Village Tigra, Tehsil and District Gurgaon. This property was owned by the appellants jointly according to their share in the property.
On 17.02.2004, the parties entered into a separate agreement to sell this property. One of the appellants’, was a female, and wanted to sell her property as well. This share was owned by herself along with her minor son and therefore, she was bound to take permission under Hindu Minority and Guardianship Act, 1956 (HMGA 1956) to sell the share of the minor. Consideration for the concerned property is decided at the rate of Rs 79,00,000 per acre between the parties. Respondent paid the part payment of the amount (earnest money) which is Rs 22,90,000. Both parties decided to execute the sale deed on 16.08.2004.
The respondent, who is the original plaintiff in the case, had filed a suit in January 2006 because he sought relief of specific performance of sale agreements entered by the appellants.
Secondly, contractual obligations need to be fulfilled as per the sale agreements and this was completely mentioned in the notices served.
Thirdly, for a certain period of time it is not necessary to get NOC according to Section 7A of the HUDA Act and the land was agricultural land at the time of execution
Contentions of the respondent
Firstly, the appellants were unwilling and that’s why they failed to perform their contractual obligations. Respondent’s obligations were restricted to those which were sanctioned and he could obtain them unilaterally.
Secondly, she argued that the sale agreements were acquired by the state of Haryana and that is why they were rendered impossible.
Thirdly, the appellants have obtained land possession measuring eight Marla from land acquired.
Legal issues involved
Whether time was the essence of the contract?
Whether it was proved that appellants were willfully avoiding the performance of their contractual obligations?
Whether the respondent was entitled to recover the earnest money?
Judgment
The Supreme Court of India while deciding the present case in hand had observed that the forfeiture was justified and the respondent neither prayed for earnest money nor contested the nature of forfeiture. While holding that the suit is liable to be dismissed, the Apex Court had set aside the decision of the lower courts.
Analysis of the judgment
Before beginning the analysis, it is ideal to note that time is a critical component of every contract and the same holds immense importance in giving effect to the same. In this case, it was clearly mentioned that time was the essence of the contract and even in the notice that was delivered, the intention of appellants abided by such an essence.
In the case of Citadel Fine Pharmaceuticals v. Ramaniyam Real Estates Private Ltd (2011) andSaradamani Kandappan v. S. Rajalakshmi(2011), time being the essence of the contract, was considered to be a valid defence for the purpose of specific performance. Hence by analysing every aspect we can say that time being the essence is the clear intention of parties to contract and the respondent delayed the time decided and specific performance relief cannot be granted.
Secondly, the court rejected the interpretation of this clause that his obligation was limited to NOCs that he could obtain independently and there is no evidence given by the respondent which can say that he has taken all necessary steps to obtain the required NOC for execution of sale deed.
Respondent’s stand that the property in concern was an ‘urban’ area according to Section 2(o), also includes lands within five kilometres of the municipal area. This stand also gets rejected because he did not plead to courts and there is no evidence that can say that property was within five kilometres radius of the municipal area. It was observed by analysing various facts that respondents have not even pleaded for relief of earnest money and courts cannot suo moto grant any refund of earnest money.
Conclusion
As we reach the conclusion of the present case analysis, it is ideal to note that the judgment comes with an affirmation of two significant observations which are by itself declared laws as well:
Time is the essence of every contract.
The court cannot suo moto grant any relief unless the same has been specifically prayed for in the suit.
Thus, the relevance of this particular case lies in these two firm and unambiguous observations.
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This article is written by Aashank Dwivedi, a student of Amity University Lucknow. This article elucidates Section 354D of the Indian Penal Code, 1860 i.e., stalking. This will help you to provide a key understanding of Section 354D of the Indian Penal Code, 1860.
It has been published by Rachit Garg.
Table of Contents
Introduction
As the definition of crime varies from society to society, there are many different forms of crime that have been emerged in society with the advent of time. The Indian Penal Code, 1860 essentially looks at Actus Reus and Mens Rea to punish someone for the act of the crime. In most cases, stalking generally refers to a person being followed either physically or online without the permission of the person. The Indian Penal makes stalking as an offence but it is only punishable when it is committed against women. Stalking, in its broadest sense, refers to the behaviour that involves following someone or attempting to communicate privately with them in order to make them feel uneasy or scared. There are several methods to commit stalking, including sending threatening texts, following someone on the street or through social media, making persistent phone calls, or engaging in other harassing behaviour. Stalking is typically committed against women and ultimately causes harm to them. This article will give an overview of Section 354D and other necessary components of stalking.
What crime is defined under Section 354D IPC
Stalking as defined under the Section 354D IPC occurs when man repeatedly approaches a woman for the personal connections, even after the lady has made it obvious that she is not interested in getting to know him. This also covers online stalking as well which means monitoring her usage of internet, email or other types of electronic communications.
There are further exceptions to it, they are as follows:
If a man pursued a woman as a part of his responsibility to a state to detect the crime or prevent it from happening.
To follow any instructions or rules issued by a person with the legal authority.
Any other circumstances that would allow his actions to be defended as reasonable.
In accordance with this section, the punishment which is prescribed for stalking is three years simple or grievous imprisonment and fine for the first offence and a subsequent offence has sentence of five years of imprisonment and fine.
Essentials of stalking under Section 354D IPC
The following elements are required for the stalking offence to be considered a violation of Section 354D of the IPC
It must be committed by any man.
The following man tried to contact any woman against her interest.
The act of the man creates a certain repeatedness.
There should be an absence of interest against the part of the woman.
Modes of Stalking
There is no one style that constitutes stalking as a crime, but rather a myriad of possibilities and techniques, some of which are as follows:
Tracking the girl;
Sending offensive messages;
Coercive attempt to communicate;
Taking her pictures without her consent;
physical assault, sexual assault threats, and threats of physical violence;
standing outside the house while making an unnecessary visit;
Using Social media and other apps used for stalking.
Types of Stalker
Rejected stalker
Some stalkers have just gone through a breakup or have been rejected by someone they wanted to be in a relationship with. The stalker can be trying to patch up their relationship or just want to hang around the victim as much as they can. In other cases, they are enraged and seek retaliation after being rejected.
Resentful Stalker
Some individuals turn to stalking because they believe they have been wronged in some way. These stalkers frequently suffer from a mental illness, feel paranoid or persecuted, and may exhibit self-righteousness and self-pity. One strategy for exacting retribution for the victim’s alleged mistreatment is to stalk them. As they follow the victim, they believe they have some control over them.
Heroic stalker
Those who want to have a romantic relationship with the victim or engage in other forms of closeness with her and who think they may win her love by doing so.
Predatory stalker
Predators frequently have aberrant sexual fantasies or are sexually fixated. Mostly male, these stalkers target women who are strangers to them but who they have feelings for. Voyeurism can be the beginning, which sets the stage for a sexual assault.
Incompetent stalker
These stalkers tend to be unsuccessful in romantic relationships, lonely, and prey on total strangers or passing acquaintances. They erroneously believe they may persuade the target of their desire to begin dating them. They frequently appear to be unaware of or unconcerned about the misery they cause the victim. The social skills of many of these stalkers are lacking.
Intimacy seeker
The intimacy-seeking stalker, who is frequently mentally ill, thinks the victim will love them or eventually learn to love them, and they might even have a hallucination that the victim already loves them. They frequently concentrate on well-known or well-known personalities.
Hitman
The most hazardous victims are those who are being followed by a hired murderer with the intent to kill or seriously hurt them.
Punishment for stalking under Section 354D IPC
Section 354D, specifies the punishment for stalking. It includes the punishment, which is that, for a primary conviction, anyone convicted of stalking faces a sentence of imprisonment of either description for a term that may not exceed three years and must pay the fine liability. For a secondary conviction, an accused person faces a sentence of imprisonment of either description for a term that may not exceed five years as well as the fine.
In the 1995 case of Rupan Deol Bajaj v. Kanwar Pal Singh Gill, the Supreme Court plainly instructed the Magistrate to consider the complaint under Sections 354 and 509.
Important case laws on stalking
In the case ofShri Deu Baju Bodake v. The State of Maharashtra, (2016), the Bombay High court investigated a case involving the death of women and after discovering it was found that the cause of her death was ongoing harassment and stalking by the offender. She was the target of the accused’s harassment and stalking while she was at work and despite her resistance and lack of interest. The High Court held it important to record Section 354D coupled with abetment to suicide to punish the guilty.
Recently the single judge bench of Madhya Pradesh High court while refusing the Bail application to the 18 years old boy held that some crimes result in financial benefit, while others result in psychic gain. The petitioner, in this instance, pursued and stalked the deceased, a 16-year-old girl, for the purpose of gaining mental benefits and satanic delight. In addition to causing severe embarrassment and harassment to any female, stalking, voyeurism, and following her also erode her self-esteem. This is especially true in feudalistic societies where the perpetrator of such crimes views his actions as a trophy and tries to send the message to the community that he can capture his victim at will.[11]
Santosh Kumar Singh v. State Through CBI (2010), where Priyadarshini Mattoo, a 25-year-old law student, was stalked, raped, and killed at her house in New Delhi, was one of the most perplexing cases that triggered clause 354D. The senior student at the Delhi campus law centre, Mr. Santosh Singh, the son of a former IPS officer, had repeatedly stalked and tormented the third-year law student. He was the subject of numerous complaints for stalking, harassing, threatening, and making lewd demands of her. The culprit was apprehended on a bail bond after an FIR under Section 354 was filed at the Maurice Nagar Police Station. Due to the seriousness of the situation, a complaint was made to the university’s dean, who asked the accused to refrain from engaging in such behaviour and assigned personal protection to the victim.
He attacked the woman on January 23, 1996, while she was home alone due to reaching a court settlement. Then he raped her, struck her 14 times with his helmet, and strangled her to death with a wire. Due to the fabrication of evidence by the CBI and the fact that evidence was not gathered in accordance with legal processes, the matter was taken up by the trial court, which granted the accused the benefit of the doubt. The accused was given the death penalty when the case came before the High Court, but the Supreme Court eventually commuted that punishment to life imprisonment.
In the case of Inspector General of Police v. S. Samuthiram, (2012), the Court talked on how important it is to address the complaints of victims and onlookers of evening taunting in public settings like transit, schools, theatres, etc.
In the case of Kalandi Charan Lenka v. State of Orissa, (2017), the informant is a student who attends Pattamundai’s Women’s College. Her father is said to have three children, the first of whom is a girl with mental retardation, and the second of whom is the informant. The victim girl came in with a claim about her persona while looking for indecent remarks at school. Prior to this, the informant’s father’s phone had also received pornographic messages that affected his character from an unidentified mobile number. After receiving the message, her father expressed regret and informed the informant-victim of the situation. The High Court ruled that the accused was sexual harassed prima facie liable, hence the motion for bail was also denied.
Conclusion
In India, men and women alike are stalked on a regular basis, including working professionals, students, housewives, and numerous women. Furthermore stalking and harassment are not considered significant crimes, many women and girls refrain from leaving their homes out of fear of being followed. An important part of creating a framework for provisions for women has been the Indian Penal Code. The code aims to address all offences committed against women of all ages.
The fact that many eyewitnesses overlook it and that most stalking incidents go unreported that is why the crime is rarely treated seriously, despite the fact that it is punishable. Women do not want to compromise their freedom of movement. A change can be made if people are informed and trained in how to respond when they are being followed or use Section 354D to report the crime, register a FIR, and contact the appropriate authorities.
Frequently Asked Questions (FAQs)
What does Section 354D of IPC is related?
Section 354D of the IPC is related to Stalking
What kind of offence it will be of stalking upon first conviction?
It will be the cognizble and bailable offence.
What would not amount to stalking within Section 354D of IPC even if the man pursued her?
It would not amount to stalking if a man pursued a woman for preventing or detecting any crime by person entrusted with the responsiiblity of prevention and detention of crime.
What is the maximum punishment for the offence of Stalking?
The penalty for stalking is imprisonment of either description for a term that may not exceed three years on the first conviction, and for successive convictions, imprisonment of either description for a time that may not exceed five years, as well as a fine.
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Bankruptcy is beneficial to those who do not have sufficient means to pay their debts and can pay their debts through a good repayment plan, by liquidating their assets. The bankruptcy proceedings is filed in a court of law in which a judge and a court trustee appraise the assets and liabilities of individuals, partnerships, and businesses who have outstanding debts so inordinate that they can no longer pay them. The court has to make a decision whether to discharge the debts or to go on with the proceedings, discharge basically means relieving people or entities who have appropriate assets to pay the bills. These laws are introduced to provide an opportunity to the people whose finances have collapsed to start anew and make amends, whether the reason for such collapse would have been a bad business decision/s or inevitable situations, the legislative intent regarding the same is to provide a chance to these businesses and individuals in a capitalist economy. A very important thing to note here is that individuals or businesses which are hesitant to take this second chance must be aware of the fact that the American Bankruptcy Institute has announced that 95.3% of these people who file under Chapter 7 of the United States Bankruptcy Code (from here on Code) are successful. This article sheds some light on the concept of bankruptcy remote structures or entities, which are used to protect some assets during the restructuring or reorganising of the bankruptcy in a particular setting.
What is Chapter 11: United States Bankruptcy Code
This chapter gives the definition of bankruptcy. There are two groups that need to be considered in this context i.e. debtors and creditors. While a debtor is a company who wants to file for bankruptcy, a creditor is some entity or person who has specific claims against the debtor. If we compare United States Bankruptcy laws with that of other countries we see that debtors get favourably treated in the US as here the importance is not given to liquidation but to reorganisation. The Bankruptcy Code has been structured in a way that it prioritises reorganisation by preserving businesses that provide jobs, valuable supply of goods and services, pay taxes, and benefit the communities.
The primary objectives of Chapter 11, Reorganisation, is to, give the debtors another chance and discharge their prepetition debts, giving the creditors a fair and equitable distribution, and while doing this allowing the debtors to plan for reorganisation, clubbing all such disputes regarding the debtor into one forum, empowering the debtors to resolve uneconomic business arrangements. While also providing the creditors with greater recoveries than they would have received in liquidation.
Restructuring modelling
If the debtor chooses to continue with Chapter 11 Restructuring, that debtor has the liberty to continue the ordinary course of the business. But if there is any such activity that counts as a detour from the ordinary course such as selling the entire company or obtaining post-petition financing, will require the prior approval of the Bankruptcy Court.
This process is useful for the debtor as it can help the debtor to turn things around in the meanwhile by reorganising its balance sheet, and trying to come back to solvency as such. The steps to file for the reorganisation is that the debtor first files all the disclosure statements which provides the necessary information to the creditors, thereafter the debtor files the plan of reorganisation and impetrate votes among the creditors after the negotiation takes place with the debtor, Unsecured Creditor Committee (UCC) then makes a recommendation on the voting to the unsecured creditors, but UCC does not itself vote, then the creditors vote on the plan of reorganisation, votes then get tabulated in classes which need a two-third in amount and one-half in a number of class, which is repeated until an agreement is reached.
After the Bankruptcy Court confirms the plan of reorganisation, and the businesses then leave Chapter 11 via an asset sale or as a reorganised company, but the bankruptcy case continues, after this process other claims such as rejection damages, voidable preferences, prepetition litigation, fraudulent transfers, etc, are resolved. Finally, the trustee allots the bankruptcy estate to creditors in accordance with the plan of reorganisation.
Bankruptcy Remote Structures
What is a Bankruptcy Remote Structure?
Such structures which are used in the United States to decrease the risk of non-payment under a credit facility are known as Bankruptcy Remote Structures. These structures have been used in the US for 30 years now.
Single purpose company
The Bankruptcy remote structure consists of a company called single purpose company (SPC). It is a kind of borrower, it owns a single asset generating income from it which is later used to pay the credit facility. We can call the SPC remote as it is separate from other entities which form part of the borrowing group, which generally have significant debts and own various assets, and the provisions which allow SPC to form are framed in such a way that it becomes difficult to bring SPC into bankruptcy.
How the bankruptcy remote is not so remote
As to filing for bankruptcy
Although the Single Purpose Company has been restricted to file for bankruptcy, the bankruptcy courts have allowed these entities to file for bankruptcy when the interest of their lenders come into the picture, in the case of, General Growth Properties Inc., 409 B.R. 43 (Bankr. S.D.N.Y. 2009), where the debtors consisted of a sizable commercial real estate enterprise. Among the several entities allied to the debtors’ estate were also several Special Purpose Vehicles (SPV). It was the notion of the lenders that these remote entities are also bankruptcy proof, they thought that the independent directors will have to take the prior permission of the lenders to authorise a bankruptcy filing which was totally misconceived as was described by the bankruptcy court, “if movants believed that an ‘independent’ manager can serve on a board solely for the purpose of voting ‘no’ to a bankruptcy filing because of the desires of a secured creditor, they were mistaken.”
It is not the creditors or other lenders to who the Directors are answerable to, instead it is the SPVs and the shareholders, to whom they are answerable. Before the filing of the general growth bankruptcy, the incumbent independent directors were replaced with new directors and they gave their authorisation for the same without taking consent from the lenders. As a result of this, the secured lenders citing bad faith and unauthorised action filed before the bankruptcy court to dismiss the case for the above reasons. Many of these SPVs were not in need for bankruptcy relief, though the bankruptcy court did not allow the claims of the lenders, and held that it is the interest of the entire enterprise which has to be looked into and not only a group of lenders as such in making the decision to file individual SPVs.
Through substantive consolidation
Although this might sound as a rather harsh remedy, oftentimes the bankruptcy courts have forced remote entities into bankruptcy by merging these entities with the other allied estates of the debtors’, ( Westlb AG v. Kelley, Bank of N.Y. Trust Co. v. Official Unsecured Creditor Comm (2014)). The important thing to understand here is that this remedy is to provide the creditors with adequate distribution of the funds. The court looks at factual analysis while considering the consolidation, they include being compliant with corporate formalities, liberty of decision making, severalty of operations including offices and financial statements, holding of assets, etc. The result of this consolidation may affect those SPVs, which have not been meticulously looking after the organisational and operational needs.
Conclusion
It is important to look at the purpose of creating the Special Purpose Entity and contrasting it with the impact that it has on other assets which are a part of the other structure of the asset which includes those entities which are susceptible to debts and also forms the part of the bankruptcy estate as such, it is important to note here as we have established through various authorities that although the Special Purpose Entity is different from the Big Entity which contains all other entities which are susceptible to bankruptcy, it is not completely free from the constraints of the inclusion in the same list, in the interest of the Shareholders and also the majority of the stakeholders it can file for bankruptcy, also it can be consolidated with the bigger chunk of the assets of the debtors’ when the interest of the Creditors is on the line and they are not getting enough relief as such.
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This article has been authored by Bhavika Mittal, pursuing BA LLB from Shri Navalmal Firodia Law College, affiliated with Pune University, Pune. It provides a detailed insight into capital gains tax and briefly discusses related terms like capital asset, capital gain, and others. Moreover, the article talks about the taxation system in India with regard to inherited property and how capital gains tax is levied on inherited property when it is sold.
It has been published by Rachit Garg.
Table of Contents
Introduction
Humans are selfish beings, and personal gain is all that truly matters, but we live in a society, and our development depends on society’s development. In order to survive, public welfare is essential, but this requires monetary support. The annual tax paid by the citizen is the most crucial source. A purchase, a property sale, or a product purchase or production has a tax imposed on it that is legally entitled to the government to be used for a larger good. Further, it is through the taxes we pay that the government carries out civil operations.
The tax rate on every entity or asset differs owing to the variety in nature and possession or acquisition of the property or entity. For instance, income tax, direct tax, wealth tax, gift tax, and many more. Another kind of tax is the capital gains tax, which is levied on profits sold by the investor or owner. The capital gains tax is imposed on the sale of numerous kinds of assets like the sale of bonds, precious metals etc.
However, the current article solely focuses on how and what conditions are based on which capital gains tax is levied on inherited property. So, what is capital gains tax on inherited property? Instead, the primary question shall be, what is capital gains tax?
What is capital gains tax
Before understanding the meaning of capital gains tax, for the sake of clarity, it seems imperative to get acquainted with terms like a capital asset, capital, and capital gains. The meanings and illustrations of the same are enumerated below.
Capital asset
A capital asset is a significant component of capital gains tax. Taxes are levied on the capital asset, and this transaction is known as the tax on capital gains or capital gains tax. Capital assets are those assets which are connected or not connected to a company’s operation or the profession of an individual. These capital assets are part of the organisation for a long time and are usually not sold in the regular course of the company’s or organisation’s operation. For instance, land, building, property, vehicles etc.
Illustration
A, the owner of company B, purchases machinery for the production of the material required for the development of the final product. This machine is used on a regular basis, will be in the company for a long time, and won’t be sold during the regular course of business.
Additionally, various case laws have interpreted that the term “capital asset”, under its purview, includes diverse types of properties.
Further, there are two types of capital assets, short-term like prepaid expenses, cash and cash equivalents, trade receivables etc., and long-term, like land, machinery, vehicles, fixtures etc. The bifurcation of capital assets has an impact on the applicability of tax rates under the subject matter of capital gains tax.
Illustration
Mr B is a business owner. In the month of April 2020, he purchased land and sold it in December 2021. Here, the capital asset is the land, which has been held by Mr B for less than thirty-six months. Thus, it will be categorised as a short-term capital asset. But if Mr B sold the same land in December 2025, then it would be classified as a long-term capital asset as it is more than thirty-six months old.
Capital gains
Next is capital gains; Section 45 of the Income Tax Act, 1961, defines capital gains. The Section provides that the profits or gains earned due to the transfer of capital assets will be chargeable to income tax under the umbrella of capital gains. These capital gains contribute to the increase in capital asset value. Simply put, the profits or gains incurred from the sale of a capital asset are known as “capital gains”.
Illustration
A, a person buys land worth Rs. 80,00,000. After a specific time period from the date of purchase, A sells the land at Rs. 90,00,000. Here, the land is a capital asset, and A has profited by Rs. 10,00,000 from the sale of such a capital asset. Thus, A has benefitted by Rs. 10,00,000, which is a capital gain.
Moreover, the capital gains are also divided into short-term and long-term capital gains. The following illustration will help in drawing a line between the two.
Illustration
Mr A, in April 2021, sold his residential property, which was purchased in December 2017. The said property was sold with a capital gain of Rs. 7,00,000. Since the property was held for more than twenty-four months, it is categorised as a long-term capital gain. With everything being similar, if the property was sold in May 2018, then Mr A has held the property for less than twenty-four months. Thus, in this situation, it is a short-term capital gain.
Calculation of capital gains
The calculation of capital gains is dependent on the type of asset and the holding period that is long-term or short-term. The time period for selling a property is less than thirty-six months from the date of acquisition. While the long-term period is selling a property that is in holding for more than thirty-six months, since March 2017, the time period for immovable property has been reduced to twenty-four months, as referred to in the above illustration.
Before understanding the mathematical formula, it is imperative to understand the individual concepts of the elements constituting it.
Full value consideration means the consideration received by a seller in return for a capital asset.
The acquisition cost is the asset’s value when the seller acquires it.
The cost of the improvement is the cost incurred by the seller to make alterations to a capital asset.
Transfer expenditure be included wholly and exclusively in connection with such transfer.
The computation of capital gains has been prescribed under Section 48 of the Income Tax Act of 1961.
Capital gains = full value consideration received on transfer – (cost of acquisition + cost of improvement + expenditure incurred on transfer of capital asset).
Additionally, the calculator formula for long-term and short-term capital gains is the same. Except under long-term capital gains,
The indexed cost of acquisition is derived when the cost of acquisition is multiplied by the inflation index of the year of transfer upon the cost inflation index of the year of acquisition.
For instance, Mr A purchased a piece of land in June 2005 for Rs. 84,000 and sold the same in April 2021 for Rs. 10,10,000 (brokerage Rs. 10,000). Upon computation, the taxable capital gain would be rupees 2,27,589.
The indexed cost of the improvement is derived when the cost of the improvement is multiplied by the inflation index of the year of transfer upon the cost inflation index of the year of improvement.
Therefore, the above formulas need to be applied for calculating capital gains tax. Nowadays, there are numerous online websites and apps which calculate the same for you, one has to only enter the accurate digits under the headings majorly elucidated above.
Well, despite any legislation defining capital gains tax, the meaning of the same is self-explanatory after knowing what capital assets and capital gains are. Conclusively, capital gains tax is nothing but a type of tax imposed by the government on the individual profiting from the sale of his or her capital asset.
Further, as the entity or asset on which tax is imposed is divided under two heads, short-term and long-term, the capital gains tax also has two types. The difference between the two has been enumerated below.
Basis of comparison
Long-term capital gains tax
Short-term capital gains tax
Meaning
Profit or capital gain from the sale of long-term capital assets. But the gain on depreciable assets is never long-term even though the criteria of more than thirty-six months have been satisfied.
Profit or capital gained from short-term capital assets.
Duration of holding capital assets
The capital assets, which are held for a period of more than twenty-four months for immovable property and more than three years for moveable property. These are taxed as long-term capital gains.
The capital assets, which are held for a period of less than twenty-four months for immovable property and below three years for moveable property. These are taxed as short-term capital gains.
Applicable tax
20% tax is applicable on long-term capital tax gains, excluding the surcharge and cess.
15% tax is applicable on short-term capital tax gains, excluding surcharge and cess.
Profits attained
There are chances of higher profits as the holding period of assets is longer than one year.
There is a probability of lower profits as the holding period of assets is less than a year and there is no established position in the market.
Sections
Section 112 of the Income Tax Act, 1961 talks about the tax on long-term capital gains.
Section 111A of the Income Tax Act, 1961, talks about tax on short-term capital gains in certain gains. There is no separate section elucidating the definition of short-term capital gains.
Illustrations
Mr A sold his residential property after holding it for more than 24 months for Rs. 9,00,000. As the asset is sold after more than 24 months, it is a long-term capital gain, and Rs. 9,00,000 will be taxed.
Mr B sold his residential property within a period of less than 24 months for Rs. 8,20,000. As the asset was sold in less than 24 months, it is a short-term capital gain and Rs. 8,20,000 will be taxed.
Therefore, capital gains tax is the tax on capital gains. The tax is due on capital gains for the year the gains are realised. For instance, if a property is sold between 1 April 2021 to 31 March 2022, then the taxes on the gains shall be filed in the financial year 2021-22.
Finally, the illustration below explains the relationship between the concepts dealt with here before.
Illustration
Mr. A is a farmer who purchases land to cultivate crops. The land purchased is a capital asset for the farmer. After a time period of twenty-five months, the farmer sells his capital asset, which is the land, and gains a profit of Rs. 2,00,000. This capital gain of Rs. 2,00,000 is chargeable to income tax under the heading of capital gains tax.
Capital gains and inherited property
The capital gains tax on inherited property can better be understood with a piece of prior knowledge of the status of inheritance tax in India and which legislation regulates it. However, let’s start with the basics.
What is inherited property
The property that is passed down to the legal heirs of a deceased person is known as inherited property. The property that the legal heir receives is said to be their inheritance. These legal heirs could include a son, daughter, brother, grandchildren etc.
In India, the procedure to inherit property is controlled and regulated by personal laws like the Hindu Succession Act,1956, and Indian Succession Act,1925. For the legal heirs to bequeath the property, a will of inherited property is drafted; if not, the Law of Succession or Inheritance of personal laws carries out the procedure. There are two types of property succession in India- testamentary succession and intestate succession.
Inheritance tax
Once the property is inherited by the legal heir, he or she is regarded as the new owner of the property. Now, the new owner, or the receiver of the inheritance, is entitled to all matters in regard to the property inherited. For instance, the tax, the income incurred, the losses suffered, etc. Such rights and duties of the receiver of an inheritance are enumerated below.
Firstly, “inheritance tax” means the tax levied on property or money acquired by a person through inheritance. The system of income tax on inherited property in India is unique. In 1985, the inheritance tax, as a concept and practice, was abolished in India. It was referred to as an estate or inheritance tax.
Additionally, Section 56(x)(B) of the Income Tax Act, 1961, provides taxation on gifts received but expressly provides that immovable property received under will or inheritance does not have a tax liability. Even though for the purpose of calculating income tax returns, inheritance or such transfers of property are considered gifts, at times, the above provision of the Income Tax Act, 1961, states that under the purview of gift, inheritance is not included. Therefore, under the legislation of the Income Tax Act of 1961, the transfer of such property is not taxable.
Illustration
Mr. A owns a property and a three-storey building on the same property. Mr. A was survived by his only son, Mr. B. This property and the building owned by Mr. A are passed down to Mr. B. In this case, there is no law that imposes a tax upon this transfer of property from one person to another.
This means that the law doesn’t levy a tax on the receiver of the inherited property, but there are other situations related to the inherited property where the government imposes a tax on the new owner or receiver of the inherited property. Some of those circumstances are.
An inherited property often has the capacity to be a source of income for the receiver of the inherited property. This receiver is considered the new owner because the property is legally transferred. The source of the income could be interest or rent. When a new owner collects revenue, it becomes new income which is taxed. Therefore, the new owner or the legal heir is liable to pay the tax on the income earned through the inherited property.
Illustration
Mr A owns a residential three-storey building which is transferred to Mr B, upon A’s death. Mr B decides to rent out five flats at Rs. 40,000 each. Here, the new income generated by the new owner is Rs. 2,00,000. Mr B is liable to pay tax on the income earned through the inherited building.
Sale of inherited property
Apart from earning income and being legally entitled to claim it, the new owner is empowered to sell the property. The gain or the loss incurred from such a sale is to be solely borne by the new owner, who is obligated to pay the taxes charged.
Upon a conjoint reading of Section 2(42)A,Section 47(iii), Section 49(1), and Section 55(2) of the central tax legislation, that is, the Income Tax Act, 1961. It can be deduced that the “transfer” of such a capital asset is not considered unless the receiver of the inherited property transfers the inherited property for consideration. Consequently, the capital gains are subject to tax. Therefore, the sale of inherited property is taxable.
Illustration
A inherited a property worth Rs. 20,00,000 from his father in 2022 and is willing to sell it in 2023. The inherited property is sold at Rs. 25,00,000. The capital gains tax would be assessed here, and B would be held liable to pay the tax.
Now, here the property held by B was for a short term, thus applying short-term capital gains tax on inherited property. But long-term capital gains tax and various other factors are required to be considered to assess the capital gains tax of inherited property or calculate the capital gains tax on inherited property. The factors are-
Holding period
The amount of time for which an individual has ownership over the property is known as the holding period. The holding period shall start when the previous owner gets possession of the property. The date of new ownership acquired by the legal heir is irrelevant.
Illustration
Mr. Ramesh acquired land from his mother as a share of the inherited property in April 2021. The land was originally acquired by Mr. Ramesh’s mother in 2002 for Rs. 50,000, and when Ramesh sold the land in 2021, he got gains of Rs. 1,00,000.
Here, the holding period is from 2002-2021, which is more than twenty-four months, constituting a long-term capital gains tax. Mr. Ramesh is liable to pay 20% capital gains on the property.
Cost of acquisition
The cost of acquisition is the cost at which the property was acquired. The amount of money invested by the previous owner to acquire the property shall be deemed the cost of acquisition. For instance, in the above illustration, the cost of acquisition was Rs. 50,000.
For property acquired before 1st April 2001, the assessee can use the fair market value as of 1st April 2001 as the cost of acquisition or the cost of the asset as acquired by the previous owner. Here, the fair market value shall not exceed stamp duty as on 1st April 2001.
Cost of improvement
The term cost of the improvement is self-explanatory; it basically means the cost incurred by the assessee for the improvement or completion of the capital asset. The costs borne by the previous owner can also be added.
The cost of improvement would include renovating or modifying the structure of the property, for instance, by constructing a new room or adding new flooring, but regular maintenance, like painting the property periodically, is not included under the head of improvement expenses.
Indexation benefit
The indexation benefit allows the assessee to inflate or increase the price of the asset. This means that the inflation index can be used to show the impact of inflation on costs. The indexation benefit can be implied from the time of the previous owner, just like the cost of acquisition is deemed the acquiring cost by the previous owner.
Earlier, the initial period of consideration of the indexation benefit was ambiguous. However, in Commissioner of Income Tax v. Manjula J Shah (2013), the Bombay High Court held that the indexation benefit incurred by the previous owner should be considered just as the holding period by the previous owner is taken into consideration.
Therefore, the above-mentioned four points are the factors that contribute to calculating the capital gains tax on inherited property. The amount taxable is determined by these factors, and the capital gains on inherited property are levied accordingly. Moreover, this is how capital gains tax on inherited property is governed and regulated.
Ways to save capital gains tax
The taxes levied on profits generated from property sales are huge. Fortunately, there are ways to save tax on the money earned by selling property or assets; they are
Reinvest the money earned into buying within two years or constructing a new residential unit within three years. It is under Section 54 of the Income Tax Act of 1961 that further provisions regarding the same are prescribed.
To invest in Capital Gains Account Scheme, 1988, interested candidates can open a “capital gains account” in authorised Indian banks. This amount deposited shall be utilised within two years.
Conclusion
On the face of it, the taxation system provided by legislation may seem complicated, but a basic understanding of essential concepts and the nature of terms like capital assets, capital gains, inherited property, and others simplifies the comprehension of capital gains tax on inherited property. In India, as per the legislation, inherited property is not taxable, but when the legal heir receives the property and decides to actively utilise it, the government levies tax.
The tax rate imposed varies due to factors like the holding duration of the property, which categorises the gains as short-term or long-term. Further, the time of acquisition, etc., helps decide the appropriate tax rate.
Therefore, an inherited property is not free from tax liabilities; the sale of an inherited property comes with tax outlays that impose capital gains tax.
Frequently Asked Questions (FAQs)
What is the difference between capital and capital assets?
Capital means financial support in form of money. While capital assets are a collection of assets like land, vehicles, etc. This doesn’t include money.
What is the inflation index?
Firstly, the cost of the inflation index is calculated in order to match the inflation prices, so an increase in the inflation rate will consequently increase the prices. It is basically a concept which is used to estimate the increase in prices of goods and assets year by year due to inflation. A cost of inflation index is used to calculate long-term capital gains from capital assets transfer or sale.
The cost of the inflation index (CII) varies every financial year; for 2023-24 CII is 348.
Is cryptocurrency considered a part of capital assets?
Until 2022, any virtual digital asset was considered a capital asset. However, the 2022 budget stated that cryptocurrency is considered a special asset, and the tax rate would be 30% without expenses, without indexation, and without carrying forward issues to further years and without the set-off against any income within the year.
What is meant by fair market value?
The fair market value is the price at which the property is exchanged between a willing and informed buyer to a willing and informed seller. Thus, the parties involved are well aware of the facts and act in their own interests while exchanging an asset.
How are capital gains taxable on property inherited by more than one person?
A jointly inherited property, when sold, the capital gains tax shall be paid by every owner. Despite every owner being taxed, the chargeable tax may differ as the owners are taxed based on the proportion of the share in the property.
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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This article is written by Kavyasri S. J. of SASTRA University. The article deals with defamation, its essentials, and punishments with substantiating judicial precedents. Defamation is imputing harm to a person’s reputation in layman’s language. It has its own set of exceptions, as well, and upholds the freedom of speech guaranteed under the Constitution. While the right to speech is a fundamental right, so is the right to dignity. The article discusses various aspects of defamation under Indian laws.
It has been published by Rachit Garg.
Table of Contents
Introduction
Defamation, in layman’s language, refers to damage to the good reputation of an individual. It is a derogatory remark made against someone with the intent to taint their reputation. Any publication of false information with regard to a person is a punishable offence. It is primarily of two types based on the mode of publication, namely libel and slander. Libel refers to a written defamatory statement, while slander refers to defamation caused by oral statements. The former is a representation made in the form of writing, pictures, printing, etc., and the latter may be made through words spoken or gestures.
Rahul Gandhi made some derogatory remarks against the “Modi” surname. BJP MLA and former minister of Gujarat, Purnesh Modi, had registered a complaint against Rahul Gandhi under Sections 499 and 500 of the IPC for his alleged statement where he stated, “how come all the thieves have Modi as the common surname?” Following this, Rahul Gandhi was suspended and disqualified as a member of the Lok Sabha. Rahul Gandhi has appealed before the Surat Sessions Court, challenging his conviction over the “Modi remark”. He claimed that the statement made by him against the Modi surname targeted only Narendra Modi, Nirav Modi, and Lalit Modi and not the whole of the Modi community.
What is defamation
Salmond defines defamation as“Defamation consists in the publication of a false and defamatory statement concerning another without lawful justification.”
The definition of defamation by Winfield is “Defamation is the publication of a statement which tends to lower a person in the estimation of right-thinking members of the society, generally or which tends to make them avoid that person.”
The definition of defamation was first given by Justice Cave in the case of Scott v. Sampson (1882), it was noted that every person has a right to estimate where he stands in the opinion of others and be unaffected by any false statements. If such false statements are made without any lawful excuse, the aggrieved party shall have the right of action. Only a remote bearing was placed on the question as to the magnitude or extent of damage caused to a person’s reputation due to the false allegations.
Defamation under the IPC
Defamation has been defined under Section 499 of the IPC, which reads as follows:
“Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter expected, to defame that person.”
Defamation, as under the IPC, refers to any words spoken, written, or represented by signs or visual representations that are made or published with an intent to cause harm or knowing to cause harm to a person’s reputation, or having reason to believe that such an action will cause sufficient harm to the person’s reputation. Any false statement published or spoken knowingly, with the intent to harm someone’s reputation amounts to defamation.
Explanations provided under Section 499 of the IPC
Explanation 1 to Section 499 of the IPC states that, any imputation caused to the deceased, if affects him had he been alive or is intended to cause harm to his family, may amount to defamation.
Explanation 2 states that, imputation against a company or association or collection of persons amounts to defamation.
Explanation 3 states that any imputation which is expressed ironically shall amount to defamation.
Explanation 4 states that, when imputation is caused directly or indirectly to a person and if it lowers the moral or intellectual character, lowers credit or in respect of his caste or community, or causes to believe one’s body is in a disgraceful state, in the opinion of others then such imputation is said to have caused defamation.
Illustration: If A writes a poster that states, ABC Co.Ltd . is a fraudster company that scams people as the company is his rival, it shall amount to defamation.
Types of defamation
There are two types of defamation, namelylibel and slander.
Libel includes publishing defamatory statements in any permanent form, while slander includes making false accusations orally. Libel may be in the form of written statements, graphical representations, pictures, movies, or recorded statements. This attracts stringent punishment.
Slander may take transitory forms, either visible or audible, like gestures, signs, hissing, etc. This attracts punishment only if there is proof of actual damage being caused.
Only libel is an offence, not slander. However, under the law of torts, slander is actionable only upon proof of damage, unlike libel. Libel is actionable per se,and slander requires proof of damage except in a few cases.
In the case of S.T.S Raghavendra Chary v. Cheguri Venkat Laxma Reddy (2018), a clear distinction was made between libel and slander by the High Court of Andhra Pradesh. Slander, a false and harmful statement made orally that is of a temporary nature, is a tort that gives rise to a common law right of action. Libel has a broader scope when read in an international context. Though slander and libel, both require the publication of false remarks against a person to cause harm, the difference lies in the mode of publication. The burden of proof is on the prosecution to prove that the defamatory statements have been published and that the publication must have taken place within the territorial jurisdiction.
What is not considered to be defamation
In order to understand the punishment for defamation, it is important to know what is and is not defamation. Now that we have discussed what is defamation, let us read about what is not defamation.
Exceptions under Section 499
Section 499 provides for ten exceptions where false allegations do not amount to the offence of defamation. If false remarks made by any person fall under any one of the ten exceptions, then they do not amount to defamation.
The imputation of truth that was for the public good does not amount to defamation. If the accusation causing defamation was true, it cannot constitute an offence, and the question as to whether a statement is for the public good or not is subject to the facts and circumstances of each case.
Anything expressed in good faith against a public servant discharging his duties does not amount to defamation.
Anything expressed in good faith with respect to the conduct of any person in touching a public question does not amount to defamation.
Publication of any true report of the court proceedings does not amount to defamation.
Anything expressed in good faith against a witness or his conduct in court, both in civil and criminal cases, does not amount to defamation. For example, if X says that Y’s evidence on trial is contradictory and not true, X is saved by the exception if he has said it in good faith.
Anything expressed in good faith with regards to an author or a performing artist does not amount to defamation.
For example, if A says, “B’s book is of low-grade and unsuccessful, for B himself is a man of indecent mind,” then A is covered under the exception.
Anything censured in good faith by a person having lawful authority over another with regards to one’s conduct is not defamation.
For example, if a teacher censures a child in front of the class in the presence of other children, it does not amount to defamation.
Any person accusing another authorised person or any lawful authority in good faith is not defamation. If A accuses B of committing theft to a police officer in good faith, A falls within the exception.
Any imputation made by a person with respect to a person’s character, in his own or another’s interests, in good faith, is not defamation. If A has a notice asking the public not to lend money to B as B never pays back, it falls within the exception as it is made in the interest of the public.
Conveying a caution to a person in good faith, intending for the good of that person or the public good, is not defamation.
Illustrations: A holds a sign with derogatory terms written about B, outside his house. Here, A has committed the act of defamation against B by imputing harm to him and his family.
If B states that, A is an honest man and he would have never stolen C’s gold ring, then it is inferred that B intends or causes to intend the presumption that A might have stolen. This amounts to defamation as well.
The mere writing of defamatory words does not essentially amount to defamation if they were only read by the person it was intended for or made against and not by any third person. It is necessary to prove that such defamatory statements were read by a person other than the addressee or are likely to be read by any other third party.
In the case of Mahendar Ram v. Harnandan Prasad (1958), a letter was addressed to the plaintiff itself but was in Urdu. Since the plaintiff did not know Urdu, he required a third party translator to read it. It was held by the court that the defendant cannot be accused of defamation for publishing a false statement in the letter that was read by the translator, as he had no intention of exposing it to a third party.
The defendant shall have “privileges”. In absolute privilege, no action shall lie against the defendant even if it is made maliciously, which could include statements made in parliamentary proceedings. One can claim qualified privilege if a defamatory statement is made without malice in good faith for the protection of oneself or the interests of society.
Section 153A of the IPC deals with promoting wanton enmity between different groups, and Section 153 A(1)(a) provides that, if anyone by words spoken or written, or by signs or by visible representation, or by any other means, promotes or attempts to promote on grounds of race, religion, caste, community, language, place of birth or any other ground, results in disharmony, feelings of enmity, hatred,or ill-will between different various groups or castes or communities shall also amount to promotion of wanton enmity.
Essentials of defamation
To constitute defamation, certain prerequisites must be fulfilled:
Making a defamatory statement, either orally or written
A defamatory statement must be made against someone, either oral (slander) or written (libel). To constitute an offence, any such derogatory remark must either be made orally or in written form. Both oral and written statements are taken as to constitute the offence of defamation under the IPC. For example, A published a false information stating B has forged his documents to procure his job is defamation.
The statement must be a false accusation
The defamatory statement made must not be true. It must be a false accusation by the concerned person. Had the statement been true, it would have been a substantial claim for defence. There must be falsity in the statement; otherwise, the statement would not amount to defamation as it is true.
In Ram Jethmalani v. Subramanian Swamy(2006), the court held that the allegations made against Ram Jethmalani about receiving funds from a prohibited organisation (LLTE) to protect then Chief Minister, Ms. Jayalalitha in the Rajiv Gandhi assassination case were defamatory. The accusation made was held prima facie false and defamatory.
Intention to impute harm or tarnish someone’s reputation
The person making such a defamatory statement must cause or intend to cause harm to a person or his family members. The person making a defamatory statement must have done it with the mala fide intention of harming one’s reputation.
When someone makes a defamatory statement to a general class of people, it cannot be termed defamation unless it is being referred to a certain set of individuals. If X says all the politicians are corrupt criminals with no particular intention to harm any specific individual, X cannot be sued. Had X mentioned that all politicians of the PZF political party are criminals, he could be sued by the said political party for defamation.
Publication or communication of the false statement
For a false accusation to amount to defamation, there must be an element of publication. Publication does not necessarily mean a statement published in a book or newspaper. The defamatory statement must be in such a state that it must be noticed or likely to be noticed by a third party.
Publication must have been noticed by at least one third party
When a defamatory statement gets published, it should get noticed by at least one third party other than the addressee. The statement is not to be read or intended to be read by any other person other than the person against whom the allegation was made. It is necessary that the writer intended the publication to be read by or ought to have been read by any third person or persons.
Defamation under Indian laws
Defamation is defined under the Indian Penal Code, 1860. Sections 499 to 502 deal with defamation. Section 499 provides a definition for defamation, whereas, Section 500 provides punishment for defamation.
Section 499 defines defamation. If anything is imputed against a deceased person, it will amount to defamation if the imputation would have affected him had that person been alive and the accusation was intended to hurt his or his family’s feelings. Defamation can also be made against a company or an association of people.
An imputation shall, however, not affect a person’s reputation unless it either directly or indirectly lowers the moral or intellectual character of a person, lowers his character with regards to caste or credit.
Defamation under the Code of Criminal Procedure, 1973
The Indian Penal Code is the substantive law (which defines the rights and responsibilities, duties and obligations of a person), while the Code of Criminal Procedure, 1973 is the procedural law. If the offence of defamation is proved under the IPC and CrPC applies. Once the offence of defamation is proven and the accused is prosecuted for the same, the Code of Criminal Procedure, 1973, enters into play. The prosecution for defamation in a court of law shall follow the procedure mentioned under this code.
According to the classification under Schedule I of the CrPC, a complaint for defamation made by the public prosecutor against the president, vice-president, governor of a state, administrator of an Union Territory, or a minister who is discharging his public duty, shall be punishable with simple imprisonment up to 2 years or a fine or both, and any other defamation is also liable for the same punishment. The former is triable by courts of session, and the latter by a magistrate of first class.
Section 199 CrPC (Prosecution for defamation)
Section 199 of the CrPC provides for prosecution for defamation. It states that the court shall not take cognizance of the offence unless a complaint is registered by an aggrieved person.
When can another person file a complaint on behalf of an aggrieved party?
When under the age of 18 years
When he/she is an idiot or a lunatic
When he/she is suffering from any infirmity
When a woman is not allowed to go out in public owing to customs
Provided, the complaint filed on behalf of the aggrieved party is to be done with prior leave of court.
As provided under sub-section (2), the court of sessions may take cognizance of offences under Chapter XXI of the IPC, that are alleged to have been committed against the below-mentioned persons while discharging their public duties:
President of India,
Vice -president,
Governor,
Administrator of union territory,
minister of union or state or union territory, or,
Any other public servant
Cognisance can be taken by the Sessions Court upon a written complaint given by the public prosecutor. Such a complaint must be made within 6 months from the date of commission of offence. Else the Sessions Court will not take cognisance under Section 199(5).
The public prosecutor can file a complaint under Section 199(2) only with prior permission from:
the State Government, if it is against a person who is or has been the Governor of that State or a Minister of that Government;
the State Government, if it is against any other public servant employed in connection with the affairs of the State;
the Central Government, for complaints filed in any other case.
Section 199(3) deals with the constituents of complaints filed under this section. Components in the complaint filed by public prosecutor for defamation:
Offences alleged;
Nature of the offence;
Other particulars of the offence committed.
This Section shall not deprive the rights of the person against whom the offence is alleged, to make a complaint to a Magistrate having jurisdiction or before Magistrate who have power to take cognisance of complaint filed in respect of that offence.
The High Court of Karnataka, in a judgement passed in June 2022, in the case of Divya v. State of Karnataka(2022) stated that the bar under Section 199 CrPC for a magistrate against exercising powers under Section 156(3) of the CrPC, for the complaint made under Section 500 IPC shall be applicable even when there are other offences alleged along with the offence under Section 500 IPC.
Other provisions for defamation in CrPC
Section 202 CrPC (Postponement of issue of process)
Section 202 states that a magistrate, upon receipt of a complaint of an offence that he is authorised to take cognisance of, may postpone the issue of process (order the accused person to appear before the court), as he thinks fit. He may either inquire or direct an investigation to be made, to decide if there is sufficient grounds to proceed with the case.
Section 203 CrPC (Dismissal of complaint)
Section 203 provides that the magistrate, upon hearing the statements of the complainant and the witnesses, and the reports of inquiry or investigation as under Section 202, may dismiss the complaint with reasons for the same, if he thinks that there are no sufficient grounds for the proceeding.
Section 204 (Issue of process)
As per Section 204 of the CrPC, the magistrate may take cognizance of an offence if he finds there is sufficient ground for proceeding and the case is either of the nature of a summons or warrant case. A copy of a written complaint shall always be accompanied by a summons or warrant. A process of issuance shall be issued only when the fees are paid, and failure to pay within due time shall make the complaint stand dismissed by the magistrate.
Section 207 CrPC (Supply to the accused of copy of police report and other documents)
When proceedings are instituted with a police report as a basis, the magistrate is to furnish copies of the police report, FIR, recorded statements, confessions, and other relevant documents to the accused free of charge and without any delay under this Section.
Section 357 and 357A CrPC (Order to pay compensation and victim compensation scheme)
As per Section 357 of the CrPC, the court imposing a sentence of fines or a sentence where fine is a part of it, may in judgement order whole or part of the fine recovered to be applied in defraying expenses, compensation to person aggrieved by loss or injury, damages under Fatal Accidents Act, 1855 for death caused to another or for abetment of death or to compensate bona fide purchaser for loss caused and restoration of possession in cases including theft, criminal misappropriation, criminal breach of trust, cheating or dishonest retainment of property. An order may also be passed during revision by appellate court, high court or any sessions court.
Section 357A provides for a victim compensation scheme. Every state government shall form a scheme in coordination with the central government to provide funds for compensating victims who have suffered loss or injury and require rehabilitation. The quantum of damages to be given shall be decided by the district legal service authority or the state legal service authority.
The trial court may make recommendations for compensation if the compensation awarded under Section 357 CrPC is not sufficient for rehabilitation or when the cases end in acquittal or discharge. If the victim is identified and the offender remains untraced, and no trial happens, then the district or state legal services authority may, after an inquiry, award compensation within 2 months.
Section 358 CrPC (Compensation to person groundlessly traced)
According to this Section, when a person causes a police officer to arrest another person, and if it appears to the magistrate that there were insufficient grounds for arrest by a police officer, then the aggrieved person shall be compensated with Rs. 100 for loss of time and expenses caused by the person who caused the police officer to arrest the other person. The same may apply in cases where more than one person is arrested, as the magistrate deems fit. All compensations recovered under this section shall be treated as a fine. The magistrate may order simple imprisonment for a term not exceeding 30 days upon failure to pay.
If the arrest was for persons more than one, then the Magistrate may award compensation to each person but not exceeding Rs.100, as it deems fit.
Section 359 CrPC (Order to pay costs in non-cognisable cases)
When a complaint is made to the court for a non-cognisable offence and the accused is convicted for the same, an order may be passed against him to pay the whole or part of the prosecution costs in addition to the penalty imposed on him as per this Section. In default of such payment, the accused may be liable to simple imprisonment for a term up to 30 days. The revision power shall also lie with the appellate court, high court, or sessions court.
Whether defamation is a criminal or civil offence
Defamation is both a civil and criminal offence. Under civil law, defamation shall be punishable under torts, for the damages caused, and under criminal law, it is a bailable, compoundable, and non-cognizable offence. The Indian Penal Code makes the offence of defamation punishable under Indian criminal law.
Defamation suits, in which relief for damages is claimed in the form of monetary compensation, constitute a civil offence, whereas, defamation as a criminal offence shall be punishable under the IPC. Defamation is a civil as well as a criminal offence, as it falls under the purview of both torts and the IPC, respectively.
Civil and criminal defamation
Defamation can either be of a civil or criminal nature, based on the intent of the accused parties and the remedy claimed by the aggrieved party. Defamation under tort law deals with libel and not slander. Defamation under criminal law is covered under Sections 499 to 502 of Chapter XXI of the IPC. Additionally, Section 124A of IPC deals with sedition, defamation against state; Section 153 deals with riot, defamation against a class or community and Section 295A deals with hate speech that outrages religious sentiments.
Civil defamation is where the remedy for relief is claimed under the law of torts. Any person who is aggrieved by defamation can seek damages in the form of monetary compensation before the subordinate courts or high courts. In cases of criminal defamation, the party charged with defamation may be punished with imprisonment up to two years, a fine, or both. In Indian law, both libel and slander amount to defamation and are deemed criminal offences under Section 499 and Section 500 of the Indian Penal Code.
Defamation is a bailable, non-cognizable and compoundable offence. Section 2(a) of the Code of Criminal Procedure defines “bailable offence” as an offence that is bailable under Schedule I or bailable under any law for the time-being in force. Section 2(l) of the CrPC defines non-cognisable offence as an offence where a police officer might not be able to arrest without a warrant. Compoundable offences are those offences mentioned under Section 320 of the CrPC.
The High Court of Calcutta, in Asoke Kumar Sarkar and Anr. v. Radha Kanto Pandey and Ors (1966), held that any person aggrieved by defamation has a right to proceed in both civil and criminal court. The aggrieved person can choose either of the remedy or both of them and law does not bar enforcing both civil and criminal rights simultaneously. It was also further observed that, the Solicitor’s demands is not a condition precedent for claiming damages in a defamation suit but it is merely to notify the accused of the charges pressed against him if he fails to apologise or do certain duties.
Punishment for defamation
Section 500 of the Indian Penal Code provides for punishment for defamation. Any person guilty of defamation shall be charged with simple imprisonment for up to two years, or a fine, or both.
Section 501 deals with punishment for printing or engraving defamatory things. Whoever prints or engraves anything, knowing or believing it to be defamatory of any person, shall be punished with simple imprisonment for up to two years, or a fine, or both.
Section 502 deals with punishment for the sale of printed or engraved substances containing defamatory things. Whoever sells or offers to sell, any printed or engraved matter containing defamatory things shall be punished with simple imprisonment for up to two years, a fine, or both.
The Supreme Court of India, in the case of Mohammed Abdulla Khan v. Prakash K (2017) laid out the ambit for application of Sections 500 to 502 of the IPC. An order passed by the Karnataka High Court in the defamation case of Kannada Daily Newspaper’s owner was quashed. The Apex Court bench in this case held that the owner of printed defamatory content shall not be vicariously liable for any remarks conveyed in his newspaper, book or any other platform, provided such printed or engraved defamatory statements are not sold or offered for sale.
Once it is proved that the defamatory remarks are printed and offered for sale, it is also to be established that such an offence of publication was done wilfully or with the knowledge of the accused for him to be guilty of such an act.
The Defamation Bill, 1988 was introduced in the Rajiv Gandhi government, but was withdrawn following the widespread criticism from the opposition and the media, owing to its draconian provisions.
Cyber defamation
With the growing age of technology, “cyber-defamation” has become a major concern. Defamation exists not only in physical form, but has also assumed its existence on digital platforms. Due to the proliferation of digital networking, people are more often prone to cyber-defamation. Any person making such a defamatory statement, its publishers, and its distributors can be sued, but the social networks, website holders, internet service providers, and other intermediaries can be sued only to an extent. The IT Amendment Act, 2008 exempted the intermediaries from liability provided they acted in a bona fide manner.
Cyber defamation is the publication of false information about an individual on the internet platforms. When any false and derogatory remark is posted online, it reaches hundreds of people within a short span of time, imputing harm to the individual. Since anything posted on the internet is retained in any of the databases and remains permanent, it is irreparably in the public view. The offenders tend to hide themselves behind a fake identity, and their anonymity makes it difficult to trace the culprit. Cyber defamation can often be seen in political satire, wherein drawings or jokes are made against political personnel or any public figures. Even emails sent with offensive material amount to defamation. There is a grey-area as to pinning responsibility on the internet service providers. Any defamation in cyberspace shall be dealt with by the crime investigation department.
Section 65A and Section 65B of the Indian Evidence Act, 1872, deal with the admissibility of electronic records. The latter section states that any information that is in an electronic record and is printed on paper, stored, or copied in magnetic media produced by computers shall be deemed a document and is admissible as evidence. Online chains and electronic e-mails are also admissible as evidence in a court of law.
Section 469 of the IPC was amended to include forged electronic records in the definition under the Information Technology Act, 2000. Any statement published as either libel or slander with an intent to harm one’s reputation amounts to defamation, provided that the statement must have been read by at least one third party other than the addressee. The same offence has been made an offence under the IPC.
Information Technology Act, 2000
Section 43
Section 43 of the IT Act, 2000 deals with penalty and compensation for damage to computers, computer systems, etc.
Any person who, without the permission of the owner or without the permission of the person in charge of a computer, computer system, or computer network:
accesses or secures access;
downloads, copies or extracts data;
inputs any virus into the system;
damages or causes to damages any computer system;
disrupts or causes to disrupt the computer system;
denies or causes to deny access to authorised person;
provides assistance to facilitate intervention into someone else’s computer;
tampers or manipulates data;
destroys, deletes or alters any resource in the computer;
steals, conceals,destroys or deletes any data
shall pay compensation for damages to the aggrieved party under Section 43.
Section 66
Section 66 deals with computer related offences and states that any person who dishonestly or fraudulently does any act referred to in Section 43 shall be punishable with imprisonment for a term up to 3 years or a fine up to 5 lakh rupees or both.
Section 66A of the IT Act was struck down by the Supreme Court in 2015 in the case of Shreya Singhal v. UOI (2015), stating it violated the fundamental right to freedom of speech.
Section 67
Section 67 deals with punishment for publishing or transmitting obscene material. As per this Section, in electronic form, any person who publishes or transmits any information that is lascivious, lustful, or obscene in electronic form that can be heard or read shall be punishable with imprisonment up to 3 years or a fine up to 5 lakh rupees in the case of a first conviction, and with imprisonment up to 5 years and a fine up to 10 lakh rupees for subsequent conviction.
Section 74
Any person who voluntarily creates, publishes, or makes available an electronic signature certificate for any unlawful purpose shall be punished with imprisonment up to 2 years, a fine up to 1 lakh rupees, or both under Section 74 of the Act.
Section 79
Section 79 deals with exemption from liability of intermediaries in certain cases. It states that an intermediary shall not be liable for any third party information, data, or communication that is sourced from him or hosted by him. The function of an intermediary is limited to providing access to a system where information available to third parties is transmitted, hosted, or stored temporarily. The intermediary shall be liable if he has conspired or abetted any illegal acts or when he fails to report the unlawful acts that are controlled by him despite his knowledge of the same.
Case laws on cyber defamation
Avnish Bajaj v. State (2008)
In the case of Avnish Bajaj v. State(2008), infamously known as the DPS MMS scandal case, Ravi, a student from IIT Kharagpur, posted a listing on a website offering offensive MMS video clips for sale under the name “alice-elec”. Though the baazee.com website filters such content, the video clip was still available on the website. It was removed two days after it was posted. The police crime branch of Delhi filed an FIR, and a charge sheet was filed against Ravi, Anish Bajaj (the website’s owner), and Sharat Digumati (the person in charge of processing content). An appeal was filed by Avnish after Ravi fled, to end the criminal proceedings against him. The court held that an offence under Section 292(2)(a) and (d) of the IPC was committed, and due to strict liability, the website can also be held liable as it did not have proper filters to detect such pornographic or abusive content. However, the Court acquitted Avnish because Section 292 and Section 294 of the IPC do not recognise a default criminal obligation to a director when a corporation is accused.
Article 12 of the European Convention on Cyber Crime, provides for imposing criminal liability on legal entities that represent, control, and make decisions and holding a legal person accountable for criminal offences. Had India been a signatory to the Convention, then Avnish would have been liable. There still remains ambiguity as to the culpability of internet service providers and their directors.
SMC Ltd. v. Jogesh Kwatra (2014)
In SMC Ltd. v. Jogesh Kwatra(2014), an employee sent derogatory remarks to the employer and other subsidiaries of the company. The High Court of Delhi restrained such communication. This judgement was significant as it was the first time that an Indian court has assumed jurisdiction in a cyber-defamation case and granted an ex parte injunction against the defendant to prevent him from sending any derogatory, abusive, or obscene emails about the plaintiff. It was further stated that the employer is not vicariously liable as the employee did such an act on his own and not as part of his employment.
Shreya Singhal v. UOI (2015)
The Supreme Court of India, in the case of Shreya Singhal v. UOI(2015), struck down Section 66A of the Information Technology Act, 2000, which deals with punishment for sending offensive messages through communication services or computers, and held that restrictions on online speech were unconstitutional, and violated the right to freedom of speech. The section did not fall under the purview of reasonable restrictions, and online intermediaries will have to take down its contents upon receiving a court order or order from a government authority.
Important case laws on defamation
The following cases deal with constitutional validity. Sections 499 and 500, scope of the sections, essentials to prove defamation; and exceptions to defamation.
Thiyagaraya v. Krishnamani (1892)
In the case of Thiyagaraya v. Krishnamani (1892), it was held that any defamatory statement sent by letter or printed on paper shall constitute an offence of defamation under Section 499 IPC if the same is distributed or broadcasted to the public. Circulation of defamatory material to caste members was privileged, and there was admission of absence of malice. However, there was evidence of circulation of 600 copies to people in the bazaar and such mode of publication tends to destroy the privilege. The conviction was upheld by the High Court on grounds of mode and extent of publication as it was more injurious than necessary.
M.C. Verghese v. T. J. Poonan (1967)
In M.C. Verghese v. T. J. Poonan (1967), a letter containing defamatory statements about a wife’s father, was sent by a husband to his wife shall not amount to defamation as communication between spouses is protected under Section 122 of the Indian Evidence Act, 1872 as “privileged communication”. The husband shall not be liable if the letter gets wider publicity when in the hands of the complainant, who secretly read the letter, which was not addressed to him, but sent by his son-in-law to his daughter.
T.V. Ramasubba Iyer v. A.M.A Mohideen (1971)
In T.V. Ramasubba Iyer v. A.M.A Mohideen (1971), the defendants published news headlines in their newspaper stating that a person was exporting scented agarbattis to Sri Lanka. It was also said that the person resided in Tirunelveli and was arrested. Due to this publication, the plaintiff, who had an agarbatti business in the same place and was exporting it to Sri Lanka, suffered great losses in the business. He filed a defamation suit, and the defendants argued that they had no intention to defame him. The defendants published an article the very next day, stating the prior article did not refer to the aggrieved plaintiff. The Court referred to the case of Hulton and Co. v. Jones (1909) and held that they were not liable as Indian laws do not confer liability for statements published innocently.
D.P. Choudhary v. Manjulata (1997)
The High Court of Rajasthan, in the case of D.P. Choudhary v. Manjulata (1997), held that a person making defamatory statements and publishing them in a daily newspaper shall be prosecuted for defamation. In this case, a false accusation was made in a local newspaper against a minor college girl, alleging she eloped with a boy after leaving the house under the guise of attending lectures. This false information had caused adverse effects not only upon her but also upon her family’s reputation, ruining all her prospective marriage proposals. It was further observed that an individual shall be liable irrespective of the malicious intention of causing defamation to a person. The defamatory words were actionable per se, and the court awarded damages to the aggrieved plaintiff.
SMC Pneumatics Pvt. Ltd. of India v. Jogesh Kwatra (2014)
In the case of SMC Pneumatics Pvt. Ltd. of India v. Jogesh Kwatra (2014), an employee of the company had sent defamatory and derogatory emails. The same was forwarded by him to the other members of the company and to the company’s holdings worldwide with a malafide intention to defame the company and the reputation of the CEO. The Delhi High Court passed an ex parte ad interim injunction against the employee to prevent any further defamation of the company in the cyber network.
Subramanian Swamy v. Union of India (2016)
The Supreme Court, in the case of Subramanian Swamy v. Union of India (2016), upheld the constitutional validity of the offence of defamation as under Sections 499 and 500 of the IPC and stated that it does not violate the right to freedom of speech under Article 19 of the Constitution. The right to reputation is protected under Article 21 of the Indian Constitution.
Article 19 (1) (a) reads, “All citizens shall have the right to freedom of speech and expression.” guaranteeing the right to freedom of speech to all citizens. However, there are restrictions for the same where freedom of speech is curbed, including preservation of the interests of sovereignty, security, and integrity of India, public order, defamation, contempt of court, or incitement to an offence.
The Supreme Court in the case ofManoj Kumar Tiwari v. Manish Sissodia(2022), held that the tweets against the minister were prima facie defamatory under Section 499 IPC and further noted that a minister or a public servant covered under Section 199(2) of CrPC can file a private complaint for defamation without following special procedure as given under Section 199 (2) and 199 (4) of CrPC.
Kaushal Kishor v. the State of Uttar Pradesh (2023)
The Apex Court in a recent ruling dated 03.01.2023 in the case ofKaushal Kishor v. the State of Uttar Pradesh (2023)discussed the right to freedom of speech for MLA’s and MP’s. The five judge Constitution Bench, comprising Justices S. A. Nazeer, B. R. Gavai, A. S. Bopanna, V. Ramasubramanian, and B. V. Nagarathna, answered the question as to the imposition of restrictions on public functionaries’ right to freedom of speech and expression. The majority ruling stated that, “A statement made by a minister even if traceable to any affairs of the state or for protection of the government cannot be attributed vicariously to the government by invoking the principle of collective responsibility.”
Defences to defamation
All statements that impute harm to one’s reputation shall not amount to defamation. It has its own exceptions, as mentioned under Section 499 of the IPC. Any person who is accused wrongfully of defamation can claim certain defences.
Statement made is true
If the defamatory statement is true, then it does not amount to defamation because the information is honest. In such cases, the burden of proof is on the accused to prove the validity of the statement.
Fair and bonafide statement
Furthermore, any statement made in a fair and bona fide manner for the welfare of the general public shall not amount to defamation. Duncan and Neill had laid down guidelines to fair comment. It includes a statement of assessment not as a declaration of reality, reasonable comment without any malafide intention and the comment must be for public interest.
Honest statement made in the interest of the public
The statement should be based on facts, and a comment or criticism must have been made honestly in the public interest.
Statement of opinion
A mere statement of opinion is not defamation. The mere expression of one’s opinion regarding any article, artwork, music, book, etc. does not amount to defamation by default.
Additionally, there are privileged comments, which are of two types – absolute and qualified privilege.
Absolute privilege is applicable to any remarks passed against judiciary or parliament proceedings, political speeches, or between spouses even if defamatory shall not be punishable.
Qualified privilege is available when a person has legal, social or moral duty to make a statement that does not amount to defamation.
Remedies for defamation
Injunction
The aggrieved party can file an injunction against the defendant to prohibit further publication of defamatory contents.
Damages
Plaintiffs can claim damages against the person who published the defamatory statements. This is the available civil remedy for defamation.
A private complaint is filed before the judicial magistrate in case of criminal defamation, and a civil suit can be filed under Section 19 of the Code of Civil Procedure, 1908, where the defendant resides or the place where the defamatory statement was made, in any competent court of pecuniary jurisdiction to seek relief for damages.
In the case ofN.N.S. Rana v. Union of India (2011), that the language of the Limitation Act, 1963 is clear and unambiguous. The period of limitation for filing a compensation suit, shall be one year from the date of publication of the libel.
How to file a suit for defamation in India
Any person whose reputation is damaged shall either file a civil suit or initiate criminal proceedings.
Filing of a civil suit
A suit can be filed under Section 19 of the Code of Civil Procedure, 1908 which deals with suits for compensation for wrongs to persons or movables. Though there is no explicit mention of defamation, it is a tort or civil wrong against a person’s rights that falls under the ambit of this section. A suit needs to be instituted as per Order 7 of the CPC, and a complaint under Section 200 of the CrPC needs to be registered.
Procedure for a civil suit
A written complaint or plaint is to be filed in the court mentioning all particulars including name of court, name and address of parties and a declaration by plaintiff.
Court fee of Rs. 10 and procedure fee of Rs. 25 is to be paid.
Hearing takes place in court. If substantial matter is found in the case, then a written notice is sent to the defendants. The plaintiff is to submit relevant documents within 7 days from date of notice along with process fee and two copies of the plaint.
The defendants must submit a written statement within 30 days from receipt of notice with all counter-arguments and verification. The maximum period it can be extended is 90 days which is at the discretion of the court.
Plaintiff is to file his reply to the written statement of defendants and the pleading is complete.
Issues are to be framed and a list of witnesses must be filed within 15 days.
Parties may call the other party personally or the court may issue summons to witness.
The witness is cross-examined and the Court gives the final date of hearing.
Upon final hearing, the Court issues a final order and a certified copy of the order.
The parties not satisfied with the judgement, may go for appeal, review or reference.
Filing of criminal suit
A criminal complaint can be made under Section 499 of the IPC. Defamation is a non-cognizable and bailable offence. Upon receipt of the complaint and permission from the Magistrate, an investigation shall commence as under Section 156 of CrPC. The magistrate shall start the trial after the accused is produced before him. Based on evidence and arguments from both parties, punishment shall be awarded under Section 500 IPC.
Procedure for criminal proceedings
Complaint is made to a police officer who records all details in a book or diary authorised by the state government.
The complaint is forwarded to the magistrate and investigation is carried on with his permission. The complainant has a right to follow-up on the progress of the investigation.
A complaint may be directly made to the magistrate if the police officers do not act properly.
The magistrate may issue notice to the accused to appear before court.
If the magistrate is satisfied that the case is not substantial, he may direct the police officers to conduct proper inquiry. He may summon the accused and continue trial if satisfied.
Evidence shall be given, and police shall also give a final report of investigation to the magistrate. The police may give a closer report in absence of evidence of the charge and the magistrate may order to close the case or carry on further investigation; or the police may submit charge sheet which has brief facts, copy of FIR, list of witnesses, etc. for the magistrate to believe that there is sufficient substance in the case.
Upon filing a chargesheet, prosecution takes cognisance and issues arrest warrant to accused under Section 190 of the CrPC but if the case is not made out in first hearing, it shall discharge the accused under Section 227.
If the accused pleads guilty, he is convicted under Section 229 of the CrPC; otherwise, the trial continues.
The prosecution may produce witnesses and conduct cross-examination. The defence witnesses are also produced.
On the basis of the arguments and the evidence produced by both parties, the judge may either convict or acquit the accused.
Punishment for defamation and freedom of speech under the Constitution of India
Defamation and freedom of speech seem like a double-ended sword. The offence of defamation is said to have curtailed freedom of speech, which is a fundamental right guaranteed under Article 19(1)(a) of the Indian Constitution. However, this right is no exception and falls under the purview of Article 19(2) for reasonable restriction. Laws on defamation are imposed to strike a balance between freedom of speech and abuse of the right. If the right to speech were absolute, then anyone and everyone could be criticised; and their reputation could be harmed under this right. It is imperative in the good faith of the citizens, that there lies a law to curb the abuse of the right and punish those who use the freedom of speech as a facade to hurt one’s feelings or impute one’s reputation.
However, not all that tarnishes reputation amounts to defamation. They may sometimes be of public good or have bitter truth in them; in such circumstances, the persons are protected under the exceptions to defamation under the IPC. The onus of proof lies on the person alleging the statement to prove it was either for public good or is the hard-hitting truth or falls with the exceptions under Section 499 IPC. The aggrieved party on the other side, must prove that there was evidence for prima facie defamation, publication of defamation and the malafide intention to do so.
The right to freedom of speech does not mean that a citizen has unlimited rights to criticise others. Defamation laws are imposed to counterbalance the rights guaranteed under the constitution. It is a reasonable restriction that falls with Article 19(2), so as to ensure that there is no unnecessary imputation of one’s reputation or spreading of any false information that might trigger society.
Conclusion
When the right to freedom of speech is enshrined under Article 19, it carries with it a set of restrictions as well. A limit is set on the same to prevent any adverse exercise of the right to speech. The objective of curbing defamation under the restrictions is to safeguard one’s reputation and honour. However, defamation has exceptions too. If a true statement is made or if it is made for the public good, though it imputes harm to a person’s reputation, it is not punishable.
The reputation of an individual is indirectly enshrined under Article 21, and any false accusation made to tarnish one’s reputation shall constitute the offence of defamation, leading to a punishment of imprisonment, a fine, or the payment of compensatory damages. If defamation falls within the exceptions given under the IPC, it shall not be punishable. Several judicial precedents have been laid down to define the ambit of defamation. With changing times, cyber defamation has assumed a new form. A rigid legal framework is required to be drafted to prevent defamation in the digital world.
Frequently Asked Questions (FAQs)
What is defamation?
Defamation is the act of imputing harm to one’s reputation by alleging false information against that person. It is done deliberately with a mala fide intention to harm an individual’s reputation, moral character, or intellectual character.
What are the essentials of defamation?
A defamatory statement needs to be made either orally or in writing. Such a statement should contain allegations of false information against a person. The intention of making such a statement must be to harm one’s reputation. The statement must be published, and it should be read or acknowledged by any third party other than the addressee.
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In the first half of 2022, the world recorded about 236.1 million ransomware attacks with a predicted increase of 700% by 2025. The danger posed by ransomware is not abating. The costs and losses incurred from these attacks run into millions of dollars annually. Rather than abating, it has moved from targeting conventional devices to attacks on the cloud, data centre and enterprise infrastructure. It continues to evolve as the threat actor adopts strategies and implements components that make it more difficult for victims to detect the attacks or recover their data. It is one of today’s most disruptive forms of cyber attacks, putting victims out of business, forcing hospitals to turn away patients, and bringing entire cities, governments and municipalities to a halt. Derived from the terms ‘ransom’ and ‘malware’, ransom is money paid for the release of a thing or person held hostage while malware is any software designed to damage, disrupt or infiltrate a standalone file, computing system, server or an entire network of computing systems. Ransomware attacks are very common with attackers getting innovative in style, targeting individual and organisational computer systems and infrastructures. This article presents an overview of the concepts and technicalities of ransomware attacks.
What is ransomware
Drawing from the literal meaning of ransom, ransomware is the same thing but in this case, the target is a computing system or device. Ransomware is software used to hack into a device by blocking access to it or its contents until a ransom is paid in exchange. It is a form of malicious cyber attack on a computing system.
A ransomware attack was defined in paragraph 14 of Section 2240 of the Cyber Incident Reporting for Critical Infrastructure Act of 2022 as, an incident that includes the use or threat of use of unauthorised or malicious code on an information system, or the use or threat of use of another digital mechanism such as a denial of service attack, to interrupt or disrupt the operations of an information system or compromise the confidentiality, availability or integrity of electronic data stored on, processed by, or transiting an information system to extort a demand for a ransom payment. According to the Act, a ransomware attack does not include any event where the demand for payment is:
Not genuine or
Made in good faith by an entity in response to a specific request by the owner or operator of the information system.
This definition qualifies a ransomware attack with the payment of ransom. These attacks are usually carried out for a purpose whether financial or not. Payment of ransom here will therefore cover situations where financial gains are not the purpose for the attack. This can be established from the definition of ransom payment in the same Act as, ‘‘a transmission of money or other property ….”. It then follows that there must be something to be exchanged for the data stolen or hacked for the offence of ransomware to be established.
A ransomware attack exploits the vulnerabilities of the computing systems (this includes a PC, laptop, IOT endpoint, tablet, server or an entire network of computing systems) to gain access to it. The threat always comes with a deadline to meet the demands of the attacker after which depending on whether or not the demand is met, either the device is unlocked, access to files unblocked or files deleted, transferred, published or sold to an adversary or competitor.
These attacks have evolved over the years as attackers continue to devise several means to achieve their goals without detection. Technological advancements have also enabled the development of more creative ways to launch a ransomware attack. While users improve security measures for their devices and data, attackers also develop sophisticated means to exploit the vulnerabilities or loopholes in these security mechanisms by launching anonymous attacks.
Ransomware attacks might occur through the insertion of infected USB sticks into computing devices, pop-ups, social media, mal advertising (the introduction of a malicious code into the system through what appears to be a legitimate advertising network), infected programs or Traffic Distribution System (TSD) or self-propagation.
Come to think of it, the ransom does not have to be in monetary terms and so these attacks do not always target financial payments. It may well be used to obtain anything of interest or great value to the attacker or those sponsoring the attack. It can be for disruption purposes, for example, to destabilise an individual, organisation or to harm a competitor or an opposition. In lending credence to this fact, paragraph 13 of Section 2240 of the Cyber Incident Reporting for Critical Infrastructure Act of 2022 defines ransom payment as “the transmission of any money or other property or asset including virtual currency, or any portion therefore, which has at any time been delivered as ransom in connection with a ransomware attack”. The words underlined lend weight to the fact that ‘the payment’ might not necessarily be financial in nature. This, therefore, expands the scope of implementation of the Act against any form of ransomware attack and payment.
Beyond attacks on individuals and organisations, ransomware attacks can be launched on/against states. In these cases, the goal might not be financial but strictly political to disrupt state operations. It might also be deployed as a bargaining tool to protect state interests or acquire sensitive information from a state/country. In 2017, hackers from Russia launched a ransomware attack on Ukraine by encrypting systems. It was not for financial gains but to disrupt the system. If it can be used as a bargaining tool, states might want to deploy it for security-sensitive purposes, for example, to coerce a country to release a state prisoner. Now, that is really scary and something to be worried about beyond the present concerns.
How does the attack work
It either blocks access to the computing device such that the user is locked out and denied access to the device or it encrypts specific files on the device such that the user is unable to access such files. In the former, the user is unable to gain access to the device, while in the latter, the user can gain entry into the device but is locked out of using files or data on the device. In both situations, the user is unable to access valuable content on the device until the ransom demand is met.
The attack usually comes in the form of a phishing email. When opened, the email exposes the system to infection from malicious software. A user is likely to open a phishing email because it is designed in a way to deceive the user to believe that it emanates from a trusted source. Once opened, it serves as a pathway for the infected file to gain access to the device and lock or encrypt files. In most common cases, the malicious files come as a downloadable pdf file, doc file or XLS file from a trusted source. This, therefore, reiterates the need for users to be extra careful in opening and downloading suspicious files.
With the evolution in technology, attackers have become creative by requiring payments that are almost impossible to trace (especially with cryptocurrencies) and adopting anonymous identities.
Stages involved in ransomware
These attacks go through various stages to compromise a computing device.
Firstly, it infects the system. This is achieved by introducing malicious software into the system either by the attacker using a USB stick, or by the user ignorantly opening a phishing email, or clicking on a malicious digital advert, etc.
Secondly, the malicious code locates the targeted files and is activated to encrypt such files thereby blocking access to the device or selected files. This then leaves the devices in the control of the hacker or attacker.
Thirdly, a notification pops out on the screen notifying the user of the attack. This notification demands a ransom in exchange for removing, deleting, terminating the attack or decrypting the affected files. Failure to meet this demand might lead to deleting, or corrupting files in the devices or even selling sensitive data to adversaries or competitors. Most times, users comply with the demand to avoid these losses.
Fourthly, the attack is terminated and the attacker deletes its digital footprint if the ransom demand is met. The ransomware contains pay-for-decryption information which describes the mode of payment. The pay-for-decryption information is retained for the user to gain access into the files after the demand is met.
Types of ransomware attacks
The different types of ransomware attacks are broadly categorised into two namely:
Crypto ransomware
Locker ransomware
Crypto ransomware
Just like the name, this ransomware encrypts data. Encryption makes files unreadable. The cybercriminal or attacker uses an encryption mechanism to block access to files on the device. The encryption might be symmetric or asymmetric. Symmetric encryption uses a single key, which is a private key to lock or unlock encrypted files while asymmetric encryption uses two keys which are a public and private key to encrypt and decrypt files. Without access to the right keys, it is difficult to unblock the files. This is one way the attacker gains an upper hand over the victim.
Locker ransomware
This type of attack blocks the user’s access to the computing device. They are also referred to as ‘screen lockers’. The aim is to completely lock the victim out of the system such that all of its contents such as files, applications are inaccessible. The ransom demand is then displayed on the screen with a deadline for payment and payment instructions. While crypto-ransomware might attack only selected files or sensitive files, locker ransomware blocks access to the entire system.
Statistics of ransomware attacks
Over the years, ransomware attacks have increased and gained momentum as cybercriminals continue to devise more sophisticated ways of unleashing malware into computing devices. Statistics reveal an alarming increase in the number of attacks.
The rise in these attacks has been popularised by the advent of cryptocurrencies such as bitcoin, ethereum, litecoin and ripple. This is because these digital currencies are encrypted in such a way that makes it difficult to trace thereby eluding detection. This feature makes cryptocurrencies a more appealing mode of payment for cybercriminals.
In 2017, about five million dollars was recorded as a ransom paid for the recovery of files, data and devices from these attacks. Propelled into 2020 when a record of 304.6 million attacks were detected, this has continued to rise as the year 2021 witnessed more than double of these attacks with a record of 188.9 million attacks in the second quarter alone and 623.3million attacks recorded worldwide at the end of the year.
Most attacks have been attributed to:
Inadvertent user action example clicking on malicious emails. This resulted in 0.42% of the attacks recorded in 2012.
Negligence of managers or administrators from risks arising from software patches etc, resulting in 43% of attacks in 2021.
Activities of hackers dominate the attacks with a record of 65% in 2021.
Major attacks target Windows, Mac-based and Linux devices. There are also significant attacks on health and financial institutions.
Predictions into the future show an increase in the cost of ransomware attacks above $42 billion by the end of 2024 and over $265 billion by 2031. There will likely be a 700% increase by 2025 with a minimum of 75% organisation as targets. It is also envisaged that by 2025, 30% of countries will pass regulations guiding payments, fines and negotiations on ransomware.
Legal analysis of ransomware attacks
The law has always played catch up with technology and ransomware cases are not left out. In most jurisdictions across the world, there are no specific laws on ransomware attacks. These attacks however involve some traditional criminal activities for example, theft, extortion, defamation, fraud and as such in most jurisdictions, the regular penal and criminal legislations apply to them where there are no specific laws on the issue.
In the United States for instance, the Federal Computer Fraud and Abuse Act (CFAA) 18 U.S.C 1030, is the primary legislation on cybercrime. The Act provides for both criminal and civil penalties for cyber offences. This includes for:
Unauthorised access to computer systems,
Knowingly accessing a protected computer without authorization with the intent to defraud. This attracts imprisonment for up five years
Transmitting threats of extortion, specifically, threats to damage a protected computer and threats to obtain information or compromise the confidentiality of information (imprisonment for up to one year)
Cyber extortions relating to demands of money or property (imprisonment up to five years).
From the above provisions, it is clear that there are common ingredients in the offences of cybercrime and ransomware as the latter is in fact a subset of the former. This explains the ease with which the provisions of cybercrime laws across the globe can be used to address cases of ransomware attacks as seen in provisions of the Federal Computer Fraud and Abuse Act (CFAA) reproduced above. If these ingredients are proven in a ransomware attack, then the CFAA can be adopted to punish offenders in the United States.
The Act is aimed at strengthening the ability of critical national infrastructure to prevent and quickly respond to cybersecurity attacks. It requires Critical National Infrastructure (CNI) owners to report ransomware attacks within 72 hours and ransomware payments within 24 hours to the Cybersecurity and Infrastructure Security Agency (CISA). It further directs the CISA to establish a new programme to warn organisations of new vulnerabilities used by ransomware operators and it set up a joint ransomware taskforce to co-ordinate federal and industry efforts to disrupt the activities of cybercriminals. This new law will go a long way to keep organisations at alert on cyber security issues in the country.
Other important highlights of the Act include:
The rapid centralised aggregation and dissemination of real-time attack data. This entails information sharing and timely reporting of ransomware attacks especially as ransomware groups and attack methods become more sophisticated and frequent. It ensures information dissemination in real time which will be critical to mitigate these attacks.
The process of ransomware attack reporting entails having the right reporting tools and systems in place to address these attacks. The Cyber Incident Reporting Act which is embodied in this legislation mandates the timely report of these attacks.
In Nigeria also, there are no specific laws addressing ransomware attacks, but as is the case in the United States, the Cyber Crimes Act (Prohibition, Prevention etc) Act, 2015, covers offences of such nature. Sections 6, 8,14,16, 32 of the Act which prohibits unlawful access to a computer system, system interface, tampering with critical infrastructure, cyber fraud and spread of computer viruses or malware are directly applicable to ransomware attack cases and punishable by fines or terms of imprisonment ranging from three (3) years and one million naira respectively depending on the offence. In addition to legislation, case laws are emerging and contributing to the growing body of laws on ransomware attack cases across the globe.
In 2022, a US court delivered a laudable judgment prohibiting by way of injunction the use and unlawful disclosure of data obtained from a ransomware attack to third parties. In XXX vs. Persons Unknown (2022) ENHC 2776 (KB), the Claimant’s databases were attacked, files encrypted and made inaccessible to the Claimant with a ransom note notifying it of a cyber attack. The attackers also demanded an 8 million dollars ransom in exchange for decryption and non-disclosure of data. The Claimant provides technology-led solutions for projects of natural significance so the data was highly classified, security-sensitive and protected by the Official Secrets Act 1989, hence the identity of the claimant was made anonymous. The court gave an injunction prohibiting the use of data obtained from the attack.
This decision is laudable for proceeding and making orders against unknown persons as ransomware attackers are usually persons unknown or with disguised identities. It however begs the question of the enforceability of the order, how practicable is the enforcement of this judgment order?
It is trite law that orders of the court should not be made in vain or speculative in nature. The order is commendable and will only be enforceable when the identity of the attackers are known and will also be valid to proceed against the recipients of data obtained from the attack. It will therefore be useful against future misuse or sale of the information to third parties.
Question of jurisdiction
Another issue raised in ransomware attack cases is the question of the jurisdiction where the fraud is international in nature. Earlier in the article, we have established that these attacks might be launched against critical government infrastructure from another state simply to disrupt operations or to use the information obtained as a bargaining tool for another state. Where this is the case and data was obtained for political espionage,
How enforceable is this judgment in the jurisdiction of another country or state?
To put it in a clearer perspective, what if the sensitive data obtained in XXX v. Unknown Persons (2022) (discussed above) is intended to be used outside the United States of America?
This then raises the issue of state sovereignty in international relations which is beyond the scope of this work. However, the NetWalker ransomware attacks might shed some light on the jurisdiction of the state in combating or handling international crime of this nature. In that case, a collaborative effort between law enforcement officials across states led to the arrest of the attackers.
Payment of ransomware
One critical aspect of ransomware attacks is the payment of ransom. In most jurisdictions, payment of ransom to criminals involved in kidnapping or hostage situations are not encouraged. Should this same approach be applied or adopted in ransomware attacks especially where the payment of ransom by the victim is one remote way of assurance of the recovery of stolen data or prevention of its disclosure to third parties?
Well, while there is no general or outright prohibition of ransom payment in the US and UK, however, government and law enforcement officials advise against it. Guidance released by the UK National Cyber Security Center (NCSC) states that UK law enforcement does not encourage, condone or endorse the payment of ransom demands. Notwithstanding this directive, Section 15(3) of the UK Terrorism Act 2000, makes it an offence for anybody to provide money or other property, or invite another to provide money or other property, or receive money or other property with the intention that it will be used, or has reasonable cause to suspect that it may be used for purposes of terrorism.
The Act defines terrorism as the use or threat of one or more of the actions listed below to influence the government, or an international governmental organisation or to intimidate the public. The actions constituting terrorism identified by the Act include any action designed to seriously interfere with or seriously disrupt an electronic system. This definition applies to ransomware attacks which involve the disruption of an electronic system to influence or intimidate an organisation, government or the public. A combined reading of these provisions, therefore, makes a party liable for ransom payment where he knows or reasonably suspects that it will be used for terrorism financing. The party may, however, seek the consent of the National Crime Agency (NCA) prior to carrying out a transaction that will likely result in an offence.
The UK Economic Crime (Transparency Enforcement) Act 2022 also makes it a strict liability offence to make payments to sanctioned individuals or entities like terrorist organisations whether or not the victim has knowledge of the nature of the group or organisation.
From the foregoing analysis, it is evident that the legal landscape in ransomware attacks is gradually taking shape and evolving. From injunctions against unknown attackers to internationally coordinated actions against the crime, states are definitely poised to put an end to this crime or at best mitigate it.
Prevention and detention
While it might not be very easy to detect or completely eliminate ransomware attacks considering the sophisticated and evolving nature of the same, there are organisations committed to developing strategies and techniques to detect and avert these attacks.
Prevention techniques or measures include the setting up and testing of backups, and also applying ransomware protection in security tools such as email protection gateways and endpoints. Intrusion detection systems (IDSs) are also used to detect ransomware command and control and to alert against a ransomware system calling out to a control server. It is also important to train users on these techniques.
A fallback measure where other preventive defences fail is to stockpile bitcoin. This is commonly used where immediate harm can be brought upon customers or users at the affected organisation.
Conclusion
Ransomware is one of the most devastating forms of cybercrime. Attackers have successfully extorted huge sums of money (running into millions of dollars) from their victims with the victims willing to pay to avoid exposure or loss of data. It locates and exploits the vulnerabilities in the system, gains unguarded access to the business, infiltrates and progresses inside the system, gets unknown access and control of the data, steals valuable and critical data or locks out the user from the device and then comes the demand for ransom. Predictions reveal an astronomical increase in ransomware attacks and this demands adopting the right measures and techniques some of which are mentioned in this article to detect, prevent or minimise this threat. It is, therefore, time to brace up to the challenge and address this issue head-on. The Strengthening the American Cybersecurity Act has laudable provisions directed at addressing ransomware attacks for example timely reporting of the attacks. Most covered entities or victims of attack however might not be quick to report these attacks for fear of lawsuits arising from a breach of the data in their custody once the attack is publicised. This is where cyber insurance, an emerging concept to protect institutions whose data have been compromised by cyber attacks in this case ransomware attacks in the event of a lawsuit becomes important.
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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