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Section 54 of the Income Tax Act, 1961

By
Sneha Mahawar
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This article is written by Jaya Vats, a practising advocate in Delhi. In this article, the author provides a detailed study of Section 54 of the Income Tax Act. The article provides an in-depth analysis of the purpose, applicability, and exemptions of Section 54.

This article has been published by Sneha Mahawar.​​ 

Introduction

On several occasions, homeowners have to sell their homes due to circumstances such as relocating to a different place, changing careers, retiring, and so on. If the seller of a residential property purchases or develops another residential property from that amount, he or she receives capital gains tax advantages under Section 54 of the Income Tax Act, 1961. In other words, if an assessee sells a residential property and then buys or builds another residential property, he/she is free from capital gains tax under Section 54 of the Income Tax Act. 

Section 54 of the Income Tax Act

House owners may need to sell their property for a variety of reasons, such as relocating to a new location, changing employment, retiring, and so on. Property is frequently bought and sold for investment purposes. Property owners, on average, make a profit on the sale of their properties. This is particularly true if the owner has been in possession of the property for a long period. According to Indian tax rules, the profit gained in this manner is considered a source of income for which the income earner is required to pay taxes.

Section 54 of the Income Tax Act exempts the seller of residential property from capital gains tax. The clause permits taxpayers to get capital gains tax reduction only if the funds of the sale are utilised to purchase another residential property. Owners of residential properties frequently sell their property in order to buy another one, due to varied reasons such as, for a variety of reasons such as job relocation, retirement, and so on. In such a circumstance, a taxpayer sells a property not for the sake of profit, but for the purpose of relocating. As a result, when a taxpayer sells a residential property and buys another, the taxpayer is free from capital gains under Section 54 of the Income Tax Act.

Applicability of Section 54 of the Income Tax Act

Section 54 entitles a person to avail an exemption when he sells a residential property and buys a new one under specific conditions. The assessee must develop or acquire a home property for his personal dwelling in order to benefit from Section 54. The Section’s phrasing would indicate that the legislation does not require that the selling consideration acquired by the assessee itself be used to purchase real estate. The primary portion of Section 54 states that the assessee must acquire a home property for the purpose of his own habitation within one year before or after the date on which his property was transferred, or he must construct a house property within two years from the date of transfer. 

Eligibility criteria to avail benefits under Section 54 of the Income Tax Act

According to this Section, an assessee is qualified to claim a tax exemption when he or she sells a residential property that is a long-term capital asset and purchases another residential home property. 

Individuals must meet the following requirements to qualify for this exemption:

  • They should either be an individual entity or a HUF. (This provision does not assist the businesses)
  • The taxpayer’s house property should be a long-term capital asset.
  • The property to be sold should be a single-family home. This property’s revenue should be charged under the heading ‘income from dwelling property’.
  • The new residential home property shall be acquired one year before the transfer date or two years after the transfer date. In the event of a new house building, the individual is allowed an extended time frame to construct a house, namely within three years of the date of transfer or sale.
  • The residential property purchased should be within the territory of India.

If the individual fails to meet any of the above-mentioned qualifications, he/she will not be eligible to claim an exemption under Section 54 of the Income Tax Act. A taxpayer may claim a benefit under Section 54 of the Income Tax Act for just one residential home property acquired or built-in India. If a taxpayer is involved in more than one such transaction over the taxpayer’s lifetime, the benefit will be accessible for just one of the transactions. Finally, a taxpayer cannot sell a house in India and acquire a residence elsewhere while getting Section 54 benefits. The property must be acquired or built-in India exclusively.

Purpose of Section 54 of the Income Tax Act

A person can invest in a property today, hold it for a few years, and then sell it off for a better price. This is an age-old adage for many people who choose lower-risk, safer, and less volatile investments. However, when individuals construct their plans, the most important aspect of tax planning is sometimes overlooked. Individuals can arrange a sale of immovable property and reinvestment with the necessary preparation for tax exemption under Section 54.

An individual must comprehend if the amount of his or her income is taxed on the sale of the property. Profit from the sale of a property is individually taxed. Profit is calculated as the difference between the property’s sale price and the asset’s cost.

Exemptions under Section 54 of the Income Tax Act

According to Section 54 of the Income Tax Act, any person or HUF who sells a residential property can claim tax exemptions on capital gains if the capital earnings are used to purchase or construct a residential property.

Companies, LLPs, partnership businesses, and other bodies or associations cannot claim any type of tax exemption under Section 54 of the Income Tax Act. The following are the requirements that must be met in order to take advantage of this Section:

  • The asset must be considered a long-term capital asset, i.e. any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer.
  • If the asset sold is a residential property, the income created from such a house should be taxed in accordance with the revenue earned from House Property.
  • The property seller must have bought a residence within two years of the date of transfer/sale or within one year of the date of transfer/sale.
  • The residential residence must be located in India. The seller is not permitted to acquire any residential property outside of India and claims this exemption.

All of the requirements listed above are cumulative. As a result, even if one of the aforementioned qualifications is not met, the seller will be ineligible to benefit from the Section 54 exception.

The Finance Act, 2020, modified Section 54 with effect from Assessment Year 2021-22 to prolong the advantage of the exemption in respect of investment in two residential house properties. The exemption will be provided for investments made in two residential home properties through acquisition or building if the amount of long-term capital gains do not exceed Rs. 2 Crores. If an assessee exercises this option, he will not be able to do so again for the same or any subsequent assessment year.

Exemption amount

Section 54 of the Income Tax Act provides for a capital gains exemption equal to the lesser of:

  • Amount of capital gains realised on the sale of a residential property.
  • Investing in the acquisition or building of a new residential residence.

The deduction on capital gains permitted would be revoked if the taxpayer transferred the new asset three years from the date of acquisition.

Capital gains

Capital gains are profits made from the sale of an asset. Gains in the stock market are obtained from the difference in value between a stock’s buy and sell price. When you sell an asset for less than what you purchased for it, you incur a capital loss. Because the gain or profit is defined as “income” under Indian income tax regulations, the individual who earns from the sale is required to pay tax on the profit amount during the year in which the capital asset was transferred.

The sale of a residential residence is a sale of an asset, and the profit generated from the sale is referred to as a capital gain. Section 2(14) of the Income Tax Act defines a capital asset as “any property of any kind, whether immovable or moveable, intangible or tangible, held by the assessee for any particular purpose.”

According to the Income Tax Act, capital gains are categorised into two classes based on the asset’s holding term, which are as follows:

  • Short-term capital assets: These are owned by a single person for a duration of less than 36 months. The earnings gained from the sale of these assets are referred to as short-term capital gains.
  • Long-term capital asset: Long-term capital assets are those held by the assessee for more than 36 months. The earnings gained from the sale of these assets are referred to as long-term capital gains.

To be deemed a long-term capital asset under Section 54, the home property must be kept for more than 24 months.

One of the main factors for claiming Section 54 benefits is that the residential property is a long-term capital asset. As a result, in order to claim capital gains exemption, the taxpayer must have kept the property for more than three years from the date of purchase.

Capital Gains Account Scheme

A taxpayer with long-term capital gains from the sale of a residential property might avoid the same under Section 54 of the Income Tax Act by acquiring or building a residential property one year before or two years after (in the event of property acquisition) or before three years (in case of construction of property). In certain situations, the taxpayer would not have invested the funds from the sale of the residential property at the time of filing income tax returns. In such instances, the capital gains advantage under Section 54 can be obtained by depositing the unutilised sum in the Capital Gains Account Scheme at any public sector bank branch.

Deposits made through the Capital Gains Account Scheme are subject to numerous restrictions outlined in the Income Tax Act:

  • This is done in an approved bank branch by the government. Bank branches in remote regions are not featured.
  • To avoid fines, the deposition must be finished by the filing deadline for income tax returns.
  • Deposited funds must be utilised to purchase or build a property, according to the law.

It is crucial to remember that if the sum invested in the Capital Gains Account Scheme is not used within the prescribed time frame, it will be recognised as income for the previous year (from the date of transfer of the original asset).

Non-utilisation of funds put in the Capital Gains Account Scheme

If the amount placed in the Capital Gains Account Scheme for which the taxpayer has claimed exemption under Section 54 is not used for the purchase/construction of a residential dwelling within the required time, the unutilised amount (for which exemption is claimed) shall be taxed as income by means of long-term capital gains in the year in which the stated period of 2 years/3 years expires.

Section 54F of the Income Tax Act

Section 54F of the Income Tax Act of 1961 provides for tax exemption on long-term capital gains realised from the sale of a capital asset other than a residential property. So, if a person sells a capital asset such as shares, bonds, jewellery, gold, and so on and reinvests the profits in the acquisition or building of the home property, the returns received on the sale of capital assets are tax-free under Section 54F.

Section 54F of the Income Tax Act exempts capital gains from taxation when long-term capital assets are transferred in exchange for an investment in a residential dwelling. The following are the key elements for obtaining exemption under Section 54F:

  1. Individuals and HUFs are the only ones who qualify for the exemption under Section 54F.
  2. The capital gain should have resulted from the transfer of any long-term capital assets other than a residence.
  3. The net consideration generated by the transfer of long-term capital assets should have been invested as follows:
  • Within one year before the transfer date or within two years after the transfer date, the net consideration was re-invested in the acquisition of one residential dwelling; or
  • Within 3 years of the transfer, the net consideration was re-invested in the construction of one residential house in India.

Exemption under Section 54F is not available in the following circumstances:

The following are the situations in which an exemption is not possible under Section 54F of the Income Tax Act of 1961:

  1. As of the date of transfer of the original assets, the assessee owned more than one residential home property. However, residential home property purchased for the purpose of claiming exemption under Section 54F is free from the same.
  2. The assessee purchases a second residential dwelling within one year after the transfer of the first asset. The new asset bought for the purpose of claiming exemption under Section 54F is exempt from this provision.
  3. The assessee builds an additional residential dwelling within three years of transferring the original asset. The new asset built for the purpose of claiming exemption under Section 54F is exempt from the same.

Deduction amount

If the entire net consideration is deposited in the acquisition or building of a residential dwelling, the entire long-term capital gain is excluded under Section 54F. Only the proportionate amount of long-term capital gain is exempted under Section 54F if only a portion of the net consideration is invested in the purchase/construction of a residential dwelling. The following formula can be used to get the proportionate amount of exemption –

Exemption under Section 54F = Long-term capital gains x Amount reinvested/Net Consideration

Difference between Section 54 and 54F of the Income Tax Act

Although Section 54 and Section 54F has some similarities, these are slightly different as well. Section 54 as a whole allows for tax exemption on long-term capital gains realised from the sale of capital assets. The section, however, is separated into Sections 54 and 54F. The primary distinction between these two categories is the sort of capital asset sold. Section 54 allows for a tax exemption on long-term capital gains if you sell a home or dwelling property. However, the long-term capital gain on any other capital asset, other than property, is free from taxation under Section 54F of the Income Tax Act. Here are other differences-

  • Section 54 of the Income Tax Act exemption is applicable only when you sell a residential property. On the other hand, Section 54F of the Income Tax Act exemption is available in any capital asset transfer other than a residential property.
  • Section 54 exemption is applicable only if the long-term capital gain is invested in constructing or purchasing one residential property. On the other hand, according to Section 54F of the Income Tax Act, a taxpayer can invest in two residential properties only once in a lifetime provided only if the long-term capital gain is within 2 Crores. In Section 54F, Section 54F of capital gain needs to be used for constructing or buying any residential property. Section 54F of the capital gain must be used for the construction or purchase of any residential property.
  • Section 54 does not require you to restrict the number of residential homes you possess. However, Section 54F of the Income Tax Act exemption does not apply if the taxpayer owns more than one residential property on the day the long-term asset is transferred.
  • Even after claiming an exemption under Section 54 a person is eligible to purchase any other residential property. Such a person however cannot purchase another residential property if you have sought the exemption under Section 54F of the Income Tax Act.

Significant case laws

Ms. Moturi Lakshmi vs. The Income Tax Officer, 2020 

Facts of the case

The taxpayer put a down payment on a new apartment before selling her old one, and she sought an exemption under Section 54 for the amount. Because the investment was made prior to the sale of the first unit, the Assessing Officer (AO) denied the exemption. The Commissioner of Income-tax and the Income-tax Appellate Tribunal (ITAT) both dismissed the taxpayer’s subsequent appeals and affirmed the AO’s decision. The taxpayer filed an appeal with the Madras High Court against the ITAT’s decision.

Issues involved in the case

The High Court stated that the issue under consideration raised the following important point of law: Whether an advance payment made by the taxpayer for the purchase of a residential unit, comprises a part of the purchase price for the purposes of Section 54, when the advance payment is given to the apartment seller prior to the date of sale of the original capital asset.

Judgment of the Court

The Madras High Court upheld the benefit under section 54 in relation to the taxpayer’s advance payment made for the acquisition of a residential flat prior to the date of sale of the original apartment. It went on to say that the Legislature’s objective was to buy before or after the date of sale, and the words ‘bought’ or ‘built’ used in the Notes in the Clauses, make that plain. In view of the foregoing arguments, it was determined that the significant issue of law must be resolved in favour of the assessee.

Commissioner of Income Tax vs. Gita Duggal, 2013

Facts of the case

The assessee engaged in a development agreement under which the developer destroyed the property and built a new three-story structure. The assessee got Rs. 4 Crores and two floors of the new building in exchange for giving development rights. The Assessing Officer determined that the cost of construction of Rs should be used in calculating capital gains. The developer’s development costs of Rs. 3.43 Crores were to be added to the assessee’s total receipts of Rs. 4 Crores.

Issues involved in the case

The issue before the court was that the assessee contended that because the capital gains were invested in the two floors, she was qualified for exemption under Section 54.

Judgment of the Court

The Delhi High Court opined that the phrase “a residential unit” was not utilised. The sole stipulation is that it be used only for household purposes and not for commercial purposes. If nothing in the provision demands that the residential house be erected in a specific manner, it appears that the income-tax authorities cannot impose such a condition. A person may build a residence according to his or her designs and specifications, thus the assessee is eligible for exemption.

Commissioner of Income Tax v. Syed Ali Adil, 2012

Facts of the case

The assessee used the capital gains from the transfer of his ancestral dwelling property to purchase two apartments. The two flats are in the same apartment, with neighbouring kitchens and toilets, and they share a common meeting spot. Section 54 utilises the word “a residential property” to refer to the new asset.

Issues involved in the case

The main issue before the court was that the department contended that the section’s text assumes a circumstance in which a single residential property (new asset) is acquired through the transfer of an old asset and the assessor cannot subsequently invest the capital gains in two flats.

Judgment of the Court

The Andhra High Court held that the word “a residential property” encompasses more than one residential property, and hence the assessee was entitled to a deduction under Section 54.

Ishwar Singh Chawla v. Commissioner Of Income Tax, Mumbai, 2009

Facts of the case

The assessee, an individual, earns money via real estate, business, long-term capital gains, and other sources. During the course of the assessment, the Assessing Officer (AO) saw that the assessee had reported a different sum as a taxable capital gain on the sale of the apartment and plot. The AO further noted that the assessee had purchased a new residential residence with a loan from Punjab National Bank (PNB). However, the funds received on the property transfer were not used to pay off the loan liability obtained for acquiring the new residential house because the loan with PNB was still outstanding in the subsequent years and the assessee was claiming interest on borrowed funds as a deduction from his income.

Issues involved in the case

The issue before the court was whether Section 54 is necessary in relation to drawing a nexus between capital gain and the amount of investment.

Judgment of the Court

The Income Tax Appellate Tribunal, Mumbai ruled that the provision under section 54 does not require an assessee to demonstrate a link between the amount of capital gain and the cost of a new asset. It was determined that the assessee had originally invested the profits of the sale of its residential apartment in commercial properties before purchasing two residential flats within the time limit required in sub-section (2) of Section 54. The major point of contention was that the sale earnings were used to acquire a commercial property, while the residential dwelling was purchased using monies collected from other sources; as a result, the identification of the heads has been altered.

Commissioner Of Income Tax v. Ravinder Kumar Arora, 2011

Facts of the case

The assessee filed his return for the Assessment Year 2007-08, revealing a total income of Rs. 64,32,220/-. The Assessing officer noted in the assessment proceedings that the assessee is the proprietor of M/s. Arora Service Station operates a fuel pump, and during the relevant year, the assessee had a long-term capital gain of Rs. 45,49,045/-. The Assessing officer discovered that the purchase deed for the aforementioned residential dwelling was made jointly in the names of the assessee and his wife while reviewing the purchase deed. The assessee claimed exemption under Section 54F of the Act for the whole amount spent on the aforementioned home property. The assessee sold land he held and claimed capital gain exemption under Section 54F for the purchase of a new dwelling. The Assessing Officer determined that the assessee was only entitled to the exemption claimed under section 54F to the extent of his right in the new residential dwelling acquired jointly with his wife, granting only 50% of the exemption claimed under section 54F as a percentage of the total claim.

Issues involved in the case

In the case of a house registered in joint names, whether the exemption under Section 54F can be granted fully to the co-owner who has paid the entire purchase price of the house property, or will it be limited to his share of the house property?

Judgment of the Court

The Delhi High Court ruled that the assessee was the true owner of the residential property in dispute and that just including his wife’s name in the sale document made no difference. The court further noted that while Section 54F requires that the house be acquired by the assessee, it does not require that the house be purchased solely in the assessee’s name. As a result, the requirements required in Section 54F are met, and the assessee is entitled to the whole exemption sought in respect of the purchase price of the home property.

Conclusion

The benefits of exemption on the sale of residential property are explained in Section 54 of the Income Tax Act. This section allows for tax breaks on long-term capital gains from the sale of a residential property. This benefit can be claimed by either purchasing/constructing a new residential property or putting the number of sale profits in any authorised/approved bank’s Capital Gains Account Scheme.

FAQs

What is the maximum exemption amount allowed under Section 54?

The amount invested in a new home or the capital gain, whichever is less.

Is it possible to avail the advantage of both the sections namely, Section 54 and 54F?

Section 54F advantages may be obtained if a person sells assets other than house property and subsequently invests the proceeds in any home property. Section 54, on the other hand, permits an individual to receive an exemption while selling a dwelling property. As a result, neither can be used.

Is Section 54F applicable to non-resident Indians?

Yes, NRIs can take advantage of Section 54F privileges as well. To qualify for the exemption, however, all conditions must be satisfied.

How many residential dwelling properties can be bought/built?

Only one house property may be acquired or built for the purpose of claiming an exemption under Section 54.

References

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Maritime Law

By
Sneha Mahawar
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0

This article is written by Diksha Paliwal, a practising advocate at the High Court of Indore and a student of LLM (Constitutional Law). The article gives a brief concept of maritime law, followed by a discussion about its history and evolution. The article further sheds light on critical international regulations in the field of maritime law and noteworthy concepts of maritime law in India.

This article has been published by Sneha Mahawar.​​ 

Table of Contents

Introduction

Maritime law is the branch of law that contains a set of rules and regulations relating to nautical matters. ‘Maritime’ or ‘Admiralty’ laws are the rules and regulations that govern the disputes that arise while working on the sea. These laws govern nautical matters or any other incidences happening in open water. 

The evolution of maritime law dates back hundreds of years. During those times trade between nations was widely done through sea transport. Gradually, it became a crucial branch of law. Furthermore, expanding the scope of this field of law became increasingly necessary to protect arbitrary claims by countries over the sea, which is otherwise a common resource for all of mankind. 

The scope of maritime laws is very broad and includes a wide spectrum of matters. The article talks about the history and evolution of maritime laws. It further discusses important aspects of maritime law, along with several important conventions of International maritime laws. The later part of the article discusses maritime laws in the Indian context, historical development, evolution, and current maritime laws.

What is maritime law

In common parlance, maritime law is the body of laws that regulate nautical matters such as matters pertaining to delivery delays, lost packages, cargo damage, and other disputes that may arise while shipping like damages to the ship, collision, accidents, and injury to the crew. Maritime laws deal with a country’s laws that regulate matters of the sea, whereas, public laws relating to the same matters come under the purview of the Law of Sea. These laws are a complex structure of various national laws and treaties of an international nature. These maritime laws have evolved drastically with the changing times.  

It is the fundamental principles, laws, conventions, and treaties that administer maritime businesses and other nautical matters like shipping or offences occurring on open water. It consists of laws, rules, and regulations to handle the disputes that arise in navigable waters and protect the persons or organisations who work on navigable waters, as well as passengers aboard vessels. 

Maritime laws are greatly influenced by international customs and practices, which is very obvious due to the subject matter and field of this law. These laws deal with a wide range of affairs and activities of the sea along with matters of navigable waters, including navigation, shipping, other marine affairs, ships, sailors, travelling of passengers through the sea, etc. Ordinarily, these laws are regulated by national legislation, but they are shaped by international influences, especially international conventions and treaties. The rationale behind this, as stated above, is that shipping and other such activities are bound to involve international relations.

Generally speaking, maritime laws apply to seawater only. The shipping activities carried out in interior waterways are regulated by other laws and rules. However, there are certain countries where the scope of maritime law also includes the matter of internal waterways. For instance, in Scandinavian countries, these laws also apply to shipping activities that have taken place in all the water bodies, be they lakes, rivers, or canals. 

Difference between admiralty, maritime laws and law of the sea

Although the two terms ‘admiralty law’ and ‘maritime law’ are used interchangeably, they both differ from each other significantly. 

The word ‘admiralty’ has limited jurisdiction over a narrow class of maritime matters, as per the procedure laid down in civil law. Admiralty pertains to rem and admiralty law is restricted to the law that is administered in courts. To put it simply, it encapsulates the matters of torts and contracts of the high seas. The latter term, i.e., ‘maritime’ exercises jurisdiction over all the issues arising on water or relating to the traffic of sea. This has a wider scope than admiralty.

Maritime law means the legal rules and concepts relating to the business of carrying goods and passengers by water. On the contrary, admiralty law is considered a branch of jurisprudence that pertains to maritime matters of civil and criminal nature. Also, it envisages a court or a tribunal administering maritime law through its separate and peculiar procedures.

Maritime law deals with private shipping issues and is generally referred to as the national legislation of the country, whereas the law of the sea is a branch of public international law. The law of the sea governs how individual countries are obligated to behave in maritime environments. The law of the sea is related to maritime movement and conduct, which is applicable internationally. Thus, these laws are a matter of international affairs.

History and evolution of maritime laws

The present-time maritime laws are naturally the product of an outgrowth of the evolution in this branch. The continuous commercial dealings between the nations that were actively involved in the navigation of seas are one of the reasons behind this evolution. The history of these laws dates back almost three thousand years. Let’s get a proper understanding of the history and evolution of maritime laws.

Transportation of goods between countries, i.e., import and export, is an inseparable part of international trade. These activities constitute a crucial part of ancient trade channels. Similarly, rules and regulations governing these sea transport activities, be they of goods or passengers, have been in existence since around the 1st millennium BC. 

The Rhodian Sea Laws

Back in the early days, the Egyptians, Phoenicians, and Greeks were the ones who were most actively involved in trading, in the Mediterranean Sea, and thus, most ancient maritime customs are said to be derived from their customs. The earliest laws or codes about maritime go back to the island of Rhodes, which were in turn influenced by Roman law. The ‘Rhodian Sea Laws’ are claimed to be the oldest laws in the field of maritime. Several records claim that these laws date back to 900 B.C. However, these came to be widely recognised around the period of 500 to 300 B.C. Primarily, these laws were formulated to provide predictable treatment to merchants and their vessels. As per the excerpts found in the ancient archives, the power to dictate the terms and conditions of trade vested majorly in the hands of Rhodes.

The decline of Greece and the simultaneous rise of the Roman Empire were said to have affected the influence of the Rhodian Sea Laws, yet it cannot be said that these laws completely lost their popularity. These laws were predominantly in existence in the Mediterranean Sea for almost one thousand years, although slight changes were witnessed after the rise of the Roman Empire. In the case of contradiction between the Romans and Rhodian laws, it was observed that the Rhodians used to decide the matter. However, the Romans made it crystal clear that the decision made by the Rhodian laws must not be in contravention of the Roman laws. 

Interference of the Romans

The Rhodian laws were later on levelled up by the Romans, to meet the changing scenario. A great enlargement was witnessed in the customary maritime laws, where the Romans extended the applicability of Roman laws and principles to the existing Rhodian laws. The main enhancement was in the revival of trade and commerce pursuant to the growth of Italian Republics and cities along the Rhine and the Baltic Sea. Special tribunals were also set up in the Mediterranean port to resolve the disputes arising among the seafarers. This was a major development in the branch of maritime law, since after this the judgments given by the tribunals were recorded, which in turn led to the codification of various customary rules. The three important codes that were found in Roman law were the ‘Consolato del Mare’ of Barcelona (cities of the Mediterranean), the ‘Laws of Oleron’ (France and England), and the ‘Laws of Wisby’ (free cities of the Hanseatic League on the Baltic). Parts of these were later formulated into European laws.  

Consulate Of the sea

Among the above three mentioned codes, the ‘Consolato del Mare’ often referred to as ‘Regulation of the Sea’ or the ‘Consulate of the Sea’, is said to be the oldest of these codes, and was prepared in Barcelona. This code was said to be a compilation of almost all the matters pertaining to maritime. Some of these subject matters are disputes regarding ownership of vessels, duties of captains and masters, the duties of seamen, and matters relating to their wages, etc. In earlier times the maritime laws were not formulated by the territorial sovereigns rather it was the customary laws prevailing at the time. It was only after the rise of modern nations, that the territorial sovereigns started formulating maritime laws. 

Early European codes

Over time, trade commerce in the Mediterranean region expanded northward and westward, which led to the development of sea codes in the northern European ports. The most recognised and important medieval sea codes among these were – the ‘Laws of Wisby’ (a Baltic port), the ‘Laws of Hansa Towns’ (a Germanic league), and the ‘Laws of Oleron’ (a French island). The oldest code, i.e., the ‘Consolato del Mare’ is said to be the inspirational code, which helped in the making of these above-mentioned codes. These three codes are often termed the ‘three arches’ based on which future maritime laws and regulations were developed. After the ‘Consolato del Mare’, the ‘Laws of Oleron’ are said to be the second most important laws in the regime of maritime laws.

The most standardised laws of maritime in the earlier period are said to have been developed in the areas belonging to what is now known as the Continental legal tradition. These developments proved to be a major part of the formulation of the early admiralty law of England, which is the origin of the common law legal tradition and is also one of the richest maritime states with rich traditions in shipping.

It is important to note that the admiralty doctrines of Europe were carried to the USA, which is also an active shipping nation. These doctrines were carried to the USA through the English admiralty law, which was in turn influenced by the ‘three arches’ of sea codes.

Evolution of maritime laws 

In the early time, maritime laws were mainly found to be uniform. The reason is that these laws needed to be like the ones which benefit the whole community, and not just a few individuals carrying out naval activities. This uniformity in laws also proved to be a hindrance to the growth of nationalism concerning the sea. Uniformity in the laws in the field of maritime eliminated problems related to unpredictability and conflict of laws. This idea of maintaining uniformity was first instigated by the combined efforts of lawyers and commercial men, who founded the Comite Maritime International (CMI) and the National Maritime Law Associations. This concept continues to grow under the aegis of the Intergovernmental Maritime Organisation (IMO) and other United Nations-affiliated organisations.

The International Maritime Committee (CMI) was founded in the year 1897, with the view of maintaining uniformity in the national legislation pertaining to maritime matters. The Hague Rules (International Convention on Bill of Lading), the Visby Amendments (amending the Hague Rules), and the Salvage Convention are some of the conventions drafted by the CMI. The International Maritime Organisation of United Nations Organisations (UNO) has now taken over many of the functions of CMI. 

Even the IMO supports the existence of uniformity in maritime laws to avoid conflicts among various jurisdictions. Many countries have incorporated the views of IMO in their national legislation by adhering to the principles formulated by it. However, a lot is yet to be achieved; the countries have still not attained the desired uniformity in maritime laws.

The present maritime laws are the product of numerous ancient doctrines along with the new laws, both national as well as international. Marine insurance, general average,  salvage, the welfare of seamen, and the ancient concept of ‘maintenance and cure’. These are some early concepts of maritime that are still in existence, and someway or the other a part of current maritime laws. The consistent nature of the basic dangers of seafaring is the prime reason behind the continuous use of some principles. However, other marine activities like naval architecture, cargo handling, and many more have changed significantly. Hence, the ancient laws needed to be changed as per the evolving scenario; this is the reason that the current laws are a unique blend of the ancient principles as well as the new laws. Some ancient laws were abolished and some remain intact.

History of Maritime laws in India

The history of maritime laws in India goes back to more than hundreds of years. Though we did not have a codified maritime law, due to a rich marine history of trading in and outside India, there existed some rules and regulations to govern maritime matters. It is evident from several historical documents that a large number of merchants and traders came to India in the early times to carry on trade in numerous fields. Thus, several laws, rules, and regulations were enacted for the smooth functioning of marine trading. Just like the other countries, maritime law in India has also witnessed a fair amount of development in recent years. In the early time, the jurisdiction of maritime laws in India vested with the Britishers. 

Components of maritime law

Maritime laws are regarded as a complete system of law, which includes both public and private matters, substantive and procedural laws, national and international legislations, and having its own courts and jurisdictions.

Maritime lien

A maritime lien is one of the most crucial aspects of maritime laws. A maritime lien is considered a maritime privilege in civil law. It is one of the finest and most noticeable peculiarities of maritime laws. A maritime lien is a claim against a vessel that can be imposed or executed through the seizure of a particular thing or relevant property. This provision was brought into existence to provide credit to the ships freely, and simultaneously ensure that the ship owners do not escape their debts without making the payment as a way of furnishing security. The maritime lien provides a right to property in deference to services offered to it or in case of any injury caused by the property. This right exists as a matter of law, irrespective of any change in ownership. To avail of this claim, retaining the possession of the vessel by the creditor is not a requisite condition.

A maritime lien is often called the ‘barnacle’ attached to a ship’s hull, because a maritime lien concerning a particular ship, travels with that ship, even if there has been a change in ownership.

The International Convention on Maritime Liens and Mortgages 1993, in Article 4, defines the concept of a maritime lien, which enumerates the list of claims that could be enforced to secure a maritime lien on the vessel. It can be made against the owner, demise charterer, manager or operator of the vessel. This lien provides the right to a person to necessitate the sale of a ship, which is done to propitiate the debt owed to him/her on account of such a vessel. A delay in the enforcement of maritime lien would result in losing the privilege of claiming the right. It is also important to note here that a complete obliteration of a vessel will result in extinguishing the right of a maritime lien. Also, there is no such necessary condition that the claimant should register the maritime lien.

The right of maritime lien not only arises on the commission of a maritime tort, like, negligent collision or personal injury, but it also arises in the case of infringement of maritime contracts, general average contributions, and salvage services.

Some important judgments

Let’s discuss some judgments of different international courts as well as Indian courts to understand the concept of a maritime lien.

The High Court of the Solomon Islands, in the case of Wahono v. The Ship MV Yung Yu No 606 (2001), held that in common law, the claims pertaining to maritime lien can also attach to freight or cargo, which in turn includes the catch of fishing vessels as well.

In the case of Maruwa Shokai (Guam) Inc v. Pyung Hwa 31 and ors. (1993), the Supreme Court of the Federated States of Micronesia held that the claim in respect of maritime lien includes transhipment costs as well, as ‘necessaries’. To clarify this concept the Court went on to say that the term ‘necessaries’ includes ‘things reasonably needed in the business of vessels or ships.’

In the case of the State of Goa v. Sale Proceeds of the Vessel MT Pratibha Bheema (2018), a vessel was anchored at the Panaji Port. It was, later on, found that the vessel developed a technical snag. Due to the bad weather conditions, the plaintiff, i.e., the State of Goa, towed the vessel to Mormugao Port. In the meantime, the vessel was sold while it was anchored to the port. It is to be noted that at the time of sale, the vessel was in an area controlled by the plaintiff. Owing to this fact, the plaintiff demanded some charges from the sale proceeds. The issue before the court was to determine whether the claim made by the plaintiff was secured by a maritime lien. The Court had to determine whether this claim comes under the purview of Article 1(l) of the International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships, 1952 and Article 1(n) of the International Convention on the Arrest of Ships, 1999. The Court held that being a signatory to the conventions mentioned above, the plaintiff’s claim falls under the category of a maritime lien.

In the case of Bank One Louisiana N.A. v. M/V Mr Dean (2002), the Court dealt with the issue that when a maritime lien for breach of charter arises. The court stated that a maritime lien is the basis of the proceeding in rem. It is a process to perfect a right, which is elementary from the moment the lien attaches. The court thus held that a maritime lien attaches at the beginning of a charter.

Shipping charters

Shipping charters are the contracts governing this transportation of goods by ships carried out either by the charter parties or by bills of lading. 

Types of shipping charters

The term ‘charter party’ mainly contains three crucial types of contracts about the use of vessels owned and controlled by others. These three charters are demise charter, time charter and voyage.

Bareboat charter

In a ‘demise’ charter, also known as a ‘bareboat’ charter, the possession of the vessel is handed over to the charterer by the ship owner, who in turn performs the rest of the activities. The charterer, after the delivery of possession, employs the crew and manages them, arranges the necessary repairs and supplies, and all the other general functions, just like the ship owner would have carried out. 

Time charter

The second category of the charter is the ‘time’ charter. Under this charter, a crew and a master are employed by the shipowner, and the charterer is only authorised to direct the movements of vessels. Herein, the charterer is also authorised to determine the cargoes to be carried out during the charterer period. The charterer under this charter has very limited authority. 

Voyage charter

The third category of the charter is the ‘voyage’ charter. It is a contract of carriage or affreightment. Under this charter, it is a customary norm that the master or his agent issue a bill of lading to the shipper, and the voyage charter remains a governing contract of carriage. The bills of lading only serve the purpose of receipt and a document of title to the goods. Ordinarily, the voyage charters deal with the carriage of full cargoes on one or a series of voyages. However, in certain cases, the charterer is only allowed to use a particular portion of the carrying capacity of a vessel. In such exceptional cases, the contract is termed a ‘space’ charter.

Limitation of liability

A very distinctive feature provided under the maritime laws is the option where the ship owners or certain other persons have the choice of limiting their liability, in some exceptional cases of tort and contract claims. 

In some countries, the extent of the limit is decided based on the value of the vessel and the earnings of the voyage where it met with the casualty. However, claims for personal injury and wrongful death are excluded from this method of deciding the limitation. On the contrary, some countries have ratified the Brussels limitation of liability convention of 1957 or where new domestic legislation has been enacted, the limit is set as £28, or its equivalent, and this limit is in turn multiplied by the adjusted net tonnage of the vessel, irrespective of the actual value of the vessel. The necessary condition for availing of this privilege must be free from privity or knowledge. Simply put, the person asserting this must be free from any actual fault or privity. The term ‘actual fault’ connotes that the person who is availing the privilege of this principle is entitled to limit his liability, only up to an extent of his crew’s negligence, i.e., the shipowner should not be negligent on his part.

The shipowner will be set free from liability up to an extent, where negligence has been done on the part of the master or crew. The shipowner cannot be released from liability if the casualty has been caused because of his own negligence or that of his managerial personnel.

Collision liability

The responsibility for collision damage under maritime law is based on the foundation of the fault principle. It states that a colliding vessel will not be held accountable for damaging another ship or any fixed object like a bridge, wharf, etc. unless the reason behind the collision was insufficiency or deficiency in the colliding vessel. It will also be held accountable if there has been negligence or a willful act on the part of the navigators. Ordinarily, the onus of proof lies with the moving vessel. 

Salvage

Under the purview of the doctrine of salvage, the aliens to the maritime ventures who save the maritime property from any casualty from the dangers of open water, are entitled to be provided with an award. This is to acknowledge their efforts and thereby entitle them to a maritime lien on the rescued property. Several factors are taken into account while considering or fixing the amount that is to be given to the person who salvaged the property. Some of these factors are; efforts put in by the rescuer, skills and energy displayed, the value of the vessel, cargo or any other property salvaged, the risks that the salvager faced while rescuing, the degree of danger, etc.

General average

Under the doctrine of general average, the term ‘average’ connotes a loss sustained by a vessel or its cargo. In a situation where one part of a maritime venture is sacrificed to save the other segments, the average in such cases is termed as ‘general.’ This doctrine is still widely accepted. However, some instances were recorded when demands were made to abolish it. 

Marine insurance

Marine insurance is an essential feature offered by maritime laws. In layman’s language, marine insurance encapsulates all the damages caused to the goods during transit. The insurance policy extends to exposed goods kept offshore or onshore, marine liability, hull, or casualty. It is very essential for the import or export trade proceedings. The oldest form of insurance is marine insurance. 

Different concepts under maritime law 

Ship registration

Ship registration is a procedure that lays out the documentation of a ship’s nationality. Registration of a ship is done to establish a ship’s nationality and further govern shipping. It links the particular ship to a state, and by doing so, a state gets the right to protect that ship in the eyes of international law. 

Once a ship gets its nationality documented, it allows the ship to travel internationally wherever the citizens of that particular nation want to travel. Every ship must be registered in a particular country. A ship follows the laws of the country where it is registered. 

Flag state

A ‘flag state’ is the term given to the country in which the ship is registered. The flag state of the ship has complete regulatory control over the vessel. Also, for countries that are a signatory to international agreements, it becomes necessary that the flag state inspects the vessels regularly and gives certification to the ships and their crew members. The flag state also issues certificates regarding safety and environmental protection. The ‘registry’ is the organisation authorised to register the ships and certifies the ship for compliance. The nature of the registry, i.e., private, governmental, or a hybrid of two depends on the national legislation of the country. In some cases, the government authorises the third agency to carry out the process of registration of the ships. 

Ship arrest

The term ‘ship arrest’ is associated with the admiralty procedure of civil law, in which a warrant of arrest is imposed on the ship. In maritime law, there is a provision that provides for restraining the movement of a ship or trading via a ship, till the time further directions are issued by the concerned court. This is a process where the vessel or ship is detained by following a judicial procedure to secure a judicial claim. However, it is important to note that this ship arrest does not order the seizure of a ship in execution or gratification of a judgment.

A warrant of arrest for a ship can be done for several reasons. The authority delegated to do this work can arrest the ship after complying with the legal procedure laid down by maritime law. This warrant includes an investigation of the ship as well. The investigation for a ship can be done from crimes and other instances like collisions, salvage, loss of Life, personal injury, loss of property, violation of customs, regulations, road norms, health norms or safety regulations, and execution of a decree.

Recreational boating

The term ‘recreational boat’ means a ship or boat of every description that is used or is capable of being used for transportation, including lifeboats, transient boats, liveaboard boats and any other types of boats. The industry involved in recreational boating witnesses hundreds and thousands of casualties and injuries every year. It is important to note that these ships are ordinarily used for noncommercial purposes. However, the same rules that apply to commercial boats apply to non-commercial boats as well. In cases of infringements of navigation rules or maritime laws by these non-commercial boaters, they have to face legal consequences as enumerated in the concerned maritime laws. Collisions, allusions, and grounding at speed are some common incidents that may have a disastrous effect on those who are aboard these ships. 

These incidents are governed by maritime laws, apart from certain exceptions known as ‘seasoned maritime incidents.’ The injury claim in these cases is subject to comparative fault, which means that the fault is assigned to all the parties involved. For example, in cases of pleasure craft collisions, all the operators and vessels are said to be involved. However, to prove the non-involvement, the party needs to gather supporting evidence in the early stages. Some common mistakes that recreational boaters witness are; failing to yield to traffic, improperly overtaking other vessels, blind turn issues, speeding, throwing excessive wake, inadequate navigational lights, docking accidents, and lack of training.

Transit passage rights

Transit passage is a concept in the law of the sea that provides for the free movement of a vessel or aircraft, thereby providing them with the freedom of navigation or overflight to follow a smooth, continuous and expeditious transit of a strait between one part of high seas or exclusive economic zones to another. 

However, there exists an exception to this right of transit passage, which states that when the strait is formed between an island of a state bordering the strait and its mainland, and if there exists a seaward of the island, the right of transit in such cases shall not apply. 

Every military and commercial ship possesses an unhindered right of transit passage through channels that are used for international navigation in a normal mode of operation without adjoining notices or consent of states. The term ‘normal mode of operation’ in relation to surface ships and submarines means that the surface ship may move in a manner consistent with vessel security and the submarines may transit submerged. The adjoining states shall not suspend the vessel for any unnecessary reason including military exercises. Also, the states must not adopt such laws or regulations that hinder or hamper the right of transit passage.

Protection of the marine environment 

Pollution in the sea bodies has been an issue for the past several decades, owing to which the international communities have formulated various rules and regulations to deal with this problem. Various treaties and conventions have been enumerated by international communities and organisations to curb the issue of the marine population. Even the United Nations Conventions have formulated certain norms and rules in the law of the Sea like the International Convention for the Prevention of Pollution from Ships, etc for the same. It lays down duties and obligations on the signatory countries to protect and preserve the marine environment. Maritime laws consist of several provisions that provide for the protection of the marine environment. The United Nations Convention on the Law of the Sea (UNCLOS 1982) is one of the most important treaties in the field of marine laws which includes laws for the protection of the environment along with placing an obligation on all nations to work in the field of protection of the marine environment. 

International maritime law

The laws that govern international waters are known as international maritime law. It consists of several treaties, conventions, and a body of laws that are made to regulate maritime organisations and nautical issues. International maritime law regulates matters concerning the process of carrying goods through sea, protection and maintenance of vessels, registration of ships, marine insurance, damage to ships, etc. 

Fundamental principles governing the Law of the Sea

The Law of the Sea is a branch of international public law governing the matters of the sea, thereby maintaining peace and public order in the open waters. Let’s discuss the fundamental principles concerning this branch of international law. 

The three fundamental principles governing the Law of the Sea are:

Principle of freedom

Since the inception of the laws concerning the sea, the concept of freedom of the sea has been in existence, be it expressed or implied. It mainly connotes that a country has limited national rights and jurisdiction over an ocean. The concept of freedom in utilising the sea was first incorporated by the Queen of England. The motive behind the principle of freedom is to ensure free use of the ocean, thus granting freedom of various activities like navigation, overflight, laying submarine cables and pipelines, etc. 

Principle of sovereignty

The concept of sovereignty in sea laws was enumerated to safeguard coastal states’ interests. It provides that the states into offshore spaces and some maritime zones can exercise a certain amount of special jurisdiction and some exclusive rights. The parts of the sea over which a nation has control and possesses certain exclusive rights and jurisdiction, then that part of the sea falls under the territory of that nation. Put simply, the principle of sovereignty provides for territorial jurisdiction overseas concerning a coastal state.

The common heritage of mankind

This principle of the common heritage of mankind emerged as a converse of the principle of sovereignty. This principle marked its presence against the traditional concepts of the Law of the Sea. This principle considers mankind as a whole and states that the sea belongs to none. It is based on the notion that man is the pivotal actor in the laws concerning the sea, thus, bringing individuals into the concept of the Law of the Sea.

International conventions on maritime law

In order to establish maritime laws and ensure better enforcement and regulation of these laws, the United Nations (UN) established an organisation titled ‘International Maritime Organisation’. The organisation was formed by the UN as a specialised agency that has been conferred with the responsibility for managing the safety and security of shipping, along with preventing marine pollution that is caused by the ships. In the light of fulfilling the duties conferred upon the organisation, the IMO has created various conventions. The establishment of IMO in 1948 has played a crucial role in the reformation of several important marine policies all over the globe. 

The foremost important conventions brought upon by the IMO and United Nations are;

United Nations Convention on the Law of the Sea

The year 1982 marked the emergence of the United Nations Convention on the Law of the Sea. The law is a comprehensive regime of law that deals with the regulations pertaining to the world’s oceans and seas, thereby establishing law and order. It further lays down rules regulating the usage of ocean resources. The Law of the Sea is a compilation of traditional laws which deals with the uses of oceans and several new legal notions and regime which talks about the current issues and matters concerning maritime matters. Also, the law provides a legal framework to further develop several areas of the Law of the Sea. It is an international agreement in which several countries of the world are signatories, which enumerated several guidelines for conducting business via sea, the marine environment framework and also the management of marine natural resources. 

Safety of Life at Sea (SOLAS) Convention

The ‘Safety of Life at Sea’ Convention is considered to be one of the most important conventions in the field of Maritime. In the marine industry, the most crucial concern is the safety of crew members and board members on the vessel. In light of this, the above-mentioned convention was enacted. The convention lays down minimum safety requirements that need to be met in relation to the construction, equipment, and maintenance of the ship. The code consists of 14 chapters which lay down various safety standards to be followed. However, the convention does not apply to all ships. The convention applies only to vessels travelling in international waters, provided it does not include warships, cargo ships of less than 500 GT, non-propelled ships, wooden ships, non-commercial pleasure yachts, and fishing vessels. Hence the above-mentioned list of vessels will not be held accountable for not following the rules and regulations enumerated in the SOLAS convention.

Maritime Labor Convention (MLC)

The minimum standards for seafarers who are working on a ship are set up by the Maritime Labour Convention. It is an internationally recognised convention, that enumerates uniformly the regulations and guidelines to be followed while setting minimal standards for several things like contracts of employment, pay, manning levels, hours of rest, leave entitlement, repatriation, compensation for ship loss or foundering, and career and skills development. As per the provisions of this convention, the seafarers before working on a ship should be trained first, to avoid future problems that may come the way of seafarers due to the lack of knowledge. The convention also ensures other hospitality facilities for seafarers. The convention also lays down certain norms for undergoing regular risk assessments. It is important to note that the convention does not apply to inland waters.

Standards of Training, Certification, and Watchkeeping (STCW) for Seafarers Convention

The convention that lays down the minimum qualification standards for the seafarers or the crew members and the personnel on board a ship is known as the ‘Standards of Training, Certification and Watchkeeping for Seafarers Convention’.The convention provides for the training of seafarers, following which a certificate is issued by an approved source. It is important to note that this convention also applies to non-party states when the ships are visiting the states which are party to the convention. This convention applies to all ships that are greater than 24 metres. 

The International metersConvention for the Prevention of Pollution from Ships (MARPOL)

This convention was formulated to deal with the issue of marine pollution that is caused by ships. This convention enumerates various codes and regulations for the protection of the environment from the pollution caused by ships. The convention includes pollution prevention from a routine operation or accidental perspective. It also lays down the discharge and cleaning process that is to be done for a ship on a regular basis. The convention also provides for regulation for setting standards of stowing, handling, and transfer of hazardous cargo.

Convention on the International Regulations for Preventing Collisions at Sea, 1972

This convention was adopted in the year 1972, thereby repealing the Collision Regulations of 1960. It is considered one of the most important conventions since it gave recognition to traffic separation schemes, which included various provisions like determining a particular speed limit, the conduct of vessels, other provisions for the risk of collision, etc. The enactment of this convention made it crystal clear that observance of all traffic schemes shall be made mandatory. 

International Convention on Tonnage Measurement of Ships

This convention was formulated to introduce uniformity in the tonnage measurement system. It was enacted in 1969 and came into force in July 1982. Before this convention, several methods were in existence for the calculation of tonnage of the merchant ships. Gross and net tonnages are the two calculations included under this convention, both of which are calculated independently. 

International Convention on Maritime Search and Rescue (SAR)

This convention was adopted in the year 1979 and came into force in 1985.  It was adopted with a view to inculcate a uniform search and rescue plan, hence irrespective of the fact of the place of incident, the rescue team will immediately contact the SAR organisation. Thus, the incorporation of a separate SAR organisation will facilitate a smooth resolution of the casualties caused by accidents. 

International Convention for Safe Containers

The convention for safe containers was adopted in 1972 and came into force in 1977. It was witnessed that there was a rapid increase in the use of freight containers in the delivery of goods by sea, along with the development of special container ships. Hence, the IMO, in cooperation with the Economic Commission for Europe, came up with the draft of this convention. The convention aims to address two important issues, namely, a high level of safety of human life by incorporating some test procedures and requirements for the containers, and secondly, smooth facilitation of containers on an international level, by providing uniform safety regulations. 

International Convention Civil Liability for Oil Pollution Damage

This convention was adopted with a view to provide a better amount of compensation to the people who suffer due to the oil pollution caused by the oil-carrying ships. The convention places the liability for payment of compensation to the deceased on the shipowner whose ship caused the pollution.

Several other conventions have been formulated by International Maritime Organisations and are readily available on the website of IMO.

Maritime law in India

Prior to independence, several laws and rules were enacted to ensure safe and efficient maritime trading. Some of the post-independence laws that were enacted by the British in the field of maritime law are the Inland Steam Vessels Act, 1917; the Coasting Vessels Act, 1838; the Indian Ports Act, 1908; the Indian Merchant Shipping Act, 1923; the Merchant Seamen (Litigation) Act, 1946; the Control of Shipping Act, 1947; the Merchant Shipping Laws (Extension to the Acceding States and Amendment) Act, 1949; etc. These laws were mainly in the fields of salvage, certification of seafarers, ship liability, owner’s safety, line conventions, etc. However, these laws were not in harmony with the current needs of the maritime, and hence most of the above laws are no longer in existence, yet these laws have somehow helped in shaping the current maritime laws. 

In the pre-independence period, admiralty jurisdiction was vested in the courts of Madras, Bombay, and Calcutta. In the case of M.V. Elisabeth And Ors v. Harwan Investment And Trading (1993), it was held that ordinarily, the High Courts of India hold superiority over any other courts in India in case of maritime matters. The High Courts of India have unrestricted jurisdiction over maritime matters. Thus, their decision was final and binding. 

India has enacted the Admiralty (Jurisdiction and Settlement of Maritime Act), 2017 as the national legislation for governing maritime matters. 

Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017: an overview

Enactment of the Act

The Law Commission in its 151st Report recommended various amendments and suggestions in the field of maritime laws. Based on these recommendations, a Bill was introduced in the Lok Sabha in the year 2005. However, the bill was not passed at that time. Later, in the year 2016, the Admiralty (Jurisdiction and Settlement of Maritime Claims) Bill was introduced in the Lok Sabha, which received the assent of both houses. Finally, the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 was enacted, which later came into force in April 2018. 

The enactment of the 2017 Act resulted in the abolishment of the Admiralty Courts Act of 1861, the Colonial Courts of Admiralty Act of 1890 and provisions of the Letters Patent Act of 1861 which related to matters of admiralty. The Act of 2017 is retrospective in nature; thus, all the pending adjudications pertaining to admiralty matters would be adjudicated under this Act. As per the provisions of the Act, it empowers the High Court of Karnataka, Gujarat, Orissa, Kerala, and Hyderabad (for Telangana and Andhra Pradesh) or any other High Court as per the notification published by the Central Government to decide the matters concerning maritime claims. 

Scope

The Act aims to consolidate current laws on civil matters of admiralty jurisdiction of courts, proceedings concerning maritime claims, arrest of ships, and all other matters in relation to this. The title of the Act itself clarifies the objective of enacting the statute. The Act attempts to consolidate all the laws concerning admiralty jurisdiction and other legal proceedings in relation to the vessels, along with ship arrest, detention, sale, and other connected matters.

Application

The Act applies to all the vessel owners, i.e., irrespective of the fact of the domicile of the owner. However, the Act does not apply to those vessels that are still under construction and have not been launched yet. The warship, naval auxiliary or other vessels which are owned and used by the Central or State Government or which are used for non-commercial purposes are also some other exceptions to the applicability of the Act. Also, a foreign ship that is used for non-commercial purposes as per any notification by the Central Government falls under the exceptional category. Section 4 of the Act provides a list of the matters that fall under the jurisdiction of maritime claims against any vessel. Section 5 provides for the provision of in rem proceedings against the vessel, wherein the vessel itself is considered a wrongdoer. It further empowers the High Court to make a ship arrest within the jurisdiction of the Court. The Court then directs the parties to furnish security against a maritime claim. 

Landmark judgments 

M.V. Elisabeth And Ors vs. Harwan Investment And Trading (1993)

Facts of the case

The appellant, M.V. Elisabeth,  in the present case left his ship in the Marmagao in India, without issuing any bills of lading or any other required documents required by the respondent for the goods carried by it. After reaching the port, it was found that the appellant had misdelivered the goods, contrary to the respondent’s directions. 

Being aggrieved by this, the respondent instituted an action in rem, in the High Court of Andhra Pradesh. The vessel was arrested at the Visakhapatnam Port and was later released after furnishing security as per the court order.

Later on, the appellant disputed that the Andhra Pradesh High Court does not have jurisdiction over the vessel. This contention of the appellant was rejected by the Division Bench of the High Court, against which the appellant moved an appeal before the Supreme Court.

Issues

  1. Whether Indian High Courts possess admiralty jurisdiction against a foreign ship, whose owner is not a resident of India or does not have a business in India.
  2. Whether the High Courts of India have the power to arrest the vessel once it enters Indian waters for legal proceedings.

Judgment 

The Supreme Court dismissed the appeal on the ground that the trial court possesses jurisdiction over this matter and further directed the case to be returned to the High Court. It further stated that the Andhra Pradesh High Court undoubtedly possesses admiralty jurisdiction claims relating to inward and outward cargo movements. Hence, the court quoted that it did nothing wrong by ordering the arrest of the vessel from the port of Visakhapatnam, as the Court had jurisdiction to order an arrest of the ship.

British India Steam Navigation Co Ltd vs. Shanmughavilas Cashew Industries (1990)

Facts of the case

In the present case, Shanmughavilas Cashew Industries, i.e., respondent no. 1 purchased 350 tons of raw cashew nuts from East Africa. The cashew nuts were shipped in the vessel SS Steliosm chartered by the appellant, a company incorporated in England. The vessel was chartered by the contract of affreightment, as evidenced by 3 bills of lading issued in favour of the shipper for 3 loads of cashew nuts. However, it was found that out of 4,445 bags, only 3,712 bags of cashews were delivered in Cochin. The respondent, aggrieved by this, sued the appellant and demanded damages for the short delivery. The trial Judge and the High Court ruled in favour of the respondent. Followed by this, the appellant moved an appeal before the Apex Court.

Issue

Whether the consignee or an endorsee is bound by the terms of the charter party terms incorporated into the bill of lading even if he is unaware of those terms. 

Judgment

The Apex Court allowed the appellant’s contention, thereby setting aside the judgment of the High Court of Kerala. The court further remanded the case back to the trial court, stating that the parties should be given a fair amount of opportunity. The court went on to say that the consignee or an endorsee is bound by the terms of the charter party and other terms of the contract enumerated in the bills of lading, even if the consignee or endorsee is not aware of the terms.  

Owners And Parties Interested In The Vessel M.V. Polaris Galaxy vs. Banque Cantonale De Geneve (2022)

Facts of the case

In the present case, the Commercial Appellate Division of the High Court of Madras allowed the commercial appeal filed by the respondent in respect of an admiralty suit. The appellant, Galaxy Marine Service Ltd., a registered owner of the ship executed a charter party with Profitable Wealth Inc. (PW), which is further managed by Wirana Shipping Corp Pte Ltd., a Singapore company. The charterer further sub-chartered the vessel to Gulf Petroleum for carrying marine oil. Gulf Petroleum entered into a contract with Indian Oil Corporation, which was to be loaded at Kandla Port for discharge at Fujairah.

The Gulf Petroleum asked the respondent, Banque Cantole De Geneve, to finance the purchase of the oil. Later, PW issued a letter of indemnity to the appellant, and GP in turn issued a counter-indemnity to PW. The respondent further honoured the indemnity credit and paid Indian Oil Corporation. After some time, it came up before the appellants that they were cheated by the GP. Owing to this fact, the respondent asked the owner of the vessel to not discharge the ship. However, it was found that the ship was already discharged, and because of this, the respondent filed a misdelivery claim before the Madras High Court (Commercial Division Bench). The Commercial Division directed the arrest of the ship. A summary judgment was demanded by the respondent. Gradually, security was furnished, and the vessel was released. However, the court demanded that since GP is a necessary party, he should be made a party to the suit. Thereafter, an appeal was filed in the Commercial Appellate Division of the High Court (Division Bench), by the respondent. The Court allowed the appeal. Being aggrieved by this, the appellant moved before the Apex Court.

Issue 

Whether an appeal lies before the Commercial Appellate Division of the High Court against an order passed by the Single Bench Commercial Division of the same High Court for the addition of a party, in an Admiralty Suit.

Judgment

The Apex Court dismissed the appeal and held that an appeal before the Division Bench of the Commercial Appellate Division is not maintainable. An appeal cannot lie against the order passed by the Single Bench Commercial Appellate Division of the same High Court. 

Conclusion 

The maritime industry is one of the most important industries for the economic development of any country. Hence, it is of prime importance to have uniform and stable laws to regulate and govern these matters. 

Frequently Asked Questions (FAQs) 

Which regulatory authority governs shipping in India?

Shipping in India is centrally regulated and governed by the Ministry of Shipping (MoS). The Ministry of Shipping has formed a semi-autonomous body, i.e., a statutory body, called the Directorate General of Shipping, commonly referred to as “DG Shipping.”  The authority has been granted powers through the Indian Merchant Shipping Act, 1958 (MSA). The Act deals with all the matters pertaining to shipping policies, legislation, and the implementation of international conventions. 

In India, the admiralty suits are brought before which court? 

In India, admiralty suits come under the jurisdiction of the High Court of the coastal state where the matter arose. As per the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, a High Court can only exercise jurisdiction over a vessel which falls under their coastal waters.

Which Convention codified the basic principles of nationality and registration pertaining to a ship for the first time?

The 1958 Geneva Convention was the first formal code that established the principles of the flag state and ship registration in international maritime law. In the convention, it was stated that the vessel should possess the nationality of the state to which it belongs upon registration. 

References 

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Judicial powers of the President

By
Sneha Mahawar
-
0
President powers

This article is written by Pujari Dharani, a B.A.LL.B student at Pendekanti Law College, affiliated with Osmania University, Hyderabad. The article talks about all judicial powers of the President such as consulting the highest court for advice, pardoning powers, and powers regarding appointment and removal with constitutional evaluation and landmark case laws.

This article has been published by Sneha Mahawar.​​ 

Introduction 

The President of India is the constitutional head of the country. The framers of the constitution of India put the President of India on a higher pedestal. It was evident in the provisions of the constitution of India. Even though the President is an integral part of the legislative organ of government, still he is empowered with executive and judicial powers as well under the Indian Constitution. 

This article deals with the various aspects of the judicial powers of the President of India with constitutional evaluation. 

Importance of independence of judiciary vis-à-vis judicial powers of President

In a country like India, which follows a parliamentary democratic form of government, the doctrine of the independence of the judiciary is of utmost significance to prevent the intervention or interference of other organs of the government, that is, the executive and legislative wings, in the functioning of the judiciary. India follows a political system based on the features of constitutional government. In such a case, the judiciary also works to keep a check on arbitrary actions of both the legislative and executive. Indeed, this is one of the essential features of constitutional government. Also, in a quasi-federal system, which is adopted by our country, the judiciary adjudicates the disputes between the Centre and states, and its judgment is the final word. Any intervention or creation of disturbance in the functioning of the judiciary would amount to the destruction of the very foundation of the country, i.e., democracy. Hence, the doctrine of the independence of the judiciary is regarded as a significant component in a constitutional government like India. Because of its profound significance, the government took many measures to uphold the doctrine, and anything that acts detrimental to it is regarded as unconstitutional.

Now, you may have a doubt that wouldn’t it be against the doctrine of the independence of the judiciary when the President, who is part of the legislature, is exercising his judicial powers? Why did the framers of the Constitution empower the President with some judicial powers even at the cost of relaxing the doctrine of the independence of the judiciary? What made them do this? Besides this, after reading this article, you will understand and learn what are the powers of the President in India, his powers in emergency times, his pardoning powers, his role in the appointment and removal of judges, and the relevant and most important case laws for better understanding of the concept. 

Need for empowering the President with judicial powers

As India has a democratic constitution, it adopted the theory of separation of powers (also known as the theory of division of powers). This theory stipulates that the three organs of government, namely the legislature, executive, and judiciary, should always function independently. Implementing this theory avoids arbitrariness and the concentration of powers in one or a few members of any organ of government. Hence, three organs possess their respective powers, such as the legislature, which exercises legislative powers, the executive, which exercises executive powers, and the judiciary, which exercises judicial powers.

However, the President, who is the head of state, is vested with both executive and judicial powers along with legislative powers. This happened because India does not follow the doctrine of separation of powers in a strict sense. Currently, there is no watertight division between the three governmental branches, i.e., the executive, legislature, and judiciary. Indeed, it incorporated another theory named “the theory of checks and balances,”  by which the strict application of separation of powers is relaxed in India. The reason for the same is already stated, i.e., to prevent arbitrariness and the concentration of excessive powers in one organ of the government.

By empowering the President with judicial powers, he can take few decisions on judicial matters independently from the judiciary. The courts would not intervene with the President’s actual decisions on the merits because it is mainly a matter of his discretion. Here, he is not acting as an appellate court by exercising judicial powers; rather, his authority is separate from the judicial process. By this, we can see how the balance of powers is maintained. This is how the theory of checks and balances works.

Would empowering the President with judicial powers be against the independence of the judiciary

Following the instruments of checks and balances can never be considered against the doctrine of the independence of the judiciary or the theory of separation of powers. Indeed, it will be a better add-on to the administration of justice. The checks and balances between the organs of government ensure the smooth, effective, and efficient functioning of government. Similarly, conferring judicial powers to the President will make justice administration fair and just, provided the President uses it judiciously without any unfairness and unreasonableness. 

Powers of the President in India 

India, which adopted the parliamentary form of government, has two executives, viz., the President and the Prime Minister. The President of India is the constitutional head as he represents the country. The Prime Minister of India with his/her cabinet would be real executives due to their deciding, directing, and determining force in all central executive functions.

As per Article 53 of the Indian Constitution, the President is conferred with executive powers of the Union, which can be exercised by him directly or through his subordinates. Article 53 further states that nobody can take away the powers conferred on the President. However, in reality, the Prime Minister of India and his council of ministers will aid and advise the decisions taken by the President. Nevertheless, every executive power is exercised in the name of the president as mandated by Article 77. Thus, we can say he is the head of the central executive. 

Judicial powers

The Indian President has the following judicial powers: 

  • According to Article 143, the President may consult the Supreme Court for advice on some crucial constitutional, legal, and diplomatic issues. 
  • According to Article 72, he/she also has the authority to commute a court-ordered sentence or to grant a pardon, reprieve, respite, or suspension of the term. 
  • According to Articles 124 and 217, the Supreme Court and High Court judges, including the Chief Justice of India and the Chief Justice of High Courts, are appointed by the President.

The above-mentioned powers are considered judicial powers of the President because they are more connected to the judicial processes just like the Supreme Court’s functions and other courts’ functions. Let’s understand those judicial powers in detail under separate headings. 

Consulting Supreme Court for advice

In addition to the original and appellate jurisdictions, the Supreme Court has advisory jurisdiction. Article 143 confers advisory jurisdiction on the Supreme Court of India. Article 143  is identical to Section 213(1) of the Government of India Act, 1935, a provision that can be found in British legislation named “Government of India Act, 1935,”. The framers just replaced the words ‘Federal Court’ with ‘Supreme Court,’ ‘Governor-General’ with ‘President,’ and ‘decision’ with ‘opinion’.

Article 143(1) stipulates that the President of India can seek the advisory opinion of the Supreme Court whenever he/she thinks that an event has arisen or is likely to arise, that is of public importance and that such a situation requires the President to consult with the Apex Court. This article also says that once the President puts the question before the Supreme Court, the court, upon hearing the matter, will report its opinion to the President. 

However, the opinion rendered by the Supreme Court to the President is not a judgment, order, or decree. It is just an opinion on the nature of advice, not a judicial pronouncement. Whether to enforce the opinion is purely in the hands of the executive. i.e., President. Thus, the opinion does not have a binding effect, and the President is not bound to implement it. Y.V. Chandrachud, the then C.J.I, said in Re The Special Courts Bill, 1978 v. Respondent also known as “Special Courts case”, that “the opinions and references made by the Supreme Court under Article 143 are not binding on subordinate courts, the same as the law declared by it within the meaning of Article 141 of the Indian Constitution because those opinions are advisory in nature”. But, the utmost importance of the Supreme Court’s opinion doesn’t lower just because it is not binding on the President. 

Also, whether to examine and reply to the opinion of the President or not is up to the Supreme Court. There is no compulsion on the Supreme Court to render an opinion to the President. However, the reasons should be cited by the court in case of denial of giving an opinion. This was held by the Supreme Court in the case of Dr. M. Ismail Faruqui v. UOI & Ors (1994).

In the Re The Delhi Laws Act, 1912 v. The Part C States (Laws) Act, (1950), the first reference under Article 143 was made. Around twelve consultations were made by the President for the Supreme Court’s opinion in accordance with Article 143 of the Constitution.

Pardoning power of the President 

“I have always found that mercy bears richer fruits than strict justice.” – Abraham Lincoln

The concept of pardon was introduced in the Indian Constitution not just as an act of clemency but as a part of the constitutional scheme. The primary rationale behind incorporating this provision in the Constitution and empowering the President to pardon a convict is the doctrine of checks and balances on authorities, especially the judiciary, and to execute convicts unbiasedly. The other reasons backing the concept of pardoning the power of the President are as follows:

  • To ease the extreme severity of the criminal laws.
  • To save people for humanitarian and moral reasons.
  • If the conviction is based on harsh, unjust and arbitrary judgments, to prevent injustice caused to an innocent.
  • To uphold the tremendous importance of Article 21.

The pardoning powers of the President of India are dealt with under Article 72 of the Indian Constitution. The term “pardoning power” refers to the President’s attempts to alter the punishment or sentence imposed by the court. This power is enjoyed by both the President of India under Article 72 and the Governor of any state under Article 161. 

Applicability

The President of India cannot use his pardoning powers in all the cases decided by courts. There are a few specific circumstances in which the President may use his/her pardoning powers. Those situations prescribed under Article 72 are as under

  • when he/she is considering cases where a person has violated a Union law or any other law that enforces the executive power of the Union.
  • When he/she is considering cases in which the punishment was imposed by a court-martial or military court.
  • When he/she is considering cases in which the punishment given to the convict is the death penalty or capital punishment.

On the advice of the council of ministers

In general, the President is considered a nominal head, i.e., only for namesake. The reason behind this is that he/she acts on the aid and advice of the council of ministers headed by the Prime Minister. Even though all executive functions are put into force in the name of the President of India, he/she cannot exercise his powers independently without the government’s consent. The same applies to granting mercy to any convict. The Supreme Court reiterated that only on the advice of the Council of Ministers can the President of India use his/her pardoning powers in the case of Maru Ram vs Union of India (1980).

Types of Pardoning powers

As per Article 72 of the Constitution of India, the President has the authority to pardon, reprieve, respite, or remit a punishment or to suspend, remit, or commute the sentences of criminals who have received the punishments of the Indian judiciary.

Procedure

The following procedure is followed by the President:

The other side of the coin: Misuse

The framers of the Constitution conferred pardoning powers on the President of India on the grounds of humanity as well as to rehabilitate the sinner who is also a human. In a way, the pardoning powers support the reformative theory of punishment. Nevertheless, despite the good objectives, this power has remained a source of debate due to its inappropriate use and abuse for political and other unethical reasons. The power to pardon someone has an inherent potential for abuse and exploitation.

However, whenever the Constitution gives such a privilege to a person, whether the legislature, judiciary, or executive, the person using such a privilege or power should exercise it with care and caution. Because if implemented with evil motives, it causes grave injustice to a person or group of persons and directly hits the foundations of democracy. 

In the past, misuse of pardoning powers by both the President and the Governor has been seen multiple times. The following reasons behind such misuse of pardoning powers are: 

  • Political agendas;
  • Monetary greed;
  • Position of victim;
  • Lack of accountability;
  • Lack of procedure and guidelines;
  • Role of media;
  • Misrepresentation by the convict.

Many times, India saw the abuse of the pardoning powers of the President. For example, in  Kehar Singh v. Union of India, jurists like Naveen Thakur claim that the guilty parties’ appeal could never have been successful because Kehar Singh, a 21 years aged convict, was liable for killing the then Prime Minister and a prominent leader in Congress party, Mrs. Indira Gandhi, and Congress was then in power at the central level. In this case, ‘young age’ could have been one of the grounds to exercise powers given under Article 72 by the President, but still, the ground was not considered while hearing the mercy petition. Additionally, this issue was not resolved in a coalition government either because the council was unable to provide the President with a fair and impartial opinion due to conflicting political interests. This caused further issues and, in the opinion of many experts and academicians, there is a need for judicial review of the pardoning powers of the President. From these experiences, it has also been observed that the President’s use of pardoning power on the council of minister’s advice is not without its own set of complications and troubles.

Another major misuse or demerit is the delay in deciding and disposing of mercy petitions. It’s taking years to obtain the assent or rejection of mercy petitions filed by convicts. It is not just to keep the mercy petitions open for donkey’s years without any kind of response. So, what is the solution? Is there any time limit in the constitution? Unfortunately, there was no stipulated time limit prescribed in the Indian Constitution or any other statutes. However, this is not sensible if the President doesn’t pass the petitions within a reasonable time period because it amounts to an abuse of power and constitutes an act against “due process” and “procedure established by law” as provided under Article 21 of the Indian Constitution. Also, it is said to be a grave infringement of human rights. Furthermore, in Shatrughan Chauhan & Anr vs Union Of India & Ors. (2014), the Supreme Court held that if the mercy petition is pending for an indefinite period without any valid reasons, then the court would intervene and decide on the petition or fix a time limit to pass the petition by the President and Governors. In addition to this, recently in September 2020, the Supreme Court bench led by then Chief Justice of India U.U. Lalit criticised the delay caused in the case of the mercy petition which was filed by Balwant Singh in 2012. It’s been 10 years waiting for the response of the President. 

Even in the cases where the President took a quick decision to grant mercy, the delay persisted. For instance, in the case of Nirbhaya, the President rejected the mercy petitions immediately, but the execution of capital punishment didn’t begin right away. The convicts misused the loopholes in the procedures for mercy petitions. They moved the Supreme Court multiple times through different convicts against the rejection of mercy petitions, which took long years to execute and deliver justice. This case is notoriously known for delayed justice and one of the causes for delivery is loopholes in procedures and guidelines for mercy petitions.

Suggestions

Almost every country recognises the historic authority to pardon crimes, remit punishments, and confer clemency. But, in reality, the pardon is a shadowy, alien entity that looms over the legal system. Even for criminal law professionals and practitioners, its current applicability is questionable because it instantly reverses years of criminal investigation and prosecution. Apart from this, it is described as arbitrary, unaccountable, inaccessible to the common man, highly corruptible, and considered to be highly regarded by both politicians and the general public. 

Insofar as scholars have given it some consideration, a pardon is viewed as a constitutional deviation that does not belong to the theory of checks and balances and plays no good part in a democracy.

It is advisable to create rules for the usage of pardoning powers by the President. Provided, every single pardon given by the President of India should be subjected to those rules and regulations because it won’t be feasible to fairly and effectively govern the pardons without the rules.

Even though the highest executive authority, that is, the President, may be using the pardoning power, it must still be used in good faith, with thoughtful and informed consideration for the benefit of the public. Additionally, the authority to pardon is combined with the responsibility to behave justly and sensibly on the part of the President.

Power of the President to appoint judges

Since the Constitution places a greater emphasis on the executive organ of government than the judiciary when making appointments, the appointment of judges is seen as one of the elements of checks and balances. The framers of the Constitution of India provided such a provision to ensure the appointment is made fairly so that the deserving and qualified legal professional will become a judge in judicial institutions. 

The provisions that prescribe the appointment of judges to the Supreme Court and High Court are Article 124(2) and Article 217 of the Constitution of India respectively. Article 124(2) states that the President appoints a person as Supreme Court judge after consultation with those people, which includes judges of the Supreme Court and High Courts, whoever is deemed fit according to the President. Whereas, Article 217 states that the President appoints High Court judges after consultation with the Chief Justice of India, the Governor of that particular state, and the Chief Justice of that particular High Court. Additionally, in case the Chief Justice of the High Court is appointed, a consultation will be with the first two stated persons. However, the Constitution ignored the procedure to be followed for the appointment of judges. That’s where the collegium system comes into the picture as a solution for the conflict between the executive and judiciary.

If you want to know the procedure of appointing judges through the collegium system, its gradual evolution through three judges’ cases, and the new procedure after the 99th Amendment Act, click here and here.

Removal of judges

The concept of the removal of judges is borrowed from the American Constitution. This concept is backed up by reasons of accountability and transparency. Hence, the power of removal of judges is given in the hands of the President by the Constitution. However, most of the removal procedures and investigations will be regulated by the Parliament by following the law of the land.

The removal of judges is also said to be one of the measures of checks and balances. According to Article 124(4) of the Constitution of India, the President of India cannot remove a Supreme Court judge himself but only after the Parliament’s approval on the grounds of proven misbehaviour and incapacity, which was neither defined by the Constitution nor by the Judges (Inquiry) Act, 1968. The approval of Parliament should be a special majority, i.e., more than two-thirds of members present and vote. 

Here, it is pertinent to note that the Constitution of India protected the independence of the judiciary by creating Articles 121 and 211 which disallow the Parliament to conduct discussions on the misconduct while discharging their duties, of the judges of both the Supreme Court and High Courts respectively. 

Procedure for removal of judges

The procedure detailing the removal of judges through the impeachment process is laid down in the Judges (Inquiry) Act, 1968. The impeachment of high court judges is described under Article 218 of the Indian Constitution. 

The following is the procedure followed for removing a judge:

For more details on the procedure and steps involved in the removal of judges and related laws, click here.

Flaws in Impeachment procedure

It is shocking to know that until now, not even one judge has been impeached since 1949, although there is prima facie evidence. History shows the early 1990s case of former Justice V. Ramaswami, who was the first Supreme Court judge against whom an impeachment procedure was initiated, as an example of this. He was acquitted as the motion was defeated in Lok Sabha, despite prima facie evidence of fund embezzlement, financial impropriety, and irregularities due to the flaws and loopholes that existed in the removal procedure. Not just this one case, there are numerous incidents where allegations and accusations are made against judges, but none of them didn’t result in removal.

One of the major reasons no corrupt judge is impeached in India is the difficult procedure of impeachment to be followed by the Parliament. Despite this, impeachment proceedings were initiated against several judges but with no results.

In the last few decades, we have witnessed a lot of amendments made to the Constitution or statutes. Multiple legislations on various issues are also in existence. With this, we can clearly tell where there is a will, there is a constitutional or statutory amendment. Nevertheless, there is no judicial or political will to introduce changes in the impeachment procedure. They made amendments to the salaries, pay, perks and other things, but not to the removal process or the investigation held by the Parliament. 

The path of the government to ensure judicial accountability and transparency is, therefore, still difficult and lengthy. However, now, it is necessary for the survival of democracy and the rule of law in India.

Landmark Cases

Ismail Faruqui v. Union of India 

In the Babri Majid case, the issue of Ismail Faruqui dominated the then debates and discussions. It was held in the case of Ismail Faruqui v. Union of India (1994) that the Supreme Court of India cannot be bound to reply to the question or give advice as asked by the President under Article 143 of the Constitution of India. Instead, if the Supreme Court feels that a matter is undesirable or not appropriate for such an action, it may decide not to offer its opinion under Article 143. However, the Supreme Court pointed out that reasons had to be provided in case of refusal to render the advisory opinion. 

In the present case, on a Presidential request for the Supreme Court’s opinion, the five-judge bench of the Supreme Court declined to respond to the question of “whether a temple originally existed at the site where the Babri Masjid subsequently stood” because it was superfluous, unnecessary, opposed to secularism, and favoured one religious community. 

Apart from the above observations, the Supreme Court of India addressed the issue of the State acquiring religious property in this case. Places of worship like churches, mosques, and temples were declared to be immovable property under Article 26 of the Indian Constitution by the court. But, since it is not a fundamental component of the religion, the government is permitted to buy the property.

Re Delhi Laws Act, 1912

The Re Delhi Laws Act, 1912 is the first case to reach the Supreme Court under Article 143 of the Constitution of India through advisory jurisdiction. The court in this case reviewed the legality of a statute in relation to the delegated legislation. Although a bench of seven judges presided over the case, their opinions varied. However, all the judges agreed that the legislature had the authority to give the executive some lawmaking authority, and they disagreed on how much of that authority may be given to the executive. The court mainly expressed the following two opinions:

  • To whatever extent it decides, the Parliament may delegate its legislative authority, subject to the condition or restriction that it does not surrender its existence or abdicate its powers.
  • The essential legislative role of the Parliament which includes drafting, formulating and enacting the policy and turning them into a legally binding standard of conduct, could not be delegated to other branches of the government.

In Re: The Kerala Education Bill

The Kerala Education Bill case is a significant one under Article 29 of the Constitution of India, which protects Indian citizens’ right to conserve their culture. The decision of the court is based on the application made by the President of India under Article 143 for the opinion of the Supreme Court on the matter. The Kerala Education Bill reference is the second one in history that was made under Article 143; the first one was made by the President in the Re Delhi Laws Act, 1912.

In contrast to the Re Delhi Laws Act decision, where the nature and scope of the reference under Article 143(1) were not considered. Instead, in the current reference, the court first discussed the scope of advisory jurisdiction before expressing its opinion.

G. Krishta Goud v. State of Andhra Pradesh

The case of G. Krishta Goud v. State of Andhra Pradesh (1975) is one in which the Supreme Court decided to express its opinions on the pardoning powers of the President. The petitioner, in this case, asked the Supreme Court to review the denial of clemency by the President because the petitioners are murderers and the President decided not to show pity on them. 

While deciding the case, the court stated that the pardoning powers of the President and the Governor were historically a sovereign power, politically a residuary one, and morally a help to intangible justice. Thus, in this case, the court was hesitant to use judicial review on the President’s decision. Justice Krishna Iyer, in the ruling, stated:

“People of a republic serve as custodians and beneficiaries of the power. Hence, no authority in a republic is irresponsible and unresponsive. But our constitution has two limitations. The court is not an omniscient, omnipotent, or omnipresent being that can intervene in any matter and anywhere. And, when the constitution, as in this case, gives the nation’s highest executive authority while implicitly excluding judicial review, it is inappropriate for this court to have unlimited power”.

As a result, the court, in this case, demonstrated considerable reluctance to even consider the judgment of the court. It is important to note that the judgment quoted assumes that the public power was not reckless from the start. In fact, Justice Krishna Iyer finally issued a warning, saying that “the Supreme Court may not stay silent and impotent if total arbitrary law and mala fide execution of power are gruesomely founded.”

Therefore, despite the Supreme Court’s initial hesitancy to use its judicial scrutiny, it ultimately limited the President’s and the Governor’s power to pardon through its interpretation and activist stance. 

Maru Ram v. Union of India

In Maru Ram v. Union of India and Others (1980), Justice Krishna Iyer held that public authority, including constitutional power, should not be used in an arbitrary or dishonest manner and that, typically, guidelines for fair and equitable execution are the best assurances of the proper use of power. As it will “exclude the character flaw of discrimination, such as may arise when two persons have been convicted and sentenced in the same case for the same degree of culpability, but one is released and the other is rejected for mercy for such illogical reasons as religion, caste, color, or political loyalty“, the court, for the first time, suggested that the guidelines be put in place for the purpose of the President exercising his pardoning powers.

The Constitutional Bench asserted that the Courts would intervene in cases where political vendetta or party favouritism was evident or where arbitrary criteria like religion, caste, or race had affected the decision-making process. This case also discussed judicial review in the case of abuse of powers while dealing with a mercy petition by the President. Such unethical elements undermine the use of the pardon power and ought to be checked by the judiciary through judicial review.

In contrast to the Krishta Goud case, when the court initially showed great reluctance and eventually accepted that in a few circumstances, it would not be prohibited from exercising judicial review, the Maru Ram case looks to be a step forward. However, it looks clear from the current case that Justice Krishna Iyer is no longer reluctant to use judicial review and strongly urges the government to create guidelines that aim to regulate the exercise of pardoning power by the President of India.

Epuru Sudhakar & Anr vs Govt. Of A.P.

In this case of Epuru Sudhakar & Anr vs Govt. Of A.P. (2006), the Supreme Court ruled that it is a well-established concept that the Supreme Court and High Courts have the right to a limited judicial review of the use of their pardon powers. The following primary guidelines can be used to challenge the President’s or Governor’s clemency decision:

  • The decision was made without application of mind.
  • The order is made with bad intentions.
  • The decision was made based on unrelated factors.
  • Relevant information was not taken into account.
  • The order was arbitrarily given.

Conclusion 

The President, being the highest executive authority, also has a legal duty to preserve, protect and defend the Constitution to his/her best ability as per Article 60 of the Constitution of India. To strengthen democracy, independence of the judiciary, and checks and balances, the Constitution conferred few judicial powers on the President of India so that the concentration of all judicial powers is not in the hands of one organ of government, i.e., the judiciary. However, the President exercises these powers with great caution and does not act arbitrarily while using them. If abuse of powers is committed by the President, being a constitutional head, that will lead to the collapse of democracy in India. Hence, all three organs of government should enforce their respective functions and exercise their powers as prescribed by the Constitution of India while following the measures of separation of powers along with checks and balances.

Frequently Asked Questions (FAQs) 

Can a President be answerable to any court?

The President of India is not answerable to any court in India for how he exercises or performs his duties and powers that are given to him. However, only those courts, tribunals, or other bodies designated or constituted by either house of Parliament have the authority to look into the accusations made against the President under Article 61  of the Constitution of India.

Can a court summon the President?

The President of India enjoys a few immunities to discharge his duties without any obstacles. One of them is immunity against legal proceedings. The protection is given by Article 361 of the Constitution of India. The same kind of protection is also given to the governors in India. Under Article 361, it is mentioned that criminal proceedings cannot be initiated against the President. Also, no court can grant an arrest warrant to imprison the President during his tenure. However, the President’s actions, which are done in his personal capacity, can be challenged in any court.

Can the President overrule the Supreme Court?

The human intellect is imperfect. Sometimes, the methods and approaches adopted by the judges may be incorrect because judges are also human beings. But, when a mistake concerns the death penalty, it is crucial to consult the President before executing such a big punishment that affects the life of someone. By using his pardoning powers lawfully, he can overrule the decisions made by the Supreme Court.

Can the pardoning powers of the President be subject to judicial review?

The pardoning power of the President of India is subject to judicial review by the judiciary. However, the court cannot review the substantial merits of the decision taken by the President other than in instances of arbitrariness, bad intent to harm, or ignorance of some crucial information. Even while the courts have occasionally gone over the fine line that limits the extent of their review, as established in the case of Maru Ram, it is believed that such instances are an exception.

Can a judge escape from impeachment?

No judge, including the Chief Justice of India, can escape the impeachment proceedings. That’s how important is given to the concept of judicial accountability. However, many judges in the past used one way to escape the impeachment proceedings i.e., resignation from the post. The reason for that is the law is blank regarding the resignation of a judge against whom the impeachment proceedings had started. Hence, a judge is not mandated by the law to sit through the impeachment process. In this manner, the judges can simply resign from their positions and avoid the humiliation of imprisonment proceedings.

The resignation of Soumitra Sen is one such example. A motion for the impeachment of Soumitra Sen was moved in the Rajya Sabha, an investigation was made, and Justice Soumitra Sen was found to have misappropriated the funds that were associated with a case. Then, the motion was approved by the Rajya Sabha. However, Justice Sen resigned before it was sent to the Lok Sabha for voting and hence the house decided to end the impeachment proceedings against him.

References 

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Section 227 of CrPC

By
Sneha Mahawar
-
0

This article is written by Sanjana Santhosh, a law student at Christ (Deemed to be University), Bengaluru. The article explains the concept and scope of discharge under Section 227 of the CrPC, along with the landmark case laws that explain the parameters of the application of the section. 

This article has been published by Sneha Mahawar.​​ 

Introduction

Black Law Dictionary defines “discharge” in the context of criminal law as “the opposite of charge; hence to release, liberate, annul, unburden, disencumber.” After the investigation into a crime is concluded and the charge sheet is filed against the accused, the provisions of discharge under Sections 227 and 239 of the Criminal Procedure Code, 1973, come into play.

When someone is falsely accused, they have the option of filing for a discharge application under the Code of Criminal Procedure, 1973. If they are innocent of the charges against them, they might apply for discharge under the terms of this Code. In the absence of a prima facie case against the accused, where the evidence presented to the court is insufficient to satisfy the offence, the accused is entitled to be released.

A ‘discharge’ petition can be filed by someone who has been wrongfully accused of a crime if the evidence presented to the court is so weak that it makes a conviction impossible. The reasons for discharging the accused must be documented and made available to both the accused and the court.

An accurate representation of the circumstances surrounding a person’s potential conviction cannot be determined unless there is a firm grasp on the reasons for releasing him from prosecution. There are three legal questions that must be answered in order to fully grasp the subject at hand.

  1. In what ways might a suspect be released from custody or brought up on charges?
  2. What level of scrutiny is applied when deciding whether to drop charges or exonerate an accused person?
  3. What information is necessary to decide if a discharge or framing charge is appropriate?

Scope of Section 227 of CrPC

In the case of Richard Winn Harcuss v. State of West Bengal and Ors. (1975), Sections 227 and 228 of the Code of Criminal Procedure, 1973, are meant to guarantee that the court is convinced that the allegation against the accused is not groundless and that there is some substance for proceeding against him.

The accused is made aware of the evidence that will be used to convict him at trial by reading the charges that will be filed against him. Discharges are currently only possible through the Court of Sessions, following the implementation of the new Code, also known as Act No. 2 of 1974. In matters only triable by the Court of Sessions, the trial judge is required by law to dismiss the case against the accused upon the defendant’s fulfilment of the four conditions listed in Section 227:

  1. Review of the case file and any supporting materials;
  2. Listening to the defence and prosecution’s arguments;
  3. The absence of any basis for continuing with the prosecution of the accused;
  4. Documenting reasons for dismissal.

Before a charge is brought against someone, there must be “grave suspicion concerning the conduct of the offence by the accused.” The former does not call for the judge to examine the documents. The latter allows for some selective examination of evidence. Therefore, there are two sets of evidence that are being compared when the term “prima facie evidence” is being used, and both of them are at distinct phases of the criminal process. It’s important to keep in mind that there are varying phases to a trial. Consequently, there has to be a range of standards for evaluating evidence. At the beginning of the trial, suspicion is just that; at the end, when all the evidence has been presented by both the prosecution and the defence, it is a critical analysis and a rigorous assessment of all that has been presented. So, the evidence is appreciated at a micro level during the charge-drafting phase and at a macro level during the sentencing phase of a trial. As a result, the mental degree of appreciation shifts at each stage of the criminal process, going from a superficial level to a more in-depth level.

At the Sections 227 and 228 phase, the law is well decided that the court must evaluate the material and papers on record to determine if the facts emerging therefrom, taken at face value, disclose the existence of all the components constituting the accused offence. It is unrealistic to assume that a court, even at a preliminary level, will accept anything the prosecution says without question, especially if it runs counter to common sense or the overall probabilities of the case. Therefore, at the stage of framing the charge, the court is required to examine the evidence in order to determine whether there is a basis for the presumption that the accused has committed the offence or whether there is not any sufficient ground for proceeding against him. This examination cannot be conducted with the intention of reaching the conclusion that it is not likely to result in a conviction. Instead, the court must make this determination in order to determine whether or not there is a basis for the presumption.

Parameters for application of Section 227 of CrPC

Supreme Court precedents have established the limits within which this authority may be exercised.

In State of Karnataka Lokayukta v. M. R. Hiremath (2019), the Supreme Court noted that when deciding whether or not to grant a discharge, the court must assume that the material brought on record by the prosecution is true and evaluate the material to determine whether or not the facts emerging from the material, taken at face value, disclose the existence of the ingredients necessitating a discharge.

The Supreme Court noted in State of Tamil Nadu v. N. Suresh Rajan and Ors. (2014) that the true significance of the materials has to be taken into account at the stage of discharge, and the Court is not expected to go deep into the issue in a different case, citing earlier decisions on the subject of discharge. The question that must be asked is whether or not sufficient evidence exists to convict the accused. A charge can be framed if the court believes the evidence presented in court has some probative value that the accused committed the crime, but the court must find sufficient evidence of guilt in order to convict the defendant. The Court further noted in this case that a mini-trial is not permissible at the time of dismissal under the legislation.

However, things are set apart in the case of M. E. Shivalingamurthy v. Central Bureau of Investigation (2020). The Supreme Court noted that the defence of an accused person cannot be considered at the stage where the accused person wants to be released under Section 227 of the Criminal Procedure Code, 1973. When an accused person requests dismissal under Section 227, no consideration of the accused’s defence is to be made. The documentation produced by the prosecution, if any, constitutes “the record of the case” under Section 227 of the Code of Criminal Procedure, 1973. At the stage of charge formulation, the accused has no right to produce any document under the Code. At the stage of drafting the charge, the contribution of the accused is to be restricted to the material presented by the police.

Guiding principles on discharge and framing charges

The following six principles were developed by the Hon’ble Supreme Court in two separate cases, Vijayan v. State of Kerala and Another (2010) and Union of India v. Prafulla Kumar Samal and Others (1979):

  1. While deciding whether or not to file formal charges under Section 227 of the Criminal Procedure Code, the judge has the unquestioned authority to carefully examine the evidence in order to determine whether or not a prima facie case has been established against the accused. It would be up to the specifics of each case to judge whether or not there was a prima facie case.
  2. If the evidence presented to the court raises substantial doubts about the accused’s innocence and fails to provide satisfactory explanations for those doubts, the court has every right to bring charges and proceed with the trial.
  3. The court must take into account the overall likelihood of the case and not only operate as a post office or a mouthpiece for the prosecution. A trial-like analysis of the case’s merits and assessment of the evidence cannot be conducted ad hoc.
  4. The court can decide to file charges if it believes, based on the evidence presented, that the accused is guilty of the crime in question.
  5. The probative value of the evidence cannot be discussed when the charges are being drafted, but the court must apply its judicial mind to the evidence presented in order to be convinced that the commission by the accused was possible.
  6. At the junctures of Sections 227 and 228 of the Criminal Procedure Code, the court is required to evaluate the material and documents on record with a view to find out the existence of all the ingredients constituting the alleged offence, but the court cannot be expected to presume that the prosecution’s story is the absolute truth.

Discharge in different trial cases

The discharge application is the legal recourse provided by the Criminal Procedure Code, 1973 to the wrongfully accused. If he is innocent of the charges against him, he might apply for discharge under the terms of this Code. In the absence of a prima facie case against him and in the event that the evidence presented to the Court does not suffice to fulfil the offence, he is entitled to be discharged. According to the CrPC, there are two broad categories of criminal cases:

  1. Cases instituted based on police reports.
  2. Cases instituted on complaint.

The Criminal Procedure Code specifies the following four distinct types of trial procedures:

  1. Trial before a Court of Sessions;
  2. Trial of warrant cases by Magistrates;
  3. Trial of summons cases by Magistrates;
  4. Summary trials.

Discharge of accused in warrant cases on the basis of a police report

A person who has been falsely accused has the option of filing an application for “discharge” under the Criminal Procedure Code of 1973. It is possible for someone to seek dismissal from his position if he has been subjected to false accusations. If the court does not have enough evidence to find him guilty, he is entitled to be released. After an investigation by the police has been completed, a charge sheet is filed under Section 173 of the Criminal Procedure Code. The court then decides what charges to bring against the accused and holds a trial. However, the accused may be released before formal charges are filed if he or she meets the requirements of Sections 227 and 239 of the Criminal Procedure Code. It is only in circumstances involving a warrant that the accused may employ these measures.

When reviewing a motion to discharge, the court must take into account the following information:

  • Report and charge sheet filed by police pursuant to Section 173 of the Criminal Procedure Code.
  • The prosecution and the defence both had sufficient time to present their cases.
  • The judge rationalises that the accusations are without merit.

When accused shall be discharged in Sessions trial

After hearing the prosecution’s and defence’s arguments and reviewing the record of the case and any documents submitted therewith, if the judge determines that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record reasons for doing so, as defined by Section 227 of the Code. Situations in which the Sessions Judge must order a discharge by law:

  1. If a previous high court ruling prevents him from continuing, 
  2. In cases where there is a statute of limitations against pursuing a prosecution,
  3. When presented evidence is insufficient,
  4. If there is no basis in law for pursuing criminal charges, or
  5. Where no approval has been granted.

In Tapati Bag v. Patipaban Ghosh (1993), it was held that if the court determines that there are insufficient grounds for proceeding against the accused, the accused must be discharged. However, if the court determines that there is ground for presuming that the accused has committed the offence that is exclusively triable by the Court of Session, the charge against the accused must be framed. Once charges are filed, the defendant goes to trial and is found not guilty or guilty and sentenced; he cannot be released. Once Section 228 charges are filed, the accused cannot be released under Section 227 of the code. The CrPC does not take into account dismissal after a charge has been framed.

In the case of State of Karnataka v. L. Muniswamy (1977), to allow the superior court to evaluate the illegality of the impugned order, the Supreme Court ruled that the Sessions Judge must record his reasons while examining a discharge petition under Section 227 of the Criminal Procedure Code. The trial court’s refusal to discharge the accused without providing a rationale in its impugned order is a fundamental flaw in this instance.

In Sanjay Gandhi v. Union of India (1978), it was held that there exists no such provision that would allow the Magistrate to release the accused. Only a trial court, not the court of the judicial magistrate, has the authority to issue a discharge order for offences that can only be tried in a court of session.

In Satish Mehra v. Delhi Administration and Another (1996), the Supreme Court ruled that it would be unjust to propose that the court should not look into any evidence presented by the accused at the stage of taking cognizance or framing of charge if that evidence could potentially damage the case’s viability. It was determined that the purpose of allowing the accused to make representations, as envisioned by Section 227 of the Cr.P.C., is to allow the court to determine whether or not to conduct the trial. Why would the court rule against the accused by claiming that such documents need to be submitted only after wasting a lot of time in the name of trial proceedings if the materials produced by the accused even at that early stage will settle the issue? In addition, the trial court would be well within its rights to evaluate even material that the accused may produce at the stage specified in Section 227 of the Code, as nothing in the Code restricts the scope of such an audience to oral arguments.

In Sheoraj Singh Ahlawat v. State of U.P. (2013), when deciding whether to file charges, a judge must examine all of the evidence at their disposal to determine whether or not there is sufficient evidence to assume guilt. It was held that the weight of the evidence in favour of guilt is not subject to evaluation. During the hearing on the discharge application, the accused could offer his arguments based on the evidence supplied by the prosecution, but cannot, however, submit fresh evidence, and the court is under no need to do so. The trial judge has the authority to grant a discharge regardless of the verdict if there are two plausible explanations for the events and one of them raises mere suspicion rather than grave suspicion. 

Application for discharge in cases instituted based on police reports and otherwise

The charge sheet with specific allegations is the final report filed by the police under Section 173 of the CrPC, the commission of which constitutes a ‘punishable offence’ if proven. The accused has the right to seek “discharge” even in a private complaint brought under Section 200 of the CrPC. However, the process for dismissing a warrant case initiated on the basis of a police report and a warrant case initiated on the basis of a private complaint submitted under Section 200 CrPC is very different:

  • The Magistrate in a warrant­ case instituted on police complaint must review the final report, the statement of witnesses recorded under Section 161 of CrPC, documents, and, if he deems it necessary, he may also examine the accused. If he concludes that the charges (allegations) are without merit, he may either discharge the accused under Section 239 of CrPC or frame charges under Section 240 of CrPC. However, the process for charging or dismissing a case initiated by a private complaint differs significantly from that of a case initiated by the police. 
  • There will be only one opportunity for cross-examination in criminal prosecution. However, there will be two cross-examinations in a case involving a private complaint.
  • At the hearing, the accused will be examined in accordance with Sections 227 and 239 of the Criminal Procedure Code, marking the official start of the trial in a police case. However, once evidence has been recorded per Section 244 of the Criminal Procedure Code, charges can be filed under Section 246 and the trial can begin.

In Manakshi Bala v. Sudhir Kumar (1994), it was held that the magistrate must take into account the police report and any other documents submitted pursuant to Section 173 of the Criminal Procedure Code before making a decision on whether or not to discharge the accused. If the charge is without merit, the magistrate must discharge the accused pursuant to Section 239 of the Criminal Procedure Code. 

In Rumi Dhar v. State of West Bengal (2009), while hearing a petition for dismissal under Section 239 of the Criminal Procedure Code, the Supreme Court ruled that a magistrate must examine the specific allegations against each defendant in order to determine whether or not a prima facie case has been established and whether there is reasonable suspicion that the petitioner is guilty.

In Rajesh Bajaj v. State NCT Delhi and others (1999), the Supreme Court ruled that while hearing a petition for discharge, the High Court or Magistrate should not use a rigid hyper-technical approach, testing the accused’s guilt by weighing the ingredients of the crime against which he was accused. It is acceptable to make such an effort during the trial phase, but not the pre-trial phase under Sections 239 or 482 of the CrPC. 

Discharge of accused in warrant cases instituted on complaint

The Magistrate is required to review the evidence presented under Section 244 of the Criminal Procedure Code, and if he concludes that there is insufficient evidence to convict the accused, he is to discharge the accused under Section 245(1) of the Code. Otherwise, a charge must be drafted under Section 246(1) CrPC if the magistrate does not. If it is determined at any time before trial that the charges against the accused are without merit, as required by Section 245(2) CrPC, the accused will be released. So even at any previous stage of the case, if there is a cause for presuming that the accused has committed an offence, the magistrate has to establish the charge.

Section 245(1) and Section 245(2) of the Criminal Procedure Code are distinct from one another. The Magistrate, in determining whether or not to convict the accused based on the evidence presented to him by the prosecution under Section 244, has the benefit of the prosecution’s case presented to him under Section 245(1). If the Magistrate determines that there is insufficient evidence to convict the accused, the accused will be released from custody under Section 245(1) of the Criminal Procedure Code. However, the rules change when Section 245(2) of the Criminal Procedure Code is examined. In accordance with subsection (2), the magistrate may order the accused’s discharge at any time before such evidence is presented in court. In order to be released from custody under Section 245(2) CrPC, the magistrate must first determine that the accusation is without merit. Since no evidence exists at that point, there is no need to evaluate it. Under Section 244 CrPC, the Magistrate may make this determination before the accused appears or is produced before the court or before any evidence is led. This is made abundantly evident by the phrase “at any previous stage of the case” found in Section 245(2) of the CrPC.

In Ajoy Kumar Ghose v. State of Jharkhand and Anr. (2009), it was held that Sections 245(1) and 245(2) of the Criminal Procedure Code are distinct from one another:

  • Section 245(1) requires the Magistrate to assess whether, if the prosecution’s case were to go uncontested, the accused should be found guilty. This is because the Magistrate has the benefit of the prosecution’s evidence presented under Section 244. When the Magistrate hears that there is nothing in the evidence that may lead to an indictment, he or she will proceed to release the accused under Section 245(1) CrPC.
  • But the law states otherwise under Section 245(2) CrPC. The Magistrate has the authority to discharge the accused at any time prior to the leading of such evidence (i.e., at any time before the case reaches the stage of hearing such evidence), per Section 245(2). However, in order to be released from custody under Section 245(2) CrPC, the Magistrate must conclude that the accusation is without merit. At that point, there won’t even be a chance for evidence to be considered, as the complainant won’t be able to call any witnesses other than the ones who signed the sworn affidavits under Section 200 of the Criminal Procedure Code.

In Yeduruparthi Kamakshamma v. T. Taranadh (1979), it was decided that the Magistrate has the authority to release the accused under Section 245(2) of the Criminal Procedure Code at an earlier stage if he makes a decision that the facts do not amount to a criminal offence. In order for the order to be valid, there must be a valid justification for it.

Discharge in a summons case

In a “summons case,” the accused may be questioned in accordance with Section 251 of the Criminal Procedure Code. The specifics of the crime must be explained to the accused as required under Section 251 of the Criminal Procedure Code. Unlike in a Sessions case (under Section 227 of the Code of Criminal Procedure) or a warrant case (under Section 239 of the Code of Criminal Procedure), a magistrate does not have the authority to discharge an accused person in a summons case.

It is clear from a cursory reading of Section 251 of the CrPC that the magistrate in a summons trial does not have the authority to discharge the accused or drop the proceedings. Nonetheless, the Supreme Court ruled in K.M. Matthew v. State of Kerala (1991) that the Magistrate may drop the proceedings if he is convinced on reconsideration of the complaint that there is no offence for which the accused might be tried in a summons case. The magistrate can end the case whenever he chooses, and there is no rule or regulation that must be followed if he so prefers.

In Adalat Prasad v. Rooplal Jindal and others (2004), the Court considered whether or not the legal argument laid down in K.M. Mathew’s case was accurate. A three-judge bench ruled that an accused may seek redress under Section 482 of the Criminal Procedure Code if a magistrate’s issuance of process is without legal authority, and that a magistrate lacks the authority to reconsider or revoke his own order issuing process.

In Subramanian Sethuraman v. State of Maharashtra and another (2004), the Supreme Court upheld the rule that was set up in the Adalat Prasad case (2004). The Supreme Court said that an appeal, review, or recall of the order of issuance of process under Section 204 of the Criminal Procedure Code is not possible in a case involving a summons. It was also noted that there is no provision that authorises the magistrate to drop the proceedings once the accused has been summoned and their plea has been recorded in accordance with Section 251 of the Criminal Procedure Code.

In Amit Sibal v. Aravind Kejriwal (2016), the issue of whether or not the magistrate in a summons case based on a complaint has the authority to drop proceedings and discharge the accused arose before the Hon’ble Supreme Court. Defamation under Section 500 of the IPC, dishonour of checks under Section 138 of the Negotiable Instruments Act, and other cases of relatively private character that are in the nature of summons cases based on private complaints, in which police opposed investigating and no charge sheet was filed, give this question great practical significance.

In Arvind Kejriwal and Others v. Amit Sibal and Another (2014), according to the single judge of the Delhi High Court, the Magistrate has the authority to hear the accused person’s explanation of the content of the accusation and, if no offence is made out, to discontinue the case. The case was taken to the Supreme Court of India. In the absence of any explicit provision in the CrPC, the Magistrate has no authority to dismiss a case. In contrast to summons cases based on private complaints, proceedings can be terminated under Section 258 of the CrPC in cases based on F.I.R. and charge sheet under Section 173 of the CrPC. However, this provision is noticeably lacking in cases where a summons is issued due to a private complaint.

However, in Dhariwal Tobaco v. State of Maharashtra (2009), the Supreme Court made it clear that even though there is no provision to discharge the accused in summons cases, a dual remedy is available by invoking both Section 482 of the CrPC and Section 397 of the CrPC.

This view prevailed for a long time before the Supreme Court’s ruling in Bhushan Kumar v. State (NCT of Delhi) (2012). It was determined that the Magistrate can dismiss the case and release the accused person on a summons. It is further noted that the duty cast upon the trial court to carefully go through the allegations in the charge sheet or private complaint, as the case may be, considering the evidence to come to a conclusion regarding the involvement of the accused is inherent in Section 251 of the CrPC when an accused appears before the trial court pursuant to the summons issued under Section 204 of the CrPC. If the defendant admits guilt, the magistrate must explain the nature of the charges and obtain a plea of guilt or no contest in accordance with Section 239 of the Criminal Procedure Code, or else discharge him. 

In R.K. Agarwal v. Brig Madan Lal Nassa and others (2016), the Delhi High Court ruled that the Magistrate has no competence to discharge the accused in a summons case for the following reasons:

  • A case that results in a summons cannot be dismissed based on the police department’s final report or a private citizen’s complaint.
  • Due to the lack of discharge authority under Section 251 of the Criminal Procedure Code, the magistrate cannot rely on Section 239 in a case involving a summons. To finally put this matter to rest, however, a ruling from the courts is necessary.

Procedure of discharge under Section 227 of Cr.P.C. 

Dismissal of an accused person in a Sessions case is addressed in Section 227 of the Criminal Procedure Code. It is also important to examine Section 226 of the Criminal Procedure Code as a whole. 

  1. Consideration of the accused’s submission.
  2. A lack of adequate grounds for proceeding against the accused.
  3. Legally sound principles for drafting charges. 

Difference between discharge and acquittal

According to Section 227, the judge must release the defendant and justify his reasoning if he decides there is insufficient evidence to proceed with the case after reviewing the evidence and hearing arguments from both the defence and prosecution. The judge will grant an acquittal under Section 232 if, after hearing the prosecution’s case, he or she concludes that there is insufficient evidence to prove that the accused committed the crime.

The judge may rule in favour of the accused after hearing their side of the story and verifying the evidence, but only if he or she is convinced that there is sufficient evidence to proceed with the case. He or she would then issue a discharge order and document the basis for the decision. Whereas, when the court determines that there is insufficient evidence to convict the defendant, it will issue a judgement of acquittal.

An acquittal in a criminal case is a finding that the accused is not responsible for the crime. On the other hand, if the magistrate decides there is insufficient evidence to continue the case, he or she will issue a discharge.

The accused gets released before formal charges are even drafted. Acquittal, on the other hand, occurs after charges have been brought against a person.

If strong and material evidence is found after a discharge, further procedures can be initiated. In contrast, acquittal restricts the second trial relating to the same offence or a different offence, under the same circumstances.

The distinction between acquittal and discharge can be broken down by looking at their respective definitions and statutory contexts:

  1. The concepts of autrefois and double jeopardy forbid retrial on the same accusations within the same jurisdiction after an acquittal. However, even being released from the case, the person could be re-arrested for questioning on the same basis.
  2. While acquittals are possible in situations when there is no complainant, the complaint is withdrawn, or the crime is compounded. When there is insufficient evidence to convict a person, a release may be granted.
  3. The accused gets released before formal charges are even drafted. Acquittal, on the other hand, occurs after charges have been brought against a person.
  4. An acquittal order is issued only once the relevant investigation and trial have concluded. Since the accused has been exonerated by the court, the verdict of “not guilty” has been officially announced. The opposite of this is a discharge, which occurs when no evidence is found to support continuing the investigation into the accused. Therefore, it does not establish the defendant’s innocence.
  5. If strong and material evidence is found after a discharge, further procedures can be initiated. In contrast, an acquittal prevents a retrial for the same or a different crime based on the same evidence.

Legal position vis-à-vis judgements passed by Supreme Court

State of Orissa v. Debendra Nath Padhi (2004)

Comparing Section 207 of the 1898 Code to the new Section 227 of the CrPC, it was noted in this case that:

The situation is clarified when the Code’s design is analysed in light of the old Code’s provisions from 1898. There was nothing like Section 227 in the previous Code. The purpose of including Section 227 in the Code is to save the accused from the kind of relentless persecution that inevitably comes with a lengthy criminal trial. When the evidence acquired during an investigation falls short of the minimum legal requirements, this is meant to stop the accused from being harassed. 

Dilawar Balu Kurane v. State of Maharashtra (2002)

In this case, Y.B. Chavan College in Kolhapur, State of Maharashtra, is administered by the Municipal Corporation and is connected to Shivaji University, Kolhapur, where the appellant worked as a lecturer. A letter requesting the appellant to serve as an examiner for the B.Com. IInd Year examination in Accountancy (theory) was accepted.  Ashok Salokhe, who was taking the aforementioned exam on May 1, 1986, came up to the appellant and indicated that he was unable to pass the paper that was going to be examined by the appellant. In exchange for Rs.400/-, the appellant scored out the prior marks given on the answer script and raised the number to help the student pass the exam in question. When the university’s registrar learned about the incident, he confiscated the appellant’s answer sheets. The university’s deputy registrar had filed a First Information Report with the police against the appellant. The appellant was charged under Section 477A of the IPC and Section 5(2) and Section 5(1)(d) of the Prevention of Corruption Act of 1947. The appellant sought to have the charges against her dismissed by filing a Writ Petition with the High Court of Judicature in Bombay according to Article 227 of the Constitution in conjunction with Section 482 of the Code of Criminal Procedure. The High Court received a revision petition of an application filed with the Special Judge pursuant to Section 227 of the Code of Criminal Procedure.

There was a realisation in this case that the commitment inquiry under the old Code was taking too long and not accomplishing much. With the goal of speedy case resolution in mind, the Code no longer requires that kind of investigation. If the accused is not released under Section 227, the Court of Session is responsible for drafting the charge under Section 228 rather than the committal magistrate. Additionally, this new Code provision must be considered with the others as the question is resolved.

State of M.P. v. S.B. Johari and Ors. (2000)

In this case, the defendants are accused of forging documents and misusing their positions to embezzle money from the government while purchasing drugs for the S.G. Cancer Hospital in Indore. Many of the items allegedly have not been purchased, but the full sum has been paid using fraudulent vouchers. Evidence suggests that several medications were acquired at nearly half price in Jabalpur. The learned Sessions Judge framed the aforementioned charge after reviewing the evidence. By agreeing with the defence and taking into account the evidence presented, the High Court dismissed the charges against the respondents, and appeals were filed.

The Supreme Court has ruled in this case that a charge may be dismissed if there is no sufficient ground for proceeding with the trial because the evidence the prosecutor intends to adduce to prove the guilt of the accused cannot show that the accused committed the particular offence, even if fully accepted before it is challenged by cross-examination or rebutted by defence evidence, if any.

Dipakbhai Jagdishchandra Patel v. State of Gujarat and Anr. (2019)

After learning that the accused were peddling counterfeit currency at a discount, the complainant went to the location in question armed with panchas, where he encountered three individuals engaged in monetary transactions and, upon searching their possessions, discovered several fake Saudi Arabian Riyals of varying denominations. Upon questioning, the defendant said that he had imported counterfeit cash notes from Mumbai and kept them at the applicant’s location. The applicant had requested the notes and received them. The defendant was then detained, and the complainant-respondent filed the FIR in question.

It was held in this case that when it comes to drafting the charge in accordance with the court’s outlined principles, the court is not expected to perform clerical duties. Indeed, the court must sort through the evidence. The evidence presented and relied upon by the prosecution is the evidence that must be filtered. A careful examination is not required because the court is not acting as a trial judge hearing arguments after all evidence has been presented following a full-fledged trial, and the issue is not whether the prosecution has made out the case for the conviction of the accused. With the current evidence, a case can be built for the accused to stand trial; this is all that is required.

Conclusion

Although Section 227 of the Code of Criminal Procedure, 1973, gives guidance as to the scope of inquiry for the purpose of discharging an accused, it only states that the “Judge shall discharge where he thinks that there is no sufficient reason for putting the accused on trial.” Instead of deciding guilt or innocence during the charging process, the trial itself will do so. Therefore, the court does not need to conduct a detailed investigation. The purpose of the discretionary discharge granted by Section 227 is to spare an innocent individual the stress of going to trial or facing criminal charges. It is important to let the law take its course, since the Sessions Judge has the power to use whatever facts and circumstances he has studied after having the parties frame a charge and also make a ruling in support thereof. Unless an obvious wrong is staring the High Court in the face, it should exercise restraint.

The current judicial system places severe constraints on the availability of discharge. The prosecution only needs to show a prima facie case against the accused from the evidence on record at the stage of framing of charges before the trial may begin. However, the accused may choose to rely on impeccable evidence in seeking his discharge at the time of the Discharge Application’s decision, and if the Judge is convinced on the basis of such an unimpeachable record that the accused is entitled to an absolute wrongful conviction for the alleged crime, it is perfectly legal for the accused to be discharged.

Frequently Asked Questions (FAQs)

Does the court merely evaluate the complainant’s allegations or does it also take into account the complainant’s evidence that the accused is innocent?

The court is required to take into account any remarks or information in the record that might exonerate the defendant while drafting the accusation against him or her. Judges are required by law to act as neutral arbiters by reviewing all of the available evidence in a case and giving equal weight to each side. He is ineligible to serve in either the prosecutor’s office or as a spokesperson for the prosecution.

Whether the evidence produced by the accused can be investigated by the court that presided over the session?

The Supreme Court of India ruled in the case of Satish Mehra v. Delhi Administration and Another, that it is unfair to suggest that no such material should be considered by the court at the stage of framing of charges if the accused produces any convincing material at that time that might drastically affect the very sustainability of the case. According to the ruling, the purpose of allowing the accused the opportunity to make representations, as envisioned in Section 227 of the CrPC, is to help the court decide whether or not to proceed with the trial. The trial court might take into account the material submitted by the accused at the stage observed under Section 227 of the Code, as nothing in the Code confines the range of such hearings to only oral arguments.

In cases involving a warrant, under what circumstances can the accused be released?

After conducting their investigation, the police often file a final charge sheet with the court under Section 173 of the Criminal Procedure Code. Afterward, the relevant court will begin the trial of the accused. A person may be released from custody before formal charges are filed in accordance with Sections 239 and 227 of the Criminal Procedure Code. The only time the accused can invoke these provisions is in warrant instances.

References

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Section 374 CrPC

By
Rachit Garg
-
0

This article is written by Sanjana Santhosh, a law student at Christ (Deemed to be University), Bengaluru. The article explains the concept of appeal under the Indian criminal law regime, along with the circumstances in which such appeals may be filed under the Criminal Procedure Code, 1973. 

It has been published by Rachit Garg.

Introduction

The criminal justice system can have far-reaching effects on an individual’s life, most significantly affecting their right to life and freedom. Since courts, like any other man-made organisation, are likely to make mistakes, it follows that the judgements they make are also subject to this risk of making errors. In order to prevent a serious miscarriage of justice, there should be procedures in place to carefully review the rulings of subordinate courts. To account for this, certain measures have been incorporated into the criminal procedure for appealing a criminal court’s judgement or order. From Section 372 all the way up to Section 394 of the Criminal Procedure Code are detailed requirements regarding appeals.

However, the opportunity to appeal is not always available. For this reason, even in circumstances where the right of appeal has been limited by CrPC, the lawmakers integrated the concept of a review procedure termed “revision” into the legislative process to entirely preclude any miscarriage of justice. The higher courts’ revision powers and the method for exercising those powers are laid forth in Sections 397 to 405. These authorities are wide-ranging and ad hoc, which should be taken into account.

While litigants are guaranteed the opportunity to appeal in most circumstances, criminal courts have wide latitude in deciding whether or not to grant a motion for rehearing, therefore revision is not a guaranteed legal right. Legally, an accused person has the right to at least one appeal in criminal proceedings but no such recourse in situations of revision. The distinction between an appeal and a revision has been revisited numerous times in court. According to the Supreme Court’s decision in Hari Shankar v. Rao Ghari Chowdhury (1963), “the distinction between an appeal and a revision is a real one. Unless the statute that grants the right of appeal specifies otherwise, a rehearing on appeal includes a rehearing on both the law and the facts. In most cases, a higher court has the authority to review a previous ruling to ensure that the original decision was made in accordance with the law.”

Appeal under criminal law

Although the term “appeal” is not defined in the Code of Criminal Procedure, 1973, it can be thought of as the review of a lower court’s ruling by a higher court. It must be stressed that no appeal can be made from any judgement or order of a criminal court except in accordance with the legislative procedures given forth in the Code of Criminal Procedure, 1973, or any other law that is in force. This means that even the initial appeal is time-limited by law; hence, no “vested right” to appeal exists. The rationale behind this principle is the presumption that the trial was handled fairly by the courts that heard the matter. In the event of an acquittal, a conviction for a lesser offence, or insufficient compensation, however, the victim may file an appeal of the court’s decision. Appeals in the sessions courts and the high courts are typically governed by the same sets of rules and procedures. The high court is the highest court of appeal in a state and enjoys more powers in matters where an appeal is permissible. Since it is the country’s highest court of appeals, the Supreme Court has the ultimate discretion and plenary power in all appeals. The Supreme Court’s authority is principally determined by the provisions of the Indian Constitution and the Supreme Court (Enlargement of Criminal Appellate Jurisdiction), 1970. If the high court overturns an acquittal ruling and sentences the defendant to life in prison, 10 years in jail, or death, the defendant has the right to appeal to the Supreme Court. Article 134(1) of the Indian Constitution establishes the same law under the appellate jurisdiction of the Supreme Court, recognising the importance of a criminal appeal being brought to that court. In accordance with Article 134(2) of the Indian Constitution, the legislature also passed the Supreme Court (Enlargement of Criminal Appellate Jurisdiction) Act, 1970, which gives the Supreme Court the authority to hear appeals from the high court in certain cases. If the trial involved multiple defendants and the court issued an order of conviction for all of them, each defendant has the same right to appeal the decision. The right to appeal may be waived, however, under limited circumstances. These rules can be found in Sections 265G, 375, and 376. The Code of Criminal Procedure of 1973 prescribes that verdicts and orders cannot be appealed except in certain situations. This demonstrates the critical status of appeals.

A criminal defendant can file an appeal with the Supreme Court, a high court, or a sessions court, depending on the nature of the case. According to the Supreme Court’s decision in Arun Kumar v. State of Uttar Pradesh (1989), the Allahabad High Court was right to overturn the Sessions Judge’s acquittal and convict the appellants if it determined that the Sessions Judge’s position was clearly erroneous and even contributed to a miscarriage of justice. The Supreme Court of India ruled in Satya Pal Singh v. State of Madhya Pradesh (2015) that a victim’s next of kin has standing to appeal a conviction to a higher court under the provisions of Section 372, provided that the deceased victim’s father meets the definition of a victim. The victim needs the permission of the high court to initiate an appeal against a decision of acquittal, as the Supreme Court ruled in the case of Satya Pal Singh v. State of Madhya Pradesh. These are the cornerstones of the appeals process under CrPC:

  • The right to appeal must be established by law.
  • No automatic right to seek an appeal.
  • No appeal only against conviction.
  • Petty cases are final and cannot be appealed.
  • A plea of guilt results in an automatic conviction; there is no right of appeal.

Who can appeal

A person whose trial results in a guilty verdict may file an appeal of that verdict. When an appeal is made, it does not imply that the case is being heard again. Issues raised by the trial transcript are used to make a decision on the appeal. The court may hear new evidence from the appellant if the circumstances warrant it. Affidavits from witnesses detailing their prepared statements for a new trial should be submitted to the court to demonstrate this. It is the appellant’s burden to persuade the court that:

  • claims that the jury’s judgement should be overturned because it was arbitrary or not supported by the evidence,
  • the judge made an error in interpreting the law, or
  • there was a miscarriage of justice.

If an appeal is filed, the court can do just about anything with it. The court may uphold the conviction, overturn the conviction, substitute a judgement of acquittal, or order a new trial. Even if the court rules in the appellant’s favour on a technicality of the law, it may nonetheless decide to throw out the appeal if it determines that there was no serious miscarriage of justice. The Director of Public Prosecutions may also file an appeal with the Court of Appeal, requesting that the Court of Appeal quash an acquittal and retry the case, or file an appeal against an interlocutory judgement.

Subsequent appeals

A person who has been found guilty at trial may, with the approval of the Court of Appeal, make a second or subsequent appeal. An individual seeking permission to appeal must convince the court that new and persuasive evidence exists and should be taken into account. If the court believes there was a significant miscarriage of justice, it may hear a new appeal, overturn the conviction, and either substitute a judgement of acquittal or order a new trial.

Kinds of appeal

Section 373 CrPC – Appeal in court of session

In the event that a person has been ordered to offer security for the purpose of maintaining the peace or for good behaviour, an appeal against the order may be filed with the Court of Session in accordance with Section 117.

Where a person has been wronged by any order refusing to accept or reject a surety, the person may seek redress under Section 121.

Section 374 CrPC – Appeal from convictions 

  • High Court orders of conviction issued while exercising original criminal jurisdiction have the right to be appealed to the Supreme Court.
  • Conviction orders issued by the Court of Session or Additional Court of Session are appealable to the High Court.
  • If the Court of Session or the Additional Court of Session imposes a sentence of more than seven years in prison, the defendant may appeal the decision to the High Court.
  • Appeals may be taken to the Court of Session from convictions handed down by the Metropolitan Magistrate, Judicial Magistrate I, or Judicial Magistrate II.
  • The court of session hears appeals from anyone who is dissatisfied with the results of a criminal proceeding under Sections 325 and 360 of the Criminal Procedure Code.

Exception to Section 374

The exceptions to Section 374 of the Criminal Procedure Code are found in Sections 375 and 376 of the CrPC as given below:

  1. There is no right to appeal a conviction where the defendant has made a guilty plea and been found guilty on the basis of that plea.
  2. A person who has been found guilty and sentenced by a high court to a period of imprisonment of not more than six months or a fine of not more than one thousand rupees, or to both such imprisonment and fine, shall not be permitted to file an appeal against that sentence.
  3. A person who has been found guilty and sentenced by a court of the session or a metropolitan magistrate to a period of imprisonment of not more than three months or a fine of not more than two hundred rupees, or to both such imprisonment and fine, shall not be permitted to file an appeal against that sentence.
  4. A person who has been fined by a first-class magistrate of not more than one hundred rupees shall not be permitted to file an appeal against that sentence.

Section 377 and 378 CrPC – State appeals

State government appeals: 

  1. Under Section 377, to increase the severity of a punishment; 
  2. Under Section 378, to overturn an acquittal of an accused person

Section 377 CrPC – Appeal against sentence

The state government may appeal the sentence to the Court of Session or High Court on the grounds that it is inadequate pursuant to this clause, which may be done through the office of the public prosecutor.

If one disagrees with a magistrate’s sentencing decision, they have the right to file an appeal with the court of session. If a sentence is handed down by a lower court, an appeal could be filed with the high court.

If the inquiry is conducted by the Delhi Special Police Establishment or another central agency, the Central Government would issue the directive to the public prosecutor.

It is expected that the accused will be given a fair hearing before any appeal or decision to increase their sentence is issued.

Section 378 CrPC – Appeal in case of acquittal

If a magistrate issues an acquittal in a case involving a cognizable and non-bailable offence, the district magistrate may instruct the public prosecutor to appeal the decision to the court of session. If an acquittal is issued by a court other than the high court, the state can still ask for a review of the decision by filing an appeal with that court.

If the inquiry was conducted by the Delhi Special Police Establishment or another government body, the Central Government will provide instructions on how to file an appeal.

It should be mentioned that the high court’s authorisation will be sought in advance of launching an appeal there.

In the event that the high court grants special permission to make an appeal, the complaint may do so in the event that the case launched on the basis of the complaint is afterwards acquitted. A government employee who has been found not guilty may file a new application within six months after the acquittal.

An application may be filed within 60 days following the judgement of acquittal if the complainant is not a government employee. No appeal from a judgement of acquittal shall lie if such an appeal is dismissed.

Section 379 CrPC- Appeal against conviction by High Court in certain cases 

If a person’s acquittal by the high court is overturned and he is subsequently convicted and sentenced to death, life in prison, or a term of imprisonment of 10 years or more, the accused may appeal to the Supreme Court.

Section 380 CrPC- Special right of appeal in certain cases 

If a co-defendant has received an appealable sentence, then the other defendant has the right to appeal his own non-appealable punishment under this provision.

Non-appealable cases

Section 375 CrPC- Certain guilty pleas are non-appealable

No appeal shall lie if the defendant enters a plea of guilty before the high court and the court records such a plea and finds the defendant guilty.

If the defendant enters a guilty plea in a lower court, an appeal of the sentence may be made to the high court.

There is a right to appeal a sentence based on: 

  1. The totality of the punishment.
  2. The sentencing process was followed per the law.

Section 376 CrPC- No appeal in petty cases

Petty misdemeanours shall not be subject to appeal. The procedures for handling petty matters vary by jurisdiction. The following are examples of minor offences:

  • In the instance of the High Court, the possible penalties include either imprisonment for up to 6 months or a fine of up to Rs 1000, or both.
  • Up to three months in jail time, a Rs. 200 fine, or both if found guilty in court of session.
  • Up to 3 months in jail, or a fine of Rs. 200, whichever is greater, if prosecuted by a metropolitan magistrate.
  • There is a Rs 100 fine if you are caught breaking a law in front of a judicial magistrate.
  • Up to Rs. 200 in the instance of a Magistrate authorised under Section 260 of the Criminal Procedure Code.

Important judgements 

Dhananjay Rai v. State of Bihar (2022)

The bench consisting of Abhay S. Oka and MM Sundresh, JJ., decided that an appeal against conviction that was filed by an accused under Sub-Section (2) of Section 374 of the Code of Criminal Procedure, 1973, cannot be dismissed on the ground that the accused is absconding. This decision was made in order to further the cause of criminal justice.

The accused was found guilty by the Sessions Court on September 4, 2009, and the charges against him were brought under Sections 302 and 120B of the Indian Penal Code (IPC), as well as Section 27(1) of the Arms Act of 1959. The accused person took their case to the High Court in Patna, where they filed an appeal. After some time, it was determined that he had vanished. The appeal against conviction was thrown out by a division bench of the Patna High Court on August 25, 2015, for the sole reason that the accused had vanished without a trace, without any consideration being given to the validity of the appeal.  The High Court ruled that even though the right to appeal is substantial, the appellant lost his right to do so the minute he misused the legal process by evading capture. The appellant’s conduct here constitutes willful resistance to the criminal justice system.

But the Supreme Court did not agree with the High Court’s method when the High Court acknowledged that it was departing from the established position of law.

The Court stated that the High Court’s distress about the appellant’s boldness in evading justice by fleeing the jurisdiction is understandable. Non-prosecution is not a valid reason to ignore the merits of a previously granted appeal of a conviction.

As a result, the Court reversed the challenged verdict and sent the case back to the High Court to be heard again on its merits.

As the appeal is from 2009 and challenges a conviction under Section 302 of the Indian Penal Code, the Court has stated that it should be given the utmost attention in being resolved. The Court ruled that “if the appeal could not be heard within a reasonable time, in that situation, the appellant will have to be allowed the liberty to seek suspension of sentence” and asked the High Court to consider the appeal as soon as practicable, ideally within six months.

Jogi v. the State Of Madhya Pradesh (2021)

When hearing a substantive appeal under Section 374 of the Code of Criminal Procedure of 1973, the High Court must conduct its own analysis of the evidence and draw its own conclusions about the accused’s guilt or innocence based on its own evaluation of the evidence in the record.

Dilip S. Dahanukar v. Kotak Mahindra Company Limited (2007)

An offender who has been convicted has the unalienable right to exercise his or her appeal under the provisions of Section 374 of the Code. In light of Article 21‘s broad definition, the ability to appeal a conviction that has an impact on one’s freedom is likewise a basic right. Therefore, the right of appeal cannot be limited in any way or subjected to any conditions. The right to appeal is guaranteed by Article 21 of the Indian Constitution and Section 374 of the Criminal Procedure Code.

Bindeshwari Prasad Singh @ B.P v. State Of Bihar (2002)

When dealing with an appeal from an acquittal preferred under Section 374 of the Code of Criminal Procedure, the high court has much broader jurisdiction than a revisional court exercising jurisdiction under Section 401 of the Code of Criminal Procedure against an order of acquittal at the instance of a private party. All arguments that can be made in favour of the petition for revision can also be made in the appeal, but not the other way around. When the state’s appeal against the verdict of acquittal is denied, the verdict of the lower court becomes final. To thereafter exercise revisional jurisdiction under Section 401 of the Code of Criminal Procedure against the order of acquittal at the instance of a private party might not be a proper exercise of discretion in such a scenario.

Appellate court

The jurisdiction of an appellate court is laid out in detail under Section 386 of the Criminal Procedure Code. Although the appellate court has the jurisdiction to dismiss an appeal summarily, it will only do so if the appeal has not been dismissed under Section 384. In accordance with Section 386 of the Criminal Procedure Code, the Appellate Court may dismiss the appeal if it finds that there is insufficient cause for interfering with the order under appeal.

If the appellate court hasn’t already ruled out the appeal for the reasons stated, it might:

  1. Reverse the lower court’s acquittal decision and remand the matter for further investigation, a new trial, or commitment, as appropriate; or find the defendant guilty and impose the appropriate punishment;
  2. Reverse the finding and sentence and acquit or discharge the accused, or order him to be retried by a Court of competent jurisdiction subordinate to such Appellate Court, or commit him for trial, or alter the finding, maintaining the sentence, or with or without altering the finding, alter the nature or the extent, or the nature and extent of the sentence, but not so as to enhance the same in an appeal from a conviction;
  3. Reverse the finding and sentence and acquit or discharge the accused or order him to be retried by a Court competent to try the offence; Alter the finding maintaining the sentence; Alter the nature, the extent, or both, of the sentence, so as to enhance or reduce the same; With or without altering the finding, alter the nature, the extent, or both;
  4. Modification or reversal of any prior order pending appeal;
  5. Make any adjustment or order that is necessary or appropriate to the punishment; Provided, however, that the sentence shall not be increased unless the accused has been given a chance to show cause against such increase.

Further, the Appellate Court shall not impose on the defendant a greater penalty than that imposed by the court that issued the order or sentence that is the subject of the appeal. Regarding an appeal that has arisen from an order of conviction, Section 386(b) provides the Appellate Court with extensive powers, and the Appellate Court has the authority to even acquit a person who has been found guilty of an offence by the trial court.

According to Section 386 of the Criminal Procedure Code, a person who has been convicted has the right to appeal their case, and the Appellate Court has the authority to, while the appeal is pending, order that the execution of the sentence or order that is being appealed against be suspended, and also, if the person is in confinement, that they be released on bail or on their own bond.

Conclusion

An appeal does not result in a new trial. In order to evaluate whether there are sufficient grounds to grant the appeal, the appellate court instead reviews the record of the lower court’s proceedings. A complete transcript of the trial as well as all pre and post-trial motions are included in the record. Appellate courts don’t just look at the evidence presented in the trial; they also read the briefs the parties submit. Appellate briefs provide context for the arguments made in an appeal and lay out the relevant legal issues at stake. Since it was created by legislation, the appellate court’s authority and jurisdiction must be defined within the confines of the law. At the same time, an appeals court is a “court of error,” the purpose of which is to revise the lower court’s ruling if it was incorrect, and its jurisdiction should be identical to that of the lower court. It should not and cannot perform an action that the lower court lacked jurisdiction to execute. Similarly, in circumstances where the trial for conviction was not held in the High Court, the State Government has the authority to direct the Public Prosecutor to file an appeal against the sentence on the grounds of inadequacy with either the session’s court or the High Court. Neither the victims nor the complainants nor anybody else has been afforded the opportunity to file an appeal challenging their sentences on the grounds that they are inadequate. In addition, the court must provide the defendant with a fair opportunity to present arguments against any proposed sentence enhancement. The defendant has the right to show cause in order to be exonerated or have his sentence reduced.

Frequently Asked Questions (FAQs)

What is the format for filing an appeal?

One can only file a petition for appeal in writing. A written petition of appeal shall be given by the appellant or his pleader, and every such petition shall (unless the court to which it is presented differently instructs) be accompanied by a copy of the judgement or order appealed against, as stated in Section 382.

In what circumstances is it possible to have the appeal dismissed?

Section 394 of the Criminal Procedure Code states that the right to appeal a conviction or sentence is lost upon the accused’s death, with the exception of an appeal of a fine.

When an appeal is pending against a conviction and sentence of death or imprisonment, however, and the appellant dies during the appeal process, the appeal shall not abate if any of the appellant’s close relatives apply to the Appellate Court for leave to continue the appeal within thirty days of the appellant’s death.

What are the grounds for appeal?

  1. Legal error.
  2. Juror misconduct.
  3. Ineffective assistance of counsel.

Is the victim allowed to seek an appeal, and if so, against what kind of order?

The victim does have the option to file an appeal. The following judgments can be appealed:

  1. Issue a judgement of not guilty,
  2. Issue an order finding the accused guilty of a lower offence, and
  3. Inadequate compensation ordered.

What are the cases when an appeal is filed?

The following circumstances call for an appeal:

  1. A person who has been found guilty in a trial held by a high court may appeal the decision to the Supreme Court. However, if the trial takes place before a session judge, extra session judge, or some other court and the sentence handed down is more than seven years, the defendant may file an appeal with the supreme court.
  2. One has the right to appeal any order that calls for security or that refuses or rejects surety for the purpose of maintaining peace or good behaviour.
  3. Section 377 of the Criminal Procedure Code provides that if the state or central government believes that the sentence imposed by the court is too lenient, they may instruct the public prosecutor to appeal the decision.

What are the cases when an appeal is filed?

  1. No reliance on false testimony unless as required by law: In most cases, an appeal is only lodged if the law allows it. “No appeal may lie from any decision or order of a criminal court save as allowed for in this Code or by any other legislation for the time being in effect,” as stated under Section 372 of the Criminal Procedure Code.
  2. No appeal in minor cases: Section 376 provides that a person convicted of a minor offence shall not be entitled to an appeal of his or her conviction.

References

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International Law Commission

By
Sneha Mahawar
-
0
law commission reports
Image source - http://bit.ly/2lESwHg

This article is written by Adhila Muhammed Arif, a student of Government Law College, Thiruvananthapuram. This article seeks to explain what the International Law Commission is, its history, constitution, functions, and its achievements throughout the years. 

This article has been published by Sneha Mahawar.​​ 

Introduction

The International Law Commission is an international body established by the United Nations General Assembly in 1947, in pursuance of Article 13(1)(a) of the Charter of the United Nations. The commission’s working procedure, constitution, functions, and purposes are laid down in the Statute of the International Law Commission. As per Article 1 of this statute, the commission is primarily concerned with public international law but, is not prevented from interfering in private international law. Article 1 also states the objective of the commission as “the promotion of the progressive development of international law and its codification.” In other words, the International Law Commission is a body established to study, develop, and codify international law. Apart from drafting international law, they play a key part in addressing issues pertaining to the regulation of relations among the states. They work in cooperation with other international bodies such as the Red Cross, the International Court of Justice, and the specialised agencies of the United Nations to effectively address the wide-ranging issues that concern international relations and international law. 

History of the International Law Commission

The idea of developing and restating the existing principles of international law is not very recent. There have been several attempts made by private individuals, societies, and governments toward the codification of international law. The purpose behind the codification of international law is to remove the uncertainties of uncodified customary laws. To achieve this goal, the League of Nations established the Committee of Experts for the Progressive Codification of International Law. The committee addressed several issues pertaining to international law. The committee conducted a Codification Conference in 1930 and it dealt with many issues pertaining to nationality laws, territorial waters, and state responsibility for damage caused to foreign nationals. 

The United Nations aspired to continue the legacy of the Committee of Experts for the Progressive Codification of International Law and hence it was adopted as one of the objectives of the UN in Article 13 of its Charter. To pursue this provision, the General Assembly passed Resolution 94 on December 11, 1946, to establish a committee that can assist the UN Secretary-General on how the General Assembly can make progressive developments and codify international law. The committee that convened from May 12 to June 17 in 1947 recommended that there must be a permanent body established by the UN in order to achieve these goals. 

As a result of this recommendation, the General Assembly passed Resolution 174 on November 21, 1947, which established the International Law Commission. The resolution also came with the Statute of the International Law Commission. 

The organisation of the commission 

Chapter I of the statute, which is titled the “Organisation of the International Law Commission”, has several provisions as to the matters such as the commission’s composition, who can be the members of the commission, the procedure for selecting such members, and so on. The following are the provisions contained in Chapter I: 

Article 2

  • This article is concerned with the composition of the commission. 
  • Article 2 states that the commission shall be comprised of 34 members who are excellent and competent in the field of international law. 
  • The article also makes it clear that there shall only be one member of every nationality. Two candidates of the same nationality cannot be elected to be a part of the commission. 
  • In cases where a particular candidate holds dual nationality, he is deemed to be a national of that state where he ordinarily exercises his civil and political rights. 

Article 3

  • This article is concerned with who shall be elected as members of the commission.
  • The candidates shall be nominated by the governments of the member states of the United Nations. From the list of nominated candidates, the General Assembly shall elect the members of the commission. 

Article 4

  • This article states the conditions for nominating the candidates by the member states. 
  • This article states that member states can nominate up to four candidates. Out of the four, two may belong to the member states and the other two may be from other nationalities. 

Article 5 and 6

  • These articles are concerned with the submission of the nominations by the member states. 
  • As per Article 5, the governments of the member states must submit the names of the nominated candidates to the Secretary-General by June 1st of the year in which the election is being held. However, the article also allows the governments, in exceptional circumstances, to substitute a candidate for another one within thirty days before the opening of the General Assembly. 
  • As per Article 6, after the submission, the Secretary-General must communicate to the nominating governments the names of the nominated candidates and their CVs if they have been submitted. 

Article 7 

  • This article is concerned with the preparation and submission of the list of candidates for election. 
  • The Secretary-General prepares a list of the candidates and submits the list to the General Assembly for election. 

Article 8 – 11

  • These articles are concerned with the election of the nominated candidates. 
  • Article 8 states that electors must consider the qualifications of the candidates while electing them. The commission must represent the main forms and civilisation and principal legal systems. 
  • Article 9 states that the candidates must secure the majority of votes of the Members present and voting, and the ones securing the greatest number of votes get elected. 
  • Article 9 also states that when more than one candidate of a particular nationality gets sufficient votes, the one with the greatest number of votes gets elected. If equally divided, the older candidate gets elected. 
  • Article 10 states that the tenure for the candidates is five years. They can also get re-elected. 
  • Article 11 states that when there is a vacancy, that spot shall be filled by following the process in Article 2 and Article 8. 

Article 12

  • This article states the place where the commission shall hold meetings. 
  • The commission shall be seated at the European Office of the United Nations in Geneva. However, they may choose another place after consulting the Secretary-General. 

Article 13

  • This article is concerned with the benefits received by the members of the commission. 
  • They shall be paid travel expenses and a  special allowance, for which the General Assembly shall determine the amount. 

Article 14

  • The last article of this chapter states that for the tasks that need to be completed, the Secretary-General shall ensure the availability of staff and facilities. 

Functions

The functions of the commission are laid out in Article 15 of Chapter II of the statute. The main functions of the commission are 

  1. Progressive development of international law, and
  2. Codification of international law. 

Article 15 clarifies the meaning of the expressions as well. Progressive development of the law refers to preparing drafts of conventions on subjects for which there is no regulation by international law or for which no law has been developed. The expression codification of international law refers to the formulation and systematization of rules and principles of international law that are already in practice and enforced as precedents. 

Working procedure of the commission

There are several provisions in Chapter II that lay down the procedures that the commission must follow to perform its two functions, which are listed below:

Progressive development of international law: Articles 16 and 17

Article 16

The following are the steps taken by the commission when the General Assembly refers to the Commission, a proposal for the progressive development of international law: 

  • The commission shall appoint one of the members as Rapporteur. 
  • The commission shall formulate a plan of work. 
  • A questionnaire shall be circulated to the governments. They shall be invited to supply data relevant to items included in the plan of work within a fixed period of time. 
  • Some of its members may be appointed to work with the Rapporteur on the preparation of draft receipt of replies to the questionnaire.
  • The commission may also consult with scientific institutions and individual experts regarding the work. These experts need not necessarily be nationals of member governments of the United Nations. The Secretary-General will provide for the necessary expenses of these consultations of experts as long as it is within the budget. 
  • The commission shall consider the drafts proposed by the rapporteur. 
  • Once the commission finds a draft satisfactory,  it shall request the Secretary-General to issue it as a “commission document.” Then, the document is published, along with its explanations and supporting material, by the Secretariat. The publication shall also contain information supplied to the Commission in reply to the questionnaire. 
  • The governments shall be invited to submit their comments on the commission document within a reasonable time. 
  • The rapporteur and the members appointed for the purpose shall reconsider the draft while taking the comments into consideration. Then, they prepare the final draft and an explanatory report, which are submitted for consideration and adoption by the Commission. 
  • Lastly, the commission submits the adopted draft, along with its recommendations, to the General Assembly via the Secretary-General. 

Article 17

  • The commission shall consider proposals and draft multilateral conventions submitted by members of the United Nations, the principal organs of the UN excluding the General Assembly, specialized agencies, and official bodies established by intergovernmental agreement for the purpose of performing this function. 
  • If the commission decides to study such drafts, the commission must follow the steps given below: 
  1. The commission must first form a plan of work. Then, it must study the drafts, and compare them with any other proposals and drafts on the same subjects. 
  2. The commission shall circulate a questionnaire to all members of the United Nations, to the principal organs, specialized agencies, and official bodies established by intergovernmental agreement for the purpose of performing this function. 
  3. Then, the Commission should submit a report, along with its recommendations, to the General Assembly. If it seems desirable to the commission, it may also make an interim report to the organ or agency which has submitted the draft or proposal. 
  4. If the General Assembly should invite the Commission to proceed with its work in accordance with a suggested plan, the procedure laid down in article 16 shall apply. The questionnaire may not be necessary. 

Codification of international law: Articles 18 – 24

Article 18

  • The commission shall survey all the fields and topics under international law and choose a particular subject for codification while considering the existing drafts, whether they are governmental or not. 
  • When the Commission deems the codification of a particular topic to be necessary,  it shall submit its recommendations to the General Assembly.
  • While dealing with any question, the Commission shall give priority to requests of the General Assembly. 

Article 19

  • The commission must adopt a plan of work that is appropriate to each case. 
  • Through the Secretary-General, the commission should address to the governments a detailed request to furnish the texts of laws, decrees, judicial decisions, treaties, diplomatic correspondence, and other documents that are relevant to the topic that is being studied and which the Commission deems to be necessary. 

Article 20

  • The commission shall prepare its drafts in the form of articles. The commission shall then submit the drafts to the General Assembly, along with a commentary that contains the following things:
  1. Adequate presentation of precedents and other relevant data, which includes treaties, judicial decisions, and doctrines. 
  2. Conclusions that define 
  1. The extent of agreement on each point in the practice of States and in doctrines, and 
  2. The divergences and disagreements that exist, as well as arguments, are  invoked in favour of one or another solution. 

Article 21

  • Once the commission finds a draft satisfactory,  it shall request the Secretary-General to issue it as a “commission document.” Then, the document is published, along with its explanations and supporting material, by the Secretariat. Additionally, the publication shall contain information supplied to the Commission by the Governments in accordance with Article 19. The Commission shall decide whether the opinions of any scientific institutions or experts consulted by the commission must be included in the publication or not. 
  • The commission shall also make a request to the governments to submit comments on this document within a reasonable time. 

Article 22

  • The commission shall take the comments given by the member governments into consideration, and prepare a final draft and explanatory report, which it shall submit with its recommendations through the Secretary-General to the General Assembly. 

Article 23

  • The commission may recommend the General Assembly to do the following things:
  1. Take no action as the report has already been published.
  2. Take note of or adopt the report by resolution.
  3. Recommend the draft to members with a view to the conclusion of a convention.
  4. Convoke a conference to conclude a convention. 
  • The General Assembly may refer drafts back to the Commission for reconsideration or redrafting, whenever it considers it to be desirable. 

Article 24

  • The Commission shall consider ways to make the evidence of customary international law more readily available, such as the collection and publication of documents concerning state practice and of the decisions given by national and international courts on questions pertaining to international law, and make a report to the General Assembly on this matter. 

Relationship with other bodies

The final chapter of the statute, which is Chapter III, deals with the commission’s ‘cooperation with other bodies’. The following are the provisions of this chapter:

Article 25

  • The commission may consult with any of the organs of the United Nations on any subject which is within the competence of that organ if it is deemed necessary. 
  • All documents of the commission which are circulated to the member governments by the Secretary-General shall also be circulated to such organs of the United Nations, whenever it is relevant and necessary. Such organs may provide any information or make any suggestions to the commission as well. 

Article 26

  • The commission may consult with any international or national organization, whether they are official or non-official, on any subject entrusted to it if it deems that it might help it in the performance of its function.
  • For the purpose of distribution of commission documents, the Secretary-General shall consult the commission and prepare a list of national and international organizations concerned with questions of international law. The article suggests that the Secretary-General must endeavour to include on this list at least one national organization of each member of the United Nations. 
  • In the application of the provisions of this article, the commission and the Secretary-General shall comply with the resolutions of the General Assembly and the other principal organs of the UN regarding relations with Franco Spain (Francoist dictatorship in Spain from 1939 to 1975). The commission and Secretary-General shall exclude organisations that have collaborated with the nazis and fascists, from consultations and the list. 
  • Finally, the article recognizes the advisability of consultation by the commission with intergovernmental organizations whose task is the codification of international law, such as those of the Pan American Union. 

Achievements of the International Law Commission

From its inception, the International Law Commission’s functions has resulted in the formation of multiple treaties, and conventions, along with the institutionalisation and codification of international law. The following are the most notable works of the International Law Commission: 

Limitations of the commission 

The International Law Commission has undoubtedly made significant contributions to the area of international law. In spite of the praise that it has received, it is not immune to flaws. The following are some of the limitations of the International Law Commission: 

  • One of the major flaws is that the member governments are disinterested in the work of the commission. During its functioning, it sends questions and requests comments and suggestions from the member governments, but they rarely engage in these activities. 
  • The sessions of the commission do not happen often. It happens every year for a maximum of 10 to 12 weeks. The short span of the sessions is a hindrance to the purpose of this commission. 
  • In spite of being an autonomous body, it cannot work without the support of the member governments. The authority of the commission is limited by the interests of the member states. 
  • As an international body, the conventions and treaties of the commission have limited applicability as the commission cannot impose itself on member states. The conventions have applicability only among the states that have recognized and accepted them. 

Conclusion 

The International Law Commission serves an institutional role in the development and codification of international law. The statute of the commission contains the relevant information regarding the working of the commission, from the election procedure to the procedure for codifying international law. It has several notable achievements, one of which is the establishment of the International Criminal Court. It also suffers from some deficiencies due to the lack of cooperation from its member states and its sessions taking place less often. Nevertheless, the International Law Commission’s role as a lawmaker and a law codifier is pivotal in the field of international law. 

Frequently Asked Questions on the ILC

Who is the current International Law Commission member that represents India? 

Currently, India is represented at the International Law Commission by Bimal Patel, who got elected in 2021. 

How many members are there in the International Law Commission? 

There are 34 members in the International Law Commission. 

Where does the International Law Commission hold its annual sessions?

Geneva 

References

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All about an indemnity clause

By
Sneha Mahawar
-
0

This article is written by Pujari Dharani, a B.A. LL.B. student at Pendekanti Law College, affiliated to Osmania University, Hyderabad. The article talks about the indemnity clause, its meaning and definition, related legal framework, features, contents, benefits, and disadvantages, amongst other things.

This article has been published by Sneha Mahawar.​​ 

Table of Contents

Introduction 

The word “indemnity”’ is derived from the Latin word “indemnis“, which means “to be uninjured” or “to suffer no harm or loss.” It also can be referred to as protection or security against monetary burden. 

One of the crucial provisions that are typically included in all types of contracts is an indemnity clause. This provision is included in contracts because one of the parties guarantees to defend and indemnify the other party from harm or loss under specific conditions that have been agreed upon by the parties to the contract.

However, an indemnity clause in a contract must be carefully handled since there are several ways it could be handled erroneously, perhaps even to the detriment of the person making the contract. 

As a result, indemnity clauses seem complex but are among the most important and helpful contractual provisions that help parties manage the risks associated with a contract. The parties’ intentions and the way the indemnity clause is written largely determine its extent and impact. This is why it requires numerous negotiations during the drafting stage. Read this article to learn everything there is to know about indemnity clauses, and then pay close attention to them when you sign a contract.

Indemnity clause defined

As we all know, the fundamental idea behind an indemnity or indemnification is to transfer some or all of the liability from one party to another. This means that one party to the contract—referred to as the “indemnifier” or “indemnifying party”—promises to protect another party—referred to as the “indemnity holder” or “indemnified party”—from not only loss, cost, expense, and damage but also from any legal consequences resulting from an act or omission by either the indemnifier or a third party or any other event. Section 124 of the Indian Contract Act, 1872 (from hereon referred to as the “Act”) incorporates this indemnity principle. Likewise, an indemnity clause in any contract or agreement serves this effect.

It is important to note that, according to Section 73 of the Act, the question of indemnity only arises where a loss was anticipated or foreseen as a result of a breach of contract. However, this condition does not apply to an indemnity clause in a contract. It is a separate contract, not something that results from a breach of the contract. Therefore, unless expressly excluded in the indemnity clause, an indemnity holder can claim remedy in the case of any consequential, remote, indirect, or third-party losses.

An insurance contract serves as the most common example of indemnity. For instance, in the case of home insurance, homeowners pay an insurance company for security in exchange for compensation in the case of the most unlikely event. The homeowner is the indemnity holder, and the insurance company is the indemnifier who agrees to pay out reimbursement upon certain conditions.

Examples of indemnity clauses 

To be indemnified for any losses or damages which resulted because of an unfortunate event that occurred to the business, the owner of the business has been paying an insurance premium to a well-known insurance company. As a part of the contract between the business owner and the insurance company, if a mishap occurs, such as the building of the business underwent structural damages or the like, in such a case the insurance company will be liable for indemnity for those losses incurred by the owner through reimbursing the owner for repair amount or by rebuilding the damaged parts by employing its own designated contractors.

Another example is Mr. Ram booking a package holiday via a travel agent that has provisions for a hotel stay. As part of the holiday contract, there is an indemnity clause saying if Mr. Ram damages any amenity of the hotel room, he will have to compensate the hotel for the same. 

When does the need for an indemnity clause arise 

Almost all commercial contracts contain indemnity clauses. They are one of the most frequent and highly disputed clauses in a contract since they are a crucial means of allocating risk between the parties. 

The objective of these clauses is to safeguard a party from third-party claims. To be more specific, in cases where the indemnity holder believes the indemnifier holds a greater share of responsibility for the loss or harm caused by a third party, the former includes the indemnity clause in the contract made with the latter, which states that the indemnifier should be liable for the third-party claims if any. However, the indemnifier can negotiate with the indemnity holder if the contents of the clause are not satisfactory and conclude with the final contract.

Therefore, once the indemnifier accepts an indemnity agreement as stated in his contract, the risk of future losses is transferred to the indemnifier, irrespective of who caused them. Here, acceptance of the indemnifier for the stated terms and conditions is crucial because the indemnification issue comes into play only when the loss or damages concern the prior acceptance by the indemnifier to protect the indemnity holder from the damage or injury. The general guideline is to look for an indemnity that will protect a party from obligations caused by the actions of another party to the maximum extent possible.

Take a situation where a manufacturer sells goods to a retailer. The retailer might be concerned that if the goods are defective, consumers may sue him for product liability. To avoid such situations, the retailer would typically ask the manufacturer for protection from those claims in the form of an indemnification clause in a contract so that they can be compensated if they occur.

There is no requirement that indemnity clauses include a component of monetary compensation. They can be used to simply absolve a party of liability, as in the preceding example. However, for financial reasons, indemnity clauses are frequently used in commercial contracts.

Reasons for insertion of an indemnity clause

The following points are the reasons for the inclusion of indemnity clauses in commercial contracts:

  • Under Section 73 of the Act, a party may only be compensated for losses that occurred in the process; remote or indirect losses are expressly excluded. According to how it is typically drafted, an indemnity clause covers all damages, not just direct losses. As a result, an indemnity clause might allow for the recovery of remote, indirect, or consequential losses and damages. However, this claim is not without dispute. 
  • According to Section 73 of the Act, the loss must have naturally resulted from the breach in the ordinary course of events. As a result, it would be necessary to prove a direct connection between the loss and the breach. This criterion, however, may be relaxed if the indemnity clause in the contract is written with words like “arising out of”, “in connection with”, and “as a result of”.
  • The methods available for resolving the hardship brought on by the non-performance of the contract must also be taken into account when evaluating the loss or damage resulting from a breach of contract. Unless expressly indicated in the indemnity provision, this obligation may not come from an indemnity. However, on this issue, Indian law is not particularly clear.
  • Another major reason is that indemnification claims may be brought even before a party has sustained a loss (if the clause permits), whereas the claim for damages can be made only after the breach of the contract. The Bombay High Court observed this in Jet Airways (India) Limited v. Sahara Airlines Limited (2011).
  • Claims for damages can only be made against the party who made the promise in the contract, and the contract in question must have been concluded for the claim to be valid. The indemnity holder, however, is free to claim for losses sustained as a result of the indemnifier’s conduct as well as those of any third party.

Exceptions to indemnify

There are many standard exclusions to indemnity. Typically, they deal with situations where the party being indemnified either directly or indirectly causes the harm that demands indemnification. For instance, actions may be excluded by an indemnity clause when indemnification for claims or losses resulting from the indemnified party’s:

  • Gross negligence or carelessness;
  • Incorrect product usage;
  • Bad faith or non-compliance with the agreement’s requirements.

Apart from the above exceptions, the indemnity also does not apply, under English law, to those losses caused by acts that are not considered human conduct. That is, if the indemnity holder incurred damages due to natural forces that are not man-made, then the indemnifier is not liable to indemnify. However, by virtue of the 13th Report of the Law Commission in 1958, Section 124 of the Contract Act was amended and included all those losses or damages caused to the indemnity holder, irrespective of the involvement of human conduct.

Types of indemnity clauses

There are broadly six types of indemnity clauses based on their respective scope and applicability. Those are as follows:

Bare indemnities

In this kind of indemnity, there are no specific limitations or exceptions on the liability of the indemnifier mentioned in the indemnity clause. For example, X agreed to indemnify Y by including the indemnity clause in a contract signed by both parties. In the clause, there are no limitations or exceptions mentioned, and it is also silent on whether X is responsible to indemnify those losses too, which occurred due to the negligent acts of B. This conveys that the liability of X applies to all kinds of losses caused by specific acts or events as per the terms of the contract. This kind of indemnity gives blanket protection to the indemnity holder. 

Reverse or reflexive indemnities

In this kind of indemnity, it was mentioned in the indemnity clause that the indemnifier would take liability for all those losses or damages incurred due to the acts or omissions of the negligent party. Here, the negligent party can also be the indemnity holder himself/herself. For instance, an insurance company agreed to indemnify a popular medical hospital. One day, due to the negligence of hospital staff, a patient suffered a few injuries. Here, the insurance company is liable to compensate the patient because it agreed to indemnify the harm arising out of the negligence of the hospital. 

Limited or proportionate indemnities

Here, the indemnity clause mentions that the indemnifier would indemnify the indemnity holder for all losses except those that were incurred as a result of the act or omission of a negligent party. Hence, the indemnifier will not be responsible for paying for all the negligent activities of the party. This kind of indemnity is the antithesis of reverse indemnity.

Third-party indemnities

The name itself conveys that, in these kinds of indemnities, the indemnifying party will pay for those claims of the other party who is not involved in the contract, i.e., a third party to the contract. Consumer product liability claims are the best example of this type of indemnity. For better understanding, let’s say there is a written contract between the manufacturer of a popular cold drink company and a restaurant owner. And the contract includes the third-party indemnity clause. If a consumer became sick because of the consumption of extraneous matter contained in that particular cold drink served by the waiter in that restaurant, he or she may have sued the restaurant for product liability. Because the manufacturer agreed to indemnify in the contract, which includes a third-party indemnity clause, the manufacturer will be obligated to pay the compensation on behalf of the restaurant.

Financing indemnities

According to these kinds of indemnity clauses, if a third party fails to fulfill a financial obligation to one of the parties to the contract, one party, i.e., the indemnifier, will indemnify the other party. That means when the third party breaches a fiduciary duty, financing indemnities come into the picture and take effect. For instance, in the event party C fails the primary commitment, i.e., a financial obligation that is owed to Party B (the indemnity holder), Party A (the indemnifier) indemnifies Party B against the losses suffered by him/her. These obligations are commonly accompanied by a guarantee.  

Party indemnities

Party indemnities allow both parties to the contract to indemnify each other for all losses or damages incurred arising out of a breach of contract. It is not specified that one party will be an indemnity holder and the other will be an indemnifier because the indemnity can flow both ways. 

Applicability of Common Law

In the case of Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri (1942), the Bombay High Court stressed the need to keep in mind that the Contract Act is not all-inclusive and that common law standards should be applied while interpreting indemnification clauses. Until and unless there is a disagreement with the Contract Act or any judgments made by the Indian Courts, the common law principles controlling the applicability of indemnity clauses are enforceable.

Features of an indemnity clause

The features of an indemnity clause are as follows:

  1. It is a promise to shift the liability or risk against loss, harm, or damage. 
  2. It is not a separate agreement. The risk of damages linked with a contract is managed through indemnity clauses by including it in the contract. 
  3. By the structure and contents of the indemnity clause, the scope of any indemnification duties one party may have to another party is determined.
  4. Additionally, the indemnity cap, which will specify the limit above which indemnity cannot be sought, is also included in the clause.
  5. It serves as a tool for dividing up risks between contingent liabilities. 
  6. Indemnity clauses should, among other things, be precise, clear, and, whenever possible, specify the circumstances under which they will apply. They should also take into account any other exclusion of liability clauses in the agreement and specify the damages that will be due if the clause is successfully invoked.
  7. The extent of losses must also be taken into account after carefully deciding whether to cover only direct losses or to account for any indirect or consequential losses. 
  8. In commercial contracts, the indemnity clauses are drafted comprehensively to include the third parties by whose conduct, action or negligence any loss might occur, which are beyond the ordinary circumstances of a breach of contract. Indemnities in such cases extend into unintended obligations which the common law might not impose otherwise.
  9. It must be written in a way that considers all essential aspects.

Contents of an indemnity clause

To ensure that an indemnity clause in a contract is appropriately worded and to avoid unnecessary risks, the following contents must be considered:

Important contents to consider by indemnity holder

Carefully define the terms like “losses” or “liability”

Caution is required when defining phrases like “losses” or “liability” because, as was previously stated, indirect, consequential, and remote losses may also be claimed under indemnity clauses. Instead of using the word “losses means,” the definition must instead use “losses include” to make it exhaustive.  Attention should also be given to the nature and type of breaches as well as whether or not they would result in losses that could be measured immediately.

Usage of the phrase “hold harmless”

The majority of indemnification clauses demand that the party providing the insurance “indemnify and hold harmless” the party being indemnified against certain obligations. It is best to use the phrase “hold harmless” rather than terms like “made good” or “compensate,” as the courts might presume that they only apply to claims involving actual losses incurred by the indemnity holder and do not apply in situations where liability has accrued but no payment has been made. 

In the absence of a “hold harmless” clause, losses are not the responsibility of the indemnifying party until the indemnified party pays. Furthermore, the duty to hold harmless may absolve the party being indemnified of any associated claims or causes of action by the party providing the indemnity.

Usage of the phrase “protect from liability”

Furthermore, the insertion of the phrase “protect from liability” assures that the indemnifier has an additional duty of “defence” imposed upon him, which, depending on the language used in the clause, requires the indemnifying party to defend the indemnified against covered third-party claims. This must be ensured, as it is frequently the case that the indemnified party will spend a significant amount of time and effort defending any claim, rendering the recovery of damages or even the simple reimbursement of the fine, loss, or penalty amount worthless.

Defending indemnity holder from third-party claims

Since indemnity clauses are fair and unbiased remedies, they may stipulate that the indemnifier is obligated to defend the indemnity holder from any third-party claims from the moment such claims are made, regardless of whether a liability has been incurred or not.

Claim notice

It is crucial to construct an indemnity clause so that the payment responsibility for the indemnity starts when a claim notice is issued. The clause should expressly state that upon the indemnity holder giving the indemnifier notice of any claim that may result from an indemnity clause, the indemnifier’s responsibility to make the payment shall become due and payable either immediately upon receipt of such notice or within a specified number of days following receipt of such notice. The following should be dealt with caution:

  1. outstanding statutory dues,
  2. any fines or penalties mandated by law, or 
  3. any authority’s demand for a deposit.

Tax ramifications

An indemnity payment is provided when a contract’s representations and warranties, or covenants, are breached. Any tax repercussions of any loss that is covered by an indemnity clause may be specified in the indemnity clause. Therefore, the indemnity payments must be made so that the actual payment equals the indemnity claim payment due plus any taxes that must be paid in connection with its receipt.

Important points to consider by indemnifier

Obligation to negotiate for mitigation

Initially, the party entering into a contract should try to exclude the indemnity clause from the contract. Despite doing this, the other party insists on including this indemnity clause. Then, the indemnifier should ensure that the losses, risks, and liabilities covered in the clause are narrower and exclude all the losses and liabilities that it feels are unfair, unreasonable, and irrelevant. For example, the indemnifier can exclude those damages that are the fault of a third party. In a nutshell, the scope of indemnity should be reduced by the indemnifier.

There may not be any particular obligation placed on the indemnity holder to mitigate losses unless it is expressly stated in the indemnity clause. Therefore, in the indemnity clause, the indemnifier must negotiate and include the duty to mitigate against the indemnity holder.

An indemnifier may demand the inclusion of such a clause to reduce its liability since losses under indemnity might not have to be accounted for by proper mitigation measures by the indemnity holder.

Using a limitation of remedy clause

As already mentioned above, contracts may contain limitations of liability clauses that restrict the indemnifier’s obligation but do not restrict the exercise of other contractual remedies against the indemnifier. To avoid any uncertainty in interpretation, an indemnifier must always choose “limitation of remedy” language that encompasses both the restriction of liability and exclusive remedy clauses.

Continuity of the indemnity clause

From the standpoint of an indemnifier, it’s crucial that the longevity clause be specifically written because, sometimes, parties may stipulate that the indemnity clause will remain in effect even after the agreement is terminated. For instance, it can be specified that any indemnity claim resulting from a violation of representations may only be valid for a short time after the agreement’s termination, such as two years.

Handling of third-party claims

Clearly describe the steps involved in resolving both third-party and statutory claims. It would be wise to have two distinct clauses for third-party claims and indemnity resulting from a breach of contract by the party. There may be no doubt as to the rights of the person who has been indemnified in defence of a third-party claim. As an indemnifier, you should seek protection from being allowed to settle or defend claims at the indemnified’s choice.

Indemnity clause in M&A transaction

Due to several aspects that are thought to be more advantageous than statutory claims for damages, indemnification clauses are a common component of commercial contracts and have come to dominate M&A transactions as well. An indemnity against breach of representations and warranties (from hereon referred to as “R&W”) is offered in M&A transactions. In other words, the promisors agree to protect the promisee from penalties resulting from any R&W breaches. R&W tries to explain the importance of the indemnity provision in M&A deals. Therefore, it is essential to create a strong indemnity clause for any M&A transaction, but especially for an outright acquisition.

The significance of R&W as a transaction security feature in M&A transactions is covered in this article. R&W is given as a compulsion to engage in a transaction, and their inaccuracy may entitle the promisee to relief under the terms of the contract as well as under the law. Indemnification is the preferred contractual remedy for R&W’s accuracy.

Reasons for inclusion of indemnity clause

Even if legal remedies in the form of damages are available for a breach of R&W, indemnity clauses are preferred for the following reasons:

  • All the above-stated reasons which are mentioned under the head “reasons for insertion of indemnity clause”.
  • By including a “sandbagging” clause, even if it is aware of information that makes a representation or warranty inaccurate, the indemnified party may still be entitled to relief because the indemnity, as a specific indemnity, is not subject to the restrictions of Section 19 of the Act (a “sandbagging clause” in a contract retains the buyer’s rights to bring indemnity claim, in case of breach of representation or warranty by seller, even if the buyer knew before terminating the transaction).
  • In the case of Gajanan Moreshwar Parelkar v. Moreshwar Madan Mantri (1942), it was decided that the provisions of the Indian Contracts Act were not exhaustive of the law of indemnity and that courts would adopt the same equitable principles as those applied by English courts. Therefore, indemnities for the large R&W, which are prevalent in M&A transactions, would be enforceable.

Concerns that are covered by the indemnity clause

The indemnity clause generally addresses the following four concerns: 

  • contract misrepresentations;  
  • breach of warranties and covenants; 
  • acts or omissions committed before the closing date; and 
  • acts or omissions committed after the closing date.

In India, R&W and indemnities in M&A transactions adhere to well-established legal and practical principles. They have altered over time in line with evolving legal and commercial practises. India, being a vibrant jurisdiction, has witnessed increased M&A activity. However, this diversity comes with a lack of uniformity. To ensure a fair allocation of risk, which is the purpose of R&W and indemnities, a cautious and deliberate approach to these provisions is necessary.

Imposition of indemnity

  • On legal heirs

The idea of indemnity also applies to the legal heirs of the parties to a contract. This solely depends on the wording of the indemnity clause, which states that the indemnifier and its legal heirs (only after the indemnifier’s death) are responsible for protecting and compensating the indemnity holder if the latter suffers loss or damage. 

And that the indemnity holder, along with its legal heirs (only after the indemnity holder’s death), is protected from any such loss or damage. Legal heirs are not subject to liabilities unless expressly stated otherwise in the clause.

  • On successors

If a company, which is an indemnifier, has agreed to compensate another company for the loss of damages and, during the time of the agreement, the indemnifier firm merges with another company, then the obligation to compensate the indemnity holder is extended to the merged company as well.

If an indemnity holder company merges with another, the newly merged company will be covered as well in the event of loss or damage. To bring such an issue under the purview of the indemnifier, the wording and drafting of the contract clause is also crucial.

Benefits of an indemnity clause

Both the indemnified and indemnifying parties gain from effectively drafting and negotiating an indemnity clause. An indemnification clause has the following benefits:

  • Certain losses, such as legal expenses, which are normally not recoverable through a common law cause of action, that is through an action against breach of contract, may be recovered by the party who was indemnified.
  • An indemnity is not always granted by repayment following payment, and an indemnity holder has the right to sue the indemnifier even before suffering any actual injury or loss. As a result, after the liability has arisen, the indemnified party may request payment from the indemnifier.
  • The party providing indemnification shall limit its liability by including a cap on liability, materiality criteria and liability bucket.

Difference between an indemnity and a guarantee

The basis for differentiationIndemnityGuarantee
MeaningA contract of indemnity is one in which one party promises to protect the other from harm caused by the promisor’s or anyone else’s conduct.A contract of guarantee is an agreement to fulfill a promise made by a third party or release them from their obligation in the event of a breach. 
SectionIt was given under Section 124 of the Indian Contract Act, 1872.It was given under Section 126 of the Indian Contract Act, 1872.
The number of partiesThere are just two parties in a contract of indemnity: the indemnifier and the indemnified.A guarantee contract has three parties: the principal debtor, the creditor, and the surety.
The number of contractsAn indemnification contract contains just one promise: the promise to make a payment in the event of a loss. In a contract of guarantee, there are three contracts. For example, a guarantee between the principal debtor and the borrower, the creditor and the surety, and an implicit contract between the principal debtor and the surety.
NatureAn indemnity contract is for the recovery of a liability.A guarantee contract is for the protection or confirmation of the creditor.
LiabilityIn a contract of indemnity, the indemnifier’s liability is fundamental and exclusive. The liability is subordinate in a contract of guarantee and only arises when the principal debtor defaults. The principal debtor is responsible for the majority of the obligation.
Arousal of liabilityIn a contract of indemnity, the indemnifier’s liability only arises upon the occurrence of a risk (event).In a contract of guarantee, there is an existing duty or debt, the fulfillment of which is guaranteed by the surety.
Discharge of dutyThe individuals for whom the indemnity was awarded must first be discharged before the indemnifier is released. After paying compensation, the fire insurance provider is not required to be released from all liability. When the principal debtor is discharged from liability, such as when the guarantee pays the sum to the bank, the guarantee is also discharged from its duty.

Difference between an indemnity clause and a limited liability clause

The basis for differentiationIndemnity clauseLimited liability clause
MeaningAn indemnity clause, also known as a limited indemnity clause, enables one party to a contract to sue the other for financial, emotional, or physical harm, even if the harm was the result of another party’s fault.As the name suggests, a limited liability clause’s objective is to place a limit on the obligation of each party to a contract. Typically, the clause limits the amount of damages to a specific percentage of the payment or transaction. 
Payment of damagesThe parties also agree that whoever loses a case is obligated to cover the winning party’s legal costs, which ordinarily consist of legal expenses and other related expenses.No such extra damages are paid.
Dealt withThe focus of an indemnification clause is on who will be responsible for paying the costs of the damage or loss caused. In contrast, in a limited liability clause, the main concern is how much responsibility can be transferred to one party if a contract is breached.
ScopeThe indemnity clause covers third-party claims.The limited liability clause does not cover third-party claims.
ResultIndemnity clauses describe which party is liable for paying specified damages that result from a loss. Limited liability clauses contain the maximum amount that may be recovered in the case of a breach of contract in some way.

What if there is a poorly-worded indemnity clause in a contract

In particular, if the indemnification clause is disputed and must be relied upon, a poorly written indemnity clause may do more harm than good. Even if you are successful in defeating a poorly worded indemnity clause and collecting the agreed-upon amount of indemnification, you might discover that your legal costs were greater than the damages you were awarded. A lengthy legal dispute can also keep a sizable sum of money out of businesses that depend on strong cash flow for a lengthy period of time. The opposite is also true, and a properly drafted indemnity clause will help to safeguard your company.

It is also common for a party to demand indemnities from other partners if they have the most commercial influence and negotiation power over a project, especially if it is large or costly. Indemnity provisions are frequently written in the broadest possible terms. However, adopting broad-based indemnities is not necessarily the most effective method for allocating risk. 

The risk of the indemnity not being held to cover losses that they intended it to cover exists when an indemnity clause is written ambiguously. The possibility of the indemnifier being forced to pay for losses they had not anticipated arises from ambiguity. Therefore, if there are any ambiguities in the clause regarding the coverage of losses, both parties may be exposed to serious consequences.

Because of this, any indemnity terms must be either written or evaluated by a skilled contract lawyer. In commercial negotiations, it is crucial to be careful to define precisely what is desired to be accomplished economically and to limit and record the intended scope of the indemnity being negotiated.

Conclusion

The indemnity clause is seen as being extremely significant since it governs both the rights of the indemnity holder and the risk that the indemnifier will bear. Therefore, if there are any discrepancies in the clause regarding the coverage of losses, both parties may be subject to repercussions. Before including indemnity clauses in a contract, appropriate negotiation is required.

The amount of indemnity that is granted when entering into a contract must be limited by the indemnifier. To reduce the loss, an unambiguous responsibility must be assumed, and the window of time in which a claim may be made must be restricted. On the other hand, an indemnity holder should take care to ensure that the indemnity clause is never written with loopholes or ambiguous terms, as this could risk excluding some anticipated liabilities.

The indemnity terms must be carefully written. They are quite significant since they transfer liability from one party to another. Therefore, when creating the indemnification clause and finalising the contracts, it is important to keep all of these consequences in mind.

Frequently Asked Questions (FAQs)

What can indemnity clauses cover?

The indemnity clause in a contract covers those terms that specify the amount of risk the indemnifier bears to indemnify the indemnified party. The majority of the risk is monetary. The clause also specifies the types of losses for which the indemnifier is liable. Whether an indemnifier is liable to indemnify against third-party claims is also stated in the clause. And this list is not exhaustive. The scope of an indemnity clause can be so wide. Nevertheless, it varies from case to case.

Who will be indemnified? 

Only two parties—the indemnifier and the indemnity holder—may enter into an indemnity clause. Only the parties named as indemnity holders in the written agreement will be protected by the indemnity. 

What kind of losses are covered under the indemnity clause?

According to how it is drafted, an indemnity clause covers all losses, not just direct losses. As a result, an indemnity clause might allow for the recovery of remote, indirect, or consequential losses and damages. The reason for that is that the indemnity clause in the contract is written with phrases like “arising out of,”  “in connection with,”  and “as a result of.” The loss could be caused by the actions of the indemnity holder or another person.

How does the Indian Contracts Act, 1872 apply?

Section 124 of the Indian Contract Act, 1872, provides the indemnity principle. The Section states that an indemnifier promises to pay the indemnity holder in case he suffers any losses. It can also be said that liability is transferred from one party to another. In this way, the Indian Contract Act speaks of indemnity. Thus, the Act applies and enforces the indemnity clause included in any contract.

Should I sign an indemnity agreement?

There is no problem or risk if you sign an indemnity agreement. However, make certain that you have read all of the contract’s clauses. Even a simple word like “include” can make you liable for all the losses. One must accept the clauses only when the terms are in your best interests; otherwise, negotiate with the party to reduce the amount of losses included or anything else that may be detrimental or against your best interests. It is always advisable to consult a lawyer, especially a contract lawyer, for advice before signing any such agreement. 

Can the indemnifier be held liable for claims made by third parties? 

Yes, the indemnifier may be held financially responsible if the third party suffers any loss or harm. It also depends on the details and content of the contract’s indemnity clause.

Should an indemnifier compensate even before the occurrence of the loss or damage?

Whether the indemnity holder in this situation can obtain indemnity before he has incurred any actual loss has always been a contentious issue.

Various high courts in India have expressed varying opinions on whether or not an indemnifier can be made to pay before the indemnity holder has experienced any damage. A person cannot be insured before he has experienced any loss, as held by the Nagpur High Court in the case of Ranganath v. Pachusao (1935). Whereas, according to the high courts of Bombay, Calcutta, Madras, and Allahabad, the indemnity holder may demand indemnity even before he has sustained a loss.

Is the indemnity clause still required even if there is a provision for making a damages claim? 

Yes, given that it differs from a claim for damages, it is crucial to include this clause in a contract. Even in the absence of a contract breach, an indemnification claim may be made and include indirect damages as well as direct and actual damages in a claim for damages.

References

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

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

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All about cyber extortion

By
Sneha Mahawar
-
0
Cybercrime

This article is written by Gautam Chaudhary, a law student at Chanderprabhu Jain College of Higher Studies and School of Law, GGSIPU. It talks about cyber extortion and its types, as well as the existing laws related to cyber extortion in India.

This article has been published by Sneha Mahawar.​​ 

Introduction

In the twenty-first century, many countries in the world have witnessed technological advancement in their respective jurisdictions. Some have been introduced as a major power in technological and economic terms, whereas others have found the world of cyberspace to be a way of coping with this race. Out of all the countries, India also holds one of the positions. In terms of cyber relations and operations, India has made great and significant advancements, since all the major operations are kept online, like the citizen’s primary identification card, driver’s licence, registration of a vehicle, etc. Along with these various essential E-services in this age, a massive threat also comes along with it, which is called ‘cyber extortion’ which operates by threatening the common public by catching hold of their personal or crucial professional sensitive information and demanding it. Therefore, the present article talks about cyber extortion in detail. 

Cyber extortion

Cyber extortion, also known as cyber blackmail, is an illegal practice conducted by a person who holds crucial personal, professional, or commercial data in his possession. The person who does this illegal digital crime is known as a “cyber extortionist.” In every case, such a person holds crucial data hostage with the motive to demand a ransom, either in cash or in another form. This practice takes a criminal turn when the hacker threatens the victim to leak the data among the public if the ransom is not paid within a strict time deadline. The data kept as hostage can be of any type; it can be either personal photos, videos, commercial trade secrets, or an organisation’s upcoming projects, blueprints, or information.

For example, there’s a man named A who hacks into the systems of Coca-Cola companies. Now he has access to its secret recipe for the Coca-Cola soft drink. Now, A threatens the company with having to pay a heavy ransom for the recipe’s restoration, or else it would be leaked into the public domain or even sent to other competitors.  

Cybercriminals typically carry out cyber extortion by either blocking access to the victim’s computer or overloading its network by running or introducing a large amount of traffic. In cases of heavy traffic on the network, the victim is not able to run his or her business at all since the network usually fails to load because of the ongoing traffic. The victim suffers from the inability to operate his business; additionally, he incurs significant expenditure on its restoration, which is also a lengthy process that drains the finances of the business.

In the case of cyber extortion, as mentioned above, the victim is forced to pay a ransom, usually in monetary terms, or else his crucial data, whether personal or commercial, is leaked to the public, which can be adverse for the victim. Moreover, in such cases, the victim cannot contact the authorities for the required help because there is a great risk of losing his/her vitally private information on social networking sites to the public. As a result, it can be understood that cyber extortion or blackmail is one of the most deterrent forms of cruelty in the form of crime, which hinders and violates the very principle of privacy and poses the victim with great mental and physical torture. 

Cyber extortion in India

Cyber blackmailing operates in Indian jurisdictions as well. It is termed “digital crime,” where a person hacks into the system and seizes or holds over sensitive files or information and, in return for its safe release, demands a ransom. Hackers commit cyber extortion by first targeting systems and then attacking the weaknesses and flaws in an organisation’s security system. 

For example, in the normal operation of a business, the CEO of the company sends his employee a trade secret relating to the new line of men’s deodorants. He sends this sensitive information over email. Here, the hacker would hack into the company’s official email account, which is used by the CEO, and catch hold of the information, thereby demanding ransom. Furthermore, hackers target a company’s official surveys and systems in order to steal more sensitive information for a higher ransom. 

Types of cyber extortion 

Cyber extortion exists in mainly five forms. The same are discussed below exhaustively. 

Sextortion 

Sextortion is a form of cyber extortion where a person first takes possession of sexual videos or private parts of the victim and then either forces him/her to perform sexual relations with him/her or demands a huge ransom for the release of the content in his possession—or even both by threatening to leak the content in public or to the victim’s parents. The crucial element for this type of cyber extortion is the possession of sexual photos or videos, which is obtained by him only through the victim by baiting him/her into the trap of fake love or affection. Only after the individual obtains these materials does he threaten the victim with leaking them to the public or sending them to their parents or other close relatives. Sextortion mainly operates on social media like Facebook or Instagram and on dating sites as well.   

Email extortion 

Cyber extortion most commonly operates via email, wherein the attacker sends a message containing the sensitive or personal files of the victim. Following that, the attacker demands a ransom be paid by the victim; additionally, the attacker threatens the victim, threatening to release his personal information to the public or on social media sites. In the event that this ransom is not paid, the information goes into the public domain. For the operation of this type of extortion, the information has to be highly personal or sensitive, like photos or videos, or, in the case of business institutions, something of high value, like their trade secrets.  

Blackmail

Among the different forms of cyber extortion, blackmail is also on the list. The specific crime is usually a criminal act in which the hacker holds onto or seizes sensitive information and blackmails or threatens to leak it to the public or rival organizations. The information mentioned can be either a photo, a video, or a business operation.  

Ransomware

Ransomware is a type of digital malware that, through its nature and functionality, prevents the original user from accessing the desired files or documents. Ransomware acts as a wall between the access desired by the true user and the documents present in the file. The vital component of this criminal act is that once established on a certain user’s mail or system, ransomware demands a ransom in monetary terms to give back access to the files to the user. The following are the types of ransomware:

Malspam

Malicious or spam email is the act of a hacker sending a message to a victim with a number of attached files containing access to adult sites or fake lottery tickets in order to gain system’s access. The motive of sending this malicious folder along with the mail is to attract the user to open it, thereby giving access to the system. The attached folder acts as bait for the victim to fall into their trap, and thereafter, the hackers get access to his system after he clicks on this fake link. 

Malvertising

Malvertising is the term used to describe malicious online advertising that distributes malware to users without their knowledge. Through this type of advertising, users come into direct contact with malware that can detect their computer information as well as their location. Malvertising operates through an infected iframe or invisible webpage element. The iframe from the original or initial webpage redirects the user to a webpage where all the information exploitation works. All this happens without the user’s knowledge. It is important to note that malvertising works on legit sites as well, since criminal web pages are designed to redirect the user to the web pages from which the information can be exploited.

Spear phishing

The term “phishing” used here refers to posing as someone else who, in reality, is not. In the context of ransomware, spearfishing is an act in which a conman sends an email to someone posing as someone he is not. For example, a manager sends an email to company A’s employees and staff, instructing them to read the email because it pertains to the organisation’s new guidelines or plans for upcoming projects. And in this very mail, the sender poses as the CEO of that particular company. Therefore, for the receivers of the mail, it is normal or obligatory to open that mail for the sake of business operations, eventually giving the hackers access to their systems, thereby making them victims of ransomware.

Social engineering

Social engineering is also called “human hacking,” since this illegal cyber technique follows the theory and method of targeting users psychologically. In such attacks, it is crucially important for the hacker to establish contact with the user directly because ransomware does not work like malvertising and spear phishing. What is required for its initiation is the actual human act for getting access to the computer by the user. It attacks human psychology by creating situations like anger or pressure to persuade them to take the necessary action.  

For example, a hacker forms up a mail wherein he conveys that the user has won 1 crore rupees as a prize or tells the user that his computer has been hit by the Trojan virus where all his data and files have been compromised, and for the same reason, immediate attention is required. Now, to get access to the victim’s system, the hacker provides a link or a webpage through which he alleges that the prize can be collected or the virus can be removed. Upon clicking on that link or web page, the user exposes himself directly to the attack of ransomware through social engineering.

Denial of Service (DOS)

A denial-of-service attack is one of the cyberattacks that is initiated by the cyber attacker and is used to steal personally identifiable information (PII), i.e., the information about an individual ascertained in combination with other data; it can be the I.D. of the user. Cyberattackers use this form of attack by putting a great deal of traffic on the victim’s server or system. The DOS can last for months, and every time a user tries to load his server, it will not work because it will take a lot of time to load, which will ultimately cause it to crash as well. This will drain the monetary capacity of an organisation since it is too costly to remove such an attack. While the DOS prevents the user from using its server by putting heavy traffic on it, the attackers steal the relevant and essential personally identifiable information, exposing the user to further and greater threats with respect to his personal information. 

How to deal with cyber extortion 

In order to have a smooth and secure mechanism for personal or professional data, it is essential to take a number of measures to deal with and prevent cyber extortion. The following are the measures or essential practices that a user must perform in order to secure his system against cyber extortion. 

Employee training 

The first and foremost measure against cyber extortion is to have the necessary knowledge about it. All organisations must have a pre- or mid-employment cyber attack prevention training programme. Through this, the company would have a strong mechanism to protect its servers from unwanted and illegal cyberattacks. 

Cyber data back-up

The second line of defence against a cyber attack is to have a backup of any data that the organisation or individual may lose as a result of the breach. The cyber attack is not prevented since it is just an after-attack measure, but it can prove to be of great aid because it minimises the cyber blackmail’s harm to someone’s data. 

Cyber insurance

Cyber insurance acts as a medium through which an individual or an organisation gets insurance after a cyber attack. Cyber insurance covers the liability for a data breach involving sensitive customer information, such as Social Security numbers, personal details, and health records. Any organisation can avail itself of this insurance if it has faced any kind of cyber attack. Mainly, cyber insurance includes legal fees and expenses that an individual or an organisation incurs after a cyber attack.  

Data breach checkup

One of the most important measures is to have monthly checks for data breaches. It is surely an expensive procedure that may require maintenance. But it is the only way to protect the data against cyber attacks since a data breach check-up keeps the computer system’s protection tools and software updated and enhances their functions against any future attack. 

Strong password system

One of the basic measures to prevent any cyber attack is to have a strong password for your system because it is the first and foremost thing that the hacker targets, and if the system is protected by a strong password, then it is difficult for the hacker to hack into the system. Next, updating the system’s password weekly is also the best measure against cyberattacks.

Strong firewall and antivirus systems

A firewall is a security system to protect an internal network from unauthorised servers and networks based on predefined rules. It acts as a barrier where it only allows the secured networks to send or receive data in daily operations. Having strong firewalls will be fruitful against any cyber attacks since it protects the system from its core network. Coming on to the antivirus system, this software are also useful for the system’s protection since they scan websites and files to compare their code to the code of known malware. If there are similarities, the antivirus will notify you that the scanned site/file/app is dangerous. Moreover, it refrains the user from going onto a virus-prone website, as it notifies him that the website contains ransomware by scanning it through its database.

Email hygiene training 

Email hygiene training by a user means regular reviewing of emails to check whether it is not sent by some unauthorised or unknown user. For the purpose of having a safe and secured business in the long run, email hygiene also includes the sending of messages containing company confidential information that is protected by the organisation’s data classification standards. Caution in sending mail to the right person is one of the most basic exercises in this type of training. Through this, the information, along with the company’s or individual’s email address, remains among the trusted members or groups. At last, email hygiene also includes the exercise of opening trusted mail. In other words, the employees or individuals are advised or trained to only open mail that has come from known and trusted addresses. The opening of fake or unknown addresses is strictly prohibited for secure operations and should be deleted. 

Cyber extortion attacks 

Cyber extortion exploits a person or a company mentally or financially. The hacker who does this illegal extortion practice creates great fear in the victim’s mind of losing his/her public image or all the business secrets. In view of the same, some of the most widely known cyber extortion cases are herein mentioned below. 

An Indian perspective

The UHBVN Ransomware attack

Uttar Haryana Bijli Vitran Nigam, a government-owned company that is responsible for power distribution in North Haryana, was hit by a ransomware attack on March 17, 2021, at 12:17 a.m. The hackers stole the billing data and demanded a ransom in bitcoins.  They demanded a whopping sum of Rs. 1 crore, or $10 million, for returning the customer’s data. 

The Mirai Botnet Malware attack 

This botnet malware took over the internet, targeting home routers and IoT devices. This malware affected 2.5 million IoT devices. The sum included a large number of computer systems in India. This self-propagating malware was capable of exploiting unpatched vulnerabilities to access networks and systems.

A global view

The Orange is the New Black attack

The creators of the famous show titled “Orange is the New Black” in 2017 also became victims of the deadly cyber extortion attack when the hacker group known as the Dark Overload hacked into the system of its server and somehow got access to the unreleased episodes of the show. The hackers threatened the creators with leaking their episodes and demanded a ransom of $50,000. Sadly, even after Netflix paid the demanded ransom, the hackers leaked the episodes online.

The dating site attack

In June 2015, a commercial dating website called Ashley Madison was hacked by a team of hackers called the “Impact Team.” In this case, the hackers broke into the website’s system and got access to its clients’ personal information along with personally identifiable information. Unlike other usual cases, the hackers wanted the dating website to shut down its entire operations; if not, they threatened that the information of its clients would be released in the public. The website did not revoke its operations. Therefore, the hackers leaked a huge load of the company’s data, including its clients’ information. 

How to file a cyber crime complaint in India 

With the increase in the opening of digital startups in India, coupled with the subsequent change from offline to online services by the Government of India, there arises a need to protect oneself from various forms of cybercrime that happen in numerous numbers with great frequency on daily basis. Therefore, one may file a cyber crime complaint if he/she is or is the victim of such heinous crimes, because now every state jurisdiction has its own cybercrime police unit that investigates and arrests accused persons who are involved in such crimes. 

Visit the cybercrime complaint portal 

Therefore, firstly to set the law into motion, one may file a cyber crime complaint by going to https://cybercrime.gov.in/. This is the official website of the National Cyber Crime Reporting Portal, where any individual can file an e-complaint against any form of cybercrime.

Select the option of filing a complaint 

Next, one may select the option of filing a complaint that is present on the homage of the portal. 

Choose the option for the manner in which the complaint must be filed 

Thereafter, after selecting the complaint option there appears a page where the portal gives an option for the complainant to choose how he/she may want to file the complaint. If the complainant is a female, she may file the complaint unanimously or report normally with the tracking option. If the complainant is a male, he may choose the option of reporting cybercrime. 

Create an account and login with requisite information and submit  

Then the next step is to create an account. After making an account, the complainant will have to fill in the state to which he/she belongs along with the details of the account. After the login, the page would consist of four sections, i.e., incident details, suspect details, complaint details, and preview and submit. In the incident detail section, the complainant has to provide the key details of the crime that happened to him. Further, in the suspect section, he has to provide any identity proof that he carries with him, and in the complaint details section, he has to provide his personal details, such as his name, email address, photography, etc. Once all this information has been filled in, then the complaint has to confirm and click on the submit option. 

Track the status 

Now that the complaint has been filed successfully, the complainant can also track the status of the complaint. It is to note that the complainant cautiously needs to provide true and relevant information or else he/she shall face penal action for the same.      

Laws for cyber extortion in India

The National Crime Bureau, Ministry of Home Affairs, Volume II, 2021, reveals that every second, a cyber extortion case is registered in the country’s capital, i.e., Delhi, where every complaint stated the accused had sensitive information about the victim. Therefore, there needs to be a defined law for such a heinous crime. 

However, unfortunately, the Information Technology Act of 2000 neither defines the term “cyber extortion” nor has a specified punishment for the same since it does not consider it an offence. Nevertheless, the accused can be booked for offences under the Indian Penal Code, 1860, and the IT Act, under Section 383 (which deals with extortion), Section 503 (which deals with criminal intimidation), and Section 66E of the IT Act.

Section 66E talks about a violation of privacy through the leak of some private areas of any person through the capture, publication, and distribution of the alleged picture. The accused faces up to 3 years in prison and a fine of up to Rs 2 lakh, or both. 

Section 383 addresses extortion, which is defined as the act of intentionally causing or putting any person in fear of injury, with the intent of inducing the person to deliver any property or valuable security to the accused. A person accused of committing the offence of extortion can be punished with imprisonment, which may extend to two years, a fine, or both.

Further, Section 503 deals with the offence of criminal intimidation, which is the act of threatening someone with an injury to his reputation, person, or property, or to the person or reputation of any other person in which that person is interested. The goal of threatening is to cause fear in the victim and force him to perform an illegal act or refrain from performing any act to which he is legally entitled or bound. A person accused of committing criminal intimidation can be punished with imprisonment, which may extend to two years, with a fine, or with both.

However, in spite of having the above-said sections under different statutes, there is a need to have a unified and specific provision for the offence of cyber extortion because, in this internet age, Indian citizens, especially big corporations and female members of society, are becoming the victims of this grave crime.  

Conclusion 

In this digital age, a country like India, which has made every service online for the convenience of its citizens, must look at the possible and emerging issues and threats coming out of this digital system. Nowadays, everyone’s data is stored online in applications like cloud storage, Digi Locker, and personal drives. Therefore, it becomes necessary for the administration to protect the same. The first step towards protection would surely be enacting a specific, well-explained provision stating cyber extortion as a cybercrime. And the same must be punished with severe punishments along with massive fines because the matter at hand is regarding the people’s privacy and reputation, which also come under one of the fundamental rights given by the Indian Constitution as the right to personal liberty. And if the same is not protected and administered, then there won’t be any digital advancement in the true sense. 

Frequently Asked Questions (FAQs)

Which authority should one contact in case of cyber extortion?

Anyone who is the victim of any type of cybercrime may contact the state’s police cyber cell and lodge a complaint with them. For example, victims residing in Delhi may contact the Delhi Police Cyber Crime Unit directly.

What is the most common way one can become a victim of cyber extortion?

Opening spam, surfing on unprotected sites, and clicking on unnecessary files, either in the mail or on the internet, provides the hacker with the medium to hit the systems with cyber extortion.

What is the purpose of NCCRP?

The National Cyber Crime Reporting Portal (NCCRP) is an online government portal that is specially made to deal with cybercrime. Here, the victim of any form of cybercrime can easily report or file a cyber crime complaint without any issue. The portal is made especially for women since it allows them to file the complaint unanimously, thereby keeping their identity unknown. 

What sort of information is considered evidence while filing a cyber crime complaint?

For the purpose of filing a cyber complaint for any kind of cybercrime, a credit card receipt, bank statement, envelope (if you received a letter or item through the mail or courier), brochure/pamphlet, online money transfer receipt, copy of an email, URL of a webpage, chat transcripts, a screenshot of the suspect mobile number, videos, images, or any other kind of document are needed.

References

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

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

https://t.me/lawyerscommunity

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

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RTI Amendment Act, 2019

By
Sneha Mahawar
-
0
Right to Information

This article is written by Gautam Chaudhary, a law student at Chander Prabhu Jain College of Higher Studies and School of Law, GGSIPU. The present article talks about the Right to Information Act and its important provisions, followed by the amendments that were introduced in the Right to Information Act in the year 2019.

This article has been published by Sneha Mahawar.​​ 

Introduction 

Any country is said to be truly democratic on the basis of its five core components, i.e., transparency, good governance, participation, accountability, and corruption eradication. The right to information is a statute that, through its provisions, provides the public with the most important constitutional principle, i.e., transparency in the governmental administration and public authorities, without any question or doubt. Further, Greek philosophers named Aristotle and Plato also supported the right to information, saying that “disclosure of all information relating to the state and government and clarification of those details to the public is the core of democracy.” Hence, it is essential to know about the fundamental right to information since we all live in the largest democracy in the world. Therefore, the present article discusses the Right to Information Act of 2005 and its important provisions, followed by the 2019 amendment.  

Right to Information Act, 2005

The National Freedom of Information Act of 2002 was the first ever Act formulated by the Indian government in order to provide the citizens of India a medium for getting public authorities’ information. The said Act was enacted by the parliament after a number of anti-corruption protests by numerous activists, heated debates, and due to pressure from other states that had already introduced the required activities in their respective states. But even after its introduction, it suffered since the Indian government did not put it officially in the Indian Gazette. The Right to Information Act was passed on June 15, 2005, and later came into effect on October 12, 2005. It became officially operational in 2005 when it was assented to by the President of India, making it a law. The said Act was introduced in India to bring the general public out of the dark with regard to the practical and actual functioning of the public authorities. But most importantly, it was introduced to truly achieve the status of “democratic,”  i.e., giving the public the tool to have information about anything that remains with the public authorities, thereby having and promoting the notion of transparency in society between the general public and the public authorities. 

The Hon’ble Supreme Court of India, in the landmark case of Raj Narain vs. the State of Uttar Pradesh (1975), held that the general public has a fundamental right to information. Including it under the ambit of Article 19 of the Indian Constitution. Upon enactment and enforcement, the Right to Information Act gained widespread public acceptance and support for its operation because now the government and its public authorities could be checked upon the filing of RTI applications, which were not available to the public before. 

Important definitions under RTI Act

Information

Section 2(f) provides as to what may be termed “information” according to the act, wherein it states “information” means material in any form, whether in records, documents, memos, emails, opinions, advice, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, or models. It also includes data material stored in any electronic form. The act also provides information about any private body that is to be provided by the public body according to any other law.  

Right to information

Section 2(j) defines the “right to information,”  which states the “right to information” means the right to excess information under the provisions of the act, provided by or under the control of any public authority, the right to inspect works, documents, and records, to take notes, extracts, or certified copies of documents or records, or to take certified samples of material, or to obtain information in the form of printouts, diskettes, floppies, tapes, video cassettes, or in any other electronic mode or through printouts.

Public authority

Section 2(h) states the meaning of public authority under the act, wherein it says public authority means any institution or body of the government formed by or under the constitution, any law made by the parliament, and any law made by the state legislature. It also includes any institution formed by notification issued or order made by the appropriate government and any body owned, controlled, or substantially financed by a non-government organisation, directly or indirectly, with funds provided by the appropriate government. If the information sought by the applicant is held by or is part of any other authority, then in this case the office where the application was primarily filed will transfer the application to that authority at the earliest possible time. The time period for such transfer shall not exceed five days at most.

Time period for application’s disposal

Section 7 of the act prescribes the time period in which any application made under the statute is to be disposed of. It shall dispose of the application within thirty days, or if the information sought is related to the life or liberty of a person, then such an application shall be disposed of or entertained within forty-eight hours from the receipt of the application. 

Right to Information (Amendment) Act, 2019

The Right to Information (Amendment) Act, 2019, was passed on July 22, 2019, by the Lok Sabha and by the Rajya Sabha on July 25, 2019. It came into force with the consent of President Ram Nath Kovind. The amendment of 2019 in the action brought key changes in the following sections:

Section 13 

Section 13 of the RTI Act talks about the term of office and conditions of service for the chief information commissioner and the information commissioner. Prior to the 2019 amendment, the act prescribed the terms of the chief information commissioner and the information commissioner under subsections 1 and 2 as five years. The terms of the aforementioned commissioners were changed to be at the discretion and on the orders of the central government as a result of the aforementioned amendment. The amendment also made changes to subsection 5 of the same section, which discusses the salary and allowances of the chief information commissioner and the information commissioner, which were previously equal to those of the chief election commissioner for the chief information commissioner and the election commissioner for the information commissioner. Now their salaries and allowances will be prescribed by the government. 

Section 16 (state)  

Section 16 of the RTI Act talks about the term of office and conditions of service for the chief information commissioner and the information commissioner. Prior to the 2019 amendment, the act prescribed the terms of the chief information commissioner and the information commissioner under subsections 1 and 2 as five years. The terms of the aforementioned commissioners were changed to be at the discretion and on the orders of the central government as a result of the aforementioned amendment. The amendment also made changes to subsection 5 of the same section, which discusses the salary and allowances of the chief information commissioner and the information commissioner, which were previously equal to those of the chief election commissioner for the chief information commissioner and the election commissioner for the information commissioner. Now their salaries and allowances will be prescribed by the government. 

Section 27

The present section frames out the power to make rules by the appropriate government, wherein the central government, through the said amendment, added two new subsections, i.e., “ca” and “cb.” The added sub-section generally empowers the government to make rules for the amended provisions to give effect to the said amendment in regards to tenure, salaries of the chief IC and information commissioner and of states as well, etc. 

The above-substituted provisions inducted in the RTI Act, 2005 in the year 2019 are said to be arbitrary and authoritative because it is taken as the step taken by the central government to attain more power with respect to the RTI act which in consequence of the same hinders the independence of the central and states information commissions. The said amendment is also considered “fishy” in nature since the government of 2019 introduced the same without keeping the draft of amended provisions in the public domain mandated by the pre-legislative consultation policy of 2014, therefore violating the same. However, in response to the above-mentioned contentions against the amendment, the government justified the same on the ground of having a differentiation between the information commission and the election commission, According to the government, the earlier provisions Somewhere, the information commissions were mixed up with the election commissions, which is very unacceptable and uncalled for in nature since the election commission is a constitutional body established in accordance with the constitutional provision, i.e., under Article 324, whereas information commissions are statutory bodies formulated in accordance with the statute.  

Judiciary and the Right to Information Act

The Apex Court has, as always from time immemorial, adjudicated matters in favour of the general public at large. It has undoubtedly provided judicial precedents and decisions advocating for the public’s right to information from the public body. 

The landmark and most notable case of the Hon’ble Supreme Court of India can be termed  Raj Narain vs. the State of Uttar Pradesh, (1975), wherein the court was of the view that every citizen of India has a fundamental right to information since the people of India have every right to know the information that is available in the public domain and have the absolute right to know every detail of every operation of the public authority under Article 19 of the Constitution, which talks about freedom of speech and expression.

In Maneka Gandhi vs. Union of India (1978), they provided an additional and new constitutional provision under which the general public could have the right to have information from the public authority. It provides the people of India with a right to information, which they can apply for under Article 21, which talks about the right to protection of life and personal liberty. 

In CBSE vs. Aditya Bandopadhyay & Ors (2011), the Supreme Court dealt with the question of whether the examinee has a right to have his answer sheet from the public examination board and whether he has a right to obtain a certified copy of the same. To this end, the Hon’ble Supreme Court held that the Central Board of Secondary Education undoubtedly comes under the definition of public authority given in the act, and therefore it must provide the required information pertaining to his answer sheet. 

In Girish Ramchandra Deshpande vs. Central Information Commission & Ors. (2013), the Supreme Court held that information like assets, property, and liabilities of a public servant does not fall under the ambit of the RTI Act. The information relating to the same cannot be made public since it is the personal information of a public servant. 

Conclusion 

In a truly democratic country, one of the most important aspects of the rule of the people is the transparency between the governing bodies and the common public. Such transparency in countries like India which is said to be the largest democracy in the world can only be achieved by conveying the basic and necessary information to the general public. Likewise, the Right to Information Act operates as a medium between these two pillars, i.e., the government and the common public. The RTI Act enables the citizens to have knowledge about the public offices’ functions and operations without any objections because the constitution and the apex court of the land term it the people’s fundamental right to have it; otherwise, if this basic right isn’t available to the citizens, then it will be simply arbitrary and authoritative states, which would be against the core values of the Indian constitution. 

Frequently asked questions (FAQs)

Who can file an application under the RTI Act?

According to the provisions of the act, any citizen of India can file an application to obtain any information from the public authorities. The information requested must be provided to the citizen within thirty days. 

Is the Right to Information a legal right in India?

The Right to Information is a fundamental right guaranteed by the Indian Constitution under Article 19.

What are the benefits of the Right to Information Act?

The Right to Information Act enables every person in India to have access to information that is with public authorities. The foremost benefit of the Right to Information Act is that it communicates information to the public about everything that is held by the public authorities, like information regarding delayed pensions, passport renewals, and the salaries of government employees.

References 

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

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Role of WTO in International trade

By
Sneha Mahawar
-
0
WTO

This article is written by Pragya Agrahari of Amity Law School, Lucknow. This article provides a detailed analysis of the role played by the WTO in boosting international trade and its various key objectives, functions, and principles of trade on which international trade rests.

This article has been published by Sneha Mahawar.​​ 

Introduction

We usually use goods and services imported from different countries, like wearing jeans from Italy, using mobile phones produced in the US but manufactured in China, riding in a bus designed in Germany, and many more. The question here is how these goods or services came to your city, how easy is it to transport one good from one nation to another, and on top of these, who supervises such activities and relations among various countries? The answer is that all these activities became possible because of international trade agreements among different countries, which like any other economic activity, is governed by a vast set of rules and regulations, which are further governed by international organisations.

With the coming of the era of globalisation and liberalisation, international trade between two countries became comparatively easier. The countries came closer by means of different economic deals and agreements between the countries and by reducing trade barriers. And these agreements and reductions in trade barriers were the outcomes of efforts made by the World Trade Organisation (WTO) through negotiations and various other methods. WTO is the world’s largest economic organisation with 164 members that represent 98% of global trade.

International trade and World Trade Organisation (WTO) 

International trade refers to the sale and purchase of goods and services across international borders. This trade is carried out through a contract between two or more parties, which is regulated by the World Trade Organisation (WTO). The WTO is the only international organisation that regulates rules and regulations for trade carried out by different nations. The main purpose of the WTO is to ‘open trade for all’ so that every nation can benefit from it.

States generally, enjoy unfettered sovereignty over their internal affairs, which also includes trade. But in accordance with international customary law, states have to give up some percentage of their sovereignty so that an international community can be created in order to carry out business, trade, or other activities more easily. Lack of such compromise made international organisations futile. 

Various nations exercise their supreme economic sovereignty while regulating the import and export of goods and services in and out of their territory. Some of them believe the use of foreign goods in their territory is an infringement of their territorial integrity or an incursion of their uniqueness. This results in various kinds of “trade barriers” between the countries, which consequently leads to difficulties in international trade. Moreover, it led to the unavailability and scarcity of certain commodities in the state markets. This necessitated the formation of international organisations in order to remove trade barriers and ease international trade. As a result, firstly, in 1947, the General Agreement on Trade and Tariffs (GATT) came into existence, and later it was replaced with the World Trade Organisation (WTO), which is playing a significant role in promoting international trade at present.

GATT and the formation of WTO : Brief history

The story of the establishment of GATT begins with the Bretton Woods Conference held in 1944 in the post-World war era. This conference originally named the United National Monetary and Financial Conference was a gathering of representatives from 44 countries that was held from July 1  to 22 in Bretton Woods, New Hampshire. The main objective of this conference was to set new rules for the regulation of the international monetary system and to build a new system of economic order to help countries overcome the losses incurred due to war and conflict. It led to the creation of two important institutions, namely the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). 

This conference also recommended the establishment of a third institution, the International Trade Organisation (ITO). The draft charter for ITO was also concluded at the 1948 United Nations Conference on Trade and Employment, also known as the Havana Charter. In this draft, various rules regarding trade, business, services, commodity agreements, investments, and employment practices were provided. But due to the failure of the US Senate to ratify this Charter, an ITO can never come into existence. 

Meanwhile, in 1947, a group of 25 countries entered into an agreement that came to be known as the General Agreement on Trade and Tariffs (GATT), which came into force on January 1, 1948. GATT primarily aims to reduce tariffs on goods and remove the system of import quotas. Though GATT was not meant to remain on a permanent basis, it has completed approximately 50 years as a major multilateral agreement on trade, until the formation of WTO. GATT sponsored a total of eight rounds of multilateral trade negotiations for tariff reductions or other trade policies. The last of these rounds, that is, the Uruguay Round held from 1986-1994 and culminated in the Marrakesh Agreement establishing the WTO in 1995.   

The WTO has incorporated major principles of the GATT, making it the most robust multilateral institution related to international trade. It has integrated GATT’s provisions in GATT 1994, which is an international treaty with respect to trade in goods only.

Uruguay Round

The Uruguay Round is known as the largest trade negotiation ever in history. Today’s WTO rules and agreements are largely the outcomes of Uruguay Round trade negotiations that were launched at Punta del Este, Uruguay, on 20th September 1986, and concluded at Marrakesh, Morocco, on 15th April 1994. It is one of the biggest reformations of the GATT rules and agreements since the GATT’s inception. A total of 125 countries have participated in this trade negotiation, which covered almost all subjects from industrial goods, electronics, textiles, agricultural goods, and services to intellectual property like copyrights, patents, and designs.

The most important contributions of the Uruguay Round to liberalising international trade are as follows:

  1. Major reductions in tariffs on industrial goods,
  2. Inclusion of services and intellectual property within the range of the multilateral trading system,
  3. Integrating trade in textiles and agricultural goods,
  4. Introduction of more effective means of dispute resolution,
  5. Strengthening international trade against unfair trade practices,
  6. Provides for greater transparency in procedures for import licensing for ensuring fairness,
  7. Introduction of a new Trade Policy Review Mechanism for comprehensive and periodic reviews of national trade policies of the GATT member countries,
  8. Successful negotiations between the US and the EU on agriculture in a deal called the ‘Blair House Accord’.

As a result of these negotiations, the WTO replaced the GATT, but its updated version still exists, famously known as the GATT of 1994. 

Key objectives of WTO

The WTO was established to fulfil key objectives with respect to international trade and other economic activities, including: 

The welfare of the people

The main objective of the WTO is to improve the lives of people by raising their living standards, creating jobs, raising their incomes, or expanding the trade of goods and services globally. It helps developing or under-developed countries enhance their trade capacity so that they can achieve economic growth and stability. 

Negotiating trade rules

WTO strives to remove trade barriers or any other obstacles from the way of the progressive international trading system. These negotiations help the countries open their markets for trade. But at the same time, some trade barriers were maintained in order to protect the interests of consumers or the environment, etc.

Supervising WTO agreements

WTO agreements provide the rules for conducting international trade and commerce. It binds the signatory countries to limit their trade policies in accordance with these agreement provisions. These agreements strive to protect and help producers of goods and services, importers or exporters in conducting their businesses, and others involved in these trading activities.

Ensuring open trade

The main objective behind the emergence of the WTO is to maintain the free flow of trade as much as possible without any undesirable consequences like unfair competition, hegemony in a certain variety of goods or services, biassed trade policies, etc. WTO helps the inclusion of developing countries in the international trading system and helps them to achieve economic growth and ensure full employment. It oversees the trade rules and policies governing international trade and ensures that they are transparent and easily predictable.

Dispute settlement

In conducting international trade, several trade disputes also arise due to the conflicting interests of one nation and those of another nation. These disputes have been settled or negotiated by the WTO, which also involves the interpretation of WTO agreements. The WTO, as a neutral body, settles these disputes in accordance with the Dispute Settlement process provided in WTO agreements.

Key functions of the WTO

Implementation of the WTO agreements

WTO ensures that governments of every member country make their trade policies in accordance with the WTO agreements. WTO councils and committees ensure that WTO agreements are properly implemented and all other requirements have been satisfied. To monitor the status of such implementation, all members have to undergo a periodic review of their trade policies.

Trade negotiations

This is one of the most important functions of the WTO. WTO agreements include goods, services, and intellectual property. These agreements are not fixed, they may be negotiated according to the situation of one or more countries and their commitments to open trade markets. The WTO provides exceptions to various principles of trade enshrined in WTO agreements. New rules or agreements are also added from time to time. 

Settling of disputes

Settling disputes arising between countries or with respect to trade is essential for the system of international trade to run smoothly. The process for settling such disputes is provided in WTO agreements. So, if any country thinks that its rights under any agreement have been infringed, it can bring such disputes to the WTO. The WTO appoints independent experts to resolve its disputes based on the interpretation of provisions of the WTO agreements and other relevant factors.

Help countries build trade capacity

The WTO empowers developing countries to boost their trading capacity and help them develop the skills and infrastructure required to expand their trade. It conducts various missions or courses, especially focused on developing countries. Even in WTO agreements, special provisions were provided for developing countries.

Enhancing cooperation between states and non-state actors

WTO remains in constant touch with various non-governmental organisations (NGOs), media, parliamentary members, other international organisations, and the general public in order to get their opinions on various aspects of WTO and ongoing negotiations and maintain their cooperation in the international trading system.

Conducting economic research

The WTO conducts research in the field of trade and other economic activities and also collects and disseminates various data and information in support of its activities.

Important principles of WTO with respect to the trading system

No discrimination in trade

According to the WTO agreements, countries cannot discriminate between two countries as trading partners. They cannot grant some countries special favours in trade by lowering rates of customs duty or taxes, etc. Every WTO member should be treated likewise. This principle is known as Most-Favoured Nation (MFN) treatment. It means that if one nation lowers its trade barriers or opens its market, it has to do the same for all other countries, which are its trading partners. However, there are some exceptions to this general principle that are allowed. For example, a government can set up a free trade agreement for certain goods to be traded with certain countries.

Free trade

The WTO conducts its activities on the principle of “free trade” or “progressive liberalisation”. It encourages nations to open their markets, lower their trade barriers, or restrict customs duties, import bans, or quotas. Since its inception, it has continuously worked on this principle through various rounds of negotiations and agreements, persuading countries by highlighting the benefits of opening markets for international trade.

Transparency in the trading system

It is the duty of the WTO to ensure that the trade policies and rules of each member country are transparent and easily predictable. These policies should not be subject to too many recurring changes, they should be stable enough to avoid any inconsistencies in their understanding by other countries. By discouraging quotas or import limits, which can lead to red-tapism or unfair play, one can maintain stability or predictability.

Fair competition

The WTO is dedicated to establishing open and fair competition in the international trading system. As it is based on the principle of non-discrimination in trade, it is successfully establishing secure conditions for fair and undistorted competition.

Economic development and reform

WTO helps in the development of nations. It has provided special provisions for developing nations, allowing them certain trade concessions. Certain agreements by the WTO provide developing countries with a ‘period of transition’ so that they may easily adjust to new situations.

Building trade capacity of developing countries by the WTO

The WTO plays an important role in uplifting developing countries, which make up three-fourths of its total membership. Through various assistance programmes or partnerships, the WTO tries to increase the capability of developing nations to carry out trade and business so that they can present themselves in the global market. Various training courses and programmes were conducted jointly with other international organisations, in order to build their trade capacities. This guidance is provided on any subject, whether related to participation in the WTO, help in negotiations, implementation of its commitments, etc. The least developed countries among them were getting special attention and help with trade/ tariff data related to their export interests and participation in the WTO.

Committee on Trade and Development (CTD)

It is the main body in the WTO responsible for the coordination of work on development. It works on a variety of issues related to trade in developing countries, like the implementation of WTO agreements, technical assistance, and increased participation. It approves, monitors, and provides guidance for technical assistance programmes conducted by the WTO. The Doha Declaration mandates it to review all special and differential provisions for developing countries in order to strengthen them and make them more suitable and effective for them.

Aid for Trade initiative

The Aid for Trade initiative was launched by the WTO in December 2005 at the Sixth WTO Ministerial Conference held in Hong Kong, China. It works on the basis of a biennial work programme. It was designed to help developing nations build trade capacity by opening opportunities for them to enhance their infrastructure and improve their ability to earn benefits. The theme for the 2020-2022 Aid for Trade Work Programme is “Empowering Connected, Sustainable Trade.” This work programme is dedicated to carrying out an analysis of the opportunities offered by digital connectivity and sustainability. More than 400 billion dollars has been disbursed until now for supporting the Aid for Trade projects.

Enhanced Integrated Framework (EIF)

The Enhanced Integrated Framework is the main mechanism through which less developed economies can access Aid for Trade projects. It bridges the gap between demand and supply for the Aid for Trade programmes and mainstreams them into their national development plans. It provides a way for the least developed countries (LDCs) to set their priorities regarding trade-related assistance and capacity building and to channel their demands through the Aid for Trade process through the EIF process for accessing resources. The EIF Trust Fund provides funding to LDCs and enables them to take advantage of the benefits of Aid for Trade.

Standards and Trade Development Facility(STDF)

The Standards and Trade Development Facility (STDF) is the joint brainchild of the heads of FAO, OIE, WHO, the World Bank, and the WTO and was launched at the Doha Ministerial Conference in November 2001. It plays a key role in helping developing economies meet international standards for food security, animal and plant health, and other trade requirements on the way to accessing global markets. It complements the Aid for Trade initiative through other projects and monitoring of aid flows. The STDF Trust Fund, supervised by the STDF Secretariat and totaling over 50 million dollars, has been supporting many projects in Africa, Asia-Pacific, Latin America, etc.

Assistance and training

The WTO ensures that each country is able to take full advantage of the multilateral trading system and, therefore, organises many technical assistance programmes throughout the year. Under the WTO Secretariat, these assistance programmes are coordinated by the Institute for Training and Technical Cooperation (ITTC) on the basis of training and assistance plans. The Committee on Trade and Development supervises all these activities. These training and technical assistance courses were made in accordance with each country’s specific needs and requirements.

WTO’s dispute settlement mechanism

The dispute settlement mechanism provided by the WTO is very essential for the smooth functioning of the multilateral trading system and the effectiveness of its rules and agreements. It contributes to maintaining stability in the global economy. 

Any dispute brought to the WTO has to go through various stages of dispute resolution. There are two ways of dispute resolution:

  1. Mutual agreement,
  2. Adjudication

Stages of dispute settlement

Consultation

Before bringing the dispute to the authorities, both parties try to resolve it through consultation. If it fails to bear fruitful results in the desired period, parties may request adjudication by panels.

Adjudication by panels

Parties may request the establishment of panels in writing to the Dispute Settlement Body (DSB). This request must contain details like whether consultations were held, a summary of the complaint and its legal basis, etc. The panellist is a third party who is selected by the WTO Secretariat. After the selection of a panellist, they have one week to set the timetable for the whole process. Each party to the dispute makes submissions, presents their cases, and makes rebuttals before the panel. The panel then reaches a solution to the dispute after examination of each and every aspect of the dispute and submissions and sends its report to the Dispute Settlement Body. If no solution can be found, they send a report containing the findings of the case and their recommendations.

This report can only become binding when the Dispute Settlement Body adopts it. In case the party has opted to appeal, the panel report will be considered for adoption only after the completion of the appeal. If no appeal is filed, the DSB may adopt the panel report, unless there is a negative consensus in the DSB against the adoption. 

Implementation of ruling

Once there is the adoption of the panel report, DSB addresses some recommendations and ruling for the party who has lost the case, so that it can bring itself into compliance with the WTO ruling or find satisfactory adjustments. This compliance is necessary for the effective settlement of disputes. DSB is responsible for the implementation of the panel or Appellate reports. The party has been provided with a reasonable period of time to get into compliance with the ruling. 

WTO and the Sustainable Development Goals (SDGs)

In addition to strengthening and liberalising international trade, the WTO also plays a significant role in the achievement of the UN’s Agenda for Sustainable Development Goals (SDGs) by 2030 in the areas related to poverty alleviation, food security, health, education, the environment, etc. The SDGs recognise the contribution of trade and the WTO in achieving these goals, as the WTO, by implementing certain trade reforms and agreements, is helping the countries achieve economic growth and development, which are part of the SDGs. The WTO is monitored on an annual basis by the UN’s High-Level Political Forum (HLPF) on its efforts to achieve SDGs related to trade.

SDG1: No poverty

Opening markets and trade can grow more opportunities for low-income countries and can uplift their living standards through increased competition, better prices of goods and services, and more choices for consumers.

SDG2: Zero hunger

The WTO also plays an important role in achieving food security through its reformed trade policies for agricultural goods. By eliminating subsidies on agricultural produce, fairer prices in competitive markets can be ensured.

SDG3: Good health and well-being

WTO also plays a significant role in ensuring affordable medicines to all countries, especially the least developed nations.

SDG8: Decent work and economic growth

By increasing trade capacities and creating various economic opportunities for the countries that were less developed, it ensures good economic growth and a decent work environment for them.

SDG9: Reduced inequalities

WTO seeks to bridge the gap between developing and developed nations through various initiatives based on the principle of “Special and Differential Treatment for Developing Countries,” which especially focuses on developing nations taking into account their capacity constraints.

Analysis of the role of WTO in international trade

WTO plays a very indispensable role in promoting, regulating or supervising international trade. Its very purpose, since its inception, has been to encourage progressive liberalisation in trade by removing different kinds of trade barriers and opening up the markets, which is crucial for overall economic development and well-being. Its main function is the negotiation of trade rules or agreements, which provides the countries with an opportunity to show their commitment to liberalising international trade. WTO’s trading principles, like transparency in trade rules, non-discrimination, etc., further provide it with a robust structure to fulfil its commitments to promoting international trade. It created an opportunity for even developing countries to make their markets accessible to other countries and achieve economic growth and development. The WTO has been successful in establishing many trade agreements that liberalise trade between countries. Moreover, its Dispute Settlement Body has proven effective in many trade-related disputes. 

Challenges of the WTO

Despite getting many successes in steps to liberalising trade and its immense contribution to boosting international trade, it is continuously losing before its contemporary challenges. 

Some of its recent challenges are as follows:

  1. A long period of time taken to conclude negotiations,
  2. Disputes between the interests of developing and developed countries in trade,
  3. Dominance in trade by developed nations,
  4. Disputes related to the ‘developing’ status of certain countries and their eligibility to receive special treatment.
  5. Balkanisation (division into smaller, ethnically homogenous units) of trade blocs within the WTO, that is a regional alliance of some members of WTO to exert their influence within the organisation.

Conclusion

The WTO is one of the three major international organisations (the others being the International Monetary Fund and the World Bank) on which the world’s economic system rests. It has emerged as the most powerful institution for opening new markets for trade and reducing trade barriers for the promotion of international trade. Its role, whether in the settlement of disputes, uplifting developing nations, carrying out negotiations, or building cooperation with other organisations, has been very crucial for the working of the global trading system. Although there are many challenges ahead, the WTO has been continuously working toward their resolution. Now the time has come when the WTO should focus more on ‘fair trade’ instead of ‘free trade’ and create more opportunities for developing nations so that they can come up to par with developed nations. Only then these challenges will be overcome.

Frequently Asked Questions

Why was GATT replaced with WTO?

GATT was replaced with WTO due to many reasons, which are as follows:

  1. GATT was only a multilateral agreement consisting of a set of rules and regulations. The institutional structure was missing.
  2. GATT does not deal with trade in services and intellectual property rights (IPR).
  3. GATT does not have a robust Dispute Settlement mechanism. 
  4. GATT was less representative in nature as it had no members from newly independent countries or other socialist nations. Hence, it was sometimes seen as promoting the interests of the West.
  5. It has failed to curb several restrictions on trade.

What are the main organs of the WTO?

The main organs of the WTO are as follows:

  1. Ministerial Conference (top-most decision-making body),
  2. General Council consisting of Goods Council, Services Council and TRIPS Council,
  3. Trade Policy Review Body (to take reviews of trade policies),
  4. Dispute Settlement Body (to settle trade disputes),
  5. Appellate Body (to hear appeals against panel reports).

What is Doha Development Agenda (DDA) in WTO?

Doha Round is the latest trade negotiation in the WTO. Its purpose is to reform the international trading system by lowering trade barriers and revising certain trade rules. It is also called the Doha Development Agenda, as its fundamental objective is to improve conditions of trade for developing nations. This round was launched in November 2001 in Doha, Qatar. The Doha Ministerial Declaration clarifies that the interests and needs of developing nations form the heart of this Declaration, and they will ensure that even the least developed nation gets a share of the overall growth of world trade. But it failed due to many systemic problems.

References 

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

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

https://t.me/lawyerscommunity

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

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