Mr. Manu Sharma is a criminal defence lawyer and has almost two decades of experience at the Bar. He has handled many high-profile cases that include representing former Union Minister A Raja in the 2g case, Malvinder Singh in Religare Case, Om Prakash Chautala in PMLA case, and Aditya Talwar in the aviation scam case.
He has also represented Mr. Navjot Singh Sidhu, Mamata Banerjee’s daughter-in-law, and he also continues to represent Mohammed Azim Khan.
In an interview with LawSikho, Manu Sharma shares his journey and experiences while emphasising on the importance of internships.
Edited excerpts from the interview are below:
Table of Contents
Let’s begin with an overview of your professional journey so far. If you had to trace your journey from where you began to how far you’ve come, where would you like to start?
Manu Sharma: When you aspire to be in litigation, you have to first and foremost go and attach yourself to a good chamber. So my journey began with Pandit RK Naseem. He was doing all the high-profile matters so with him, I gained a lot of experience. I worked with him for about three and a half, four years. Then I had a brief stint with the then ASG Mr. Gopal Subramaniam. I wanted to spend some time in the Supreme Court to see what’s the difference between trial courts, High courts and the Supreme Court.
I had a long association with the late Shri Ram Jethmalani and that experience matters to me a lot. It instilled in me a lot of confidence, and propensity for hard work and being true to your client. And the value system that works in this profession.
How far do you think are internships important if somebody has to get into litigation? When is the right time to start doing internships?
Manu Sharma: Internships are important to enable students to decide which line is fitting into their scheme of things. You know, initially, students by virtue of the glamour which comes with a particular field, whether it’s corporate or criminal or intellectual property, become the first deciding factor, although it’s the worst deciding factor. So, one should start internships in their third year and diversify.
If you are in a 5-year course and by the time you have completed 7-8 internships, you’re in a good position to decide that yeah, this is the field for me. Those three four to two months that you will just spend with those lawyers will enable you to make an informed decision, it will enable you to assess your own inclination, and your skill set plus a realistic grounding that one requires.
How can one apply to get an internship under your guidance?
Manu Sharma: It’s purely on a first come first serve basis. There are no interviews, and there is no assessment, I am against judging children and kids who are still pursuing law and interviewing them. So they apply and if we have a slot, my associates take care of that.
My associates do assess their research skill, their drafting skills, and we also assess well how attentive they are in court. And based on that we make a mental note of it.
Research and drafting are not something that is part of the law school curriculums. It’s not being extensively taught there. So how can a student on his own personal level start sharpening those skills?
Manu Sharma: That’s where our role is important. The research will usually involve a question of law. So for instance, there is a bail application, which is going to be argued. So first of all, the intern should see the facts of the case. And what we will assign to them is to tell us that in similar cases involving cheating or embezzlement of funds, whether in the past, bail has been considered favourably. Then we will also give broader-based research like what are the parameters for grant of bail? So case law reading is critical for research. So that’s what they pick up here during the internship experience.
What do you think are the selection criteria for juniors?
Manu Sharma: Lawyers don’t usually need a very big team, especially in my field, counsel practice, and this is where counsel practice differs from a law firm.
For counsel, I can tell you what the selection criteria can be. For that, we meet an applicant, and we interview him. At my level, I don’t like to keep freshers because they are raw and they are not in a position to add value to something that I’m going to conduct in court. They need to quickly understand what I want from them. I would consider favourably a person who’s spent four or five years and has worked with a trial court lawyer already. For me, grades in your law school don’t matter at all.
It’s important for me to notice hunger and spark in an individual.
Do you notice any emerging trends in litigation post-pandemic? And if so, what are those?
Manu Sharma: Now we are back to where we were pre-pandemic in terms of the volume of work. Technology has added a great deal.
Most conferences now happen through this medium. And thanks to the incumbent Chief Justice of India who has also enabled video conferencing. So that’s a huge shift that enables lawyers from outside to participate in Supreme Court proceedings. You can be everywhere. Plus internships also through this period happened through the medium. So that’s been a huge contributor to providing access to lawyers to courts through this medium. What goes on in courts is no longer a mystery. People can watch how judges grill lawyers, how lawyers respond, how there is an exchange of information, and exchange of arguments.
Any last piece of advice that you would like to give to young law students?
Manu Sharma: Law school is a time to enjoy. Look forward to great things. Read a lot. As I said, diversify your internship experience, and work hard, but also enjoy the process, enjoy the journey. Things won’t be easy initially, financially, there will be ups there will be downs. But if you sail through the first four or five years, it’s very enriching to be a litigation lawyer.
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This article is written by Upasana Sarkar, a student at Jogesh Chandra Chaudhuri Law College. This article aims to provide an understanding of Section 194Q of the Income Tax Act, 1961. It provides a detailed analysis of TDS on the purchase of goods.
Income tax means the tax that the government imposes on the income of a person. The word ‘person’ means both a natural person as well as a juridical person. It means the tax levied by the government on the income generated by individuals and corporations within the jurisdiction. Section 194Q of the Income Tax Act, 1961, was introduced in the Finance Act, 2021. It became operative on 1st July, 2021. This Section is related to Tax Deducted at Source (TDS) on the purchase of goods. It is not applicable to import purchases that take place from a supplier residing outside India.
Section 194Q Income Tax Act
Section 194Q of the Income Tax Act, 1962, was introduced by the Central Board of Direct Taxes (CBDT). The Central Board of Direct Taxes issued a set of guidelines that is related to this section on Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). On 25th November, 2021, the Board issued a notification that became effective from 1st July, 2021. The aim of this Section is to delegate TDS on the purchase of goods where the amount exceeds fifty lakh rupees in the current financial year and ten crore rupees in the preceding financial year. This Section is somewhat similar to Section 206(1H) of the Income Tax Act, 1961. Section 206(1H) was introduced to impose a liability on the seller to collect tax from the buyer, whereas Section 194Q was introduced to impose a liability on the buyer to deduct tax while paying the seller. The rate of TDS is 0.1%, which is very low.
Definition of ‘Buyer’ as per Section 194Q
As per sub-section (1) of Section 194Q, ‘buyer’ means a person whose total sales, turnover, or gross receipts exceed ten crore from his business during the financial year immediately preceding the previous year (PPY) in which the purchase of goods has taken place. Those persons are liable to deduct tax at source and credit it to the account of the seller at the time of sale or payment, whichever takes place earlier.
As per sub-section (2) of Section 194Q, the buyer is responsible for crediting the amount referred to in sub-section (1) to any of the seller’s accounts, including the suspense account. It is to be noted that buyers must deduct tax for an amount that is payable to Indian resident sellers only and not to sellers who are from outside the country.
To whom does Section 194Q Income Tax Act apply to
This Section is applicable to a buyer in the following cases:
A buyer whose turnover or sales or gross receipt is more than ten crores in the immediately preceding financial year, and
The buyer is responsible to the resident seller for making payment of a particular amount, and
The payment is to be done for purchasing the goods when their value exceeds fifty lakh rupees.
Applicability of Section 194Q Income Tax Act
Applicability of TDS under Section 194Q Income Tax Act
Under Section 194Q of the Income Tax Act, TDS is applicable only for those payments that are made to contractors and subcontractors for work contract purposes. The person liable for making the payment should acquire a Permanent Account Number (PAN) from the contractor or sub-contractor and present the same to the tax authorities. He should also file a quarterly TDS return and deposit the TDS amount with the government. It should be done within 7 days of the end of the quarter.
Applicability of Section 194Q and Section 206C(1A) Income Tax Act
Section 194Q is applicable to goods that are exempted under Section 206C(1A)
Section 206C(1A) of the Income Tax Act exempts tax collection for some specific goods such as coal, scrap, and iron ore, provided the buyer issues a declaration that the goods are to be used for the manufacturing and production of articles or things.
Sub-section (1H) of Section 206C of the Income Tax Act makes provision for the collection of tax on the sale of all goods other than those mentioned in sub-section (1A) of Section 206C.
Under Section 194Q, tax will be applicable on the purchase of goods that are otherwise exempt under Section 206C(1A).
Section 194Q is applicable to corporations or public sector undertakings and specific government departments
Under Section 194Q of the Income Tax Act, tax are to be deducted by a government department provided –
Such government department is conducting a business or commercial activity, and
Its overall sale or turnover or gross receipt from such business or commercial activity exceeds ten crores during the preceding financial year.
Under Section 194Q of the Income Tax Act, a state government or central government will not be deemed as a seller for the purposes of deduction of TDS.
Under Section 194Q of the Income Tax Act, all public sector undertakings or corporations will be required to deduct TDS.
Effect of non-compliance with Section 194Q Income Tax Act
Non-compliance with or violation of Section 194Q will result in penalties and fines. Where a person who is responsible to make a payment fails to deduct TDS or fails to deposit the TDS with the government within a particular time period, he may be liable to pay interest equal to the amount of TDS that he has not deducted or deposited. In extreme scenarios, he may have to face prosecution.
Outcomes of violations of Section 194Q are very serious. The consequences are as follows-
In case a buyer fails to deduct TDS on the purchase of goods under Section 194Q, Section 40a(ia) will get attracted. This Section states that 30% of any purchase transactions on which TDS is not deducted, will get disallowed as an expenditure.
The aforesaid section means that 30% will be treated as the income of the buyer. It will be combined with the net income as disclosed in the income tax return and he will be liable to pay tax on that 30% sum.
The bills which support the purchases can be disallowed to the extent of 30% of the transaction value, if the TDS is not deducted.
It is very important for contractors and subcontractors to keep proper records of the payments they receive. The TDS should be deducted to make sure that they can claim the credit for the TDS on their income tax returns. They should keep a proper update of the TDS statement and reconcile the TDS amount with the amount credited to their account to make sure that the TDS has been deposited with the government. The government has implemented various policies to enhance the enforcement of the provisions relating to TDS in recent years. It will also reduce tax evasion. The implementation of electronic TDS statements and the linking of PANs (Permanent Account Numbers) with Aadhaar have made it easier for the government to track TDS compliance and find out which individuals and corporations are evading taxes.
Exemptions on TDS under Section 194Q Income Tax Act
Some of the exemptions are provided where the buyer is not responsible for deducting tax at source for purchasing goods from a seller.
A buyer who is non-resident – A buyer who is not a resident of India is not required to deduct TDS if the goods or products purchased by him are not effectively connected with the permanent establishment of the country.
The year in which the business is incorporated – A business is not required to deduct any TDS in the year in which it is incorporated as stated in this Section.
Goods purchased from a person whose income is exempted – When goods are bought from a person who is exempt from income tax under this Act, the seller is not required to deduct TDS. This exemption is applicable only when the seller’s full income is exempt and not a part of it.
Deductible under any other provisions of this Act – In cases, where the income is taxable under any other provisions of the Income Tax Act, 1961, the income will not be taxable under Section 194Q.
When the tax is collected under Section 206C – In cases where the tax is collected under Section 206C other than a transaction to which Section 206C(1H) applies, shall be exempted from TDS under Section 194Q.
Tax deducted at source for government agencies – As long as a government department is not engaged in a commercial or business activity, it is not considered a ‘buyer’ under this Section. So no TDS will be deducted if any purchases are made by such agencies, whether State or Central. Any departments of PSU or a corporation formed under a State or Central Act is not required to deduct TDS under this section.
Transactions in which both Section 194Q and Section 194-O apply – When both Section 194Q and Section 194-O are applicable on a particular transaction, the TDS must be deducted under Section 194-O. The buyer will be relieved of his liability as the responsibility of deducting the tax will rest with the e-commerce platform provider. But if the e-commerce platform provider fails to deduct the TDS, then it will be the buyer’s responsibility to do so.
Where transactions are carried out through exchanges – When a recognised stock exchange or a clearing corporation in the International Financial Service Centre (IFSC) purchases securities or commodities or conducts transactions, it will be exempt from TDS on the purchase of goods. This provision further exempts the deduction of TDS on transactions involving electricity, renewable energy certificates, and energy-saving certificates transferred through power exchanges registered in compliance with Regulation 21 of the CERC.
Threshold limit of TDS transaction
The TDS is applicable on purchases of goods where the total amount of the transaction is more than fifty lakh rupees in the calendar year. The following elements need to be taken into account while computing the fifty lakh rupees limit:
While purchasing, the amount will be taken without including the GST part.
If the amount is paid in advance, then the tax has to be deducted from the whole sum, including GST. Otherwise, it will be difficult to identify the GST component from the purchase amount.
In the event that money is refunded by the seller at the time of the transaction on the purchase of goods, TDS may be adjusted against any other purchase made afterwards from the same seller.
If the seller replaces the purchase return with any goods, then no adjustment will be needed in the future. As it has already been done with the goods, they have been replaced.
Dates and deposit rate of TDS
The dates on which the TDS is required to be deposited under Section 194Q of the Income Tax Act, 1961, are as follows –
TDS must always be deposited on or before the 7th day of the month succeeding the month in which the TDS it is deducted.
TDS must be submitted on or before the 30th April of the next financial year.
TDS shall be deducted by the buyer of goods on the transaction amount at a rate of 0.1% if it exceeds fifty lakh rupees. In cases where the seller fails to provide his PAN to the buyer or deductor, TDS shall be deducted at a higher rate, i.e., at the rate of 5%.
TDS certificate
It is the responsibility of the deductor of tax to issue a TDS Certificate to the deductee in Form 16A for a tax deduction. The deductor can download the form from the TRACES, which he will give to the deductee.
Conclusion
Section 194Q of the Income Tax Act, 1961, is a very important provision that facilitates the tax policy. This Section makes sure that the tax is collected on the sum of money earned by the contractors and sub-contractors. This Section made the deduction of TDS easier for the buyer before the payment is made to the seller. Though this Section is applicable to the residents of India only, individuals, as well as corporations, should be aware of the requirements of this provision to avoid penalties and fines. The buyer is responsible for deducting tax and filing a quarterly return in Form 26Q. The contractors and subcontractors should properly keep the TDS statements to claim credit for them in their income tax returns.
Frequently asked questions (FAQs)
Whether Section 194Q excluded payments made before its introduction?
All buyers who made payments before the introduction of this section are not liable to pay TDS. The Finance Act, 2021, introduced Section 194Q, which came into force on 1st July, 2021.
Whether Section 194Q applies to the purchase of capital goods?
Section 194Q of the Income Tax Act is applicable to the purchase of all goods, whether on a capital or revenue account.
What are the consequences faced by the buyer if TDS is not deducted or deposited?
In case the buyer who is liable to deduct TDS on the purchase of goods fails to do so, he will be liable to pay interest at the rate of 1% per month from the date when tax is required to be deducted till the date when the tax is deducted.
In case the buyer deducts TDS on the transaction amount but has not deposited the same with the government, he will be responsible for paying interest at the rate of 1.5% per month from the date of deduction until the date of deposit of the TDS.
What shall be construed as a purchase of goods in the absence of any definition of ‘goods’?
The word ‘goods’ is not described in the Income Tax Act, 1961. The expression ‘goods’ has a broad meaning. This term ‘goods’ is defined in the Sales of Goods Act, 1930, and the Central Goods and Service Tax Act, 2017.
Whether an adjustment is needed in respect of purchase returns while deducting TDS under this Section?
The adjustment is not needed if the seller replaces the purchase return with goods in the matter of those purchases on which tax was deducted under Section 194Q of the Act that have been completed with goods replaced.
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Human rights are vested with individuals by the virtue of their birth. These rights are automatically inherited and inalienable. Safeguarding of human rights is essential for a nation’s development. The Constitution of India guarantees the protection of basic human rights under Article 21 and other fundamental rights. The Universal Declaration of Human Rights clearly states that respect to humans and human dignity is the “foundation of freedom, peace and justice in the world”. The adherence of principles of human rights is a very important task, especially in the criminal justice system. Both the Supreme Court and high courts, being the guardian of fundamental rights, extend their protection toward the interest of human rights as well. Articles 32 and 226 of the Indian Constitution lays down a redressal mechanism for taking action against the State or private individuals whenever there is an infringement of fundamental rights which very much is inclusive of human rights. This article provides a glimpse of the scenario surrounding human rights with respect to India and the role of the Indian judiciary in safeguarding the same by abiding with the Indian Constitution.
All you need to know about human rights in the Indian context
The first and supreme expression of the fundamental values governing human rights is an international document adopted by the United Nations General Assembly that enshrines the rights and freedom of all human beings, the Universal Declaration of Human Rights. Articles 9-12 of the Universal Declaration of Human Rights and Article 10 of the International Covenant on Civil and Political Rights lays down a minimum standard for the criminal justice system that countries are advised to abide by. The Apex court of India has been a reflector of such advice in cases like Manekha Gandhi vs. Union of India (1978) and Kharak Singh vs. State of UP (1962). Further, in Sunil Batra vs. Delhi Administration (1978), the Supreme Court had observed that delaying under trial prisoners by keeping them behind bars stands in violation of the principles of justice, equity, fundamental freedom, dignity and fraternity, as have been established under Articles 19 and 20 of Indian Constitution.
Section 2(1)(d) of the Protection of Human Rights Act, 1993 defines human rights as “the rights relating to life, liberty, equality and dignity of the individual, guaranteed by the Constitution or embodied in the International Covenants, enforceable by courts in India”. The significant goodness of the Act is the establishment of the National Human Rights Commission (NHRC) under Section 3. NHRC is an independent statutory body established on 12 October, 1993 acting as the watchdog of human rights protection in the country.
The mechanism of NHRC
National Human Rights Commission being a separate institution altogether, is considered a ‘watchdog of human rights’. The Commission is authorised to inquire into the violations of human rights. While NHRC falls under the Union government, the state human rights commission (SHRC) functions with the aid and advice of state authorities. They only act as a check on executory functionaries to prevent human rights violations. The commission does not have any jurisdiction to deal with human rights violations between individuals unless there is a complaint received by it. But most of such complaints having violations enter into the jurisdiction of courts.
The NHRC is composed of a Chairperson along with eight other members. Those eight members are:
Four full-time members.
Four deemed members.
Section 12 of the Protection of Human Rights Act,1993 lays down the functions of NHRC, which are provided hereunder:
NHRC is responsible for involving itself in all kinds of matters that involve allegations concerning human rights violations, even if it is under any judicial process.
NHRC is responsible for understanding the condition of living for inmates so as to avoid manhandling them. Visiting prisoners to observe living conditions and recommending about the same for its betterment, is one of the important functions of NHRC.
NHRC can carry out a review of the Constitution’s provisions that intend to protect human rights and can suggest necessary restorative measures.
NHRC is supposed to promote any kind of research that needs to be carried out in relation to the field of human rights. This will ipso facto raise awareness and literacy surrounding human rights among the masses.
NHRC is also vested with the power of recommending rational steps to both central and state governments that can help in curbing violations of human rights in the Indian context.
Adversarial system of delivering justice and human rights : the relationship
In an adversarial criminal justice system, the accused is presumed to be innocent until he is proven guilty beyond a reasonable doubt. This system properly observes the rights of the defending and prosecuting persons by allowing both parties to present the evidence and cross-examine the witnesses. The significant disadvantage of the adversarial system is case management. The Indian criminal justice system suffers many systematic problems from adversarial systems which are resulting in numerous human rights violations, namely,
A divergent range of human rights violations in the criminal justice system occur during police custody and it is widely acknowledged by governmental and non-governmental studies that police custody operates in a system facilitating the use of torture and ill-treatment, towards their inmates.
The ideal example of police brutality was seen in 2020 in Tamil Nadu where Bennix and Jayaraj were beaten up brutally by the police officials, thereby leaving them to succumb to the injury within a few days. They were charged with violation of lockdown rules that were imposed by the state. While this remains one of many examples of police brutality, what can be uniformly viewed in all these instances is the failure of executive authorities towards safeguarding the right to life and dignity guaranteed under Article 21 as a constitutional mandate. Further, NHRC data suggests that about 17,146 deaths have been reported in police and judicial custody till March 2020.
The Apex court has criticised the non-dynamic nature of adversarial systems on many occasions. In Ram Chandra vs. State of Haryana (1981), the Supreme Court opined that, “there is an unfortunate tendency for a judge presiding over a trial to assume the role of referee or umpire and allow the trial to develop into a contest between the prosecution and defence with the inevitable distortion flowing from combative and competitive elements entering the trial procedure.”
Inquisitorial system of delivering justice and human rights : the relationship
In the inquisitorial justice system, the trial is conducted by the courts and the trial judge plays an active role by questioning and hearing the parties directly, determining what witness and the order of witnesses to call. The concerned police officer has to notify every offence he has taken notice of and submit in writing to the concerned prosecutor. If the prosecutor of any case feels that the case involves serious offences, he can move to the judge for his instruction to supervise the investigation of such cases. The role of lawyers is passive in the inquisitorial system.
Besides the adversarial system of India has certain deficiencies of non-dynamic nature and understaffing resulting in human rights violations and pendency of cases, the fair trial reasonability of judgment and fairness to the accused which are the basis of any criminal jurisprudence is very well protected in an adversarial system. Both adversarial and inquisitorial systems have their own disadvantages. Hence for better regulation of the criminal justice system and human rights, the significant features of the inquisitorial system can be adopted to strengthen the adversarial system which makes judges actively participate in directing investigation officers with the object of seeking justice for victims.
Resolving human rights disputes by means of plea bargaining
Judicial discipline requires promptness in the delivery of judgments and therefore delay in justice is an abrupt violation of human rights. With the advent of plea bargaining as a means of alternative dispute resolution mechanism, the process where the defendant negotiates with the prosecutor to reduce the liability of imprisonment, developed. The Justice Malimath Committee on reforms of the criminal justice system endorsed various recommendations on plea bargaining. The Law Commission of India in its 142nd report initiated the idea of concessional treatment of those who plead guilty on their own violation. Prolonged trials without any improvements can be dealt with by plea bargaining, which involves reparative methods for providing justice.
The Court while considering the reference of the parties to criminal cases to the mediation must before even ascertaining whether elements of settlement exist, examine by preliminary scrutiny, the permissibility in law for the criminal action to be brought to an end either because the offence involved is compoundable or because the high court would have no inhibition to quash it, bearing in mind the principles that govern the exercise of jurisdiction under Section 482 of CrPC.
The mediator must undertake preliminary scrutiny of the facts of the criminal case and satisfy himself as to the possibility of assisting the parties to such a settlement as would be acceptable by the court, bearing in mind the law governing the compounding of the offences or exercise of the power of the high courts under Section 482.
The system of vetting, at the conclusion of the mediation process, needs to be institutionalised so that before a settlement is formally executed by the parties, satisfaction is reached that the criminal charge is involved which is either compoundable or one respecting that there would be no inhibition felt by the high court in the exercise of Section 482 of CrPc.
Business human rights arbitration is an emerging mechanism as to the corporate obligation to respect human rights and to settle issues of a broad scope of possible human rights impacts on businesses, e.g., forced labour in a supply chain, environmental harm to the area surrounding a project or facility, or the data and privacy rights of consumers. They are heard in domestic courts, the court of public opinion, and before bodies designed to facilitate mediation and resolution. Justice Malimath Committee in its report said that, “over the years taking advantage of the several lacunae in the adversarial system, a large number of criminals are escaping convictions. This has seriously eroded the confidence of the public in the efficacy of the system. Therefore it is necessary to examine how to plug the escape routes and to block the possible new one.”
The ADR mechanism neither follows adversarial or inquisitorial systems of law. It follows the principle of natural justice as the core guide for functioning. The third person (neutral adjudicator) who is adjudicating must ensure the application of natural justice. The arbitral award can be challenged in court only on the grounds of violation of natural justice. The objectives of human rights are very well protected in such cases with the absence of bias and delay in trials.
Recommendations for the well-being of human rights through the justice delivery system
The adversarial system is considered to be the best way to protect humanity, equity and fairness in trials. The irregular practices causing abuse to its fairness can be treated by making judges involved proactively in the investigation. The question that arises here is judicial activism. Judicial activism is necessary when it involves the question of Article 21. The Justice Malimath Committee report on criminal justice reform has both essential and unfavourable recommendations to the criminal justice system. The legislature should review the report and insert the vital recommendations which may have an inquisitorial touch for the protection and enhancement of human rights.
More emphasis on plea bargaining to be given. The investigation process should be made before recommending cases for plea bargaining under the guidance of a judge.
The National Human Rights Commission should be vested with a proper investigation team to deal with investigation whenever necessary, unlike requesting the Central Government for an appointment of the team.
The Commission should be provided with jurisdiction to hear complaints of human rights violations between private parties. Complaints received for any violation in an investigation should be entertained and not get rejected merely because a case is registered and comes under judicial purview. National Human Rights Commission should be enriched to take cognizance irrespective of the sub judice of court or tribunal.
Separate human rights cells should be set up to monitor the human rights regulations of the working class and households irrespective of gender. This human rights cell’s primary duty is to ensure protection for even unreported violations which a person faces in day-to-day life.
Conclusion
A country’s regulation of human rights can be analysed by its criminal justice system. The paper drives to the conclusion that almost every gap in the enforcement of human rights in the criminal justice system can be filled by a proper investigation system. A judge should participate actively in investigation practice whereby he avoids a passive role and there would be more reliability in equity justice resulting in humanity. Plea bargaining should be given importance to investigation processes to sort out every violation. The National and state human rights commissions, when provided with strong and separate investigation teams and no restriction to enter in any proceedings undertaken by any department for the review of any violation of human rights upon any complaints or in its suo moto would assist in enhancing its powers and protecting its objectives.
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 has been written by Srejan Gupta Reza, pursuing law at Jagran Lakecity University, School of Law, Bhopal, Madhya Pradesh. The article explains Section 198 of the Companies Act, 2013 and sheds light on the nuances surrounding this section.
Section 198 of the Companies Act, 2013 titled “Calculation of profits” provides for a particular method that is used for calculating the net profits of a company in a Financial year. The provision makes use of certain rules and limitations, that are not there in the general Accounting Standards, in order to arrive at the net profit. This particular section corresponds with two other provisions of the act. These are Sections 135 and 197.
Section 135 is titled “Corporate Social Responsibility” and it makes a company responsible for spending atleast 2% of their average net profits in the last three years on CSR activities. This net profit is different from the net profit that is presented in the financial reporting. Thus, this net profit is calculated by the means of Section 198.
Similarly, Section 197 titled “Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits” purports an identical condition. As per Section 197, the maximum remuneration that can be paid by a company is restricted to 11 % of the net profit, which has to be computed as per Section 198.
Therefore, it can be determined from the aforementioned that the particular mode of calculation and computation of net profits of a company which is prescribed under Section 198 is used for two purposes:
(i) for identifying the minimum CSR amount which is to be spent by the company in a financial year, under Section 135(5) of the 2013 Act; and
(iI) for determining managerial remuneration under Section 197 and Schedule V.
Origin of Section 198 : Sections 349 and 350 of the Companies Act, 1956
Sections 349 and 350 of the Companies Act of 1956 (the “1956 Act”) are closely related to the provision under Section 198. The fundamental objective of the provisions under Sections 349 and 350 of the 1956 Act was to ensure that a corporation pays managerial compensation out of legitimate operational earnings only and not out of any artificially inflated profits that have been earned by means of the sale of real estate or any kind of investment.
These provisions were included in the 1956 Act, which established stringent restrictions on the amount of managerial compensation that the firm was permitted to offer. There was a need to make sure that businesses do not intentionally inflate their earnings and that such remuneration is paid exclusively out of operating profits because severe limits had been placed by the 1956 Act. When the 1956 Act was passed, there weren’t many “accounting standards” to govern specifics pertaining to calculating net profit. By removing a few unique sources of income and expenses, Sections 349 and 350 aimed to normalise profit.
Section 349 of the 1956 Act brought up a variety of practical problems. In 1960, the Companies Amendment Committee noted that Section 349 had caused “many difficulties in its interpretation and application.” The Committee did not consider the possibility of additional computing methods, albeit making a few minor amendments to Section 349.
In 2005, the J.J. Irani Committee in its report came to the conclusion that the computation techniques outlined in Sections 349 and 350 were no longer necessary because the current provisions of the Companies Act sufficiently ensured the presentation of a genuine and fair image of the company’s earnings. This suggestion of the J.J. Irani Committee was not mentioned in the report of the Parliamentary Standing Committee on Finance, which investigated the Companies Bill, 2011, which was at issue. The computation technique specified under Sections 349 and 350 was kept in Section 198 of the 2013 Act with a few minor changes.
Purpose of Section 198
Section 198 is incorporated into the Companies Act, 2013 for the simple reason of ensuring standardisation of the computation of the net profit for the purposes of Section 135 which provides for corporate social responsibility— and Section 197, which provides for managerial remuneration. Specifying the method of calculation is important as different companies might assume different net profits for the purposes of Sections 135 and 197, which is not good for financial reporting as far as transparency and good corporate governance are concerned. Therefore, we have Section 198 in the Company’s Act, which ensures that all the companies that have to compute the profit do so in a very standard manner.
Despite the fact that the law brings out all the provisions very clearly, many times, for some reason or another, there is bound to be some confusion with regards to certain provisions, and there is also bound to be confusion regarding the application of Section 198. The best thing to do in order to clear any kind of confusion is to go to the root of it. The rationale behind Section 198 is very simple. The rationale behind Section 198 for the purpose of Section 197 is that the managerial remuneration should be linked with the profit that is accruing to the business on account of the efforts of the managerial team. It is also for the purpose of determining the maximum ceiling of managerial remuneration which can be paid by a company. That remuneration must be linked with a profit, which can be credited to the efforts of the managerial team, so if a business is making some profit or loss, it would be incorrect to pass the credit or debit. It would also be unfair to the managerial team to give them less remuneration because of some losses that have occurred in the business which were due to the fault of the managerial team.
If the maximum ceiling of the remuneration that is working out gets reduced, that means the managerial person will get less remuneration or will be eligible for a lesser amount of remuneration, and vice versa. If a profit is accruing to a business on account of the sale of a capital asset, and if this profit is added to the net profit for the purpose of computing the maximum ceiling as per Section 197, the amount of the maximum ceiling is going to increase as a profit has been added on account of the sale of a capital asset. Section 198 operates to ensure that only those incomes are taken into account which can be credited to the efforts of the managerial team and to deduct only those expenses which are related to the income of the managerial team. This same logic is also applicable with regard to spending on corporate social responsibility under Section 135. The profit after Section 197 also becomes a basis for the purpose of deciding the two percent average profit of the last three years for the purpose of spending on CSR activities.
Computation of net profits of a company in a financial year
Section 198 of the Companies Act, 2013 lays down the manner of calculating the net profits of a company in any financial year for purposes of Section 197. Sub-Section (2) specifies the sums for which credit shall be given, and sub-Section (3) specifies the sums for which credit shall not be given while calculating the net profit. Similarly, sub-Section (4)/(5) of Section 198 specifies the sums which shall be deducted/not deducted while calculating the net profit.
The provision under Section 198 of the Act of 2013 prescribes the following method:
Sub-Section (1) prescribes that the amounts specified in sub-Sections (2) and (3) are not eligible for credit when calculating a company’s net profits for any given financial year for the purposes of Section 197. Second, the amounts specified in sub-Sections (4) and (5) are not eligible for deduction when calculating a company’s net profits.
Sub-Section (2) provides that credit will be provided for the bounties and subsidies received from any government, or any public authority established or authorised in this regard by any government, in the computation described above, unless and except in the instances where the Central Government specifies differently.
Sub-Section (3) provides that credit shall not be given for the following amounts in determining the aforementioned calculation:
(a) profits received as a premium on shares, unless the company is an investment company.
(b) profits received from the sale of forfeited shares by the company;
(c) profits of a capital nature;
(d) profits from the sale of immovable property or fixed capital assets of the company unless the company is in the business of purchasing and selling such property or asset as long as the sum for which a fixed asset is sold does not exceed its written-down value, credit will be awarded for the portion of the surplus that does not exceed the difference between the fixed asset’s original cost and its written-down value;
(e) Any modification to the carrying amount of an asset or liability that has been recognised in equity reserves, including any surplus in the profit and loss account following the measurement of the asset or liability at fair value.
(f) Any sum corresponding to unrealized gains, notional gains, or asset revaluation.
Sub-Section (4) prescribes that the amounts such as all usual working expenses; directors’ compensation; any bonus or commission paid; any tax designated by the Central Government as a tax on excess or abnormal profits; any other tax; interests on mortgages, loans, unsecured loans, and advances; expenses on repairs; outgoings; depreciation; excess expenditure; compensation or damages paid in case of legal liability; insurance; and bad debts must not be included in the computation described above:
Finally, Sub-Section (5) prescribes that the amounts such as income-tax and super-tax payable by the company under the Income-tax Act; any compensation, damages or payments made voluntarily; loss of a capital nature; any change in carrying amount of an asset or of a liability recognised in equity reserves shall not be deducted while computation of the net profits.
Effect of the 2017 Amendment
The Ministry of Corporate Affairs introduced the Companies (Amendment) Act, 2017 on 3rd January, 2018. The main objective behind this amendment act was to simplify the compliance process and do away with unnecessary procedures, to ensure lesser regulatory interference and promote greater self-regulation, to bring clarity to the provisions of the act. to encourage startups, and to strengthen the corporate governance standard.
This 2017 Amendment, in pursuance of these objectives, removed the stringent restrictions on managerial compensation that were established under the provisions of Section 197 and Schedule V. This step was taken as a result of the recommendations made by the Company Law Committee, 2016 (the “CLC 2016”) and the Standing Committee on Finance. The obligation to obtain the permission of the Central Government for the payment of compensation above the permissible levels was eliminated by the 2017 Amendment.
Now, after the amendment has been effected, a corporation may pay remuneration that is greater than the permitted criteria with the consent of the shareholders by presenting a special resolution. Accordingly, the 2017 Amendment has essentially abolished the severe control on managerial compensation that had been placed upon Indian companies for the past 61 years. The government’s objective of making India an appealing environment to do business and making it easier by eliminating superfluous restrictions is highlighted by this significant adjustment in manager compensation.
Fading relevance of Section 198
There had been several instances where a company would inflate its profits and therefore, Section 198 was incorporated in order to prevent the companies from doing so by requiring them to pay managerial compensation entirely from their actual operational earnings. After the 2017 amendment came along, there was a removal of the stringent controls that had been placed on managerial compensation since 1956, as they were no longer required. The major contention against the provision under Section 198 is that it is completely out of date and incompatible with Indian Accounting Standards (AS). The provisions on which Section 198 is based, i.e., Sections 349 and 350 of the 1956 Act, were passed into law in a period where the socioeconomic environment of the country was entirely different. The needs and circumstances of the present do not align with the provision, and therefore, it is no longer required.
The Indian Accounting Standards (AS), which is considered to be the Indian counterpart of the International Financial Reporting Standards (IFRS) has thoroughly covered all aspects of “net profits” accounting. The Ministry of Corporate Affairs has notified 39 Indian AS Accounting Standards in compliance with Section 133 of the 2013 Act. Therefore, even in the absence of Section 198 of the 2013 Act, the Accounting Standards have provided sufficient safeguards which guarantee that profits made by companies are not exaggerated or reported incorrectly. Since the Ind AS properly covers every area of net profit accounting, Section 198 does not need to be used to prescribe a different approach.
Conclusion
The provision under Section 198 of the Companies Act, 2013 Act has lost its relevance. The major reasons behind this are the withdrawal of severe controls over managerial compensation and the notification of Indian AS Accounting Standards under Section 133 of the Act. Furthermore, the provisions under Sections 349 and 350 of the 1956 Act have also been struck as irrelevant by the Irani Committee’s assessment, because sufficient safeguards are in place to guarantee an accurate depiction of the company’s revenue in the financial statements.
This makes up for an interesting argument in favour of omitting the provision under Section 198 of the Act entirely. The omission would spare Indian businesses from having to do separate individual calculations in order to calculate their net profits separately for managerial compensation and CSR. The elimination of Section 198 will result in the removal from the Act of an antiquated provision that is no longer necessary. It would increase consistency in calculating net profits and make doing business in India easier.
Frequently Asked Questions (FAQs)
What is the maximum limit of managerial remuneration according to Section 198 of the Companies Act?
The remuneration is computed as per Section 198 and the maximum limit for managerial remuneration exceeds 11% of the net profits for the financial year.
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A trademark is an intellectual property that is capable of distinguishing goods or services belonging to one enterprise from those of other enterprises. The essence of a trademark is distinctiveness in terms of the protection it has to offer. A trademark is considered to be one of the valuable assets for any organisation whether it is a small enterprise or a multinational company as it helps a company in its growth and development. A lot of revenue is generated by a company through the use of the respective trademarks. It is necessary to register a trademark in order to prevent others from using the same. Further, registration helps in filing suit for infringement if there arise disputes between two trademarks that appear to be deceptively similar to each other. In relation to the trademark, the event on 1 September 2021 has attracted our present discussion. Sony’s ‘Vita’ trademark lost out in genuine use revocation proceedings in the European Union General Court on this date. The trademark Vita was registered by Sony for a variety of items under Class 9 that included data carriers containing programs and“audio and/or image carriers (not of paper). Further, ‘Vieta Audio’ had applied for trademark registration in 2011 and also stood revoked on grounds of non-use. Although Sony provided evidence of the usage of the impugned trademark, notably in relation to the PlayStation Vita (a handheld gaming console), the same was rejected by both the Cancellation Division and the Board of Appeal (BoA). This article is a detailed explanation of this instance.
Background of the ‘Vita’ trademark of Sony
Walking on the same line as other competitive players in the gaming industry, Sony launched its own PlayStation line of home consoles thereby becoming the bestseller in the same. The company went further to first introduce the PlayStation Portable in the mid-2000s. With technological advancement, Sony eventually went ahead to release the PSP’s successor, the ‘PlayStation Vita’. Owing to severe market competition and weighing on high prices for selling its product, Sony had to, unfortunately, discontinue ‘Vita’. Alongside the same, the lack of movement in relation to ‘Vita’ had also caused Sony to lose out on its trademark due to the ‘non-use’ of the same. Thus it is pertinent to note that the ‘Vita’ trademark which was initially named for Sony, now stands partially revoked due to non-use. The issue in the present case revolved around the questions as to whether a portable gaming console could be classified as goods falling under Class 09 that includes ‘data carriers containing programs’ and ‘audio and/or image carriers’. As a consequence of this battle, Sony lost some rights to the ‘PlayStation Vita’s trademark due to lack of use.
The judgement by the General Court/Board of Appeal in the matter of ‘Vita’ trademark of Sony
The Board of Appeal held that PlayStation Vita’s gaming experience was not to be counted to be falling under the category of ‘data carrier or of storage capacity’ as required by the goods of Class 09. This was because the PlayStation Vita, although technically a ‘data carrier carrying programs’ or an ‘audio and/or images carrier’, was not how it was advertised to the consumer (and those features were supplementary to the ‘Vita’ console’s primary function which was gaming). Put simply, the General Court was trying to hold that the perception of the general public concerning the product was of utmost importance with respect to the issue at hand. The General Court had further opined that the genuine use of a trademark is not taken into account by the mere presence of probabilities or suppositions. Rather, major evidence or strong proof needs to be provided. It is important to showcase evidence in order to define the sufficient use of the trademark. It is clear that the genuine use and reputation of a trademark are independent of each other. They both must be dealt with separately. While, the trademark was primarily for the goods particularly specified under Class 09 which were data carrier carrying programs or an audio and/or images carrier, the prospective use of the said trademark was not made in consonance with the Class it was alleged to be falling under.
Analysis of the judgement delivered in Sony’s ‘Vita’ trademark case
The given judgement remains a landmark decision in the history of trademarks. It signifies how much well-known a trademark may be, if it’s not fulfilling a certain criterion then it can be revoked right away. It has no exceptions attached to it. Most importantly it is the customers who are the final decision-makers about the distinctiveness of the trademark for the relevant goods. Furthermore, this case highlights the significance of the usage of a trademark only in relation to the intended class of goods and services it is falling under. It should be taken into consideration that Sonyt’s mark was being used commercially. Such as the ‘PSVita’, and the ‘Vita’ mark should have been registered in a class of goods that includes portable gaming devices, as opposed to a class which involves the underlying software i.e., data carriers and audio/image carriers.
The General Court’s emphasis on the relevance of the product’s intended usage attracts attention as although the PSVita console was technically a ‘data carrier carrying programs’ and an ‘audio and/or image carrier,’ the same was secondary to the product’s primary purpose (a handheld device for mobile entertainment). The fact that trademark use could not be regarded ‘in abstracto’ from the perspective of a hypothetical consumer, instead from the perspective of real individuals in the world of reality, made this decision a landmark one.
Conclusion
This case highlights how famous a trademark is but if it doesn’t match the correct classification it is placed under, then it is liable to be revoked. The judgement lays down a future foundation stone for using the trademarks with a genuine use otherwise it can be revoked right away, as in the case of Sony. As a result, it is important to understand the intricacies of trademark law and its practical implications in the real world. Furthermore, it is the customers who are the final decision-makers in connection to estimating the genuine use of the trademark. Additionally, the PlayStation Vita launched in 2011 was discontinued in 2019. Earlier this year, Sony shut down the console’s digital store, effectively bringing a final end to its lifecycle
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This article is written by Upasana Sarkar, a student of Jogesh Chandra Chaudhuri Law College. This article provides a detailed understanding of Section 44 of the Transfer of Property Act, 1882. It provides an extensive analysis of the rights and liabilities of the transferee, which he acquires from a co-owner for the enjoyment of the transferred property.
Transfer means an act of converting something from one person to another. Property means something owned or possessed by a person. A person can transfer his property to another person by transferring his ownership rights. Where two or more persons enjoy common ownership of a property, any co-sharer can transfer his own share in the property to a stranger or outsider. Section 44 of the Transfer of Property Act, 1882, deals with transfers by co-owners. The co-owners have equal rights to use, possess, and dispose of the property. Section 44 also deals with the rights and liabilities of the transferee and the exception. It also states the idea of joint transfer and transfer by co-owners of common property.
What is Section 44 of the Transfer of Property Act
Section 44 of the Transfer of Property Act, 1882, deals with rules applicable in cases of transfers by a co-owner. It also discusses the rights and liabilities of a transferee as a co-owner for the enjoyment of the transferred property. This Section states that any one or more legally competent owners of immovable property may transfer their share of such property or any interest to the transferee. The transferor’s right to joint possession or other common or part enjoyment of the property, along with his rights and liabilities subject to certain conditions, are transferred to the transferee. In the second part of the section, it states the exception to this rule. This exception prevents a stranger from claiming joint possession of a family share of a dwelling house. The term ‘co-owner’ specifies that the co-owner may have joint possession or possession in common under English law.
Definition of co-owner
The term ‘co-owner’ means one person or a group of persons who owns property with another person or organisation. The general meaning of the term is “a member of the same family”. The co-owners may either have an equal share in the property or a portion of the property in their names. The meaning of co-owner is very wide. It includes all kinds of ownership, such as joint tenancy, tenancy in common, and tenancy by the entirety. Under Indian law, a co-owner is entitled to mainly three kinds of ownership like-
Right to possession,
Right to enjoyment, and
Right to disposal.
Ownership includes innumerable claims, liberties, and powers with regard to the ownership of a property.
Different kinds of co-ownership
The expression ‘ownership’ consists of various rights, privileges, and powers in relation to the property in question. A co-owner has the right to share and possess property jointly with others. Therefore, under Indian law, a co-owner has the right to own, enjoy, and dispose of property. If a co-owner is deprived of his property, he has the right to reclaim it. The following are the different types of co-ownership:
Tenancy in common (TIC)
“Tenancy in common” means a situation where two or more persons share ownership of a property or a portion of land. When two or more persons jointly possess a property as owners but their share of the property is not specified, such individuals are said to be tenants in common. Equal ownership rights in the property will be granted to each co-owner. Although every tenant in common has a separate interest in a particular property, each may possess and use the entire property. If a co-owner dies, his portion will pass to his legal heir or any individual whose name is stated in the will. Then he will be the tenant in common with the other co-owners.
Joint tenancy
Joint tenancy means a situation where there are two or more owners of a property who are sharing an equal share of the property. If one of the joint owners dies, his or her interest in the property automatically transfers to the surviving joint tenants. Some of the essential elements of joint tenancy are as follows:
Unity of possession: Every co-owner of a joint tenancy has the right to possess and enjoy the entire property.
Unity of time: The co-ownership interest must vest at the same time.
Unity of interest: Every co-owner of a joint tenancy must own the same estate and for the same duration.
Unity of title: The interests of the co-owners of a joint tenancy must be procured from the same source, like a will or deed.
Tenancy by entirety
“Tenancy by entirety” means a type of co-ownership that is exclusively for spouses. The co-owners must be husband and wife to own a property in its entirety. Either spouse cannot transfer his or her interest to a third party. He or she can transfer the interest in the property only to his or her spouse. In this kind of ownership, all four units, such as the unity of possession, unity of time, unity of interest, and unity of title, must be present, along with the unity of marriage. The co-ownership right in tenancy by the entirety is only terminated by divorce, or death, or mutual agreement by both spouses. When it is terminated, it becomes a tenancy in common.
In the case of Kochkunju Nair v. Koshy Alexander (1999),it was observed that where a co-owner wishes to erect a dwelling house on the lady, he is allowed to do so. In the event that the co-ownership of a property is divided, each co-owner can claim that the property be allotted to his share. Mostly, the court would originally grant such an equitable right.
Joint possession and consequences
When more than one person owns a property, it is known as joint ownership. One of the important characteristics of joint tenancy is the right of survivorship. This means that after the death of one joint co-owner, his share immediately passes to the surviving joint co-owners of the joint possession. Every co-owner must have equal rights to the property. Every co-owner may occupy the entire property subject to certain conditions, i.e., the rights of the other co-owners.
Certain specifications must be fulfilled in order to create joint tenancies. For the creation of joint tenancy, specific language must be incorporated. Despite the fact that such language is contained in the conveying instrument, a joint tenancy may not exist. Their interests must vest at the same time.
The co-owners must have undivided interests in the whole property, not divided interests in separate parts. They derive their interest from the same instrument, and the estates must be of the same type and duration. Joint possession can be created either by a will or deed. It might not be created by intestacy because there has to be a source expressing joint tenancy. A joint tenancy is freely and easily transferable.
Joint tenancy denotes both the unity of titles and the unity of possession, whereas tenancy in common signifies simply the unity of possession. In joint tenancy, when a co-owner dies, his share in the property passes to the survivors, but in matters of tenancy in common, when a tenant in common dies, his interests in the property pass to his heirs or representatives. These two concepts are derived from English law. The idea of joint tenancy is unknown in India. The only exception is in cases of coparcenary between members of a Hindu Undivided Family (HUF). The concept of coparcenary is an essential part of the Hindu Undivided Family (HUF). Every co-owner has an inherent title to the joint property, where all of them together own the entire property.
Legal competency to make the transfer by co-owner
Section 7, when read with Section 44 of the Transfer of Property Act, 1882, explains the meaning of the expression ‘legally competent’. It states that every person who is a major, of sound mind, and is not otherwise disqualified under any law is competent to make a contract. As a consequence, the interest of a co-owner can be transferred, mortgaged, and leased to another co-owner or to an outsider. The fact that the partition has not taken place does not become an obstacle to the interests of a co-sharer.
What if one co-owner opposes the transfer of joint possession
As per Hindu law, a coparcener of a Hindu joint family can alienate his share of the joint family’s property for consideration. Section 45 of the Transfer of Property Act states that there must be a transfer of immovable property to more than one person. In cases of joint possession, when a co-owner is in exclusive possession of a joint plot of land and lets it out to a tenant without the consent of other co-owners, such a tenancy will not bind the latter. In those cases, the lease will be confined to the interest and share of the lessor.
What are the rights and liabilities of a transferee
The Transfer of Property Act, 1882, vests the transferee with various rights and liabilities, which are as follows:
Rights of transferee
Section 44 of the Transfer of Property Act, 1882, states various rights of the transferee and their safeguards regarding those rights. The following are the rights of the transferee after transfer-
Right to joint possession
Every co-owner of a property has proprietary rights over the entire property. The transferee becomes the co-owner after the transfer of the property by a co-owner, except for the dwelling house. In cases where a co-owner of the property is expelled from a joint possession, he has the right to file a suit for a joint possession instead of filing for partition.
Right to peaceful possession
Every co-owner has the right to peaceful possession of property. When possession of a property is transferred by the co-owner to the transferee, he cannot be disturbed by other co-owners until the final partition comes into force.
Right to make improvements
Every co-owner has the right to make construction on any portion of his land where he is authorised to make such improvements. But he is not entitled to make any construction on any other part of the joint property or to the prejudice of the other co-owners.
Right to enforce partition
Every co-owner has a right to enjoy his portion of the property separately and peacefully without any interference or interruption. So he can demand and enforce a partition. In fact, not only a transferee of an offer but also a transferee of any interest can do so. A lessee, a mortgagee, or a life tenant is entitled to seek partition subject to certain conditions that give effect to the transfer. In the event of partial partition, which prohibits the working out of equities between the co-owners is not maintainable.
In the case of Lalitha James and others v. Ajit Kumar and Others (1991),P.S. Chouhan, owner of a vast property, was unmarried and issueless. So he decided to give his property to his two sisters, Dayabai and Grace Pritabai, and executed a deed for the transfer of said property in their favour. No partition took place between them. The acres of land were divided among the three survivors of Grace Pritabai. The survivors are the respondents in this case. The third respondent sold her share to the second respondent, who started digging on the land to raise a structure after purchasing it. It was objected to by the first respondent. In the final judgment given by the Madhya Pradesh High Court, it was held that a purchaser of a joint property is not entitled to possession of any particular part of the joint property. He will be the co-owner of the property and not the exclusive owner of any particular portion of the joint property. Section 44 states that a transferee is not in a better position than the co-owner himself. The respondents can use their right to enforce the partition of the joint property only. The sale of the exclusive property will not be allowed. So he was given the right to appeal in this case.
Liabilities of transferee
The transferee also has certain liabilities that he has to fulfill. The rights are given to the transferee along with a few conditions and liabilities that attach at the date of transfer to the share or interest so transferred. According to the principles established by Mitakshara law, the right of an alien is limited to instituting a suit for partition to work out his equities based on the charges and encumbrances that affect the coparcenary property at the time of transfer. The transferee shall not be liable for the damages caused to the rest of the property by the transferor after the date of transfer. In short, the transferee gets all the rights of the transferor and is responsible for fulfilling all the duties of the transferor after the property is transferred to him.
Role of a dwelling house and undivided family
The basic concept of a dwelling house falls under the exception to the rule, which is mentioned in Section 44 of the Transfer of Property Act, 1882. If a portion of the dwelling house is transferred to an outsider, then the transferee cannot claim joint possession or any common part or enjoyment of the house. This Section states that since the transferee is not a member of that family, he will be unable to enjoy that property, which is a dwelling house belonging to an undivided family. He is only given a share in a residential house belonging to a joint family member and is not entitled to joint possession. This exception was framed to avoid any kind of hassle that may occur after the transfer of the share of a joint family to a stranger who may belong to a different caste or religion. This restriction is applicable even if only one male member of the family is present in the family dwelling house.
In order to award relief under this Section, two conditions must be fulfilled-
The transferee should be an outsider and not a member of the family, and
The property that is transferred should be a dwelling house.
In short, we can say that the transferee should be a stranger. In this situation, the transferee has the right to have the house partitioned based on Section 4 of the Partition Act, 1893. This Section states that an outsider transferee who claims partition by metes and bounds may be compelled, at the option of the other family members, to forgo his legal partition right and accept pecuniary compensation. The Partition Act, 1893, allows the co-owner to buy the share from the transferee at the valuation to be awarded by the court.
Dwelling house: According to the Partition Act, 1893, ‘dwelling house’ not only means a residential house but also includes all the adjacent buildings, gardens, cartilage, courtyard, orchard, and all other items that are essential for the favourable use of the house. If the dwelling house does not belong to an undivided family, Section 44 does not apply. The word ‘undivided family’ not only means Hindus but also includes a group of people who have blood relations and live in one house under one head.
Explanation of dwelling house with reference to several case laws
Durgapada Pai v. Debidas Mukherjee (1974)
In the case of Durgapada Pai v. Debidas Mukherjee (1974),the members of the family were living separately in different places. They are in the house for the purpose of Kali Puja. The place where they were living was previously used for the collection of paddy. The Calcutta High Court held that using a property for some specific reason and for a short term will not make it a dwelling house. A dwelling house is said to be one that has been an ancestral dwelling and the family members have not abandoned it.
Ramdayal v. Mannaklal (1973)
In the case of Ramdayal v. Mannaklal (1973),the defendant bought a house from the plaintiff’s father, who was put in possession thereof. The plaintiff filed a suit on the ground that the sale in favour of the defendant was without legal necessity, and so he claimed possession of the house. The Madhya Pradesh High Court stated that where a purchaser files a suit for partition within a specific time period, he can be in possession during the pendency of the suit. The defendant can possess the property if it is not in excess of the share of the co-owner. In the event that the co-owner transfers more than his share to the purchaser, he can only acquire the portion that belonged to the co-owner. The Court held that in this case, the property transferred was less than the share of the vendor, and therefore, the defendant was given possession.
Ashim Ranjan Das v. Bimal Ghosh (1992)
In the case of Ashim Ranjan Das v. Bimal Ghosh (1992), the plaintiff filed a suit for an injunction where the disputed property belonged to the four sons. The members of a Hindu Undivided Family were in possession of the house, where a co-owner leased out his share without effecting partition. The tenant then made an attempt to enter into possession jointly with members of his family. The Supreme Court granted a temporary injunction in the pending suit. However, it was held that a stranger purchaser is reduced to a trespasser. Section 4 of the Partition Act gives the right to partition to such a stranger. Hence, the appeal was dismissed.
Judicial pronouncements in matters relating to Section 44 of the Transfer of Property Act
Baldev Singh v. Darshani Devi (1993)
In the case of Baldev Singh v. Darshani Devi (1993), the question that arose was whether a co-owner who does not have actual physical possession of the property can transfer a valid title to a specific portion of land. The Himachal Pradesh High Court observed that the remedy for the plaintiff was to get a share of the property allotted after the partition or to claim compensation or damages from the defendant, though he had no right to claim a decree for possession against the defendants.
Rukmani and Others v. H. N. Thirumalai Chettiar (1985)
In the case of Rukmani and Others v. H. N. Thirumalai Chettiar (1985), the plaintiff questioned the order of the trial court, which refused to grant an injunction. In the opinion of the plaintiff, the respondent, who purchased only 2/3rd of the suit property, was trying to do huge constructions in the entirety of the suit property before actually having 2/3rd of the share divided. The Madras High Court held that a co-owner cannot be allowed to cause prejudice to other co-sharers and issued an injunction restraining the respondent from moving forward with the construction on that particular site during the pendency of a suit for partition filed by the other co-owners.
Hazara Singh and Anr. v. Faqiria (2004)
In the case of Hazara Singh and Anr. v. Faqiria (2004), the question was whether the plaintiff could declare him the owner of the property on the basis of adverse possession of land. The Punjab and Haryana High Court held that the possession of a co-owner is the possession of all the co-owners. It was concluded that the possession cannot be adverse unless the persons in possession deny their right to knowledge. A co-sharer possesses the property on behalf of all the other co-owners. Therefore, his possession of the entire property cannot be deemed to be adverse.
Srilekha Ghosh (Roy) and Anr. v. Partha Sarathi Ghosh (2002)
There is no law that states that a co-sharer must only sell his or her part to another co-sharer. Hence, strangers or outsiders can also purchase shares in a dwelling house. Section 44 of the Transfer of Property Act, 1882, states that if a person is not a member of the family, he does not get a right to joint possession or common enjoyment of that house when the transferee of a share of a dwelling house transfers his property to him. Section 4 of the Partition Act, 1893, has no application in this particular case. The daughters cannot be called strangers to the family. They have acquired an interest in the property as a gift from their mother. As a consequence, they succeeded their mother. The petition filed by the defendant under Section 4 of the Partition Act was not maintainable in that situation and was, therefore, dismissed.
Conclusion
Section 44 discusses the legal position of the co-owners of the property. When one of the co-owners of a property passes his share to another, the assignee obtains all the rights with respect to that property. Therefore, it can be concluded that when the transferor transfers his share to another person, the transferee takes the place of the transferor and gets all the rights and liabilities of the transferor. Although there is one exception that states that if the transferee happens to be a stranger, he cannot claim joint possession of a family dwelling house unless and until partition takes place. This Section deals with transfers by co-owners, which can be done by will or deed.
Frequently Asked Questions (FAQs)
What are the various modes of transfer of property?
Property under the Transfer of Property Act, 1882, can be transferred through various modes, such as sale, exchange, gift, mortgage, lease, and by creating an actionable claim.
What is the co-owner’s right against trespassers?
The co-sharer has the right to sue a trespasser in ejection without impeaching the other co-owners.
What is the right of the Muslim co-heirs in the case of partial partition?
Under Muslim law, where the property has been passed on to a number of co-heirs, a definite fraction of every part of the estate belongs to all the co-heirs. In that situation, any co-heir can ask for the recovery of his share of the property from another co-owner.
Whether a co-owner can make a transfer without the consent of other co-owners?
A co-owner of a property can make a transfer of a commercial property to any outsider without the consent of the other owner. Even though it is an undivided share, the co-owner has all rights to enter into any sale, mortgage, or lease with a stranger.
Can an owner remove a co-owner?
An owner can remove a co-owner from the deed by removing his name from the deed of his house and replacing it with the relevant beneficiaries. The earliest way of removing his name from the deed of the owner’s house is by executing a release deed or relinquishment deed in his own favour. This will make him the absolute owner of the property.
How to remove a co-owner from a house title in India?
If an owner wants to remove a co-owner from the house title, he needs to file a suit for declaration before the civil court and produce evidence therein to prove that payments were made entirely by him. Therefore, the co-owner’s name must be deleted from the sale deed.
Which rights of ownership cannot be transferred?
The ownership rights that cannot be transferred are as follows-
The right to transfer an easement cannot be allowed apart from the dominant heritage.
The right to enjoyment of an interest in the property is confined to the owner personally and cannot be transferred by him.
The right to future maintenance, however arising, secured, or determined, cannot be transferred.
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Indian society places great emphasis on the modesty of women and any act that is seen as an insult to modesty is considered to be a grave offence. The offence of outraging the modesty of a woman is not limited to physical acts of violence but also includes any verbal or non-verbal conduct that is intended to insult the same. The offence is considered to be cognizable, non-bailable, and non-compoundable by nature. In recent years, the issue of the safety and security of women has come to the forefront in India, with several high-profile cases of sexual offences against women being reported. The Indian government has taken steps to strengthen laws against sexual offences, including the introduction of stricter deterrents for rape and sexual assault. However, sexual offences against women continue to be a major problem in India and efforts are still needed to ensure that laws are effectively implemented. It is important for individuals to be aware of their rights and for society to take a zero-tolerance approach toward sexual offences. This article aims to provide an overview of the offence of outraging the modesty of women in India and the efforts being made to strengthen laws against sexual offence
Outraging the modesty of a woman – provisions under the IPC
The offence of outraging the modesty of a woman in India is a serious offence defined under Section 354 of the Indian Penal Code, 1860. The section states that any person who assaults or uses criminal force on any woman, intending to outrage or knowing it to be likely that he will thereby outrage her modesty, shall be punished with imprisonment of either description for a term which shall not be less than one year but which may extend to five years, and shall also be liable to fine.
Essentials of Section 354 of the Indian Penal Code, 1860
What is modesty
The act of outraging a female’s modesty is increasing exponentially thereby taking a toll on the lives of women leading to mental and physical agony. Modesty has been defined as a quality or state of being modest, which is characterised by humility, restraint, simplicity, and good taste. In the context of outraging the modesty of a woman, it refers to the virtue that attaches to a female owing to her gender and is an attribute associated with females in general. It is a sense of shame or bashfulness that a woman feels when faced with any act that is intended to outrage her modesty. Put simply, the court of law while deciding on the case of State of Punjab v. Major Singh (1966), has observed that modesty to a woman has evolved as altogether a different concept which has very little to do with the physique of the woman. The court further states that the modesty of a woman is intimately connected with femininity including her sex.
Further, modesty is not only limited to physical modesty but it also includes moral and psychological modesty. The moral modesty of a woman is said to be the sense of shame or bashfulness that a woman feels when faced with any act that is intended to outrage her modesty. The psychological modesty of a woman is said to be her innate sense of self-respect and dignity.
What is the punishment for the offence of outraging of female’s modesty under the Indian Penal Code, 1860
As per the Indian Penal Code, 1860, the punishment for outraging a woman’s modesty is imprisonment of either description for a term that shall not be less than one year but which may extend to five years, and shall also be liable to a fine. This means that if a person is found guilty of outraging the modesty of a woman, he can be sentenced to a minimum of one year in prison and a maximum of five years in prison. The offender will also be liable for a fine.
It is important to note that the punishment for this offence is not limited to imprisonment and fine but also includes other forms of punishment such as community service, counselling, and rehabilitation programs. The court also has the discretion to impose additional punishment if it deems it necessary. In cases of repeat offenders or aggravating circumstances, the court can impose a stricter punishment. For example, in cases of gang rape or rape of a minor, the punishment is imprisonment for a term that shall not be less than 20 years, but which may extend to life imprisonment, and shall also be liable to a fine.
In addition, certain laws such as the Protection of Children from Sexual Offences Act, 2012 (POCSO), and the Criminal Law (Amendment) Act, 2013 also provide for harsher punishment for sexual offences against children. It is important to note that the punishment for the offence of outraging the modesty of a woman is not limited to the offender alone. The Indian judiciary has held that the punishment for the offence must be such to deter the offender from committing the crime again, and also to deter others from committing similar offences. The punishment must also be such to reform the offender and bring about a change in his attitude toward women, hence can be termed as reformative punishment.
Indian judiciary and its approach towards the concept of outraging female modesty
As has been mentioned previously, the notable case of Major Lachhman Singh v. The State (1952), has considered and discussed in length, the term ‘modesty’ pertaining to the woman. As far as the offence under Section 354 of the Indian Penal Code, 1860 was placed under consideration, it was explicitly held that only allegations would not be sufficient enough to fulfil the necessary and essential ingredient of the offence of outraging a female’s modesty. Further, it was the case of Ramkripal Singh v. State of Madhya Pradesh (2007), where the Supreme Court of India had considered the relationship between Section 354 and Section 509 of the Code of 1860. Section 509 makes the intention to insult the modesty of the woman an indispensable ingredient of the offence mentioned under Section 354.
The landmark case of Swapna Barman v. Subir Das (2003), had held that under the provision of Section 509, the term ‘modesty’ does not only limit itself towards leading to the contemplation of a sexual relationship of an indecent character but also stands inclusive of indecency. Therefore, it is necessary to consider that any act which can be termed to have fallen short of rape needs to be attributed as outraging the modesty of the woman. Furthermore, it is significant to state that a woman can also be tried for the offence of outraging the modesty of any other woman as the codified sections of the Indian Penal Code, 1860, are themselves gender neutral and do not specify an individual of any particular gender as an offender for the actions. Thus prosecution for this offence extends in cases of both males and females.
The Indian judiciary has been significant in contributing to the innumerable modifications which are being brought about with regard to the offence under Section 354 of the Indian Penal Code, 1860, with an aim to make the provision stricter and with an intention to curb the accelerating rate of criminal records of such offence thereby making the provision of safety, security and protection to the woman at large, available. As per the Justice Verma Committee Report, which was submitted on January 23, 2013, non-penetrative forms of sexual contact were required to be considered sexual assault and the punishment was to be increased to five years under Section 354 of the Indian Penal Code, 1860. A quicker and more speedy trial of such an offence was also recommended by the Committee. Headed by former Chief Justice of India J.S. Verma, the Committee identified the root cause of sexual offences was the failure of governance. This report has played a considerable role in introducing the major amendment of 2013 in the Indian Penal Code, 1860. Considering the recommendations that were given, the crucial amendment was brought in March 2013, by means of the Criminal Law (Amendment) Act, 2013. The punishments were increased by means of the same.
Outranging of female modesty vis-a-vis rape
It is ideal to note that the offence of outraging the modesty of women and rape has a significant distinction as to the facts and the provisions which are responsible for creating the charge for either of the offences. Although the line of difference between the two offences is negligible, both can in no way be considered similar. Before proceeding with the differences between the two, it is necessary to have a general idea about the offence of rape.
The offence of rape
Rape as a criminal offence has been defined under Section 375 of the Indian Penal Code, 1860 with Section 376 dealing with the punishment for the commission of the same. Rape can be described as the offence committed by a man on a woman, provided she is not the wife of that man, and the man is also not below twelve years. Sub-section (2) of Section 376, provides that any person who commits rape by means of fulfilling the conditions of the clauses provided in the sub-section would be held liable for committing rape and has to serve rigorous imprisonment for a term as has been prescribed in Section 376.
Difference between outraging modesty and rape
In the case of Jeet Singh v. State (1992), lack of evidence of the offence of rape categorized disrobing of the victim under the offence of outraging modesty of women thereby altering Section 376 with that of Section 354 of the Indian Penal Code, 1860. Further, the case of Tukaram Govind Yadav v. State of Maharashtra (2010) draws attention while talking to the difference between Section 354 and Section 375, as although the case was perceived to be falling under the latter provision, the Bombay High Court with its due reasoning reached to the conclusion that as penetration of penis was not involved in the female’s body, the offence of Section 354 could only be made out with the support of medical evidence presented.
The facts of the case of Jai Chand v. State (1996) draw attention for in this case, the accused exercising force on the prosecutrix had pushed the latter onto the bed with the intention to disrobe by undressing her. Although after the prosecutrix herself exercising self-defence pushed the accused away and the latter not going back to carry on the offence, the interesting question before the court of law was whether the accused be held guilty of rape or will also be confined to the ambit of Section 354 of the Code of 1860. It was held that since there was the absence of evidence of rape according to the narrated facts and circumstances before the court, the offence which was made out was that o outraging the modesty of women under Section 354 of the Indian Penal Code, 1860.
Another case to be noted in this regard is the case of Ram Mehar v. State of Haryana (2016), in which the accused had grabbed the prosecutrix thereby trying to undress her. The offence of rape was not made out since the penetration of the penis had not taken place as prior to that, the aggrieved party had given a blow through the sickle on the accused. Thus, the accused was held to be guilty under Section 354.
These judgments were overruled by the Supreme Court’s decision in the case of State of Uttar Pradesh v. Rajit Ram (2011), in which the conviction under Section 376 being altered by Section 354 of the Indian Penal Code, 1860, was scrapped and thus sent back to the trial court. The Apex Court in this case was dissatisfied with the decision-making of the Allahabad High Court for there wasn’t any rational reason provided by the same while converting an offence under Section 376 to that of Section 354. Thus while stating that the reasoning is not sustained in the legal eyes, the top court rejected the High Court’s judicial reasoning.
What can be concluded taking into account all the above judgments is that, while the offence of rape has its own set of requirements laid down under Section 375 read with Section 376 when it comes to outraging of female modesty under Section 354, the act of causing insult to the female or an intention to harm her dignity has to be made out. Put simply, Section 375 read with Section 376 is inclusive of the offence under Section 354 of the Indian Penal Code, 1860.
Efforts made by the Indian government to strengthen provisions for outraging female’s modesty
In recent years, the Indian government has taken a number of steps to strengthen laws against sexual offences in the country, in an effort to combat the issue surrounding the same. Some of the key efforts include:
1. The Criminal Law (Amendment) Act, 2013: This amendment to the Indian Penal Code, 1860 introduced stricter punishment for rape and sexual assault, including the death penalty in cases of repeat offenders or cases where the victim is left in a vegetative state. The amendment also expanded the definition of rape to include acts such as vaginal, oral, and anal penetration, and the insertion of objects and body parts into the vagina, mouth, and anus.
2. The Protection of Children from Sexual Offences (POCSO) Act, 2012: This Act provides for stricter punishment for sexual offences against children, extending to life imprisonment in certain cases. The Act also provides for measures to protect the rights of child victims, including the use of closed-circuit television cameras in courtrooms and the use of video conferencing to record the testimony of child victims. The act also makes it mandatory for all cases of sexual offences against children to be tried in special courts within a period of one year from the date of the commission of the offence.
3.The Nirbhaya Fund: This fund, established in 2013, is aimed at enhancing the safety and security of women in the country. The fund is used to support initiatives and schemes to improve the safety and security of women, including the setting up of fast-track courts to try cases of sexual offences and the strengthening of police machinery to deal with such offences.
4. The Criminal Law (Amendment) Act, 2020: This Act introduced several changes to the Indian Penal Code,1860, including the introduction of stringent deterrents for sexual offenses, such as rape, acid attack, and stalking. The Act also introduced a new provision for the punishment for sexual harassment, including the punishment for sexual harassment at the workplace. The Act also makes it a punishable offence to disclose the identity of the victim of sexual offences or their family members.
5. The Suraksha Setu App: The Suraksha Setu App is a mobile application launched by the Indian government in 2020 to provide support and assistance to women in distress. The app provides a range of services such as emergency assistance, emergency contacts, and emergency alerts to women in distress.
Conclusion
The offence of outraging the modesty of a woman is a severe offence in India and is punishable by means of both imprisonment and a fine. Efforts have been made to strengthen laws against sexual offences in recent years, however, sexual offences against women continue to be a major problem in India and efforts are still needed to ensure that laws are effectively implemented and perpetrators are brought to justice. It is important for individuals to be aware of their rights and for society to take a zero-tolerance approach toward sexual offences.
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This article has been written by Mudit Gupta, currently pursuing B.B.A. LL.B. (hons.) from the University of Mumbai Law Academy. This article discusses arbitration and conciliation as ways of resolving disputes, how they are different from each other, and which is suitable for different types of disputes.
As per the strategy paper given by NITI Aayog in 2018, there were 29 million cases pending in Indian courts, and at that time it was said that it would take more than 324 years to clear that backlog with the number of judges that were appointed. These numbers have definitely grown by now. The figures clearly define the burden on the Indian judiciary as well as the people’s time-consuming perception of the Indian judicial system. Also, the traditional litigation procedure is very time-consuming in nature, which is not cost or time efficient in many disputes. Considering such a situation, people nowadays are considering alternative ways of dispute resolution. Arbitration and conciliation are two of those alternative mechanisms for dispute resolution.
Arbitration and conciliation : a brief overview
There are 3 prominent redressal mechanisms other than traditional litigation. Two of them are arbitration and conciliation. These are two alternative dispute resolution mechanisms used to resolve disputes between two or more parties. The aim of both of these methods is to find a solution that is fair and acceptable to all parties involved without the need for a lengthy and expensive court trial. However, the purpose of both these methods is to save money and time for the parties, there are several key differences between arbitration and conciliation that are important to understand. The purpose of this article is to provide an overview of the key differences between arbitration and conciliation and to help the reader determine the most appropriate course of action for different situations.
Arbitration can be explained as a legal process of dispute resolution in which a neutral group of people, collectively referred to as an arbitration tribunal, is appointed as per the provisions of the Arbitration and Conciliation Act, 1996, and their main task is to hear the arguments of both parties to the dispute and to take an account of all the relevant pieces of evidence and then make a binding decision on the parties, commonly known as an arbitral award, regarding their dispute on the basis of the arguments and evidence presented before them. The decision of the tribunal is final, binding, and enforceable on the parties, and there is no right of appeal provided unless it is proved that the award was induced by fraud or corruption against them. The mechanism of arbitration is primarily used for resolving disputes that are primarily related to contractual obligations related to employment, construction, and other commercial matters. Often, arbitration is used as an alternative redressal mechanism to traditional court litigation, as arbitration is, in most cases, faster, a bit informal, and less expensive for the parties to the dispute.
Conciliation, on the other hand, is a non-binding process in which a neutral individual, known as a conciliator, is appointed whose main task is to help the parties reach a mutually acceptable solution for their dispute by bringing them onto a common ground by facilitating communication between them. In his/her capacity, the conciliator can provide suggestions to the parties, but cannot give a binding decision that is applicable to the parties. This process is typically used to resolve disputes that involve personal or emotional issues, such as disputes related to family law or workplace disputes, where there is a possibility that the dispute can be resolved through communication. Conciliation is often used as a pre-litigation or pre-arbitration step that saves time and money for the parties in most cases.
Both of the redressal mechanisms discussed above have their unique advantages and disadvantages, and the choice between the two completely depends on only one thing: the specific circumstances of the dispute. While choosing between these two methods, it is important for the parties to consider the nature of their dispute, the outcome they desire, and other specific needs they have. A wide and clear understanding of the distinction between both of the redressal mechanisms helps parties make an informed decision about the most appropriate mechanism for their particular dispute so that they can opt for the same. In many cases, legal counsellors also provide help to parties in choosing the best mechanism of redressal for their particular dispute.
What is arbitration
Now let us understand what the word “arbitration” actually means. The name arbitration comes into English through the Latin word “arbitrari,” meaning “to adjudicate.” In English, arbitration refers to the process of using an arbitrator to settle disputes, and the action of that arbitrator determines the type of alternative dispute resolution where the parties, instead of resorting to litigation, agree to private quasi-judicial officers who listen to the dispute between the parties and, based on that, resolve their dispute.
Arbitration is commonly used in civil disputes. It does not intervene in criminal matters. The parties must include a clause in their agreement. When a dispute arises, the parties must appoint an arbitral tribunal to hear their claims, and based on the disputes over those claims, the arbitral tribunal issues a verdict, which is commonly known as an award.
Arbitration has become one of the most popular methods of dispute resolution in recent years, and there are two key reasons behind the same. The first reason is that it saves a lot of time for the parties, helping both the parties as well as the judiciary in India by saving time for both. The second reason is that in normal litigation proceedings, the parties are often discredited when the media reports the outcome of any trial. This defames the image of the parties by gathering unnecessary attention to the dispute. This unnecessary attention can be avoided till some extent in arbitration.
What is conciliation
The term conciliation is very much related to the term “conciliate” which has been derived from the Latin word “conciliare,” which basically means “to unite.” Conciliare in turn comes from the Latin word “concilium”, meaning “council.” Conciliation is one other type of alternative dispute resolution mechanism in which a neutral- third party, usually a single individual, is appointed whose main task is to resolve the dispute arising between the parties by facilitating communication and negotiation between the parties and bringing them to a common ground. The main motive of conciliation proceedings is to help the parties reach a mutually acceptable agreement, rather than impose a solution on them.
Conciliation is preferred in a variety of disputes, including those arising from employment, family, commercial, and community disputes. The process of conciliation is informal, flexible, and confidential. It is preferred because it helps resolve disputes quickly, and the whole procedure is much less expensive than traditional court proceedings. The parties are able to retain control over the outcomes and are able to customise the conciliation process to their specific needs and interests.
If the parties reach a settlement agreement through conciliation, it is usually written down and signed by both parties, after which it becomes legally binding. The significant advantages offered by conciliation include the flexibility and informality of the process, the confidentiality of the proceedings, and the ability of the parties to reach a mutually acceptable resolution. However, it is important to carefully consider the qualifications of the conciliator and the terms of the conciliation agreement before agreeing to this form of dispute resolution.
When to choose arbitration v. when to choose conciliation
Who should opt for arbitration
Although there are many dispute resolution mechanisms, all of them cannot be applied to all disputes. The decision regarding this is made after thinking about the nature of the dispute and the intentions of the parties. Arbitration is one such mechanism in which the decision is made prior to the dispute. An agreement regarding the same is signed by the parties before the dispute has taken place between them. Arbitration as a means of dispute resolution can be opted for by various groups of people. Let’s discuss some groups below:
Companies
As per a survey from 2013, arbitration as a means of dispute resolution is chosen by 91% of the companies. Companies may choose arbitration to resolve commercial disputes, as it can be faster and more cost-effective than going to court. Also, it reduces media attention and helps keep the goodwill of the company intact in the market. These benefits give companies a very good reason to opt for arbitration as a dispute resolution mechanism to settle their disputes.
Consumers
Consumers may choose arbitration to resolve disputes with companies, as it can provide a more informal and less intimidating setting than a courtroom to get their dispute settled. Also, many times in such cases, the amount of damages given to the plaintiff is much less than the expenditure on litigation, which defies the whole purpose of awarding damages to the aggrieved consumers. This expenditure is significantly reduced if the parties opt for arbitration as a way to resolve their dispute.
Employees
Employees may choose arbitration to resolve disputes with their employers, as it can provide a quicker and more confidential resolution than going to court. For aggrieved employees, litigation may get a bit intimidating. Also, sometimes the legal tussles can make it hard for the employees to work somewhere else. These issues are generally not faced if such disputes are resolved through arbitration.
Contractors
Another set of potential parties who can opt for arbitration are contractors, who may choose arbitration to resolve disputes with their clients or customers, as it can provide a more neutral and specialised forum for resolving disputes. Also, it can reduce their time and money expenditure for them, which can help them create more profits and complete their projects in much less time.
Investors
Investors may choose arbitration to resolve disputes with financial institutions, as it can provide a specialised forum with expertise in financial and investment disputes. The arbitrators who are to be chosen for the proceedings can be chosen on the basis that they have prior knowledge of the finance industry, which can help in resolving the dispute much faster and with a high level of satisfaction for the parties.
Ultimately, whether or not to opt for arbitration will depend on a number of factors, including the specific nature of the dispute, the choices of the parties involved, and the terms of any agreement to arbitrate. However, for many individuals and organizations, arbitration can provide a fast, effective, and efficient means of resolving disputes.
Who should opt for conciliation
Conciliation is a process of dispute resolution that is used by many groups of people who have a disagreement over some issue and feel that the same can be solved by opting for conciliation. Some of these are discussed below:
Companies
Conciliation, as a way of dispute resolution mechanism, is used by companies usually in cases related to labour law disputes, discrimination disputes, harassment-related disputes, etc. Companies prefer to opt for conciliation for these types of disputes because if they are taken to court, they may cost much more to the company in all aspects, i.e., cost, time, and reputation. Opting for conciliation solves disputes with much less time and effort, which is good for both- the company and the employee.
Individuals
Conciliation can be a suitable option for individuals who are in conflict with one another, as it can provide a more informal and less intimidating setting for resolving disputes. Many times, parties involved in a family law dispute make use of this form of dispute resolution. Most of these matters can be easily resolved by talking to the parties involved and bringing them to a common understanding. Hence, conciliation can be a very effective way of resolving disputes in such matters.
Consumers
Consumers may choose conciliation to resolve disputes with companies, as it can provide a more accessible and less intimidating forum for resolving disputes. Investment of money, as well as time, can be significantly reduced by opting for conciliation. The setting of a conciliation proceeding is much less intimidating, which helps the consumers express their problems openly and get relief regarding the same.
Employees
Employees may choose conciliation to resolve disputes with their employers, as it can provide a quicker and more confidential resolution than going to court. This can help them solve the disputes in a cost and time-effective manner, which will further help them explore the options that are best for them.
Communities
Community organisations may choose conciliation to resolve disputes between neighbours, as it can provide a more personal and community-based resolution to disputes. The parties can address their problems and get solutions regarding them. In these kinds of disputes, misunderstanding between the parties is a major issue that can be very effectively addressed by facilitating communication between the parties. The process of conciliation can do that very effectively.
The choice of whether to opt for conciliation or not depends on a number of factors. The scenario of the case and the intention and willingness of the parties are some of the factors that play a key role in deciding whether to opt for conciliation or not. If the dispute can be resolved by facilitating the communication and by bringing them on a common ground, then in that case, conciliation should be a preferred method of dispute resolution for the parties.
Process of arbitration and conciliation
Process of arbitration
Arbitration in India is governed by the Arbitration and Conciliation Act, 1996. As per the procedure given in this legislation, the following is the process that needs to be adhered to by the parties opting for arbitration:
Agreement to arbitrate
As per Section 7 of the Arbitration and Conciliation Act, 1996, the parties involved in a dispute must agree in writing to resolve their dispute through arbitration. This agreement is, in most cases, provided as a clause in the agreement in which the parties contract with each other. The clause of arbitration is valid even if the agreement is declared invalid, except in cases of fraud or corruption.
Notice of arbitration
Now that the agreement is made, the claimant must serve a notice of arbitration to the respondent, informing them of the intention to initiate arbitration proceedings. This notice is served whenever a dispute arises between the parties. After this step, the arbitrators are to be appointed, and after that, the arbitration proceedings are started. Although, as per Section 21 of the Arbitration and Conciliation Act, 1996, the arbitration proceedings in respect of a particular dispute are said to commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent from the claimant.
Appointment of arbitrators
Whenever a dispute arises, the parties have to appoint arbitrators as per the terms of their agreement. In cases where the tribunal has to be composed of 3 arbitrators, with two already appointed and the third yet to be appointed, and if the parties or the two arbitrators are not able to appoint the required arbitrator, then the Supreme Court and high courts have the responsibility to designate arbitral institutions as per their respective jurisdictions. Parties to the dispute approach the courts for the appointment of arbitrators to decide upon the dispute at hand. Appointments for international commercial arbitration are made by the institution designated by the Supreme Court. For domestic arbitration, appointments are made by the institution designated by the concerned high court. Chapter III of the Act deals with the composition of an arbitral tribunal.
After the appointment of the arbitrators, the arbitration proceedings for the dispute at hand are started.
Submission of claims
The claimant submits a statement of claim to the arbitrator, outlining the nature of the dispute and the relief sought. These are submitted as per the provisions of Section 23 of the Arbitration and Conciliation Act, 1996. Although, the party can amend or supplement their submission during the period of arbitral proceedings, the same can be denied if the arbitral tribunal considers it to be inappropriate.
Response to claims
The respondent must submit a response to the claimant’s statement of claim, setting out their defence to the claims. These are submitted as per the provisions of Section 23 of the Arbitration and Conciliation Act, 1996. Although, the party can amend or supplement their defence during the period of arbitral proceedings, the same can be denied if the arbitral tribunal considers it to be inappropriate.
Hearings
When the submissions are made by both parties, the arbitrators conduct hearings to gather evidence and listen to arguments from both parties. Chapter V of the Act deals with the conduct of arbitral proceedings. They have to gather all the information and evidence because they are acting as quasi-judicial officers. This is the most crucial stage of arbitration proceedings because the evidence and arguments that are presented to the tribunal play a very important role in the award that is given by the tribunal.
Award
The arbitrators, on the basis of all the information and evidence, deliver an award, which is a binding decision on the dispute. Chapter VI of the Act deals with provisions related to the award. As per Section 29A of the Arbitration and Conciliation Act, 1996, the award shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings.
Enforcement
After the award is made by the arbitral tribunal, the main task left is to enforce it. If either party is dissatisfied with the award, they can apply to the Indian Court for enforcement or to set aside the award. Chapter VIII of the Act deals with the finality and enforcement of arbitral awards. Enforcement of the award is done as per the provisions of Section 36 of the Arbitration and Conciliation Act, 1996.
In India, the process of arbitration is quicker and more cost-effective than resolving disputes through the courts, and the decisions of the arbitrators are enforceable under Indian law. The process is similar to traditional litigation proceedings, but the advantages it provides to the parties in dispute make it a much more efficient choice to opt for.
Process of conciliation
Conciliation proceedings in India are governed by the Arbitration and Conciliation Act, 1996. The process of conciliation in India requires the following steps to be adhered to:
Request for conciliation
For initiating the conciliation proceedings, either party may request the initiation of conciliation proceedings by giving notice to the other party. Sometimes, the judge might also ask the parties if they want to opt for conciliation if he/she feels that the dispute between the parties can be effectively resolved by facilitating communication between them. If the parties agree, further steps in conciliation proceedings are initiated.
Appointment of conciliator
Once the parties have requested conciliation, they have to get a conciliator appointed. The parties can themselves appoint a conciliator, or if they fail to do so, the Indian court can appoint one. The primary job of the conciliator is to clear up the misunderstandings between the parties, try to get them on common ground, and then explore settlement options for them, which are dependent on the outcome of the conciliation proceedings.
Opening of conciliation proceedings
The conciliator opens the conciliation proceedings by holding a preliminary meeting with the parties to understand the nature of the dispute and the parties’ positions. The conciliator may request that each of the parties provide a written statement about the facts relating to the case at hand. It is necessary for both parties to submit a written statement to the conciliator. Along with the conciliator, the parties are also requested to send written statements to each other.
Facilitation of communication
The conciliator facilitates communication between the parties and helps them identify areas of agreement and disagreement. The conciliator hears the facts from both parties and then tries to bring them to a common understanding. This helps the conciliator clear the misunderstandings between the parties and bring them to a common ground.
Exploration of settlements
After the communication is facilitated, the conciliator then explores potential settlements with the parties and helps them to reach an agreement on the terms of a settlement. If they cannot come to a common ground for settlement, then in that case, the parties continue with litigation or arbitration for their dispute resolution.
Settlement agreement
If the parties reach a common ground and agree on the terms of a settlement that are decided upon by them, the conciliator drafts a settlement agreement, that is signed by both parties and becomes binding on them. The terms of the settlement agreement are then enforced to finally put the dispute to an end.
The process of conciliation in India is a flexible and informal method of resolving disputes that seeks to promote mutual understanding and cooperation between the parties and can be a quicker and less costly alternative to court proceedings. The matters can be easily resolved by bringing the parties to a common ground, which is very much possible in many cases.
Key differences between arbitration and conciliation
Arbitration
Conciliation
Arbitration is a quasi-judicial proceeding, where the parties to the dispute appoint an arbitrator or arbitrators by agreement to adjudicate the said dispute
Conciliation is a method of dispute resolution in which a conciliator is appointed to bring the parties to a common ground and then settle the dispute between them.
Arbitration proceedings are carried on by the arbitrators, who are appointed as per the provisions of Section 11 of the Arbitration and Conciliation Act, 1996.
Conciliation proceedings are carried on by the conciliator, who is appointed as per the provisions of Section 64 of the Arbitration and Conciliation Act, 1996.
The decision of the arbitrators, which is known as an award, is enforceable against the parties to the dispute.
The conciliator cannot enforce his/her decision.
Arbitrators are not permitted to discuss the issues directly with the parties or generate options for terms of settlement or negotiation.
Conciliators are permitted to discuss the issues directly with the parties or generate options for terms of settlement or negotiation.
Arbitration can be chosen as a dispute resolution mechanism for both, present as well as future disputes.
Conciliation as a dispute resolution mechanism can only be chosen for the dispute at hand. It cannot be chosen for future disputes.
Arbitration can only be opted for dispute resolution if the parties opting for it have a prior agreement regarding it.
Conciliation can be opted for in dispute resolution without any prior agreement between the disputing parties.
Conclusion
Nowadays, we all want quick solutions to all our problems, and court proceedings have always been infamous for being lengthy and tedious. Owing to the time-consuming nature of the litigation proceedings, arbitration and conciliation are proving to be handy alternatives for dispute resolution as they reduce the time and money investments for the parties and help them solve their legal disputes in a much easier way as compared to the litigation procedure. These methods also keep the parties away from unnecessary media attention, which in some cases can be very difficult to handle. Both of the mechanisms are quite different from each other and can be chosen according to the severity of the dispute and the intentions of the parties. But the advantages which they provide are quite similar to each other. They both save time and money for the parties in dispute and help them to resolve their dispute in a much less intimidating setting. Hence, arbitration and conciliation are very efficient modes of dispute resolution, and the parties should opt for these methods depending on the facts and circumstances of the case.
Frequently Asked Questions
Can a Conciliator act as an Arbitrator in the subsequent arbitration proceedings?
No, as per the provisions given in Section 80(a) of the Arbitration and Conciliation Act, 1996, unless it is agreed upon by the parties, the conciliator shall not act as an arbitrator or as a legal representative of any of the parties in any arbitral or judicial proceeding for the same dispute.
Can a conciliator act as a witness in the subsequent proceedings after conciliation?
No. As per Section 80(b) of the Arbitration and Conciliation Act, 1996, unless it is agreed upon by the parties, the conciliator shall not act as a witness for either of the parties in any of the further proceedings.
Can conciliation be opted for during the arbitration proceedings?
Yes. As per Section 30 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal may use mediation, conciliation, or other procedures at any time during the arbitral proceedings to encourage settlement with the consent of the parties to the dispute.
Can the arbitral tribunal order for interim measures?
Yes, as per Section 17 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal may order for interim measures for some of the issues prescribed in the Act.
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The world is rapidly changing, and with it, the way we store and manage information. As technology continues to evolve, the storage of sensitive information has become a major concern for individuals, businesses, and governments alike. With the increasing reliance on digital data and the threat of cyber-attacks, the issue of data security has become a topic of great importance. In the digital age, data security has become a top priority for individuals and organisations alike. With the increasing amount of sensitive information being stored and shared online, it’s essential to ensure that this data is protected from unauthorised access and theft. However, with the rapid advancements in technology and the increasing sophistication of cybercriminals, many people question whether data security is a myth or a reality. This article aims to explore this question in-depth and provide a comprehensive overview of the current state of data security.
The reality of data security
Data security refers to the measures taken to protect sensitive information from unauthorised access, use, disclosure, disruption, modification, or destruction. With the increasing amount of personal and confidential information stored in digital form, data security has become a critical concern for both businesses and individuals. The impact of data breaches can be devastating, with consequences ranging from the loss of sensitive information to damage to a company’s reputation. The potential for financial loss and identity theft also make data security a concern for consumers.
One of the most compelling arguments for the reality of data security is the vast array of tools and technologies available to protect data. From firewalls and antivirus software to encryption and multi-factor authentication, there are numerous ways to secure data and prevent unauthorised access.
The threat of data breaches is not a new one. However, with the growth of technology and the increasing sophistication of cyber-attacks, the importance of data security has only grown. The recent high-profile data breaches, such as the Equifax data breach in 2017, have highlighted the need for robust data security measures. The Equifax breach resulted in the compromise of the personal information of approximately 147 million individuals, including names, addresses, social security numbers, and birth dates. This serves as a stark reminder of the potential consequences of poor data security practices.
One of the main reasons for the growing concern over data security is the increasing reliance on technology. As more and more sensitive information is stored in digital form, the potential for data breaches increases. This is especially true for companies that collect and store large amounts of customer data, such as financial institutions, healthcare providers, and retailers. The rise of cloud computing has also increased the potential for data breaches, as companies are now storing sensitive information on servers owned and operated by third-party providers.
Another factor that has contributed to the growing concern over data security is the increasing sophistication of cyber-attacks. Today’s hackers have access to more advanced tools and techniques than ever before, and they are using these tools to launch increasingly sophisticated attacks. For example, phishing scams, which use fake emails or websites to trick individuals into revealing sensitive information, are becoming increasingly sophisticated. In addition, the rise of ransomware attacks, where hackers demand payment in exchange for the release of sensitive data, has added another layer of concern.
The myth surrounding data security
While there are compelling arguments for the reality of data security, there are also those who argue that data security is a myth. Despite the growing concern over data security, many businesses and individuals still believe that it is a myth. They believe that data breaches are simply the cost of doing business in a digital world and that there is no real way to protect against them. This is a dangerous attitude, as it fails to take into account the serious consequences that can result from a data breach. In addition, it fails to recognize the steps that can be taken to mitigate the risk of a data breach, such as implementing strong security protocols, conducting regular security assessments, and training employees on best practices for data security. One of the main arguments is that no matter what measures are taken to protect data, it is always possible for cybercriminals to find a way to access it.
For example, despite the widespread use of encryption, cybercriminals can still use advanced hacking techniques to gain access to encrypted data. Furthermore, even the most secure systems can be vulnerable to human error, such as employees who inadvertently expose sensitive information or fall for phishing scams.
Another argument for the myth of data security is that the increasing amount of data being generated and stored makes it nearly impossible to protect all of it. With the growth of the Internet of Things (IoT) and the increasing use of cloud computing, the amount of data being generated and stored is growing at an unprecedented rate, making it increasingly difficult to protect all of this data.
In addition, the increasing sophistication of cybercriminals makes it even more challenging to protect data. Cybercriminals are constantly finding new and innovative ways to steal data, and it can be difficult for organisations and individuals to keep up with these developments.
Laws surrounding data security
When it comes to data protection, the legal framework that needs to be adopted must be a holistic approach consisting of legal, administrative, and technical safeguards, all functioning robustly in interdependence with each other. Every ID system must be designed with a legal framework for protecting individual data, privacy, and user rights. Several countries have successfully adopted general data protection and privacy laws that regulate data flow among public and private-sector activities. Being in line with international law, these data protection legislations are divergent and flexible to be easily modifiable as per requirements. Some of the prime traits they are incorporated with have been listed hereunder:
Specifying the usage of personal data:
Collection of personal data should be limited only to the purposes specified in the reference law which by itself will ensure that personal data collected are not used in various places thereby inviting the majority of issues in relation to them. It is therefore the governing legislation that prevents personal data fabrication. This will also ensure that the data collected have been consensual thereby avoiding individuals in such regard being kept in grey.
Minimum collection of necessary data:
Whatever the purpose, the governing law is to ensure that data collected must be proportionate to the purpose of the ID system, so as to avoid increased privacy risks with every amount of data being collected and processed. Therefore, data collection must be limited to the fulfilment of the intended purpose behind it and nothing beyond that.
Need for the collection of personal data to be lawful:
It is the governing law that validates the collection of personal data only after the same has been obtained with consent from the data provider, has abided by contractual necessity with the provider and is in conformity with the protection of fundamental public interests. Collection of data, otherwise to these grounds would categorise it as an offence.
Ensuring fairness, transparency and accuracy in data collection:
Fairness, transparency and accuracy are the three fundamental pillars of data collection. Whenever there is any dispute that arises in relation to data acquisition or collection, these pillars are looked out for. While fairness is a term that is very much related to our previous point which is the lawful nature of data accumulation, transparency signifies that the relationship between the data provider and collector must not be like a spider web, instead should be made of clarity that makes both aware of each other’s activities. Accuracy in data collection ensures that the data collected is not in the wrong hands thereby initiating fraudulent activities associated with it. Therefore, personal data must be accurate and updated.
Privacy-enhancing technologies (PETs):
The governing law must provide provisions that facilitate the use of technology to eliminate privacy issues in relation to data collection. PETs are prime examples of technologies made with an aim to protect privacy rights by means of limiting unnecessary processing of personal data thereby making room for compliance with data protection rules.
Ensuring accountability in data collection:
The governing law must be laying down the establishment of an independent and specialised authoritative body that will be empowered to handle data collection disputes and privacy issues which arise in day to day functioning of data collectors and processors. The authority will also ensure that the principles laid down in the above points are complied with.
Data security in USA vis a vis UK
It is essential to note that the United States of America (USA) and the United Kingdom (UK) have been especially discussed here for both being developed nations, and an idea as to how these nations govern huge amounts of personal data that are collected, is required.
Although the USA does not have a comprehensive federal privacy law for ensuring the security of collected and processed data, the Federal Trade Commission (FTC) has been the principal enforcer of web laws that are available in the States. It is ideal to state that the FTC had reached a settlement with internet giant, Google in 2012 after the latter misrepresented its privacy policies to its users in regard to the service it delivers. A sum of $22.5 million was agreed by Google to be paid by it as a penalty alongside changing its alleged privacy practices. Further, FTC had also taken action against social media mammoth, Facebook in 2018 for deceiving users in regard to their potential to control the visibility of the personal information of its users. Under a settlement with the FTC, Facebook had agreed to pay a penalty of $5 billion thereby also making significant changes to its privacy policies.
A prominent role towards securing consumers’ privacy is played by California Consumer Privacy Act, 2018 (CCPA) which allows consumers more control over the personal information that businesses collect about them than the data collectors. Although it applies only to organisations that carry out business in California, CCPA provides enforcement power to the residents by means of carrying out litigation against violating companies.
CCPA when compared with the comprehensive privacy law of the European Union (EU), General Data Protection Regulation (GDPR), can be said to be convergent in its applicability as GDPR is applicable to all organisations worldwide that monitor the data of EU citizens. GDPR further comes with consistent enforcement as it levies heavy fines against companies in violation with data collected thereby acting as a strong deterrent holder for infringers of data privacy. GDPR can also be said to have a consistent oversight in comparison to CCPA for while the former is in favour of the appointment of a data protection officer to oversee compliance, the latter does not require the appointment of any such officer.
India and data security : a long road ahead
India being a developing nation, has been experimenting with data protection laws for a long time now. The Indian Constitution does not expressly talk about data protection but has outlined the right to privacy as a fundamental right under Article 21 of Part III of the Indian Constitution. The lack of any specific and comprehensive legislation for data protection has burdened the shoulder of the Information Technology Act, of 2000 which has now come up to be recognised as a toothless tiger. The statute that was born in 2000 has been battling technological hurdles for a long time now with its overused provisions being unsuccessful in countering data privacy issues.
The Information Technology Act, 2000 has been dealing with the issues relating to the payment of compensation (civil remedy) and punishment (criminal remedies) in cases of wrongful disclosure and misuse of personal data collected which also includes breach of contractual terms in relation to personal data. Section 43 A of the Act of 2000 provides that any body corporate who is involved in possessing, dealing or handling any amount of sensitive personal data, if appears negligent in implementation and maintenance of reasonable security practices thereby resulting in wrongful loss or wrongful gain to any third person, then such bodies would be made liable to pay damages to the aggrieved person. It is significant to state that there lies no upper limit for the compensation that can be claimed by the aggrieved party in such circumstances.
It is necessary to mention that on 18 November 2022, the Indian government had come up with a draft privacy law by the name of the Digital Personal Data Protection Bill. The Bill was formulated with the intention to facilitate the Indian government to focus on technology policy in a robust and holistic manner. On Opposition parties objecting to such legislation being introduced, the Bill was withdrawn by the government. Thus India currently is no home for any data protection legislation and all one can wish for is comprehensive legislation in the field soon for the future is the new present.
Mitigating the risk surrounding data security
So, what can be done to ensure that data security is a reality, rather than a myth? There are several steps that businesses and individuals can take to protect themselves against data breaches.
Implement strong security protocols
The first step in ensuring data security is to implement strong security protocols. This includes using robust encryption algorithms to protect sensitive information, implementing firewalls to block unauthorised access, and using strong passwords to prevent unauthorised access to sensitive information. In addition, companies should regularly update their security protocols to stay ahead of emerging threats.
Conduct regular security assessments
It is important for businesses to regularly conduct security assessments to identify potential vulnerabilities and address them in a timely manner. This includes regular penetration testing to identify security weaknesses, as well as regular reviews of security policies and procedures to ensure they are up-to-date and effective. In addition, companies should also conduct regular audits of their data storage and management practices to identify any areas where improvements can be made.
Train employees on best practices for data security
Employee education and training is critical to the success of any data security program. This includes regular training on best practices for data security, such as using strong passwords, avoiding phishing scams, and reporting suspicious activity. In addition, employees should also be made aware of the consequences of data breaches, and how they can help to prevent them from occurring.
Using cloud services from reputable providers
For companies that rely on cloud services to store and manage sensitive information, it is critical to choose a reputable provider that has a strong track record of protecting customer data. This includes conducting regular security assessments and implementing robust security protocols to prevent unauthorised access and data breaches. In addition, companies should also consider using multi-factor authentication to add an extra layer of security to their cloud services.
Keeping software up-to-date
One of the most effective ways to prevent data breaches is to keep all software, including operating systems and applications, up-to-date. This is because software updates often include critical security patches that address known vulnerabilities. By keeping software up-to-date, businesses can reduce the risk of a data breach and protect themselves against emerging threats.
Conclusion
In conclusion, data security is not a myth but a reality that requires constant attention and effort. By taking the necessary steps to protect sensitive information, businesses and individuals can reduce the risk of data breaches and ensure that their sensitive information is protected from unauthorised access, use, disclosure, disruption, modification, or destruction. Whether it is implementing strong security protocols, conducting regular security assessments, training employees on best practices for data security, using cloud services from reputable providers, or keeping software up-to-date, there are many steps that can be taken to ensure data security is a reality.
While there are compelling arguments for both the reality and the myth of data security, it’s clear that the threat of unauthorised access and theft will always be present. The best way to ensure the security of your data is to stay informed about the latest developments in technology and cybercrime and to take proactive steps to protect your data, such as using encryption, multi-factor authentication, and staying vigilant against phishing scams.
Ultimately, the reality of data security is that it is an ongoing battle, and while it is possible to secure data, it is never completely infallible. However, by being proactive and taking steps to protect your data, you can significantly reduce the risk of data breaches and cyber-attacks.
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This article has been written by Naveen Talawar, a law student at Karnataka State Law University’s law school. The article discusses Section 177 of the Companies Act, 2013 in detail.
A transparent accountability system is nourished by good corporate governance. Following several corporate scandals, including those involving Sahara, Satyam, and Enron, both in India and internationally, corporate governance became increasingly important to boost the nation’s financial situation by gaining the trust of investors. As a means of ensuring the accuracy of financial statements, the role of the audit committee is essential. The board of the company delegated this authority by establishing various committees to handle work that requires more expertise, focus, and technical decisions because it is difficult for the board to take every decision with due diligence and to give it the required time and effort. As a result, the board establishes the audit committee, whose goal is to make sure that a company provides accurate, sufficient, and credible information to investors as well as to third parties who conduct independent studies that assess the performance of the company. Section 177 of the Companies Act, 2013 provides for the constitution of an audit committee, which has been discussed in detail in this article.
What is an audit committee
The audit committee is a fundamental element of the corporate governance system in public companies. It aims to boost public confidence in the reliability of the company’s internal control procedures, financial reporting, and announcements. Its main responsibilities are disclosure and financial reporting. It evaluates and records the auditor’s objectivity, effectiveness, and performance. It also examines the financial statement and the audit report.
Chapter XII (Sections 173–195) of the Companies Act, 2013 contains the provisions governing Board of Director meetings and the powers of the board, and Section 177 of the Companies Act, 2013 specifically mentions the audit committee. Every listed company, as well as the other specified classes of companies, must have an audit committee of the board, in accordance with Section 177 of the Companies Act, 2013, read with Rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014.
The following classes of companies and every listed company are required to have an audit committee of the board, in accordance with Section 177 of the Act and Rule 6 of the Companies (Meetings of the Board and Powers) Rules, 2014:
All public companies having a minimum paid-up capital of ten crore rupees.
All public companies with turnover of at least one hundred crore rupees.
All public companies with aggregate outstanding loans, borrowings, debentures, or deposits exceeding fifty crore rupees.
The paid-up share capital, turnover, outstanding loans, borrowings, debentures, or deposits as appropriate as they existed on the date of the most recent audited financial statements shall be taken into consideration for the purpose of this rule.
Composition of the audit committee
In accordance with the Companies Act
Section 177(2) of the Companies Act of 2013 states that the audit committee must have a minimum of three directors, with independent directors constituting a majority. The chairperson and the majority of the members of the audit committee shall be capable of reading and understanding financial statements.
In accordance with Regulation 18 of the SEBI (LODR) regulations, 2015
The audit committee must have at least three directors. Independent directors must make up at least two-thirds of the audit committee. If the listed entity has outstanding SR equity shares, only independent directors may serve on the audit committee. The audit committee must consist of members who are all financially literate and at least one who has expertise in accounting or a related area of financial management. The chairperson of the audit committee shall be an independent director. The secretary of the audit committee shall be the company secretary.
Reconstitution of the audit committee
Section 177(3) of the Companies Act, 2013 provides that every audit committee of a company that existed immediately before the enactment of the Companies Act must be reconstituted within a year of the Act’s implementation.
Functions of the audit committee
According to Section 177(4) of the Companies Act, 2013, every audit committee must operate in accordance with the written terms of reference set forth by the board, which must include:-
The recommendation for the appointment, remuneration, and terms of appointment of the company’s auditors.
Examine and monitor the auditor’s independence and performance, as well as the efficiency of the auditing process.
Examination of the audit report and the financial statements;
Approval or any subsequent modification of the company’s transactions with related parties.
Examination of inter-corporate investments and loans.
Valuation of the company’s undertakings or assets, as necessary.
Valuation of the internal financial controls and risk management systems.
Monitoring the end use of funds raised through open offers and related matters.
Further, subject to the conditions outlined in Rule 6A of the Companies (Meetings of Board and its Powers) Rules of 2014, the audit committee may also grant omnibus approval for related party transactions to be included in the proposals of the company. If the audit committee does not approve a transaction that is not covered by Section 188, it must still make recommendations to the board.
The transaction which involves an amount of up to Rs. 1 crore has been made by a director of the company without the approval of the audit committee and is not approved by the audit committee within three months of the transaction date may be voidable at the discretion of the audit committee. However, if the transaction involves a related party of any director or is authorized by another director, the concerned director has to indemnify the company against any loss incurred as a result of the transaction. However, a transaction between a holding company and its wholly-owned subsidiary company other than that of the transaction referred to in Section 188 is exempted from the provisions of this clause.
Powers of the audit committee
In accordance with the Companies Act, 2013
Sections 177(5) and 177(6) of the Companies Act, 2013 provide for the following powers of the audit committee:
The audit committee, before the financial statements are presented to the board, has the power to ask the auditors for their opinions on internal control mechanisms, the scope of the audit, including their observations, and a review of the financial statements.
The audit committee may also speak with the management of the company, external and internal auditors, and auditors regarding any pertinent issues.
The audit committee has the power to look into any matter related to the matters listed in its terms of reference or those that the board has referred to, and the committee for this purpose may seek professional advice from external sources.
To have complete access to the information contained in the records of the company.
In accordance with SEBI (LODR) Regulations, 2015
According to the SEBI (LODR) Regulations of 2015, the audit committee shall have the following powers:
Investigate any activity that falls within its terms of reference.
Inquire about information from any employee.
Obtain legal or other professional advice.
If necessary, it will secure the attendance of outsiders with relevant expertise.
Disclosure in the board’s report
According to Section 177(8), the board’s report under Section 134(3) must disclose the composition of an audit committee, and if the board did not accept any audit committee recommendation, the reasons for doing so must be disclosed in such a report.
Constitution of a vigil mechanism
Every listed company and the companies are required to create a vigil mechanism for their directors and employees to report any reasonable concerns or grievances, in accordance with subsections (9) and (10) of Section 177 of the Companies Act, 2013, and Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014. These companies include those that accept public deposits and those that have borrowed money from banks and other public financial institutions exceeding Rs. 50 Crores.
In case of other companies
In the case of other companies, the board of directors must designate a director to serve on the audit committee for the purpose of a vigil mechanism for other directors and employees to express their concerns. The companies that are required to have an audit committee are responsible for overseeing the vigil mechanism through the audit committee. If any of the committee members have a conflict of interest in a particular situation, they are required to recuse themselves so that the other committee members can handle the situation.
Safeguards to employees and director
The vigil mechanism provides reasonable safeguards against the victimisation of the directors, employees, or anyone else using the mechanism. It also provides direct access to the chairperson of the audit committee or the director nominated to serve in the role of the audit committee, as applicable, in appropriate or exceptional cases.
Action against the frivolous complaint
A director or employee may be subject to reprimand if they repeatedly file frivolous complaints, and the audit committee or the director designated to serve in that capacity may also take appropriate action.
Non-compliance with the provisions of the audit committee
The company shall be fined between Rs. 1 lakh and Rs. 5 lakhs and any company officer in default shall be punished with imprisonment for up to one year and a fine between Rs. 25,000 and Rs. 1 lakh, or both.
Conclusion
The audit committee is set up to regularly review processes and procedures to guarantee the effectiveness (success) of internal control systems, ensuring that the reporting of financial results is accurate and professional at all times. As a result, the audit committee’s function is to act as a channel for accurate and open financial reporting. Therefore, the penal provisions in the Companies Act of 2013 are now stricter and more severe for both companies and officers who are in default. A thorough examination of an organisation’s operations and the maintenance of internal control systems can aid in the detection and prevention of various types of fraud and other accounting irregularities.
Strong auditing systems can aid in reducing a variety of risks that can arise in an organisation, such as information risk, fraud risk, asset misappropriation risk, and risk management on operations. A company cannot produce accurate financial reports for internal or external purposes without a proper audit system. As a result, the audit committee is important to the company.
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